<PAGE> 1
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): AUGUST 8, 1997
THE TIMES MIRROR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-13492 95-4481525
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
</TABLE>
<TABLE>
<S> <C>
TIMES MIRROR SQUARE 90053
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 237-3700
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
INTRODUCTION
On August 8, 1997, The Times Mirror Company (the "Company") announced
that it had entered into agreements with its largest stockholders, Chandler
Trust No. 1 and Chandler Trust No. 2 (collectively, the "Chandler Trusts"). The
transaction, which resulted in a net effective reduction in the number of shares
of Series A Common Stock outstanding by approximately 6 million shares,
accelerated and augmented the Company's previously announced stock repurchase
program.
The Company commenced its stock repurchase plan in 1995 in conjunction
with the development of its current financial strategy to create a more
efficient capital structure by increasing the Company's debt-to-total
capitalization ratio. Since commencing the stock repurchase program, the Company
has purchased approximately 24.9 million shares of its common stock
from its public stockholders. In the second half of 1996, the Company, together
with its advisors, began exploring strategies to allow the Chandler Trusts to
participate in the stock repurchase program in order to maintain the public
float for liquidity for the public stockholders and to avoid indirectly
increasing the Chandler Trusts' voting and ownership interest. Since that time,
various possible transactions have been discussed with the Chandler Trusts,
resulting in the transaction described in this Form 8-K.
The transaction had two components: (1) the formation of a new limited
liability company among the Company and the Chandler Trusts (the "LLC
Transaction") and (2) the merger of Chandis Securities Company ("Chandis"), a
holding company owned by Chandler Trust No. 2 and affiliated minority investors,
with and into a subsidiary of the Company (the "Merger" and collectively with
the LLC Transaction, the "Transaction"). The Transaction closed on August 8,
1997 (the "Effective Date").
CREATION OF LLC
Concurrent with, and as a condition to, the consummation of the Merger,
the Company (including certain of its subsidiaries) and the Chandler Trusts
formed TMCT, LLC, a Delaware limited liability company ("LLC"), pursuant to a
Limited Liability Company Agreement (the "LLC Agreement") and a Contribution
Agreement (the "Contribution Agreement"), each dated as of August 8, 1997.
Copies of the LLC Agreement and the Contribution Agreement are filed herewith as
exhibits. Pursuant to the Contribution Agreement, the parties contributed to the
capital of LLC the following:
(1) the Company contributed approximately (a) $249 million in cash
and (b) 8 real properties (the "Real Properties") with an
aggregate market value of approximately $226 million;
(2) Chandler Trust No. 1 contributed (a) 4,424,232 shares of the
Company's Series A Common Stock; and (b) 391,525 shares of the
Company's Series A Preferred Stock; and
(3) Chandler Trust No. 2 contributed (a) 577,102 shares of the
Company's Series A Common Stock; and (b) 51,071 shares of the
Company's Series A Preferred Stock (collectively, with the
shares contributed by Chandler Trust No. 1, the "Contributed
Shares").
The cash contributed to LLC by the Company is being used by LLC to
purchase a portfolio of securities (the "Portfolio"). The Real Properties are
being leased back to the Company as described further below.
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The Company and the Chandler Trusts will share in the cash flow,
profits and losses of the various assets held by LLC as set forth in the LLC
Agreement. The cash flow from the Real Properties and the Portfolio will be
largely allocated to the Chandler Trusts and the cash flow from the Contributed
Shares will be largely allocated to the Company. For more specific information
regarding the LLC allocations, reference is made to the LLC Agreement, filed as
an exhibit hereto. The allocation of income from the LLC to the Chandler Trusts
is expected to result in an increase in annual income to the Chandler Trusts, as
the income on the Portfolio and the Real Properties is likely to exceed the
income on the Contributed Shares. At the same time, the allocated income from
the LLC to the Chandler Trusts reduces the Trusts' share of any appreciation in
the Series A Common Stock held by the LLC.
As a result of the allocations of the economic benefits in the LLC,
approximately 80% of the Contributed Shares will be considered treasury stock
for financial reporting purposes for the life of the LLC. Considering the
Contributed Shares by class, approximately (a) 4,000,000 shares of the Company's
Series A Common Stock; and (b) 354,000 shares of the Company's Series A
Preferred Stock (collectively, the "LLC Shares") will be considered treasury
stock for the life of the LLC. This will reduce the number of shares outstanding
for purposes of calculating earnings per share. Additionally, the LLC
Transaction effectively eliminates dividend payments on the LLC Shares, equal to
$16.6 million annually (based on the current dividend rate paid with respect to
the common stock and the 8% per annum dividend rate on the Series A Preferred
Stock). The foregoing changes are expected to have a beneficial impact on the
Company's earnings per share for a number of years.
The Company funded its cash contribution to LLC with short-term bank
debt provided by Citibank and expects to refinance approximately one-half of
such obligations with the proceeds of longer term debt securities and to repay
the balance of such obligations over time with cash from operations.
The Real Properties contributed to LLC included Times Mirror Square
(the principal executive offices of the Company) in California, as well as
certain office buildings, printing plants, garages and warehouses in
Connecticut, Maryland, Missouri and New York owned by the following
subsidiaries of the Company: The Hartford Courant Company, The Baltimore Sun
Company, Mosby-Year Book, Inc., Matthew Bender & Company, Incorporated and
Newsday, Inc. The Company, as tenant, and LLC, as landlord, have entered into a
master lease agreement with respect to the Real Properties (the "Lease"), a copy
of which is filed herewith as an exhibit. The Lease has an initial term of 12
years. The Company has certain rights to renew the Lease at a fair market rental
rate, as well as options to purchase the Real Properties from LLC at the end of
the initial lease term or any renewal term, or otherwise upon termination of the
Lease (at the fair market value of the Real Properties at the time of purchase).
The Company will account for its investment in LLC on the equity
method.
MERGER OF CHANDIS SECURITIES COMPANY WITH AND INTO A SUBSIDIARY OF THE
COMPANY
Chandis was a holding company through which, prior to the Merger, one
of the Chandler Trusts held most of its shares of stock of the Company. Such
Chandler Trust owned substantially all of the outstanding capital stock of
Chandis with the balance being held by related minority shareholders
(collectively with such Chandler Trust, the "Chandis Shareholders"). On the
Effective Date, Chandis merged with and into Chandis Acquisition Corporation
("CAC"), a Delaware corporation and a wholly owned subsidiary of the Company,
pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among the
Company, CAC, Chandis, and the Chandis Shareholders, dated as of August 8, 1997,
a copy of which is filed herewith as an exhibit.
At the time of the Merger, Chandis owned (a) 8,581,432 shares of the
Company's Series A Common Stock; (b) 9,656,432 shares of the Company's Series C
Common Stock; and (c) 380,972 shares of the Company's Series A Preferred Stock
(collectively, the "Chandis Shares"). Additionally, Chandis owned an interest in
undeveloped real estate and certain other assets. Prior to the Merger, any
income or capital gain with respect to the Chandis Shares was subject to
taxation at the Chandis level and, if distributed to the Chandis Shareholders,
at the level of the Chandis Shareholders as well.
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Pursuant to the Merger Agreement, on the Effective Date, all of the
outstanding shares of Chandis were converted into the right to receive shares of
the Company's capital stock . In particular, on the Effective Date, the Chandler
Trust received (a) 4,317,644 shares of the Company's Series A Common Stock; (b)
9,656,432 shares of the Company's Series C Common Stock; (c) 380,972 shares of
the Company's new Series C-1 Preferred Stock, with a stated value of
$190,486,000; and (d) 245,100 shares of the Company's new Series C-2 Preferred
Stock, with a stated value of $122,550,000. The Series C-1 Preferred Stock and
Series C-2 Preferred Stock are described below. On the Effective Date, the
minority Chandis shareholders received an aggregate of 2,263,788 shares of the
Company's Series A Common Stock.
The terms of the Company's new participating Series C-1 Preferred Stock
and Series C-2 Preferred Stock are substantially similar to the Company's
existing Series A Preferred Stock, with three exceptions. First, commencing
October 1, 1997 the annual dividend rate on the new Series C-1 Preferred Stock
and Series C-2 Preferred Stock is 5.8%, and may increase commencing in 2001 to a
maximum 8.4% (based on the percentage increases, if any, in the dividends paid
by the Company on its common stock). The dividends on the Series C-1 Preferred
Stock and Series C-2 Preferred Stock for the initial dividend period ending
September 30, 1997 will be $5.1 million. Second, as with the Series A Preferred
Stock, the Series C-1 Preferred Stock and Series C-2 Preferred Stock are
convertible into Series A Common Stock in 2025 at the earliest; however, unlike
the Series A Preferred Stock, the number of shares of Series A Common Stock into
which the Series C-2 Preferred Stock can be converted is limited. Third, unlike
the Series A Preferred Stock, neither the Series C-1 Preferred Stock nor the
Series C-2 Preferred Stock contain a dividends received deduction gross-up
provision. Further information on the terms of the Company's new Series C-1
Preferred Stock and Series C-2 Preferred Stock may be found in the certificates
of designation for such stock, filed as exhibits herewith.
For purposes of determining the consideration issued in the Merger, the
Series A Common Stock and the Series C Common Stock were valued at $50.75 per
share based on negotiations among the parties with reference to recent trading
prices of Series A Common Stock. The Series A Preferred Stock was valued based
on negotiations between the parties, with reference to valuations provided by
their advisors. The Company obtained an appraisal with respect to substantially
all of the real property interests owned by Chandis.
As a result of the Merger, all of the shares of capital stock of the
Company previously owned by Chandis are now held by CAC and treated as treasury
stock for financial reporting purposes. On a net basis, the Merger resulted in
the reduction in the number of shares of Series A Common Stock outstanding by
2,000,000. The Merger also resulted in a reduction in the number of shares of
Series A Preferred Stock outstanding by 380,972 (collectively with the 2,000,000
shares of Series A Common Stock referenced in the prior sentence, the "Merger
Shares" and, together with the LLC Shares, the "Treasury Shares").
The Company has provided the Chandis Shareholders with certain
registration rights pursuant to a Registration Rights Agreement with respect
to the Series A Common Stock issued in the Merger, the Series C-1 Preferred
Stock and Series C-2 Preferred Stock issued in the Merger, and the Series A
Common Stock issuable upon conversion of the Series C Common Stock or the Series
C-1 Preferred Stock or Series C-2 Preferred Stock issued in the Merger. A copy
of the Registration Rights Agreement is filed as an exhibit hereto.
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IMPACT OF THE TRANSACTION
As shown in the pro forma financial statements contained herein, had
the Transaction occurred on January 1, 1996, fully diluted earnings per share
for 1996 would have been $1.57 rather than $1.53. The positive impact to
earnings per share is due to the lower number of shares of common stock deemed
outstanding and the effective net reduction of dividends on preferred stock. In
addition, had the Transaction occurred on June 30, 1997, the Company's
debt-to-total capitalization ratio would have been 52.7% on a pro forma basis,
as compared to 34.4% on an historical basis.
As a result of the Transaction, the direct equity interest of the
Chandler Trusts in the Company has been reduced from 39.28% to 33.59% and their
voting power has been slightly reduced from 68.70% to 67.32%. The particulars of
these changes are as follows:
o Prior to the Transaction, the Chandler Trusts owned 17,810,238
shares (25.50%) of the Series A Common Stock, 19,811,971 shares
(76.35%) of the Series C Common Stock and 786,274 shares (95.47%) of
the Series A Preferred Stock. On a combined basis the minority
shareholders of Chandis and the Chandler Trusts owned, directly and
through Chandis, 18,668,546 shares of Series A Common Stock,
20,757,246 shares of Series C Common Stock and 823,568 shares of
Series A Preferred Stock. (For purposes hereof, the power to vote
all of the shares held by Chandis has been allocated to the Chandler
Trusts.)
o As a result of the Transaction, the Chandler Trusts now own
9,403,424 shares (13.86%) of the Series A Common Stock, 20,757,246
shares (79.99%) of the Series C Common Stock, 380,972 shares (100%)
of the new Series C-1 Preferred Stock, 245,100 shares (100%) of the
new Series C-2 Preferred Stock and no shares of the Series A
Preferred Stock. On a combined basis, the former minority
shareholders of Chandis and the Chandler Trusts now own 11,667,212
shares of Series A Common Stock, 20,757,246 shares of Series C
Common Stock and all of the shares of Series C-1 Preferred Stock and
Series C-2 Preferred Stock.
All of the pre-Transaction percentages regarding the Company's common
stock set forth above are based on the number of shares outstanding on July 31,
1997: 95,789,982, consisting of 69,841,271 shares of Series A Common Stock and
25,948,711 shares of Series C Common Stock. The post-Transaction percentages are
based on the foregoing, as adjusted to reflect the deemed reduction in number of
outstanding shares resulting from the Transaction.
APPROVAL OF THE TRANSACTION
The Transaction was approved by the Board of Directors of the Company,
including all of the independent members of the Board of Directors of the
Company. The directors affiliated with the Chandler Trusts did not participate
in the board action. Prior to taking action on the Transaction, the Board had
received a recommendation from a special committee of the Board (the "Special
Committee") that the Board approve the Transaction. The Special Committee, which
was established in January 1997 to evaluate and make recommendations with
respect to a transaction involving the Company and the Chandler Trusts,
consisted of directors Joan A. Payden, Alfred E. Osborne, Jr., and Harold M.
Williams (none of whom have any relationship to the Chandler family).
In connection with their consideration of the Transaction, the Board of
Directors and the Special Committee received opinions from Goldman, Sachs & Co.
and Morgan Stanley & Co. Incorporated, respectively, to the effect that, based
upon and subject to the matters set forth in the opinions, the Transaction is
fair from a financial point of view to the Company.
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GENERAL
The trustees of the Chandler Trusts are Gwendolyn Garland Babcock,
Bruce Chandler, Camilla Chandler Frost, Douglas Goodan, William Stinehart, Jr.,
Judy C. Webb and Warren B. Williamson. Mrs. Babcock and Messrs. Chandler,
Stinehart, and Williamson are directors of the Company. Mrs. Frost, Mrs. Webb
and Mr. Goodan are relatives of certain directors of the Company. The
beneficiaries of the Chandler Trusts include the trustees (other than Mr.
Stinehart) and certain of their relatives.
The Company will pay its own expenses (including those of the Special
Committee) with respect to the Transaction. Transaction expenses incurred by
Chandis and the Chandler Trusts were treated as liabilities of Chandis, and the
amount of consideration paid in the Merger was reduced by the amount thereof.
Under Delaware and California law, neither the stockholders of the
Company nor the Chandis Shareholders will have any dissenters' or appraisal
rights as a result of the Transaction.
The Treasury Shares will not be entitled to vote or be counted for
quorum purposes at any meeting of, or with respect to any matter submitted for
consent to, the stockholders of the Company.
The summaries herein of the Transaction are qualified in their entirety
by reference to the full text of the LLC Agreement, the Contribution Agreement,
the Lease Agreement, the Merger Agreement, and the Registration Rights
Agreement, all which are being filed as exhibits hereto.
Under the Company's share repurchase program, and after giving effect
to the Transaction and board approvals relating to the same, management of the
Company has the authority to purchase an additional 4.3 million shares of the
Company's common stock.
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Any forward-looking statements contained herein are subject to risks
and uncertainty. For example, there can be no assurances that the expected
impact of the Transaction on earnings per share will be achieved. Readers are
cautioned that the achievement of such impact, and other aspects of the
Company's performance, could be adversely affected by a number of factors. Some
of these factors are described in Note 17 to the Company's 1996 consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Not applicable (as Chandis is a holding company, not a business).
(b) PRO FORMA FINANCIAL INFORMATION
Index to pro forma financial statements:
<TABLE>
<CAPTION>
Page
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<S> <C>
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1997 8
Unaudited Pro Forma Condensed Consolidated Statements
of Operations for the year ended December 31, 1996 and
the six months ended June 30, 1997 10
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements 12
</TABLE>
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TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
The unaudited pro forma condensed consolidated balance sheet has been
derived from the historical consolidated balance sheet of the Company adjusted
for certain costs and expenses to be incurred as a result of the Transaction.
The pro forma condensed consolidated balance sheet of the Company has been
prepared assuming the Transaction occurred on June 30, 1997.
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, 1996, filed with the Company's Annual
Report on Form 10-K for such year. The pro forma condensed consolidated balance
sheet is not necessarily indicative of the financial position of the Company
that would have actually been obtained had the Transaction been consummated on
June 30, 1997.
<TABLE>
<CAPTION>
Merger LLC Transaction
Times Pro Forma Adjustments Pro Forma Adjustments
Mirror ----------------------- Merger ---------------------------- Transaction
Historical Debit Credit Pro Forma Debit Credit Pro Forma
---------- ---------- ---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 50,769 $ 5,784(a) $11,900(a)
3,700(b) $ 40,953 $ 40,953
Accounts receivable, net 433,167 433,167 433,167
Other current assets 190,743 256(a) 190,999 190,999
----------- ---------- ----------
Total current assets 674,679 665,119 665,119
Property, plant and
equipment, net 1,160,549 1,160,549 $168,021(c) 992,528
Goodwill 507,632 507,632 507,632
Investment in LLC $475,116(d) 380,092(e) 95,024
Other noncurrent assets 912,375 13,250(a)
5,460(a) 931,085 931,085
----------- ---------- ----------
Total assets $ 3,255,235 $3,264,385 $3,191,388
=========== ========== ==========
</TABLE>
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TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Merger LLC Transaction
Times Pro Forma Adjustments Pro Forma Adjustments
Mirror ---------------------- Merger -------------------------- Transaction
Historical Debit Credit Pro Forma Debit Credit Pro Forma
---------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 703,749 $ 3,700(b) $ 3,700(a) $ 703,749 $ 14,400(d)
99,266(d) $ 817,415
Noncurrent liabilities 657,910 657,910 657,910
Long-term debt 633,740 633,740 $168,021(c) 150,000(d)
211,450(d) 827,169
---------- ---------- ----------
Total liabilities 1,995,399 1,995,399 2,302,494
Common stock subject to put
options 39,273 39,273 39,273
Shareholders' equity
Series A preferred stock 411,784 411,784 411,784
Series C-1 & Series 313,036(a) 313,036 313,036
C-2 preferred stock
Series A & Series C common
stock 95,737 16,238(a) 111,975 111,975
Additional paid-in capital 396,133 807,834(a) 1,203,967 1,203,967
Retained earnings 288,443 288,443 288,443
Net unrealized gain on
securities 28,466 28,466 28,466
---------- ---------- ----------
1,220,563 2,357,671 2,357,671
Less treasury stock, at cost 1,127,958(a) (1,127,958) 380,092(e) (1,508,050)
---------- ---------- ----------
Total shareholders' equity 1,220,563 1,229,713 849,621
---------- ---------- ----------
Total liabilities and
shareholders' equity $3,255,235 $3,264,385 $3,191,388
========== ========== ==========
</TABLE>
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TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma condensed consolidated statements of operations
of the Company have been derived from the historical consolidated statements of
operations of the Company adjusted for interest expense and equity income
expected to result from the Transaction. The pro forma condensed consolidated
statements of operations of the Company have been prepared assuming that the
Transaction occurred on January 1, 1996.
The pro forma condensed consolidated statements of operations should be
read in conjunction with the historical consolidated financial statements and
the notes thereto for the year ended December 31, 1996, filed with the Company's
Annual Report on 10-K for such year. The pro forma condensed consolidated
statements of operations are not necessarily indicative of the financial results
of the Company that would have actually been obtained had the Transaction been
consummated on January 1, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------------------------------
Merger LLC Transaction
Times Pro Forma Adjustments Pro Forma Adjustments
Mirror ----------------------- Merger -------------------------- Transaction
Historical Debit Credit Pro Forma Debit Credit Pro Forma
---------- ---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $3,400,984 $3,400,984 $3,400,984
Costs and expenses 3,088,529 3,088,529 3,088,529
---------- ---------- ----------
Operating profit 312,455 312,455 312,455
Interest expense (27,047) (27,047) $29,845(f) (56,892)
Interest income 6,143 6,143 6,143
Equity income 4,379 4,379 $ 3,041(g) 7,420
Other, net 108,059 108,059 108,059
---------- ---------- ----------
Income before income tax
provision 403,989 403,989 377,185
Income tax provision 197,545 197,545 10,922(h) 186,623
---------- ---------- ----------
Net income $ 206,444 $ 206,444 $ 190,562
========== ========== ==========
Preferred dividend requirements $ 43,645 $18,156(j) $15,239(i) $ 46,562 14,163(i) $ 32,399
========== ========== ==========
Earnings applicable to
common shareholders $ 162,799 $ 159,882 $ 158,163
========== ========== ==========
Primary earnings per share $ 1.55 $ 1.55 $ 1.60
========== ========== ==========
Fully diluted earnings per share $ 1.53 $ 1.53 $ 1.57
========== ========== ==========
Weighted average common and
common equivalent shares:
Primary 105,085 16,238(k) 18,238(k) 103,085 4,001(k) 99,084
Fully diluted 113,583 16,238(k) 18,238(k) 111,583 4,001(k) 107,582
</TABLE>
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TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-------------------------------------------------------------------------------------------------
Merger LLC Transaction
Times Pro Forma Adjustments Pro Forma Adjustments
Mirror ---------------------- Merger ------------------------- Transaction
Historical Debit Credit Pro Forma Debit Credit Pro Forma
---------- --------- --------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,585,695 $1,585,695 $1,585,695
Costs and expenses 1,377,373 1,377,373 1,377,373
---------- ---------- ----------
Operating profit 208,322 208,322 208,322
Interest expense (20,268) (20,268) $14,922(f) (35,190)
Interest income 1,418 1,418 1,418
Equity income 2,368 2,368 $1,521(g) 3,889
Other, net 1,311 1,311 1,311
---------- ---------- ----------
Income before income tax
provision 193,151 193,151 179,750
Income tax provision 81,932 81,932 5,461(h) 76,471
---------- ---------- ----------
Net income $ 111,219 $ 111,219 $ 103,279
========== ========== ==========
Preferred dividend requirements $ 19,177 $9,078(j) $7,619(i) $ 20,636 7,082(i) $ 13,554
========== ========== ==========
Earnings applicable to
common shareholders $ 92,042 $ 90,583 $ 89,725
========== ========== ==========
Primary earnings per share $ .94 $ .95 $ .98
========== ========== ==========
Fully diluted earnings per share $ * $ * $ .98
========== ========== ==========
Weighted average common and
common equivalent shares:
Primary 97,754 16,238(k) 18,238(k) 95,754 4,001(k) 91,753
Fully diluted 101,329 16,238(k) 18,238(k) 99,329 4,001(k) 95,328
</TABLE>
- ---------------
*Antidilutive
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TIMES MIRROR COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(a) In exchange for all of the outstanding capital stock of Chandis, the
Company issued the following securities to the former Chandis
shareholders (dollars in thousands):
<TABLE>
<CAPTION>
Value at
Number of Transaction
Shares Date
----------- -----------
<S> <C> <C>
Series A Common Stock 6,581,432 $ 334,008
Series C Common Stock 9,656,432 490,064
---------- ----------
Total Common Stock 16,237,864 824,072
Series C-1 Preferred Stock 380,972 190,486
Series C-2 Preferred Stock 245,100 122,550
------- ----------
Total Preferred Stock 626,072 313,036
----------
Total stock $1,137,108
==========
</TABLE>
For purposes of the Transaction, the parties valued the Company's
common stock at $50.75 per share based on negotiations among the
parties with reference to recent trading prices of the Series A Common
Stock.
The Series C-1 Preferred Stock and Series C-2 Preferred Stock are
recorded at their liquidation value. These preferred stocks are
cumulative and accrue dividends at an initial dividend rate of 5.8% per
year commencing October 1, 1997. However, the dividends for the
initial dividend period ending September 30, 1997 will be approximately
$5.1 million. The dividends on these preferred stocks may increase,
beginning in 2001, based on the percentage increases, if any, in the
dividends paid on the Company's common stock, with a maximum dividend
of 8.4% per year.
Each share of Series C-1 Preferred Stock and Series C-2 Preferred Stock
is convertible at the option of the holders or the Company on February
1, 2025, at the earliest, into a number of shares of Series A Common
Stock equal to the quotient obtained by dividing (1) $500 plus accrued
and unpaid dividends to the date of conversion by (2) the average of
the closing price of the Series A Common Stock for the 20 days during
which trades of Series A Common Stock occurred immediately preceding
the conversion date (the "Common Share Value"). Notwithstanding the
foregoing, the maximum number of shares of Series A Common Stock that
may be issued upon conversion of the Series C-2 Preferred Stock is
2,956,942. If such maximum number of shares does not have a Common
Share Value equal to the liquidation value (plus accrued and unpaid
dividends) of the Series C-2 Preferred Stock converted, the holders
will receive, at the holders' option, cash or non-convertible preferred
stock with a value equal to the difference.
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TIMES MIRROR COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The assets owned by Chandis at the time of the Merger were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Value at
Number of Transaction
Shares Date
---------- -----------
<S> <C> <C>
Cash and marketable securities $ 5,784
Other current assets 256
Land held for investment purposes 13,250
Deferred tax assets and other assets 5,460
Accrued transaction expenses (3,700)
Times Mirror stock:
Series A Common Stock 8,581,432 435,508
Series C Common Stock 9,656,432 490,064
---------- ----------
18,237,864 946,622
Series A Preferred Stock 380,972 190,486
----------
$1,137,108
==========
</TABLE>
The Merger is a tax-free transaction. The deferred tax assets relate
primarily to alternative minimum tax carryforward credits which the
Company expects to utilize.
The common and preferred shares acquired as a result of the Merger will
be reported in the Company's consolidated balance sheet as treasury
shares. The cost of the treasury shares, including estimated
transaction expenses for investment bankers, legal, accounting and
other miscellaneous expenses, is as follows (in thousands):
<TABLE>
<S> <C>
Series A Common Stock $ 435,508
Series C Common Stock 490,064
Series A Preferred Stock 190,486
Transaction expenses 11,900
----------
Total cost of treasury shares $1,127,958
==========
</TABLE>
(b) The Company assumed Chandis' liability for its expenses related to the
Transaction and reduced the amount of Series C-2 Preferred Stock that
otherwise would have been issued in the Merger by the amount of these
expenses. The pro forma financial statements reflect a cash reduction
for the amount the Company expects to pay to settle this liability.
13
<PAGE> 14
TIMES MIRROR COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(c) To reduce the property, plant and equipment by $168.0 million which
represents the estimated net book value of the Real Properties at the
end of the initial lease term, August 8, 2009, as described in Note
(d). The Company has leased the Real Properties from LLC under a lease
with an initial term of 12 years. The lease is accounted for as a
financing arrangement and, accordingly, the Real Properties' book value
remains on the Company's consolidated balance sheet and continues to be
depreciated at the rates currently in effect. The depreciation, along
with the $168.0 million, result in a net book value of zero for the
Real Properties at August 8, 2009. At that time, the Company has the
option to purchase the Real Properties for their fair market value. If
the Real Properties are not purchased by the Company, they remain the
property of LLC, and may be leased by the Company at a fair market
value rent as provided for under the terms of the lease agreement. The
lease provides for two additional 12-year lease terms with fair value
purchase options at the end of each lease term. The offsetting debit is
reported as an original issue discount on the lease financing
arrangement in the Company's consolidated balance sheet as described in
Note (f).
(d) To record the Company's investment in LLC, which is comprised of the
following (in thousands):
<TABLE>
<CAPTION>
Value at
Transaction
Date
-----------
<S> <C>
Cash $249,266
Lease financing obligation:
Short-term 14,400
Long-term 211,450
--------
$475,116
========
</TABLE>
The cash was obtained under a short-term bank line of credit. The
Company intends to refinance approximately one-half of such obligation
with the proceeds of longer term debt securities and to repay the
balance over time with cash from operations. The lease financing
obligation of $225.9 million represents the present value of the
minimum lease payments for the Real Properties and will be reported,
net of the original issue discount of $168.0 million, as described in
Note (c), as debt in the Company's consolidated balance sheet.
14
<PAGE> 15
TIMES MIRROR COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(e) The Chandler Trusts have contributed preferred and common stock of the
Company to LLC. The LLC allocates to the Company 80% of the dividends
on these shares and a substantial portion of any ultimate increase or
decrease in the value of these shares. As a result, the Company is
deemed to hold an economic interest in 80% of the shares held by LLC,
which will be reported as treasury stock in the Company's consolidated
balance sheet. The assets contributed by the Chandler Trusts are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Value at 80% Allocated
Number of Transaction to the
Shares Date Company
---------- ----------- -------------
<S> <C> <C> <C>
Series A Common Stock 5,001,334 $253,818 $203,054
Series A Preferred Stock 442,596 221,298 177,038
-------- --------
$475,116 $380,092
======== ========
</TABLE>
(f) To record interest expense related to the lease financing obligation,
the new debt and the amortization of the original issue discount on the
lease. The interest on the lease financing obligation has been
calculated using an assumed interest rate of 6.7% while the interest on
the short-term debt and long-term debt has been calculated assuming an
interest rate of 5.5% and 6.55%, respectively. The amortization of the
$168.0 million original issue discount is based on the interest method.
(g) To record the Company's proportionate share of LLC's equity income. The
Company's income allocation is comprised of 20% of the ordinary profits
and losses from the lease of the Real Properties and LLC's fixed income
and equity investment portfolios. The equity income recognized by the
Company excludes (1) the Company's proportionate share of any
dividends on the Company's preferred and common stocks owned by LLC and
(2) the Company's proportionate share of LLC's interest income from the
lease financing obligation. The dividends are eliminated in
consolidation and the interest income is netted against interest
expense. As a result, the equity income recognized by the Company is
comprised of its 20% share of the LLC's Portfolio, which is assumed to
earn a 6.1% return per year for purposes of these pro forma financial
statements.
(h) To record the income tax effect of entries (f) and (g) at the Company's
statutory rate of 40.75%.
(i) To eliminate the preferred dividends for all of the Series A Preferred
Stock acquired in the Merger and 80% of the Series A Preferred Stock
owned by LLC, which is reflected as treasury stock beginning January 1,
1996.
(j) To reflect dividends on the Series C-1 Preferred Stock and Series C-2
Preferred Stock, assuming that these shares were outstanding on January
1, 1996 and earned dividends for the period from January 1, 1996 to
June 30, 1997 at the rate of 5.8% per year.
(k) To adjust weighted average shares outstanding for (1) all of the shares
acquired from Chandis in the Merger, (2) all of the shares issued to
the Chandis Shareholders in the Merger and (3) 80% of the shares owned
by LLC. The share adjustments are calculated assuming the Transaction
occurred on January 1, 1996.
15
<PAGE> 16
(C) EXHIBITS
The following exhibits are filed with this report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger by and among the Company, Chandis Acquisition
Corporation, Chandis Securities Company, and the Shareholders of Chandis
Securities Company, dated August 8, 1997
4.1 Certificate of Designation of the Company's new Series C-1 Preferred Stock
4.2 Certificate of Designation of the Company's new Series C-2 Preferred Stock
10.1 Limited Liability Company Agreement of TMCT, LLC, dated August 8, 1997
10.2 Contribution Agreement among the Company, certain subsidiaries thereof,
Chandler Trust No. 1 and Chandler Trust No. 2, dated August 8, 1997
10.3 Registration Rights Agreement by and among the Company and the Shareholders
of Chandis Securities Company, dated August 8, 1997
10.4 Lease Agreement between TMCT, LLC and the Company, dated August 8, 1997
20.1 Press Release Regarding the Transaction, dated August 8, 1997
</TABLE>
16
<PAGE> 17
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 hereunto duly authorized.
THE TIMES MIRROR COMPANY
By: /s/ THOMAS UNTERMAN
------------------------------
Date: August 11, 1997 Thomas Unterman,
Senior Vice President and
Chief Financial Officer
17
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
THE TIMES MIRROR COMPANY,
CHANDIS ACQUISITION CORPORATION,
CHANDIS SECURITIES COMPANY
AND
THE SHAREHOLDERS OF CHANDIS SECURITIES COMPANY
AUGUST 8, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
RECITALS ................................................................................1
ARTICLE 1. PLAN OF MERGER........................................................................1
1.1. BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL................................1
1.2. THE MERGER....................................................................1
1.3. THE CLOSING...................................................................2
1.4. EFFECTIVE TIME................................................................3
1.5. EXEMPTION FROM REGISTRATION...................................................3
1.6. RESTRICTED SECURITIES.........................................................3
1.7. SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES; STATUS OF OUTSTANDING
CERTIFICATES..................................................................3
1.8. DISSENTERS' RIGHTS............................................................3
1.9. TAX-FREE REORGANIZATION.......................................................4
1.10. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION.........................................................4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY..................................4
2.1. ORGANIZATION AND STANDING.....................................................4
2.2. CAPITALIZATION................................................................5
2.3. SUBSIDIARIES..................................................................5
2.4. AUTHORITY, APPROVAL AND ENFORCEABILITY........................................6
2.5. LICENSES AND PERMITS..........................................................7
2.6. FINANCIAL STATEMENTS..........................................................7
2.7. MATERIAL ADVERSE CHANGES......................................................7
2.8. ASSETS; REAL PROPERTY.........................................................8
2.9. MATERIAL AGREEMENTS AND RELATIONSHIPS........................................11
2.10. EMPLOYEE BENEFITS............................................................12
2.11. COMPLIANCE WITH LAWS.........................................................12
2.12. ABSENCE OF LITIGATION........................................................13
2.13. NO BROKERS...................................................................13
2.14. TAXES........................................................................13
2.15. COMPLIANCE WITH INSTRUMENTS..................................................15
2.16. NO POWERS OF ATTORNEY OR SURETYSHIPS.........................................15
2.17. TAX-FREE REORGANIZATION......................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS............................16
3.1. ORGANIZATION.................................................................16
3.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.......................................16
3.3. OWNERSHIP OF COMPANY CAPITAL STOCK...........................................17
3.4. NO REGISTRATION; INVESTMENT INTENT...........................................17
3.5. NO BROKER....................................................................18
3.6. TAX-FREE REORGANIZATION......................................................18
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF TMC AND ACQUISITION SUB...........................19
4.1. ORGANIZATION AND STANDING....................................................19
4.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.......................................19
4.3. FINANCIAL STATEMENTS AND SEC REPORTS.........................................20
4.4. TMC CAPITAL STOCK............................................................21
4.5. NO BROKERS...................................................................21
4.6. TAX-FREE REORGANIZATION......................................................21
4.7. CAPITAL STOCK................................................................21
ARTICLE 5. COVENANTS............................................................................22
5.1. CONDUCT OF BUSINESS..........................................................22
5.2. ACTIONS CONTRARY TO TAX FREE TREATMENT.......................................23
5.3. CONTINUITY OF INTEREST AND RESTRICTIONS ON RESALE............................24
5.4. NO TRANSFER OF COMPANY CAPITAL STOCK.........................................25
5.5. BEST EFFORTS.................................................................25
5.6. REGISTRATION RIGHTS; NYSE LISTING............................................25
5.7. TERMINATION OF CERTAIN AGREEMENTS............................................25
ARTICLE 6. CONDITIONS TO MERGER.................................................................25
6.1. CONDITIONS TO OBLIGATIONS OF TMC, ACQUISITION SUB, THE SHAREHOLDERS, AND
THE COMPANY..................................................................25
6.2. CONDITIONS TO OBLIGATIONS OF TMC AND ACQUISITION SUB.........................26
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS................27
ARTICLE 7. INDEMNITY............................................................................27
7.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; NO
SUBROGATION..................................................................27
7.2. INDEMNIFICATION OF TMC AND THE SURVIVING CORPORATION.........................28
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
7.3. INDEMNIFICATION OF THE SHAREHOLDERS..........................................30
7.4. PROCEDURE FOR INDEMNIFICATION OF TMC WITH RESPECT TO THIRD-PARTY CLAIMS......30
7.5. PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS WITH RESPECT TO
THIRD-PARTY CLAIMS...........................................................31
ARTICLE 8. TERMINATION..........................................................................32
8.1. TERMINATION BY MUTUAL CONSENT................................................32
8.2. TERMINATION BY TMC OR ACQUISITION SUB OR THE COMPANY.........................32
8.3. EFFECT OF TERMINATION........................................................32
ARTICLE 9. MISCELLANEOUS........................................................................33
9.1. NOTICES......................................................................33
9.2. ENTIRE AGREEMENT; MODIFICATIONS; WAIVER......................................34
9.3. COUNTERPARTS.................................................................35
9.4. PUBLICITY....................................................................35
9.5. SUCCESSORS AND ASSIGNS.......................................................35
9.6. GOVERNING LAW................................................................35
9.7. EXPENSES.....................................................................35
9.8. GENDER AND NUMBER............................................................35
9.9. CONSTRUCTION OF AGREEMENT....................................................35
9.10. CONSENT TO JURISDICTION AND FORUM SELECTION..................................35
9.11. ATTORNEYS' FEES..............................................................36
9.12. CONSENT TO ISSUANCE OF SERIES C-1 AND C-2 PREFERRED STOCK....................36
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
Exhibit A Certificate of Merger
Exhibit B-1 Certificate of Designation of Series C-1 Preferred Stock
Exhibit B-2 Certificate of Designation of Series C-2 Preferred Stock
Exhibit C Stock Ownership of the Company; TMC Merger Shares to be received by
the Shareholders in the Merger
Exhibit D Opinion of Counsel to the Company and Chandler Trust No. 2 and
Opinion of Counsel to the Other Shareholders
Exhibit E Opinion of Counsel to TMC and Acquisition Sub
SCHEDULES
---------
Schedule 2.1 Office & Personnel Locations; Business Undertaken
Schedule 2.2 Capitalization
Schedule 2.3 Subsidiaries; Other Investments
Schedule 2.4 Consents
Schedule 2.6 Financial Statements Exceptions
Schedule 2.7 Material Changes
Schedule 2.8(a) Assets
Schedule 2.8(b) Real Property Descriptions
Schedule 2.9 Material Agreements
Schedule 2.13 Litigation
Schedule 2.14 Brokers
Schedule 2.15 Taxes
Schedule 2.16 Compliance with Instruments
Schedule 2.17 Powers of Attorney
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of August 8, 1997 by and among (i) The Times Mirror Company, a Delaware
corporation ("TMC"); (ii) Chandis Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of TMC ("Acquisition Sub" or the
"surviving corporation"); (iii) Chandis Securities Company, a California
corporation (the "Company"); and (iv) all of the shareholders of the Company
(the "Shareholders"), the names of which are set forth on the signature pages
hereto.
RECITALS
The parties hereto intend that, subject to the terms and conditions
hereinafter set forth, the Company will be merged with and into Acquisition Sub
(the "Merger") in accordance with the terms of this Agreement, a Certificate of
Merger substantially in the form attached hereto as Exhibit A (the "Certificate
of Merger"), and the applicable provisions of the Delaware General Corporation
Law (the "Delaware Law") and the California Corporations Code (the "California
Law"), in connection with which all of the outstanding shares of capital stock
of the Company (the "Company Capital Stock") will be exchanged for and converted
into the right to receive shares of capital stock of TMC ("TMC Capital Stock").
The Company Capital Stock shall be automatically converted into TMC Capital
Stock, and certificates representing Company Capital Stock will be exchanged for
certificates representing TMC Capital Stock, as provided in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE 1.
PLAN OF MERGER
1.1. BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL. The respective
boards of directors of Acquisition Sub and the Company have duly adopted and
approved this Agreement and the transactions contemplated hereby (the
"Transactions"), and this Agreement and the Transactions have been unanimously
approved by the Shareholders, as all of the shareholders of the Company. The
Agreement and the Transactions shall be promptly submitted for consideration to
the Board of Directors of TMC and, subject to adoption and approval by such
Board, shall be approved by TMC, as the sole stockholder of Acquisition Sub.
1.2. THE MERGER. Subject to the terms and conditions of this Agreement,
the Company shall be merged with and into Acquisition Sub pursuant to the
Certificate of Merger, with Acquisition Sub as the surviving corporation, and
the separate existence of the Company shall thereupon cease. At the Effective
Time (as hereinafter defined), the Acquisition Sub, as the surviving corporation
in the Merger, shall continue its corporate existence under the laws of the
State of Delaware. As a result of the Merger, all of the issued and outstanding
shares of
<PAGE> 7
Company Capital Stock shall be converted into TMC Capital Stock in the manner
described below.
(a) At the Effective Time, all of the issued and outstanding
shares of Company Capital Stock shall, by virtue of the Merger and without any
action on the part of TMC, Acquisition Sub or the Company be converted
automatically into the right to receive shares of TMC Capital Stock (the "TMC
Merger Shares"), in such number, and of such classes, as are set forth
immediately below. The TMC Merger Shares shall consist of (a) 6,581,432 shares
of "Series A Common Stock"; (b) 9,656,432 shares of "Series C Common Stock"; (c)
380,972 shares of "Series C-1 Preferred Stock"; and (d) 245,100 shares of
"Series C-2 Preferred Stock" (as such terms are defined in Section 4.7 hereof).
The terms of the Series C-1 and C-2 Preferred Stock shall be as set forth in the
Certificates of Designation attached hereto as Exhibit B-1 and Exhibit B-2,
respectively (collectively, the "Certificates of Designation"). The TMC Merger
Shares shall be allocated among the Shareholders in accordance with Exhibit C.
In the Merger, any shares of Company Capital Stock that are owned by the Company
shall be canceled, and no securities of TMC or other consideration shall be
delivered in exchange therefor. No shares of capital stock of the Company shall
be issued in, or outstanding immediately after, the Merger. Neither the
authorized nor the outstanding capital stock of Acquisition Sub shall be
affected by, and no shares of capital stock of Acquisition Sub shall be issued
in, the Merger.
(b) If, between the date of this Agreement and the Effective Time,
any of the Series A Common Stock or the Series C Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split, reverse split, stock dividend or
combination, the consideration to be issued to the holders of Company Capital
Stock in the Merger shall be correspondingly adjusted.
(c) No certificates or scrip representing fractional shares of TMC
Capital Stock shall be issued in connection with the Merger, and any fractional
interests shall not entitle the holder thereof to any rights as a securityholder
of TMC. Each holder who would have otherwise been entitled to receive a fraction
of a share of Series A Common Stock or Series C Common Stock shall be entitled
to receive, in lieu thereof, an amount in cash (without interest), to be
determined by multiplying (a) $50.75, by (b) the fractional interest to which
such holder would have otherwise been entitled. Each holder who would have
otherwise been entitled to receive a fraction of a share of Series C-1 Preferred
Stock or Series C-2 Preferred Stock shall be entitled to receive, in lieu
thereof, an amount in cash (without interest), to be determined by multiplying
(a) $500 by (b) the fractional interest to which such holder would have
otherwise been entitled.
1.3.THE CLOSING. Upon the satisfaction or waiver of all conditions set
forth in Article 6 of this Agreement, the closing (the "Closing") of the Merger
shall take place at the offices of Gibson, Dunn & Crutcher LLP, 333 S. Grand
Avenue, Los Angeles, California 90071, at 5:00 p.m. on August 8, 1997, or such
other place, time and date as TMC and the Company may mutually select (with the
date of the Closing being referred to herein as the "Closing Date").
2
<PAGE> 8
1.4. EFFECTIVE TIME. Pursuant to Delaware Law and California Law, the
Certificate of Merger shall be filed, simultaneously with the Closing, in the
offices of the Secretary of State of the State of Delaware and the Secretary of
State of the State of California. The Merger shall become effective immediately
upon the filing of the Certificate of Merger with the office of the Secretary of
State of the State of Delaware (the "Effective Time").
1.5. EXEMPTION FROM REGISTRATION. The TMC Merger Shares will be issued
in a transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and exempt from registration or qualification
under the California Corporate Securities Law (the "California Securities Act")
and any other applicable state securities laws.
1.6. RESTRICTED SECURITIES. The TMC Merger Shares will be subject to
the restrictions and obligations imposed pursuant to Article 5 hereof, as well
as restrictions under applicable securities laws (as referenced in Section 3.4
hereof).
1.7. SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES; STATUS OF
OUTSTANDING Certificates. The conversion of shares of Company Capital Stock into
the TMC Merger Shares as provided for by this Agreement shall occur
automatically at the Effective Time without further action by the holders
thereof. Until surrendered, all of the certificates held by each Shareholder
that prior to the Effective Time represented shares of Company Capital Stock
shall, in the aggregate, be deemed to evidence that number and class of TMC
Merger Shares to which such Shareholder is entitled pursuant to Section 1.2 of
this Agreement, as set forth on Exhibit C. At the Closing and at any time
thereafter, each Shareholder upon presentation to TMC of all of the certificates
theretofore representing all of the shares of Company Capital Stock held by such
Shareholder (as set forth on Exhibit C) shall be entitled to receive from TMC,
in exchange for and upon the surrender of all of such Shareholder's Company
Capital Stock certificates, certificates representing the number and class(es)
of TMC Merger Shares to which the holder of such certificates is entitled
pursuant to Section 1.2 of this Agreement (as set forth on Exhibit C), and TMC
shall cause such certificates with respect to such TMC Merger Shares to be
issued to such Shareholder promptly after such presentation. In the case of lost
or destroyed certificates representing shares of Company Capital Stock, the
Shareholder shall submit proof of loss or destruction and such indemnity as
shall be required by TMC.
1.8. DISSENTERS' RIGHTS. The Shareholders, as all of the holders of
Company Capital Stock, have and, prior to the Effective Time, TMC, as the sole
stockholder of Acquisition Sub, will have approved this Agreement and the
Transactions, and, therefore, no person shall be entitled to exercise the
dissenters' rights as set forth in Chapter 13 of the California Law or Section
262 of the Delaware Law.
1.9. TAX-FREE REORGANIZATION. The parties intend to adopt the Agreement
as a plan of reorganization within the meaning of Section 354 of the Code, and
to consummate the Merger in accordance with Section 368(a)(1)(A) of the Code.
3
<PAGE> 9
1.10. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION.
(a) The Certificate of Incorporation and Bylaws of Acquisition
Sub, as in effect at the Effective Time, shall be (until amended or repealed as
provided by law) the Certificate of Incorporation and Bylaws, respectively, of
the surviving corporation.
(b) The directors and officers of the surviving corporation
immediately following the Effective Time shall be the directors and officers of
Acquisition Sub immediately prior to the Effective Time (until their successors
are elected or appointed and qualified).
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Shareholders, jointly and severally, represent and warrant to TMC
and Acquisition Sub as follows:
2.1. ORGANIZATION AND STANDING.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to so qualify would, individually or in the aggregate, have a
Material Adverse Effect. Whenever used in this Article 2, "Material Adverse
Effect" shall mean a material adverse effect on the business, assets, prospects,
condition (financial or otherwise) or results of operations of the Company or
the ability of the Company to consummate the Transactions.
(b) Schedule 2.1(b) sets forth a complete and accurate list of (i)
each location where the Company maintains an office or personnel or owns or
leases real property, and (ii) each state or other jurisdiction in which the
Company is legally qualified to transact business.
(c) The Company is a holding company. Except as set forth on
Schedule 2.1(c), the Company does not undertake, and has not undertaken, any
business other than the holding of the assets referenced in Sections 2.8(b) and
(c).
4
<PAGE> 10
(d) The Company has made available to TMC complete and accurate
copies of its Articles of Incorporation and Bylaws, its minute books, containing
minutes of all of its directors', board committees' and shareholders' meetings
(as well as any actions taken by written consent) and stock books. Each set of
minutes (or action taken by written consent) contained in the minute books
accurately reflect the actions that were taken by the indicated body. The
meetings of directors, board committees or shareholders referred to in the
minutes were duly called and held, and the signatures contained on all documents
in the minute books and stock books are the true signatures of the persons
purporting to have signed the same.
2.2. CAPITALIZATION.
(a) The authorized capital of the Company consists of (i) 50,000
shares of Common Stock, without par value (the "Common Stock"), of which 30,933
shares are issued and outstanding; (ii) 61,866 shares of Class A Stock, without
par value, non-voting (the "Class A Stock"), of which 24,150 shares are issued
and outstanding; (iii) 30,933 shares of Class B Stock, without par value (the
"Class B Stock"), of which 1,412 shares are issued and outstanding; and (iv)
30,933 shares of Class C Stock, without par value (the "Class C Stock"), of
which 24,108 shares are issued and outstanding. Except as set forth in the
preceding sentence there are no outstanding shares of capital stock of the
Company and there exist no (i) outstanding options, warrants or other rights to
purchase or subscribe for any equity securities or other ownership interests of
the Company, (ii) indebtedness or securities directly or indirectly convertible
into or exchangeable for any equity securities of the Company, or (iii) any
other obligations, rights, agreements or arrangements, whether absolute or
contingent, with respect to the issuance of any equity securities of the
Company. Exhibit C accurately sets forth the record ownership of all issued and
outstanding shares of Company Capital Stock.
(b) All of the issued and outstanding shares of Company Capital
Stock have been duly authorized and validly issued, are fully paid and
non-assessable, and were issued in full compliance with all applicable federal
and state laws, rules and regulations and were not issued in violation of any
preemptive rights. The Company has no obligation, whether absolute or
contingent, to repurchase any of the issued and outstanding shares of Company
Capital Stock.
(c) Except as set forth on Schedule 2.2 and except for any
restrictions imposed by applicable state and federal securities laws, there is
no right of first refusal, co-sale right, right of participation, right of first
offer, option or other restriction on transfer applicable to any shares of
Company Capital Stock. Except as set forth on Schedule 2.2, the Company is not a
party to, or subject to, any agreement that affects or relates to the voting or
giving of written consent with respect to any shares of Company Capital Stock,
and there is no agreement between or among any Shareholders to such effect.
2.3. SUBSIDIARIES. Except as set forth on Schedule 2.3, the Company
does not own or hold, directly or indirectly, an interest or investment in any
corporation, partnership, business, trust or other entity, except for shares of
TMC Capital Stock. The Company has no obligations, whether absolute or
contingent, to purchase or acquire any equity security or other ownership
interest in any other business entity.
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2.4. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transactions, and all corporate action on its part necessary for
such execution, delivery, performance and consummation has been duly taken. The
Agreement and the Transactions have been unanimously approved by all of the
holders of all classes of the Company Capital Stock.
(b) The execution and delivery by the Company of this Agreement do
not, and the performance and consummation of the Transactions will not, result
in or give rise to (with or without the giving of notice or the lapse of time,
or both) any conflict with, breach or violation of, or default, termination,
forfeiture or acceleration of obligations under, or result in any lien by virtue
of, any terms or provisions of (i) its Articles of Incorporation or Bylaws, (ii)
any statute, rule or regulation, or any judicial, governmental, regulatory or
administrative decree, order, writ or judgment, directive, interpretation or
other requirement applicable to the Company or its assets, or (iii) except as
set forth on Schedule 2.4, any material agreement, lease or other instrument to
which it is a party or by which it or any of its assets may be bound.
(c) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of the Company
for the consummation by it of the Transactions, except the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
the Secretary of State of the State of California.
(d) This Agreement has been duly and validly executed and
delivered by the Company and is the legal, valid and binding obligation of the
Company, enforceable against it in accordance with the terms hereof, except as
such enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) subject to general equitable principles.
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2.5. LICENSES AND PERMITS. The Company has, and at all times has held,
all permits, licenses, orders, authorizations, registrations, qualifications,
approvals and other analogous instruments (collectively, "Permits") (and each is
in full force and effect) as required by applicable law for the purpose of
conducting its business or owning its properties or both, in each jurisdiction
in which it does business or owns property or in which such Permits are
otherwise required and where the failure to have such Permits would have a
Material Adverse Effect. The Company is in compliance with all such Permits,
except where non-compliance would not have a Material Adverse Effect. There are
no proceedings pending or, to the knowledge of the Shareholders, threatened to
revoke or terminate any such presently existing Permits and the Shareholders
know of no reason why any such Permit would not be renewed in the ordinary
course. The Company has made all filings and registrations and the like
necessary or required by law to conduct its business, except where the failure
to make such filings and registrations would not have a Material Adverse Effect.
2.6. FINANCIAL STATEMENTS.
(a) The Company has delivered to TMC complete copies of (y) its
audited balance sheets as of October 31, 1996, 1995, and 1994 and the related
audited statements of income and retained earnings and cash flows for the years
then ended and (z) its unaudited balance sheet as of July 31, 1997 and the
related unaudited statement of income and retained earnings for the period from
October 31, 1996, through July 31, 1997 (collectively, the "Company
Financials"). Except as set forth on Schedule 2.6, the Company Financials (i)
have been prepared from the books and records of the Company, in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
with prior periods and (ii) present fairly the financial position of the Company
as of the respective dates and the results of its operations and cash flows for
the periods then ended.
(b) Except as set forth on Schedule 2.6, there is no outstanding
claim, liability or obligation of any nature, whether absolute, accrued,
contingent or otherwise, other than the liabilities and obligations reflected on
the latest balance sheet included in the Company Financials, except for (i)
liabilities and obligations for the fees and expenses charged by Merrill Lynch &
Co. and Irell & Manella LLP in connection with the Transactions; (ii)
liabilities and obligations (not exceeding $100,000, in the aggregate) incurred
in the ordinary course of business consistent with past practice since the date
of the most recent balance sheet included in the Company Financials; and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected as liabilities in the
Company Financials.
2.7. MATERIAL ADVERSE CHANGES. Since October 31, 1996, except as is set
forth on Schedule 2.7, there has not occurred:
(a) Any events, circumstances or developments of any character
that have caused, or are reasonably likely to cause, a Material Adverse Effect;
(b) Any increase in the indebtedness or liabilities of the Company
over the level thereof as reflected on the most recent balance sheet included in
the Company
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Financials (except as contemplated by this Agreement), or any
mortgage, pledge or encumbrance on any of the assets of the Company;
(c) Any amendment or modification of, or waiver with respect to,
any Material Agreement (as defined below), or any termination of any agreement
that would have been a Material Agreement were such agreement in existence on
the date hereof;
(d) Any creation of any written or oral agreement, contract,
commitment or transaction involving the Company that extends beyond the first
anniversary of the date hereof or that involves obligations or payments
thereunder in excess of $50,000;
(e) Any transaction by the Company, whether or not covered by the
foregoing, not in the ordinary course of business and consistent with past
practice, including, without limitation, any purchase or sale of any asset
having a cost or value in excess of $50,000;
(f) Any material alteration in the manner of keeping the books,
accounts or records of the Company, or in the accounting practices therein
reflected;
(g) Any declaration or payment of any dividends or distributions
by the Company (other than as reflected in the Company Financials), any
acquisition or redemption by the Company of any of its equity securities or
(except for this Agreement) any transaction between the Company and one or more
of its officers, directors, any of the Shareholders (including for this purpose
any trustees or beneficiaries of any Shareholder that is a trust) or any
affiliates thereof; or
(h) Any agreement, commitment or understanding to do any of the
things described in subsections (a) through (g) of this Section 2.7.
2.8. ASSETS; REAL PROPERTY.
(a) Except as set forth in Schedules 2.8(a) or (b) the Company has
good and marketable (and, in the case of Real Property, as defined below, fee
simple absolute) title to all of the assets reflected on the Company Financials
(except for assets sold in the ordinary course of business, consistent with past
practice, since the date of the latest balance sheet included in the Company
Financials), free and clear of all liens, mortgages, pledges, charges, security
interests, encumbrances, title defects, leases, options to purchase, material
restrictions or adverse claims of any nature whatsoever which, individually or
in the aggregate, would have a Material Adverse Effect on the Company or on the
value or the current or intended use of such asset.
(b) Set forth on Schedule 2.8(b) is a complete and correct list of
all assets owned by the Company having a value in excess of $50,000.
(c) Schedule 2.8(c) sets forth a complete and correct description
of each parcel of real property (collectively, the "Real Property") owned or
used by the Company (including properties co-owned with others).
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<PAGE> 14
(i) No portion of the Real Property contains, or is being or
has been used in any manner at any previous time for the storage, disposal,
treatment, processing, production, refinement, generation or other handling of,
waste contamination, oils or petroleum products, PCBs, asbestos, or other waste,
compound, substance or material the use, release, disposal, presence or storage
of which is restricted, or regulated, or required to be reported, or could give
rise to liability or an obligation to abate or remediate, under any
"Environmental Protection Law," as such term is defined below (hereinafter
"Hazardous Substances").
(ii) There is not present at, under, in or emanating from, any
of the Real Property, any Hazardous Substances in soil, ground water,
improvements or otherwise.
(iii) No condition exists on or with respect to any of the
Real Property that violates any federal, state, local, or other law (including
the common law), regulation, code, order, or rule (an "Environmental Protection
Law"), or requires reporting to any governmental authority or that may give rise
to any liability under any Environmental Protection Law.
(iv) No portion of the Real Property contains underground
tanks of any type, or any materials containing PCBs or any asbestos or contains
any above-ground, surface or sub-surface conditions that constitute, or that
through the passage of time may constitute if not abated, a public or private
nuisance or a trespass.
(v) No portion of the Real Property has been designated,
listed, or identified in any manner by the United States Environmental
Protection Agency (the "EPA") or any other federal, state or local agency or
governmental entity under or pursuant to any Environmental Protection Law as a
site which has been reported to have had or which has had a release of Hazardous
Substances or as a hazardous waste or hazardous substance disposal or removal
site, Superfund or clean-up site or candidate for investigation or remediation
or removal or closure pursuant to any Environmental Protection Law.
(vi) Neither the Company nor any of its affiliates has
received at any time a summons, citation, notice, directive, letter or other
communication, written or oral (an "Environmental Notice"), from the EPA or any
other federal, state, local or other governmental agency or instrumentality,
related to any portion of the Real Property, including, without limitation,
actual or possible releasing, spilling, leaking, pumping, pouring, emitting,
emptying, dumping or disposing of Hazardous Substances, and there exist no facts
that would be the basis for the Company or any of its affiliates receiving any
such Environmental Notice.
(vii) The Real Property complies with, and is currently
operated in accordance with, all applicable ordinances, laws, rules,
regulations, statutes, codes and orders affecting such Real Property or the
possession, use, occupancy or operation thereof promulgated by any federal,
state, local or other governmental agency or instrumentality (including, without
limiting the generality of the foregoing, the Americans With Disabilities Act,
health and safety codes, and all applicable zoning ordinances) and any and all
liens, encumbrances, agreements, covenants, conditions and restrictions
affecting the Real Property or the owner or occupant thereof. Neither the
Company nor any affiliate has received any notice from any governmental
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<PAGE> 15
agency or instrumentality requiring any repairs or changes to any portion of the
Real Property, except for notices which have been fully complied with.
(viii) All improvements on the Real Property are in good
condition, reasonable wear and tear excepted, and there are no material defects
in any such improvements which would be likely to preclude the use of the
improvements for the uses for which they are now being put. There are no defects
in any such improvements which would pose an unreasonable risk to the life or
health of any person.
(ix) The Company has been advised that TMC has obtained an
appraisal of the Real Property prepared for TMC by Buss-Shelger Associates (the
"Appraisal"). To the best knowledge of the Shareholders, the facts upon which
the Appraisal was based are accurate in all material respects.
(x) The Company has no notice of any pending or threatened
proceeding in eminent domain or otherwise which would affect the Real Property,
or any portion thereof, nor does the Company know of any facts which might give
rise to such action or proceeding.
(xi) The Company has no knowledge of any plan, study or effort
of any governmental authority or agency or of any nongovernmental person or
entity which in any way would materially affect the use of the Real Property, or
any portion thereof.
(xii) To the Company's best knowledge, there are no intended
public improvements which will result in any charge being levied or assessed
against, or in the creation of any lien upon the Real Property or any portion
thereof.
(xiii) The Real Property has not generated revenues in excess
of $5,000,000 since 1993.
(xiv) All taxes, assessments, charges and impositions
(collectively, "Real Property Impositions") which now constitute or may
constitute a lien on any of the Real Property have been paid before delinquency,
except those Real Estate impositions which are not yet payable.
(xv) The exercise of the right to use or maintain any easement
on or against any of the Real Property in accordance with the terms of such
easement will not damage any of the improvements on or of any of the Real
Property, and shall not interfere with the use or occupancy of any of the Real
Property.
(d) The representations and warranties contained in Section 2.8(c)
shall survive and continue to be enforceable notwithstanding any investigation,
and any knowledge of inaccuracy, by TMC or Acquisition Sub, it being agreed that
TMC and Acquisition Sub are entitled to be indemnified pursuant to Section
7.2(a) hereof against any Losses resulting from an inaccuracy in the
representations and warranties contained in Section 2.8(c) regardless of whether
any or all of them had knowledge that such representations and warranties are
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<PAGE> 16
inaccurate. The parties hereto acknowledge that they are both aware that certain
of the representations and warranties made by the Shareholders in Section 2.8(c)
may be inaccurate and that such representations and warranties are not intended
to attempt to represent that certain statements are in fact true, but rather are
intended to clarify that TMC and Acquisition Sub are entitled to be indemnified
against any Losses resulting from any inaccuracies in such representations and
warranties.
2.9. MATERIAL AGREEMENTS AND RELATIONSHIPS.
(a) Except as set forth on Schedule 2.9, the Company is not a
party to or subject to any oral or written:
(i) joint venture, partnership or other contract or
arrangement presently in effect involving the sharing of profits or losses;
(ii) agreement presently in effect relating to the purchase or
acquisition, by merger or otherwise, of a significant portion of its business,
assets or securities by any other person, or of any other person by it, other
than as contemplated herein;
(iii) agreement presently in effect containing a covenant or
covenants which purport to limit its ability or right to engage in any lawful
business activity material to it or to compete with any person or entity in a
business material to it;
(iv) agreement presently in effect involving payments to or
obligations of it in excess of $50,000, not otherwise described in this Section
2.9;
(v) agreement that relates to the borrowing or lending by the
Company of any money or the guaranty by the Company of any obligation of another
in excess of $50,000;
(vi) agreement not terminable on 60 days notice or less or
with a performance obligation on the part of the Company due more than 6 months
from today's date;
(vii) agreement that creates or continues or, upon the
occurrence of some future event, would create any material claim, lien, charge
or encumbrance against, or right of any third party with respect to, any
material asset of the Company;
(viii) agreement that affects the ownership, use, development,
operation, or management of the Real Property; or
(ix) agreement with any of its directors or officers, any
Shareholder, or any trustee or beneficiary of any of the Shareholders.
The term "Material Agreements" means the agreements of the Company required to
be disclosed on Schedule 2.9.
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(b) The Company has performed all material obligations required to
be performed by it on or prior to the date hereof under each Material Agreement
to which it is a party, except for such failures to perform, defaults, breaches,
or violations under such instruments or obligations that would not have a
Material Adverse Effect.
2.10. EMPLOYEE BENEFITS.
(a) The Company has only one employee, Mr. Warren B. Williamson.
The Company has not had any other employees during the last three years (and
shall have no employees by the Effective Time).
(b) Neither the Company nor any of its "ERISA Affiliates" sponsors
or has ever sponsored, maintained, contributed to, or incurred an obligation to
contribute to, or in respect of, any "Employee Pension Benefit Plan" or "Benefit
Arrangement" (as such terms are defined below).
(c) For purposes of this Section 2.10, the following definitions
shall apply:
(i) "Benefit Arrangement" means any benefit arrangement that
is not an Employee Benefit Plan, including without limitation (A) any employment
or consulting agreement, (B) any arrangement providing for insurance coverage or
workers' compensation benefits, (C) any incentive bonus or deferred bonus
arrangement, (D) any arrangement providing termination allowance, severance or
similar benefits, (E) any equity compensation plan, (F) any deferred
compensation plan, and (G) any compensation policy and practice maintained by
the Company covering any employees, former employees, directors and former
directors of the Company or the beneficiaries of any of them.
(ii) "Employee Benefit Plan" means any employee benefit plan,
as defined in Section 3(3) of ERISA.
(iii) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(iv) "ERISA Affiliate" of any person means any other person
that, together with such person as of the relevant measuring date under ERISA,
was or is required to be treated as a single employer under Section 414 of the
Internal Revenue Code of 1986.
2.11. COMPLIANCE WITH LAWS. The Company has complied in all material
respects with all foreign, federal, state, local and county laws, ordinances,
regulations, judgments, orders, decrees or rules of any court, arbitrator or
governmental, regulatory or administrative agency or entity applicable to the
Company, its assets or its business, except in such cases where non-compliance
would not have a Material Adverse Effect. The Company has not received any
governmental notice of any violation or alleged violation by the Company of any
such laws, rules, regulation or orders.
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2.12. ABSENCE OF LITIGATION. Except as set forth on Schedule 2.12, the
Company is not a party to any litigation, claim, arbitration, investigation or
other proceeding, nor, to the best knowledge of the Shareholders, is there any
such litigation, claim, arbitration, investigation or other proceeding
threatened against the Company. Neither the Company, the Shareholders, nor any
of their respective officers or directors is bound by any judgment, decree,
injunction, ruling or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator or
any other person that relates to the Company.
2.13. NO BROKERS. Except as set forth in Schedule 2.13, the Company is
not obligated for the payment of fees or expenses of any broker or finder in
connection with the origin, negotiation or execution of this Agreement or in
connection with the Transactions.
2.14. TAXES.
(a) Definitions. For purposes of this Agreement:
(i) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, (B) any liability
for payment of amounts described in clause (A) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law and (C) liability
for the payment of amounts described in clauses (A) or (B) as a result of any
tax sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and the term "Tax" means any
one of the foregoing Taxes; and
(ii) the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
(b) The Company has accurately prepared and timely filed all
Returns required to have been filed. The Company will accurately prepare and
timely file all Returns required to be filed after the date of this Agreement
and on or prior to the Closing, and will provide TMC the reasonable opportunity
to review and comment on any such Return prior to its filing.
(c) The Company has timely paid all Taxes required to have been
paid by it. The Company will timely pay all Taxes that are required to be paid
after the date of this Agreement and on or prior to the Closing.
(d) Except as set forth on Schedule 2.14: (i) none of the Returns
of the Company have been audited or are under audit by any tax authority, and
the Company has not
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received notice of a forthcoming audit of its Returns; (ii) no claim has been
made by a Tax authority in a jurisdiction where the Company does not file
Returns that such entity is or may be subject to Tax by that jurisdiction; (iii)
no extensions or waivers of statutes of limitations with respect to the Returns
have been given by or requested from the Company; and (iv) no power of attorney
granted by the Company with respect to Taxes is in force.
(e) There are no liens for any material amount of Taxes (other
than for current Taxes not yet due and payable) upon the assets of the Company.
(f) The Company is not a party to or bound by any tax indemnity,
tax sharing or tax allocation agreement.
(g) The Company has not ever been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, or a member of
combined, consolidated or unitary group for state, local or foreign Tax
purposes. The Company has not made an election under Section 1361 of the Code or
any predecessor provision or any similar provision for state, local or other Tax
purposes. The Company has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state, local or foreign income Tax law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provision of state, local or foreign
income Tax law) apply to any disposition of any asset owned by it. The Company
has not made a consent dividend election under Section 565 of the Code.
(h) The Company has not agreed to make, nor is it required to
make, any adjustment under Sections 481(a) or 263A of the Code or any comparable
provision of state or foreign tax laws by reason of a change in accounting
method or otherwise. The Company has always used and continues to use the
accrual method of accounting for federal and state income and franchise Tax
purposes. The Company is not a party to or bound by any closing agreement, offer
in compromise or similar agreement with any Taxing authority.
(i) The Company is not, and has not been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(j) Except as set forth in Schedule 2.14, to the knowledge of the
Shareholders, as of the date hereof, no Shareholder is other than a United
States person within the meaning of the Code.
(k) Except as set forth in Schedule 2.14, the Company does not
have a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country, and the Company has not engaged in a trade or business within any
foreign country. The Company has not made a "waters-edge election" pursuant to
California Revenue and Tax Code Section 25110.
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(l) Except as set forth on Schedule 2.14, the Company is not party
to any joint venture, partnership, or other arrangement or contract which could
reasonably be expected to be treated as a partnership for federal income tax
purposes.
(m) Except as set forth on Schedule 2.14, the unpaid Taxes of the
Company as of the date hereof are not materially in excess of the unpaid
liability for Taxes reflected on the Company Financials.
(n) All material elections with respect to Taxes affecting the
Company as of the date of this Agreement that are not readily identifiable on
the Returns heretofore provided to or made available to TMC and any attachments
thereto are set forth in Schedule 2.14. No material election with respect to
Taxes will be made after the date of this Agreement without the prior written
consent of TMC.
(p) Schedule 2.14 sets forth all state, local or foreign
jurisdictions in which the Company is or at any time during the past five years
has been subject to Tax. Other than in the State of California, at no time
during the five-year period ending on the date hereof did the Company engage in
the following activities in any state, local or foreign jurisdiction: (i)
perform more than an insignificant amount of services or solicit business using
its own employees, or (ii) engage in or do business, or (iii) own property.
(q) Schedule 2.14 sets forth all Returns the due dates for which
(including any valid extensions of time currently in effect) are sixty (60) or
fewer days following the Closing, and the Taxes for which estimated or final
payments may, based on current operations of the Company, become due sixty (60)
or fewer days following the Closing.
2.15. COMPLIANCE WITH INSTRUMENTS. Except as set forth in Schedule
2.15, the Company is not (and would not be with the giving of notice or the
passage of time or both) in violation of, conflict with, breach of or default
under any term or provision of its Articles of Incorporation or Bylaws, or any
agreement, arrangement, contract, lease or other instrument to which it is bound
or its properties are subject, except where such violation, conflict, breach or
default would not have a Material Adverse Effect.
2.16. NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 2.16, (a) the Company has not granted any general or special powers of
attorney and (b) the Company has no obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, consignor, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
2.17. TAX-FREE REORGANIZATION. The Company has not engaged in any
transaction which it believes would preclude the Transactions from constituting
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS
Each of the Shareholders severally and not jointly represents and
warrants to TMC and Acquisition Sub as follows:
3.1. ORGANIZATION. Such Shareholder is duly organized and validly
existing and (if a corporation) in good standing under the laws of the state of
its organization or incorporation.
3.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Such Shareholder has full power and authority to execute,
deliver and perform its obligations under this Agreement and the Registration
Rights Agreement (as defined herein) and to consummate the Transactions, and all
necessary action required to have been taken by or on behalf of such Shareholder
(including any actions required pursuant to its trust instrument or charter
documents, as applicable) for such execution, delivery, performance and
consummation has been duly taken.
(b) The execution and delivery by such Shareholder of this
Agreement and the Registration Rights Agreement do not, and the performance and
consummation of the Transactions by such Shareholder will not, result in or give
rise to (with or without the giving of notice or the lapse of time, or both) any
conflict with, breach or violation of, or default, termination, forfeiture or
acceleration of obligations under, or result in any lien by virtue of, any terms
or provisions of (i) its Declaration (as defined below), other trust instruments
or charter documents (as applicable); (ii) any statute, rule or regulation, or
any judicial, governmental, regulatory or administrative decree, order, writ,
judgment, directive, interpretation or other requirement applicable to such
Shareholder, its assets, or, in the case of a Trust, its Trustees (as such terms
are defined below) or their assets; or (iii) any material agreement or other
instrument to which it is a party or to which any of its assets is subject, or
in the case of a Trust, to which any of its Trustees is a party or to which any
of such Trustees' assets are subject.
(c) With respect to any Shareholder which is a trust (a "Trust"):
(i) such Trust has not been revoked, modified, or amended in any manner which
would cause the representations and warranties made by such Trust herein to be
untrue or incorrect or cause this Agreement to be unenforceable against such
Trust; (ii) each trustee (a "Trustee") of such Trust has accepted appointment as
a trustee of such Trust under the declaration of trust relating to such Trust
(the "Declaration"), and, by the terms of such Trust, is qualified and possesses
the necessary trust powers to act, and does act as a Trustee pursuant to such
Declaration; (iii) the Trustees who have executed and delivered this Agreement
and the Registration Rights Agreement on behalf of such Trust possess the full
power and authority to execute and deliver the Agreement and the Registration
Rights Agreement and to consummate the Transactions, and, in so doing, are
properly acting and exercising their powers under such Declaration; (iv) the
Trustees of who have executed and delivered this Agreement and the Registration
Rights
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Agreement on behalf of such Trust constitute all of the currently acting
Trustees of such Trust, and the signature of such Trustees is all that is
required for the execution and delivery of this Agreement and the Registration
Rights Agreement and to authorize the consummation of the Transactions; and (v)
no other signature or other proceedings on the part of such Trust or any of its
Trustees or beneficiaries is necessary to approve this Agreement and the
Registration Rights Agreement or to authorize the execution and delivery, and
the performance of the terms, hereof and thereof.
(d) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of such
Shareholder for the consummation by it of the Transactions, except the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and the Secretary of State of the State of California.
(e) This Agreement and the Registration Rights Agreement have been
duly and validly authorized, executed and delivered by such Shareholder, and are
such Shareholder's legal, valid and binding obligations, enforceable against it
in accordance with the respective terms hereof and thereof, except as such
enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) subject to general equitable principles.
3.3. OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date hereof, such
Shareholder is the sole record and beneficial owner of the number of shares of
Company Capital Stock set forth opposite its name in Exhibit C hereto, free and
clear of all liens, encumbrances, mortgages, pledges, security interests,
restrictions, prior assignments and claims of any kind or nature whatsoever
(except for those created by this Agreement).
3.4. NO REGISTRATION; INVESTMENT INTENT.
(a) Such Shareholder understands that the TMC Merger Shares are
being offered and sold without registration under the Securities Act of 1933, as
amended (the "Act"), based upon an exemption provided under the Act and without
qualification or registration under the securities laws of California, in
reliance upon the representations and warranties made by the Shareholders
herein, and the TMC Merger Shares may not be re-sold, transferred, assigned or
otherwise disposed of other than pursuant to an effective registration statement
or pursuant to an exemption from such registration requirements.
(b) Such Shareholder agrees that it shall not sell, transfer,
assign, pledge or otherwise dispose of any TMC Merger Shares (or any interest
therein) unless (a) pursuant to an effective registration statement or (b) such
Shareholder delivers to TMC an opinion of counsel, reasonably acceptable to TMC,
that such sale, transfer, assignment, pledge or other disposition is exempt from
registration under the Act. The stock certificates representing the TMC Merger
Shares will have a legend to that effect, and TMC may give appropriate "stop
transfer" instructions to its transfer agent.
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(c) Such Shareholder understands that it may be deemed an
"affiliate" of TMC and/or the Company, as such term is used for purposes of
Rules 144 and 145 under the Act, in which case any disposition of TMC Merger
Shares by such Shareholder may be subject to the requirements of such rules
(although this shall not be deemed an admission that such Shareholder is such an
affiliate).
(d) Such Shareholder is acquiring the TMC Merger Shares to be
issued to it in the Merger for investment purposes for its own account and
without a view to distribution or resale thereof (except in compliance with
applicable law).
(e) Such Shareholder acknowledges that it has had the right to ask
questions of and receive answers from TMC and its officers and representatives
and from the Company and its officers and representatives to obtain such
information concerning TMC, the Company and the terms and conditions of the
Merger and the Transactions as such Shareholder deems necessary prior to making
an investment decision with respect to the Transactions, including with respect
to the TMC Merger Shares. Such Shareholder has such knowledge and experience in
financial and business matters so as to enable such Shareholder to evaluate the
merits and risks of an investment in the TMC Merger Shares. Such Shareholder is
able to bear the economic risk of the investment in the TMC Merger Shares.
(f) Such Shareholder is domiciled in the State of California, and
files income tax returns as a person or entity that is domiciled in that State.
3.5. NO BROKER. Such Shareholder is not obligated for the payment of
fees or expenses of any broker or finder in connection with the origin,
negotiation or execution of this Agreement or in connection with the
Transactions.
3.6. TAX-FREE REORGANIZATION. Such Shareholder has not engaged in any
transaction which it believes would preclude the Transactions from constituting
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF
TMC AND ACQUISITION SUB
TMC and Acquisition Sub, jointly and severally, represent and warrant
to the Company and the Shareholders as follows:
4.1. ORGANIZATION AND STANDING.
Each of TMC and Acquisition Sub is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to so qualify would have a Material
Adverse
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Effect. Whenever used in this Article 4, "Material Adverse Effect" shall mean a
material adverse effect on the business, assets, prospects, condition (financial
or otherwise) or results of operations of TMC and its subsidiaries (on a
consolidated basis), or the ability of TMC to consummate the Transactions.
4.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Each of TMC and Acquisition Sub has all requisite corporate
power and authority (and no vote or approval of the stockholders of TMC is
required for it) to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement, as the case may be, and to
consummate the Transactions and subject to the approval by the Board of
Directors of TMC, all corporate action on their respective parts necessary for
such execution and delivery and, performance and consummation has been duly
taken. A special committee of the Board of Directors of TMC (the "Special
Committee") is considering this Agreement and the Transactions and will make a
recommendation with respect thereto to the Board of Directors of TMC.
(b) Subject to the approval by the Board of Directors of TMC, the
execution and delivery by each of TMC and Acquisition Sub, as the case may be,
of this Agreement, the Certificate of Merger and the Registration Rights
Agreement do not, and, the performance and consummation of the Transactions will
not, result in or give rise to (with or without the giving of notice or the
lapse of time, or both) any conflict with, breach or violation of, or default,
termination, forfeiture or acceleration of obligations under, any terms or
provisions of its (i) Certificate of Incorporation or Bylaws, (ii) any statute,
rule or regulation or any judicial, governmental, regulatory or administrative
decree, order, writ, judgment, directive, interpretation or other requirement
applicable to it or its assets, or (iii) any material agreement, lease or other
instrument to which it is a party or by which it or any of its assets may be
bound (other than, in the case of items (ii) and (iii) immediately above, such
breaches, violations, defaults, terminations, forfeitures or accelerations as
would not have a Material Adverse Affect).
(c) Assuming that the representations and warranties contained in
Section 3.4 are true, no consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of TMC or
Acquisition Sub for the consummation by each of TMC and Acquisition Sub, as the
case may be, of the Transactions, except any approvals or filings required under
state "blue sky" laws, the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of California, the filing of the Certificates of Designation with the
Secretary of State of the State of Delaware and, with respect to the
Registration Rights Agreement, the registration, filings and other requirements
contemplated thereby.
(d) This Agreement, the Certificate of Merger, the Certificates of
Designation and the Registration Rights Agreement have been duly and validly
executed and delivered by TMC and/or Acquisition Sub, as applicable, and are the
legal, valid and binding obligations of TMC and/or Acquisition Sub, as
applicable, enforceable against them in
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<PAGE> 25
accordance with the respective terms hereof and thereof, except as such
enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) subject to general equitable principles.
4.3. FINANCIAL STATEMENTS AND SEC REPORTS.
(a) During the past twelve months, TMC has timely filed all
required forms, reports, statements and documents with the Securities and
Exchange Commission (the "Commission"), all of which have complied in all
material respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). TMC has
delivered or made available to the Company and the Shareholders true and
complete copies of (i) TMC's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, (ii) TMC's proxy statement relating to TMC's annual
stockholders meeting held May 8, 1997, and (iii) all other forms, reports,
statements and documents filed by TMC with the Commission pursuant to the
Exchange Act since March 31, 1997 (collectively, the "TMC Reports"). As of their
respective dates, the TMC Reports (including the financial statements contained
therein) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The audited consolidated financial statements contained in
TMC's Annual Report on Form 10-K for the year ended December 31, 1996 were
prepared in accordance with generally accepted accounting principles ("GAAP")
and present fairly TMC's consolidated financial position and the results of its
operations as of December 31, 1996 and for the year then ended. The unaudited
condensed consolidated financial statements contained in TMC's Quarterly Report
on Form 10-Q for the three months ended March 31, 1997 were prepared on a basis
consistent with the audited consolidated financial statements for the year ended
December 31, 1996 and, in the opinion of management, include all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation. The results of operations for interim periods are not necessarily
indicative of the results that may be expected for the fiscal year.
(c) Absence of Certain Changes. Except as otherwise disclosed in
the TMC Reports, since December 31, 1996 there has not been any events,
circumstances or developments of any character that have, or would reasonably be
expected to have, a Material Adverse Effect.
4.4. TMC CAPITAL STOCK. The shares of TMC Merger Shares to be issued to
the holders of Company Capital Stock as contemplated hereunder (i) are duly
authorized; (ii) when issued pursuant to the terms of this Agreement, will be
validly issued, fully paid, non-assessable and not subject to any preemptive
rights; and (iii) with respect to the shares of the Series A Common Stock to be
issued in the Merger, will be listed on the New York Stock Exchange (the
"NYSE"). The shares of Series A Common Stock issuable upon conversion of the
Series C-1 and C-2 Preferred Stock shall be listed on the NYSE on or before the
time that any shares of Series C-1 or C-2 Preferred Stock are converted.
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4.5. NO BROKERS. Neither TMC nor Acquisition Sub is obligated for the
payment of fees or expenses of any broker or finder in connection with the
origin, negotiation or execution of this Agreement in connection with the
Transactions, except for the fees and expenses of (a) Goldman, Sachs & Co. which
has been employed by TMC as its financial advisor; and (b) Morgan Stanley & Co.
Incorporated, which has been employed by the Special Committee as its financial
advisor.
4.6. TAX-FREE REORGANIZATION. Neither TMC nor Acquisition Sub has
engaged in any transaction which it believes would preclude the Transactions
from constituting a "reorganization" within the meaning of Section 368(a)(1)(A)
of the Code.
4.7. CAPITAL STOCK.
(a) The authorized capital stock of TMC consists of
(i) 500,000,000 shares of Series A Common Stock, $1 par value
(the "Series A Common Stock"), of which 68,997,386 shares were issued and
outstanding as of May 8, 1997;
(ii) 100,000,000 shares of Series B Common Stock, $1 par value
(the "Series B Common Stock"), of which no shares were issued and outstanding as
of May 8, 1997;
(iii) 300,000,000 shares of Series C Common Stock, $1 par
value (the "Series C Common Stock"), of which 26,620,836 shares were issued and
outstanding as of May 8, 1997;
(iv) 900,000 shares of Series A Preferred Stock, $1 par value
(the "Series A Preferred Stock"), of which 823,568 shares were issued and
outstanding as of May 8, 1997;
(v) 8,438,822 shares of Series B Preferred Stock, $1 par value
(the "Series B Preferred Stock"), of which no shares were issued and outstanding
as of May 8, 1997; and
(vi) subject to the filing of the Certificate of Designation
attached as Exhibit B-1 hereto, 380,972 shares of Series C-1 Preferred Stock, $1
par value (the "Series C-1 Preferred"), of which (A) no shares are issued and
outstanding at the time that this Agreement is being executed and (B) 380,972
shares (being part of the TMC Merger Shares) shall be issued and outstanding
immediately after the Effective Time;
(vii) subject to the filing of the Certificate of Designation
attached as Exhibit B-2 hereto, 245,100 shares of Series C-2 Preferred Stock, $1
par value (the "Series C-2 Preferred"), of which (A) no shares are issued and
outstanding at the time that this Agreement is being executed and (B) 245,100
shares (being part of the TMC Merger Shares) shall be issued and outstanding
immediately after the Effective Time; and
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(viii) 23,661,178 (on the date of this Agreement, being
reduced upon the filing of the Certificates of Designation by the number of
shares set forth therein) shares of Preferred Stock without designation (the
"Undesignated Preferred Stock"), of which no shares were issued and outstanding
as of May 8, 1997.
(b) All of the issued and outstanding shares of TMC Capital Stock
are duly authorized, validly issued, fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws.
(c) The authorized capital stock of Acquisition Sub consists of
1,000 shares of common stock, par value $.01 per share, of which 100 shares are
issued and outstanding. All of such outstanding shares are owned by TMC and are
validly issued, fully paid and nonassessable.
ARTICLE 5.
COVENANTS
5.1. CONDUCT OF BUSINESS. The Shareholders shall not permit the Company
to, and the Company shall not, enter into any material agreements or take any
other significant actions without the prior written consent of TMC, which
consent shall not be unreasonably withheld. Without limiting the generality of
the foregoing, except as otherwise contemplated by this Agreement, the
Shareholders shall not permit the Company to, and the Company shall not:
(a) Other than in the ordinary course of business consistent with
past practice, set aside or pay any dividend or distribution of assets on its
capital stock to, repurchase any of its capital stock from, or enter into any
transaction with, any of the Shareholders (including any trustees or
beneficiaries thereof), or its directors, officers, employees, agents, or
consultants;
(b) Enter into any agreement or commitment that would be a
Material Agreement if in existence on the date hereof;
(c) Amend, modify or terminate any Material Agreement;
(d) Alter the manner of keeping its books, accounts or records or
the accounting practices therein reflected;
(e) Issue any capital stock or any security convertible into, or
options, warrants or rights to acquire, its capital stock;
(f) Create, incur or assume any indebtedness or guarantee or
otherwise become liable for any obligations of any other person;
(g) Make any loans, advances or new investments;
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(h) cancel any debts owed to it, or settle any claims held by it,
for less than the full amount due;
(i) amend its Articles of Incorporation or Bylaws;
(j) acquire, sell, lease, encumber, transfer or dispose of any of
its assets, other than in the ordinary course of business, consistent with past
practice;
(k) make any changes (including changes in compensation) in its
employment arrangements;
(l) take any action that would, or is reasonably likely to, result
in any of the representations and warranties set forth in Articles 2 and 3 being
untrue or incorrect as of the date made or at the Effective Time;
(m) take any action which would frustrate TMC's and Acquisition
Sub's ability to consummate the Transactions or materially diminish the value of
the Company or the benefits reasonably anticipated by TMC and Acquisition Sub as
a result of the Transactions; or
(n) Agree to do any of the foregoing.
5.2. ACTIONS CONTRARY TO TAX FREE TREATMENT. Each of TMC, the Company,
Acquisition Sub and the Shareholders will not, from the date hereof through and
after consummation of the Merger, knowingly take any action inconsistent with
(or fail to take any action necessary for) the treatment of the Merger as a
"reorganization" described in Section 368(a)(1)(A) of the Code. TMC has no plan
or intention to liquidate Acquisition Sub; to merge Acquisition Sub with or into
another corporation; to sell or otherwise dispose of the stock of Acquisition
Sub except for transfers of stock to corporations controlled by TMC; or to cause
Acquisition Sub to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business or transfers of assets (by
way of a merger or otherwise) to TMC or any corporation controlled by TMC.
5.3. CONTINUITY OF INTEREST AND RESTRICTIONS ON RESALE. Each of the
Shareholders represents, warrants and agrees as follows (except that Section
5.3(b) only applies to Chandler Trust No. 2):
(a) Such Shareholder intends to treat the Merger as a
"reorganization" described in Section 368 of the Code, and understands that one
condition to qualification of the Merger as a reorganization is the retention of
a significant continuing equity interest in Acquisition Sub by the Shareholders,
through their ownership of the TMC Merger Shares.
(b) Such Shareholder has no plan or intention (a "Plan") to, and
agrees that, for a period of two (2) years after the Closing, it shall not,
engage, agree to engage, or enter into any plan, agreement or understanding to
engage, in any sale, exchange, transfer, distribution, pledge, disposition or
other transaction which results in a reduction of such Shareholder's interest
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or risk of ownership in, whether directly or indirectly (such actions being
collectively referred to as a "Sale"), the TMC Merger Shares received by such
Shareholder in the Merger such that the aggregate fair market value, as of the
Effective Time, of TMC Merger Shares subject to such Sales would exceed fifty
percent (50%) of the aggregate fair market value, determined at such time, of
the TMC Merger Shares. For purposes of this Section 5.3, shares of Company
Capital Stock (or the portion thereof) with respect to which a Sale occurs prior
to and in contemplation of the Merger, shall be considered shares of outstanding
Company Capital Stock exchanged for TMC Merger Shares in the Merger and then
disposed of following the Merger pursuant to a Plan.
(c) Such Shareholder has not engaged, agreed to engage, or entered
into any plan, agreement or understanding to engage, in a Sale of any Company
Capital Stock in contemplation of the Merger. Other than as required by the
Agreement, such Shareholder will not engage, agree to engage, or enter into any
plan, agreement or understanding to engage, in a Sale of any Company Capital
stock prior to the Merger.
(d) Such Shareholder does not intend to take a position on any
federal or state income tax return that is inconsistent with the treatment of
the Merger as a "reorganization" for federal and state income tax purposes.
(e) Such Shareholder has been informed of, and has discussed with
such Shareholder's legal and financial advisors, the requirements for treatment
of the Merger as a "reorganization" within the meaning of Section 368(a)(1)(A)
of the Code.
5.4. NO TRANSFER OF COMPANY CAPITAL STOCK. During the period from the
date of this Agreement until the Effective Time, the Shareholders shall not
sell, transfer or otherwise dispose of any of the shares of Company Capital
Stock.
5.5. BEST EFFORTS. Each party will use its reasonable best efforts to
cause all conditions to the Closing to be satisfied as soon as practicable. Each
party shall use its reasonable best efforts to obtain any consents necessary or
desirable in connection with the consummation of the Transactions.
5.6. REGISTRATION RIGHTS; NYSE LISTING. TMC shall provide to the
Shareholders certain registration rights pursuant to the terms of a registration
rights agreement (the "Registration Rights Agreement") substantially in the form
previously provided to the Shareholders, which shall be executed by TMC and the
Shareholders on or prior to the Effective Time, and TMC shall cause the shares
of Series A Common Stock to be issued in the Merger to be listed on the NYSE.
The shares of Series A Common Stock issuable upon conversion of the Series C-1
and C-2 Preferred Stock shall be listed on the NYSE on or before the time that
any shares of Series C-1 or C-2 Preferred Stock are converted.
5.7. TERMINATION OF CERTAIN AGREEMENTS. Prior to the Effective Time,
the Company shall terminate, on terms satisfactory to TMC, the Agreement with
Respect to the Class A Common Stock of the Company, dated March 4, 1966, the
Agreement with Respect to the Class B Shares of the Company, dated December 12,
1982, and any related agreements (collectively, the "Redemption Agreements") and
all other agreements (other than this
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Agreement) between or among the Company and any of the Shareholders, its
directors or officers, and/or any director, officer, trustee or beneficiary of
any of the Shareholders.
ARTICLE 6.
CONDITIONS TO MERGER
6.1. CONDITIONS TO OBLIGATIONS OF TMC, ACQUISITION SUB, THE
SHAREHOLDERS, AND THE COMPANY. The respective obligations of TMC, Acquisition
Sub, the Shareholders and the Company to consummate the Transactions are subject
to satisfaction (or waiver by each party whose obligation is subject to such
condition) of the following conditions:
(a) The parties hereto shall have obtained all consents and
approvals of, and given all required notices to, third parties (including
governmental authorities) required to consummate the Transactions.
(b) Consummation of the Transactions shall not violate any
statute, rule, regulation, order, decree, ruling, injunction or judgment of any
court or governmental body having jurisdiction over any of the parties hereto.
(c) Federal and state securities law exemptions shall be available
for the issuance of the TMC Merger Shares.
(d) TMC, certain of its subsidiaries, Chandler Trust No. 1 and
Chandler Trust No. 2 shall have executed a Limited Liability Company Agreement
with respect to, and formed, TMCT, LLC, a Delaware limited liability company,
and shall have contributed to TMCT, LLC the assets described in a Contribution
Agreement.
6.2. CONDITIONS TO OBLIGATIONS OF TMC AND ACQUISITION SUB. The
obligations of TMC and Acquisition Sub to consummate the Transactions are
subject to satisfaction (or waiver by them) of the following conditions:
(a) All representations and warranties of the Shareholders made
herein shall be true and correct in all material respects as of the date made,
and as of the Closing Date as if made on and as of the Closing Date. Each of the
Company and the Shareholders shall have performed in all material respects all
obligations and agreements undertaken to be performed by them at or prior to the
Closing.
(b) TMC and Acquisition Sub shall have received opinions of (i)
Irell & Manella LLP, counsel to the Company and to Chandler Trust No. 1 and
Chandler Trust No. 2, and (ii) counsel to the other Shareholders, substantially
in the forms set forth in Exhibit D attached hereto.
(c) TMC and Acquisition Sub shall have received an opinion of
Gibson, Dunn & Crutcher LLP, counsel to TMC and Acquisition Sub, regarding
certain tax matters, satisfactory to TMC and Acquisition Sub in form and
substance.
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(d) TMC shall be satisfied that no holders of Company Capital
Stock shall be entitled to exercise dissenters' rights in connection with the
Merger.
(e) All agreements described in Section 5.7 shall have been
terminated to TMC's satisfaction.
(f) The Special Committee shall have recommended that the Board of
Directors of TMC approve this Agreement and the Transactions, and the Board of
Directors of TMC shall have approved this Agreement and the Transactions.
(g) TMC and its counsel shall have received such certificates and
other documents related to the Company, the Shareholders and the Transactions as
they shall reasonably request.
(h) TMC shall have received an opinion of Goldman, Sachs & Co. in
form and substance satisfactory to TMC.
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS. The
obligations of the Company and the Shareholders to consummate the transactions
contemplated hereby are subject to satisfaction (or waiver by them) of the
following conditions:
(a) All representations and warranties of TMC and Acquisition Sub
made herein shall be true and correct in all material respects as of the date
made, and as of the Closing Date as if made on and as of the Closing Date. TMC
and Acquisition Sub shall have performed in all material respects all
obligations and agreements undertaken to be performed by them at or prior to the
Closing.
(b) The Company and the Shareholders shall have received an
opinion of Gibson, Dunn & Crutcher LLP, counsel to TMC and Acquisition Sub,
substantially in the form of Exhibit E attached hereto.
(c) TMC shall have executed and delivered the Registration Rights
Agreement.
(d) The Company, the Shareholders, and their counsel shall have
received such certificates and other documents related to TMC, Acquisition Sub
and the Transactions as they shall reasonably request.
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ARTICLE 7.
INDEMNITY
7.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
NO SUBROGATION.
(a) All representations, warranties, covenants and agreements of
TMC, Acquisition Sub, and the Shareholders in this Agreement shall survive the
execution, delivery and performance of this Agreement, and the consummation of
the Transactions, except as otherwise provided in this Article 7. All
representations and warranties of each party set forth in this Agreement shall
be deemed to have been made again by such party at and as of the Closing Date.
(b) The representations and warranties of TMC, Acquisition Sub and
the Shareholders set forth in this Agreement, and their indemnity obligations
under this Article 7, shall terminate on the second anniversary of the Closing
Date (except to the extent that a claim has been made or notice of a claim has
been provided prior thereto, in which case the relevant representations and
warranties, and the indemnity obligations, shall continue to survive until such
matter is finally resolved) (the "Indemnity Termination Date"); provided,
however, that any representation or warranty by the Shareholders relating to
Taxes, Environmental Protection Laws, Hazardous Substances, ownership of the
Company Capital Stock, or the investment intent of the Shareholders (including
the representations and warranties set forth in Sections 2.8, 2.14, 2.17, 3.3,
3.4 and 5.3) and the indemnity obligations of the Shareholders with respect
thereto shall not terminate until the end of the statute of limitations
applicable to the subject matter of such representation or warranty (and, to the
extent that a claim has been made or notice of a claim has been provided prior
thereto, such representations and warranties, and the indemnity obligations,
shall continue to survive until such matter is finally resolved).
(c) If the Shareholders, or any of them, are determined to be
liable, in respect of an alleged breach by the Company or any Shareholder of, or
default by the Company or any Shareholder under, this Agreement or any of the
agreements or transactions contemplated hereby, then (i) the Shareholders shall
not be subrogated, and hereby waive any right of subrogation, to the rights of
TMC and/or Acquisition Sub against the Company in respect thereof, and (ii) the
Shareholders hereby waive any right to indemnification or contribution from the
Company in respect thereof.
7.2. INDEMNIFICATION OF TMC AND THE SURVIVING CORPORATION.
(a) Joint and Several Indemnity. The Shareholders agree to
indemnify, defend and hold harmless, jointly and severally (with each
Shareholder agreeing with each other Shareholder to be responsible for its pro
rata share of any obligations hereunder) TMC, and Acquisition Sub, and each of
their respective affiliates, successors, assigns, agents and representatives
(collectively, the "Affiliated Parties") against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
remedies and penalties (including, without limitation, interest, penalties,
settlement costs and any legal, accounting or
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<PAGE> 33
other fees and expenses for investigating or defending any claims or threatened
actions) (collectively, "Losses") that TMC, Acquisition Sub or their Affiliated
Parties may incur or suffer in connection with each and all of the following:
(i) Any misrepresentation or inaccuracy of any of the
representations or warranties of the Shareholders contained in Article 2 of this
Agreement;
(ii) Any misrepresentation or inaccuracy of, breach of or
default under any of the representations, warranties or agreements contained in
Section 5.3 of this Agreement;
(iii) Any breach of or default under any covenant, agreement
or obligation of the Company or the Shareholders contained in this Agreement or
any other agreement or instrument contemplated by this Agreement;
(iv) Any liabilities of the Company arising from or relating
to the operations of the Company, prior to the Effective Time (except as
contemplated by Sections 2.6(b) and 2.7 hereof);
(v) Any remediation, monitoring, removal or abatement of
Hazardous Substances on or with respect to any of the Real Property if such
remediation, monitoring, removal or abatement (a) is required by any
Environmental Protection Law or any order or decree of any court or governmental
body, or (b) is reasonably necessary to protect TMC or Acquisition Sub against
potential liability to third parties, or (c) is reasonably necessary to protect
the marketability or value of the Real Property;
(vi) The lease agreement, dated as of September 29, 1994, for
the office space previously leased by the Company and located at 350 West
Colorado Blvd., Pasadena, California;
(vii) Any agreement described in Section 5.7 hereof; and
(viii) Any Tax liabilities of the Company or Acquisition Sub
arising out of the Merger or the Transactions.
(b) Several Indemnity. Each of the Shareholders agrees to
indemnify, defend and hold harmless TMC, Acquisition Sub and their Affiliated
Parties against and in respect of any Losses that TMC, Acquisition Sub or their
Affiliated Parties may incur or suffer in connection with each and all of the
following:
(i) Any misrepresentation in or inaccuracy of any of such
Shareholder's representations or warranties contained in Article 3 of this
Agreement; or
(ii) Any breach of or default under any covenant, agreement or
obligation of such Shareholder contained in this Agreement or any other
agreement or instrument contemplated by this Agreement.
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(c) Limitations. No claim, demand, suit or cause of action shall
be brought against the Shareholders under this Section 7.2 unless and until the
aggregate amount of Losses under this Section 7.2 exceeds $250,000, in which
event TMC, Acquisition Sub and their Affiliated Parties shall be entitled to
indemnification from the Shareholders for all Losses under this Section 7.2 in
excess of $250,000. The aggregate liability of the Shareholders under this
Section 7.2 for all Losses shall not exceed the fair market value at the time of
Closing of the TMC Merger Shares (and, in the case of any Shareholder other than
Chandler Trust No. 2, shall not exceed the fair market value at the time of the
Closing of the TMC Merger Shares received by such Shareholder). None of TMC,
Acquisition Sub, or their Affiliated Parties shall seek or be entitled to
punitive damages from the Shareholders or their Affiliated Parties as to any
matter arising out of or relating to this Agreement or the Transactions.
(d) Disclosure with Respect to Schedules. Any disclosure set forth
on any Schedule hereto shall be deemed to be disclosed on all other Schedules
hereto for the purpose of determining whether any of the representations and
warranties made by the Shareholders contained in this Agreement contain any
misrepresentations or inaccuracies.
7.3. INDEMNIFICATION OF THE SHAREHOLDERS.
(a) Indemnity. TMC agrees to indemnify, defend and hold harmless
the Shareholders and their Affiliated Parties against and in respect of any
Losses that the Shareholders or their Affiliated Parties may incur or suffer in
connection with each and all of the following:
(i) Any misrepresentation in or any inaccuracy of any of TMC's
or Acquisition Sub's representations or warranties contained in Article 4 of
this Agreement
(ii) Any breach of or default under any covenant, agreement or
obligation of TMC or Acquisition Sub contained in this Agreement or any other
agreement or instrument contemplated by this Agreement.
(b) Limitations. No claim, demand, suit or cause of action shall
be brought against TMC under this Section 7.3 unless and until the aggregate
amount of Losses under this Section 7.3 exceeds $250,000, in which event the
Shareholders and their Affiliated Parties shall be entitled to indemnification
from TMC for all Losses under this Section 7.3 in excess of $250,000. The
aggregate liability of TMC under this Section 7.3 shall not exceed the fair
market value of the TMC Merger Shares at the time of Closing. None of the
Shareholders or their Affiliated Parties shall seek or be entitled to punitive
damages from TMC, Acquisition Sub or their Affiliates as to any matter arising
out of or relating to this Agreement or the Transactions.
7.4. PROCEDURE FOR INDEMNIFICATION OF TMC WITH RESPECT TO THIRD-PARTY
CLAIMS.
29
<PAGE> 35
(a) If TMC or any other indemnified party under Section 7.2
determines to seek indemnification with respect to a claim resulting from the
assertion of liability by third parties, TMC shall promptly give written notice
thereof to the Shareholders, including in such notice a brief description of the
facts upon which such claim is based and the amount thereof. The rights of the
TMC or any other party to be indemnified hereunder in respect of claims
resulting from the assertion of liability by third parties shall not be
adversely affected by the failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, the Shareholders are materially
prejudiced thereby. TMC shall select and employ counsel in such case, which
counsel shall be subject to the reasonable approval of the "Shareholders'
Representative" (as defined below), and undertake the defense of such claim. TMC
shall not, without the written consent of the Shareholders' Representative
(which consent shall not be unreasonably withheld), settle or compromise any
such claim or consent to entry of any judgment in respect thereof. The
"Shareholders' Representative" is Warren B. Williamson, or, if he is unable or
unwilling to act in such capacity, William Stinehart Jr., or, if he is unable or
unwilling to act in such capacity, such other person(s) as shall be designated
by Shareholders holding a majority of the voting interest represented by the TMC
Merger Shares (treating any outstanding Series C-1 Preferred or Series C-2
Preferred on an as-converted basis). With respect to any assertion of liability
by a third party that results in an indemnifiable claim, the parties hereto
shall make available to each other all relevant information in their possession
material to any such assertion.
(b) At TMC's option in its sole discretion, indemnification
payments by the Shareholders may be made in shares of TMC Capital Stock valued
at fair market value on the date of any such payment.
(c) Any indemnification payments under this Section 7.4 shall be
treated as an adjustment to the Merger consideration provided in Section 1.2.
7.5. PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS WITH RESPECT TO
THIRD-PARTY CLAIMS.
(a) If the Shareholders or any other indemnified party under
Section 7.3 determine to seek indemnification under Section 7.3(a) with respect
to a claim resulting from the assertion of liability by third parties, the
Shareholders shall promptly give written notice thereof to TMC, including in
such notice a brief description of the facts upon which such claim is based and
the amount thereof. In case any such liability is asserted against the
Shareholders, and the Shareholders notify TMC thereof, TMC will be entitled, if
TMC so elects by written notice delivered to the Shareholders' Representative
within ten business days after receiving the Shareholders' notice, to assume the
defense thereof with counsel reasonably satisfactory to the Shareholders'
Representative. Notwithstanding the foregoing, (i) the Shareholders shall also
have the right to employ their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Shareholders unless the
Shareholders shall have been advised by counsel in writing that there is a
conflict of interest between the Shareholders, on the one hand, and TMC, on the
other, with respect to such claim, in which case the fees and expenses of one
law firm for the Shareholders (to be selected by the Shareholders'
30
<PAGE> 36
Representative and reasonably acceptable to TMC) will be borne by TMC and (ii)
the rights of the Shareholders to be indemnified hereunder in respect of claims
resulting from the assertion of liability by third parties shall not be
adversely affected by their failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, TMC is materially prejudiced
thereby. With respect to any assertion of liability by a third party that
results in an indemnifiable claim, the parties hereto shall make available to
each other all relevant information in their possession material to any such
assertion.
(b) In the event that TMC, within ten business days after receipt
of the aforesaid notice of a claim, fails to assume the defense of the
Shareholders against such claim, the Shareholders shall have the right to select
and employ counsel in such case, which counsel shall be subject to the
reasonable approval of TMC, and to undertake the defense of such claim. The
Shareholders shall not, without the written consent of TMC (which consent shall
not be unreasonably withheld) settle or compromise any claim or consent to the
entry of any judgment in respect thereof.
(c) Notwithstanding anything in this Article 7 to the contrary, if
there is a reasonable probability that a claim may materially adversely affect
the Shareholders, the Shareholders shall have the right to participate (at the
Shareholders' expense) in such defense, compromise, or settlement and TMC shall
not, without the written consent of the Shareholders' Representative (which
consent shall not be unreasonably withheld), settle or compromise any such claim
or consent to entry of any judgment in respect thereof unless such settlement,
compromise, or consent includes as an unconditional term thereof the giving by
the claimant or the plaintiff to the Shareholders a release from all liability
in respect of such claim.
ARTICLE 8.
TERMINATION
8.1. TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing,
this Agreement may be terminated by written consent of TMC, Acquisition Sub and
the Company, notwithstanding approval of the Merger by the shareholders of
Acquisition Sub or the Company.
8.2. TERMINATION BY TMC OR ACQUISITION SUB OR THE COMPANY.
(a) TMC or Acquisition Sub may terminate this Agreement at any
time prior to the Closing by delivery of written notice to the Company, if: (1)
any court having competent jurisdiction or other governmental body shall have
issued an order, decree or ruling or taken any other action which prevents,
restrains, or enjoins the Merger and such order, decree or ruling shall have
become non-appealable; (2) any of the Company or the Shareholders has breached
or violated this Agreement in any material respect and, if such breach or
violation is curable, has failed to cure such violations within twenty days of
receiving written notice thereof; or (3) the Closing has not occurred by 11:59
p.m. on August 10, 1997.
(b) The Company may terminate this Agreement at any time prior to
the Closing by delivery of written notice from the Company to TMC and
Acquisition Sub if:
31
<PAGE> 37
(1) any court having competent jurisdiction or other governmental body shall
have issued an order, decree or ruling or taken any other action which prevents,
restrains, or enjoins the Merger and such order, decree or ruling shall have
become non-appealable; (2) either TMC or Acquisition Sub has breached or
violated this Agreement in any material respect and, if such breach or violation
is curable, has failed to cure such violations within twenty days of receiving
written notice thereof; or (3) the Closing has not occurred by 11:59 p.m. on
August 10, 1997.
8.3. EFFECT OF TERMINATION. In the event that this Agreement is
terminated (a "Termination") as provided in this Article 8, all further
obligations of the parties under this Agreement shall terminate without further
liability of any party to any other party or to the stockholders, directors or
officers of any party
ARTICLE 9.
MISCELLANEOUS
9.1. NOTICES. Unless otherwise provided, all notices or other
communications required or permitted to be given to the parties hereto shall be
in writing and shall be deemed to have been given if personally delivered,
including personal delivery by facsimile, provided that the sender receives
telephonic or electronic confirmation that the facsimile was received by the
recipient and that such facsimile is followed the same day by mailing by
certified or registered mail, return receipt requested, first class postage
prepaid (a "Mailing"), upon receipt of courier delivery or the third day
following a Mailing, addressed as follows (or at such other address as the
addressed party may have substituted by notice pursuant to this Section 9.1):
(a) If to TMC or Acquisition Sub:
The Times Mirror Company
Times Mirror Square
Los Angeles, California 90053
Facsimile: (213) 237-3800
Attention: General Counsel
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Facsimile: (213) 229-7520
Attention: Karen E. Bertero, Esq.
32
<PAGE> 38
(b) If to the Company (until the Effective Time):
Chandis Securities Company
350 West Colorado Blvd., Suite 230
Pasadena, CA 91105
Facsimile: (818) 793-2627
Attention: Warren B. Williamson
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Facsimile: (310) 203-7199
Attention: Alvin G. Segel, Esq.
And with a copy to:
Gibson Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, CA 90067
Facsimile: (310) 551-8741
Attention: William Stinehart, Jr., Esq.
(c) If to the Shareholders, to the addresses
set forth on the signature page:
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Facsimile: (310) 203-7199
Attention: Alvin G. Segel, Esq.
And with a copy to:
Gibson Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, CA 90067
Facsimile: (310) 551-8741
Attention: William Stinehart, Jr., Esq.
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above.
33
<PAGE> 39
9.2. ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement and the
exhibits and schedules hereto and the documents referred to herein constitute
the final, exclusive and complete understanding of the parties with respect to
the subject matter hereof and supersede any and all prior agreements,
understandings and discussions with respect thereto. No variation or
modification of this Agreement and no waiver of any provision or condition
hereof, or granting of any consent contemplated hereby, shall be valid unless in
writing and signed by the party against whom enforcement of any such variation,
modification, waiver or consent is sought. Waivers or consents may be granted to
TMC or Acquisition Sub by the Shareholders' Representative on behalf of, and
shall be binding upon, all of the Shareholders.
9.3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
9.4. PUBLICITY. None of TMC, Acquisition Sub, the Company or the
Shareholders, shall issue any statement or communication to the general public
or the press regarding the Transactions without first providing a copy to, and
using reasonable efforts to consult with (a) the Shareholders' Representative,
with respect to a statement or communication by TMC or Acquisition Sub, or (b)
TMC, with respect to a statement or communication by the Company or any
Shareholder. The requirements of this Section 9.4 shall not apply to any
statements or communications by TMC in response to an inquiry from financial
analysts or press or in any periodic reports to the Commission or stockholders
(other than the first such periodic report filed after the Effective Time).
9.5. SUCCESSORS AND ASSIGNS. None of the Shareholders or the Company,
without the prior express written consent of TMC, may assign this Agreement in
whole or in part. TMC may assign this Agreement, in whole or in part to an
affiliate of TMC; provided, that TMC shall remain obligated hereunder. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
9.6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware as applied to contracts
between Delaware residents made and to be performed entirely within the State of
Delaware (other than the mandatory provisions of the California Law that apply
to the Merger).
9.7. EXPENSES. Except as may otherwise be expressly provided in this
Agreement or any other agreement referenced herein, each party shall pay its own
expenses in connection with this Agreement and the Transactions.
9.8. GENDER AND NUMBER. In this Agreement, unless the context otherwise
requires, the masculine, feminine and neuter genders and the singular and the
plural include one another.
9.9. CONSTRUCTION OF AGREEMENT. No party hereto, nor its respective
counsel, shall be deemed the drafter of this Agreement for purposes of
construing the provisions of this
34
<PAGE> 40
Agreement, and all provisions of this Agreement shall be construed in accordance
with their fair meaning, and not strictly for or against any party hereto.
9.10. CONSENT TO JURISDICTION AND FORUM SELECTION. The parties hereto
agree that all actions or proceedings arising in connection with this Agreement
shall be tried and litigated exclusively in the State and Federal courts located
in the County of Los Angeles, State of California. The aforementioned choice of
venue is intended by the parties to be mandatory and not permissive in nature,
thereby precluding the possibility of litigation between the parties with
respect to or arising out of this Agreement in any jurisdiction other than that
specified in this paragraph. Each party hereby waives any right it may have to
assert the doctrine of forum non conveniens or similar doctrine or to object to
venue with respect to any proceeding brought in accordance with this paragraph,
and stipulates that the State and Federal courts located in the County of Los
Angeles, State of California shall have in personal jurisdiction and venue over
each of them for the purpose of litigating any dispute, controversy, or
proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this paragraph by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement.
9.11. ATTORNEYS' FEES. If either party to this Agreement shall bring
any action, suit, counterclaim, appeal or arbitration for any relief against the
other to enforce the terms hereof or to declare rights hereunder (collectively,
an "Action"), the losing party shall pay to the prevailing party a reasonable
sum for attorneys' fees and costs incurred in bringing and prosecuting such
Action and/or enforcing any judgment, order, ruling, or award. For the purposes
of this paragraph, attorneys' fees shall include, without limitation, fees
incurred in discovery, postjudgment motions and collection actions, and
bankruptcy litigation. "Prevailing party" within the meaning of this paragraph
includes, without limitation, a party who agrees to dismiss an Action on the
other party's payment of the sums allegedly due or performance of the covenants
allegedly breached, or who obtains substantially the relief sought by it.
9.12. CONSENT TO ISSUANCE OF SERIES C-1 AND C-2 PREFERRED STOCK. The
Company, in its capacity as a holder of Series A Preferred Stock, hereby
consents to the authorization and issuance of the Series C-1 and Series C-2
Preferred Stock, as described herein.
35
<PAGE> 41
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
THE TIMES MIRROR COMPANY
By: /s/ Thomas Unterman
------------------------------------------------
Title: Senior Vice President and Chief Financial
Officer
CHANDIS ACQUISITION CORPORATION
By: /s/ Thomas Unterman
------------------------------------------------
Title: President
CHANDIS SECURITIES COMPANY
By: /s/ William Stinehart, Jr.
------------------------------------------------
Title: Assistant Secretary
<PAGE> 42
THE SHAREHOLDERS OF CHANDIS SECURITIES COMPANY:
Torrey Pacific Corporation, a California corporation
By: /s/ Jim Staver
------------------------------------------------
Title: President
---------------------------------------------
Address:
c/o Mrs. Marian Staver
110 Stratford Court
Del Mar, California 92014
Kathryn Kirkpatrick Matheu Trust U/T/A Dated 8/26/92
By: /s/ Kathryn Kirkpatrick Snyder
------------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
------------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
------------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
------------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
2921 Laurel Drive
Sacramento, California 95864
Nairn Kirkpatrick Trust U/T/A Dated 8/26/82
By: /s/ Kathryn Kirkpatrick Snyder
------------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
------------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
------------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
------------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
<PAGE> 43
Address:
7677 Greenridge Way
Fair Oaks, California 95628
Francesca Kirkpatrick Trust U/T/A Dated 8/26/82
By: /s/ Kathryn Kirkpatrick Snyder
------------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
------------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
------------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
------------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
1071 4th Avenue
Napa, California 94559
Wendy Kirkpatrick Branscum Trust U/T/A Dated 8/26/82
By: /s/ Kathryn Kirkpatrick Snyder
------------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
------------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
------------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
------------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
1050 45th Street
Sacramento, California 95864
<PAGE> 44
Harry C. Kirkpatrick Grandchildren's Irrevocable Trust U/T/A
Dated 2/24/95
By: /s/ Kathryn Kirkpatrick Snyder
------------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
------------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
------------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
------------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
Address:
Bank of America, Attn: Mr. Kielborn
P. O. Box 471
Sacramento, California 95814
Kirkpatrick Community Property Trust
U/T/A Dated 9/11/96
By: /s/ Harry C. Kirkpatrick
------------------------------------------------
Harry C. Kirkpatrick, Co-Trustee
By: /s/ Rosanne E. Kirkpatrick
------------------------------------------------
Rosanne E. Kirkpatrick, Co-Trustee
Address:
9641 Spring Valley Road
Marysville, California 95901
<PAGE> 45
CHANDLER TRUST NO. 2
By: /s/ Gwendolyn Garland Babcock
------------------------------------------------
Gwendolyn Garland Babcock, as trustee of Chandler
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Bruce Chandler
------------------------------------------------
Bruce Chandler, as trustee of Chandler Trust
No. 2 under Trust Agreement dated June 26,
1935
By: /s/ William Stinehart, Jr.
------------------------------------------------
William Stinehart, Jr., as trustee of Chandler
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Warren B. Williamson
------------------------------------------------
Warren B. Williamson, as trustee of Chandler Trust
No. 2 under Trust Agreement dated June 26, 1935
By: /s/ Camilla Chandler Frost
------------------------------------------------
Camilla Chandler Frost, as trustee of Chandler
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Douglas Goodan
------------------------------------------------
Douglas Goodan, as trustee of Chandler Trust No.
2 under Trust Agreement dated June 26, 1935
By: /s/ Judy C. Webb
------------------------------------------------
Judy C. Webb, as trustee of Chandler Trust No. 2
under Trust Agreement dated June 26, 1935
Address:
Attention: Warren B. Williamson
350 West Colorado Boulevard, Suite 230
Pasadena, California 91105
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATION
OF THE
PREFERRED STOCK, SERIES C-1
(PAR VALUE $1.00 PER SHARE)
OF
THE TIMES MIRROR COMPANY
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
The undersigned duly authorized officer of The Times Mirror Company, a
corporation organized and existing under the General Corporation Law (the
"DGCL") of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the Company, the Board of Directors
of the Company (the "Board" or "Board of Directors") on August 8, 1997 adopted
the following resolution creating 380,972 shares of Preferred Stock, Series C-1
(in addition to the shares of Preferred Stock, Series C-2, which were also
created on such date), par value $1.00 per share, each designated as set forth
below:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by provisions of the Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), and the DGCL,
the issuance of a series of the Company's preferred stock, par value $1.00 per
share (the "Preferred Stock"), which shall consist of 380,972 shares of
Preferred Stock be, and the same hereby is, authorized, and the Board of
Directors hereby fixes the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions, set forth
in the Certificate of Incorporation that may be applicable to the Preferred
Stock) as follows:
1. Designation and Rank. The designation of such series of the
Preferred Stock authorized by this resolution shall be the Preferred Stock,
Series C-1 (the "Series C-1 Preferred Stock"). The number of shares of Series
C-1 Preferred Stock shall be 380,972. The Series C-1 Preferred Stock shall rank
prior to the Common Stock (as hereinafter defined) of the Company
1
<PAGE> 2
and to all other classes and series of equity securities of the Company now or
hereafter authorized, issued or outstanding (the Common Stock and such other
classes and series of equity securities not expressly designated as ranking on a
parity with or senior to the Series C-1 Preferred Stock collectively may be
referred to herein as the "Junior Stock") as to dividend rights and rights upon
liquidation, winding up or dissolution of the Company, other than (a) the
Company's (i) 8% Cumulative Convertible Preferred Stock, Series A (the "Series A
Preferred Stock") and (ii) Series C-2 Preferred Stock (the "Series C-2 Preferred
Stock"), with respect to which the Series C-1 Preferred Stock is expressly
designated as ranking on a parity as to dividend rights and rights upon
liquidation, winding up or dissolution of the Company; and (b) any other classes
or series of equity securities of the Company expressly designated as ranking on
a parity with (collectively with the Series A Preferred Stock and the Series C-2
Preferred Stock, the "Parity Stock") or senior to (the "Senior Stock") the
Series C-1 Preferred Stock as to dividend rights and rights upon liquidation,
winding up or dissolution of the Company. The Series C-1 Preferred Stock shall
be subject to creation of Senior Stock, Parity Stock and Junior Stock, to the
extent not expressly prohibited by the Certificate of Incorporation or Section
5(c)(i) or 5(c)(ii) hereof, with respect to the payment of dividends and upon
liquidation.
2. Cumulative Dividends; Priority.
(a) Payment of Dividends.
(i) The holders of record of shares of Series C-1 Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, cumulative cash dividends
from the date of issuance of such shares at the rate per annum per share of 5.8%
(i.e., $29 per annum), as adjusted from time to time pursuant to Section 2(c)
hereof (the "Dividend Rate"). Dividends shall be payable quarterly on the tenth
day of March, June, September and December in each year (or if such day is a
non-business day, on the next business day) with respect to the quarter ending
on the last day of such month, commencing on September 10, 1997 (each of such
dates a "Dividend Payment Date"). No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series C-1 Preferred Stock that may be in arrears. Notwithstanding the
foregoing, the Dividend Rate for the period (the "Initial Dividend Period") from
the date of issuance of such shares through September 30, 1997 (payable on
September 10, 1997) shall be such rate as is necessary such that the holders of
the Series C-1 Preferred Stock receive, on the first Dividend Payment Date, the
amount of $12.48076 per share.
(ii) Each declared dividend shall be payable to holders of
record as they appear on the stock books of the Company at the close of business
on such record dates, not more than 60 calendar days preceding the applicable
Dividend Payment Dates therefor, as are determined by the Board of Directors
(each of such dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of January,
April, July, and October of each year and shall end on and include the last day
of March, June, September and December, respectively of such year. Dividends on
the shares of Series C-1 Preferred Stock shall be fully cumulative and shall
accrue (whether or not declared) from the first
2
<PAGE> 3
day of each Dividend Period; provided, however, that the amount of any dividend
payable for any Dividend Period shorter than a full Dividend Period (other than
the Initial Dividend Period, which shall be as set forth in Section 2(a)(i)
hereof), shall be computed on the basis of a 360-day year composed of twelve
30-day months and the actual number of days elapsed in the relevant Dividend
Period.
(b) Priority as to Dividends.
(i) Subject to the provisions hereof, no cash dividend or
other distribution (other than in Common Stock or other Junior Stock) shall be
declared or paid or set apart for payment on Preferred Stock that constitutes
Parity Stock or Junior Stock with respect to dividends for any Dividend Period
unless full dividends on the Series C-1 Preferred Stock for the immediately
preceding Dividend Period have been or contemporaneously are declared and paid
(or declared and a sum sufficient for the payment thereof set apart for such
payment). When dividends are not paid in full (or declared and a sum sufficient
for such full payment not so set apart) upon the Series C-1 Preferred Stock and
any Parity Stock, all dividends declared upon shares of Series C-1 Preferred
Stock and any Parity Stock shall be declared pro rata with respect thereto, so
that in all cases the amount of dividends declared per share on the Series C-1
Preferred Stock and such Parity Stock shall bear to each other the same ratio
that accrued dividends for the then-current Dividend Period per share on the
shares of Series C-1 Preferred Stock (which shall include any accumulation in
respect of unpaid dividends for prior Dividend Periods) and dividends, including
accumulations, if any, of such Parity Stock, bear to each other.
(ii) Except as provided in the preceding paragraph, full
dividends on the Series C-1 Preferred Stock must be declared and paid or set
apart for payment for the immediately preceding Dividend Period before (A) any
cash dividend or other distribution (other than in Common Stock or other Junior
Stock) shall be declared or paid or set aside for payment upon the Common Stock
or any other Junior Stock of the Company or (B) any Common Stock or any other
Junior Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock), except by redemption into
or exchange for Junior Stock or (C) any Series C-1 Preferred Stock or Parity
Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock). The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company if under the preceding
sentence, the Company would be prohibited from purchasing or otherwise acquiring
such shares at such time and in such manner.
(iii) No dividend shall be paid or set aside for holders of
the Series C-1 Preferred Stock for any Dividend Period unless full dividends on
any Preferred Stock that constitutes Senior Stock with respect to dividends for
that period have been or contemporaneously are declared and paid (or declared
and a sum sufficient for the payment thereof set apart for such payment).
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(c) Adjustment to Dividend Rate.
(i) The Dividend Rate shall not be adjusted prior to the end
of the Dividend Period ending on December 31, 2000.
(ii) The Dividend Rate for each subsequent year (commencing
with the year that begins on January 1, 2001) (each an "Adjustment Year") shall
be adjusted upward by an amount equal to the product of (A) the Dividend Rate
for the year immediately prior to the relevant Adjustment Year multiplied by (B)
the Adjustment Percentage (as defined immediately below). The "Adjustment
Percentage" is equal to the percentage by which (A) the dividend paid by the
Company on its Common Stock for the fiscal year (the "Comparison Year")
immediately prior to the Adjustment Year exceeds (B) the dividend paid by the
Company on its Common Stock for the fiscal year (the "Base Year") immediately
prior to the Comparison Year (such percentage being the "Common Dividend
Percentage Increase"). If the dividend paid on the Common Stock in the
Comparison Year does not exceed the dividend paid on the Common Stock in the
Base Year (i.e., if there is no Common Dividend Percentage Increase), the
Adjustment Percentage for such Year shall be zero. The Adjustment Percentage for
2001 and each subsequent Adjustment Year shall be calculated by the Company
prior to (and notice shall be given to holders at their registered addresses on
or promptly after) the first Dividend Payment Date for such Adjustment Year.
Absent manifest error, the Company's calculations hereunder shall be final and
conclusive.
(iii) Increases in the Dividend Rate are subject to the
following limitations: (A) the Adjustment Percentage shall, under no
circumstances, exceed 15% prior to the Adjustment Year beginning January 1,
2005, and (B) the Dividend Rate shall, under no circumstances, exceed 8.4% per
annum (the "Maximum Dividend Rate").
(iv) If the Dividend Rate has not increased to the Maximum
Dividend Rate by the Adjustment Year commencing on January 1, 2005, then for
such and all future Adjustment Years until the Maximum Dividend Rate is reached,
the Adjustment Percentage shall be increased to equal 150% of the Common
Dividend Percentage Increase for the relevant fiscal years (and the limitation
set forth in section 2(c)(iii)(A) above shall not apply).
3. Conversion at Option of the Company.
(a) General.
(i) The shares of the Series C-1 Preferred Stock shall not be
convertible at the option of the Company except upon the later to occur of (x)
the date on which a written notice has been mailed or otherwise distributed by
the Company to each record holder of the Series C-1 Preferred Stock stating that
the assets of either Chandler Trust No. 1 or Chandler Trust No. 2 have been
distributed to the beneficiaries thereof and (y) February 1, 2025 (such later
date being the "Convertibility Date"). Subject to and upon compliance with the
provisions of this Section 3, shares of Series C-1 Preferred Stock may be
converted, in whole or in part, at the election of the Company by resolution of
the Board of Directors, upon notice as provided in Section 3(b), at any time or
from time to time on or after the Convertibility Date. Conversion
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shall be made by delivering to the holders of Series C-1 Preferred Stock, in
respect of the conversion of each share of Series C-1 Preferred Stock so
converted, certificates representing the number of fully paid and non-assessable
shares (the "Conversion Shares") of Series A Common Stock, par value $1.00 per
share, of the Company ("Series A Common Stock," which, together with the Series
B Common Stock, par value $1.00 per share, and Series C Common Stock, par value
$1.00 per share, of the Company are referred to herein as the "Common Stock")
equal to the quotient of (1) $500 plus accrued and unpaid dividends on such
shares of Series C-1 Preferred Stock to the Conversion Date (as hereinafter
defined) divided by (2) the Common Share Value (as hereinafter defined). The
aggregate number of shares of Common Stock that a holder of shares of Series C-1
Preferred Stock that have been converted is entitled to receive pursuant to this
Section 3 or Section 4 is hereinafter referred to as the "Aggregate Conversion
Shares."
(ii) The "Common Share Value" shall mean the average of the
closing prices of the Series A Common Stock for the 20 days during which trades
of Series A Common Stock occurred immediately preceding the Valuation Date (as
defined below), as reported in The Wall Street Journal, Western Edition, or, if
no closing prices were so reported, the average of the mean between the high bid
and low asked price per share of Series A Common Stock for each of the 20 days
during which trades of Series A Common Stock occurred immediately preceding the
Valuation Date in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if the Series A Common Stock is not then quoted by any
such organization, the average of the mean between the closing bid and asked
prices per share of Series A Common Stock for each of the 20 days during which
trades of Series A Common Stock occurred immediately preceding the Valuation
Date, as furnished by a professional market maker making a market in the Series
A Common Stock, or, if there is no such market maker, the fair market value of a
share of Series A Common Stock determined by whatever method the Board of
Directors reasonably determines to use. In the case of a conversion pursuant to
this Section 3, the "Valuation Date" shall mean the Conversion Notice Date (as
defined in Section 3(b)), and in the case of any conversion pursuant to Section
4, the "Valuation Date" shall mean the Conversion Time (as hereinafter defined).
(b) Notice of Conversion. Notice of any conversion, setting forth
(i) the Conversion Date (as defined in Section 3(c) hereof), (ii) a statement
that dividends on the shares of Series C-1 Preferred Stock to be converted will
cease to accrue on such Conversion Date, and (iii) the method(s) by which the
holders may surrender the certificates representing shares of Series C-1
Preferred Stock that have been converted and obtain the Conversion Shares
therefor, shall be mailed, postage prepaid, on a date (the "Conversion Notice
Date") that is at least 15 days but not more than 45 days prior to said
Conversion Date to each holder of record of the Series C-1 Preferred Stock to be
converted at his, her or its address as the same shall appear on the books of
the Company. If less than all the shares of the Series C-1 Preferred Stock owned
by such holder are then to be converted, the notice shall specify the number of
shares thereof that are to be converted and the numbers of the certificates
representing such shares.
(c) Method of Conversion. The surrender of any certificate
evidencing shares of Series C-1 Preferred Stock that have been converted shall
be made by the holder thereof by the
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surrender of the certificate or certificates formerly representing the shares of
Series C-1 Preferred Stock converted (with proper endorsement or instruments of
transfer) to the Company at the principal office of the Company (or such other
office or agency of the Company as the Company may designate in writing to the
holder or holders of the Series C-1 Preferred Stock) at any time during its
usual business hours. Shares of Series C-1 Preferred Stock called for conversion
shall be deemed to have been converted, and the shares of Series A Common Stock
to be issued in respect of the shares of Series C-1 Preferred Stock converted
shall be deemed to have been issued, as of the close of business on the date
fixed for conversion (the "Conversion Date"), without regard to when
certificates evidencing such Series C-1 Preferred Stock are surrendered pursuant
to this Section 3(c) or certificates evidencing such Series A Common Stock are
issued pursuant to Section 3(d). The rights of the holder of Series C-1
Preferred Stock that has been converted, except for the right to receive the
Aggregate Conversion Shares therefor in accordance herewith (and any cash
payments to which such holder is entitled pursuant to Section 3(e) hereof),
shall cease on the Conversion Date. In the case of lost or destroyed
certificates evidencing ownership of shares of Series C-1 Preferred Stock that
have been converted, the holder shall submit proof of loss or destruction and
such indemnity as shall be required by the Company.
(d) Issuance of Certificates for Series A Common Stock. As soon as
practicable after its receipt of any certificate or certificates formerly
evidencing ownership of shares of Series C-1 Preferred Stock that have been
converted, the Company shall issue and shall deliver to the person for whose
account such certificates formerly representing shares of Series C-1 Preferred
Stock were so surrendered, or on his, her or its written order, a certificate or
certificates for the number of full shares of Series A Common Stock issuable
upon the conversion of such shares of Series C-1 Preferred Stock and a check or
cash payment (if any) to which such holder is entitled with respect to
fractional shares as determined by the Company, in accordance with Section 3(e)
hereof.
(e) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
C-1 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series C-1 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(f) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series C-1
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
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(g) Common Stock Reserved for Conversion. The Company shall at
all times from and after the Conversion Date reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series C-1 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series C-1
Preferred Stock.
4. Conversion at the Option of Holders.
(a) General. After the later to occur of (i) the date on which a
written notice has been mailed or otherwise distributed by the Company to each
record holder of the Series C-1 Preferred Stock stating that the assets of
either Chandler Trust No. 1 or Chandler Trust No. 2 have been distributed to the
beneficiaries thereof and (ii) February 1, 2025, the holder of any Series C-1
Preferred Stock may convert pursuant to this Section 4 all or any part (in whole
number of shares only) of the Series C-1 Preferred Stock held by such holder
into fully paid and non-assessable shares of Series A Common Stock. The number
of shares of Series A Common Stock into which a share of Series C-1 Preferred
Stock may be converted shall be equal to the quotient of (1) $500 plus accrued
and unpaid dividends on such share of Series C-1 Preferred Stock to the
Conversion Time divided by (2) the Common Share Value.
(b) Method of Conversion. Each conversion of Series C-1 Preferred
Stock shall be effected by the surrender of the certificate or certificates
representing the shares of Series C-1 Preferred Stock to be converted (with
proper endorsement or instruments of transfer) to the Company at the principal
office of the Company (or such other office or agency of the Company as the
Company may designate in writing to the holder or holders of the Series C-1
Preferred Stock) at any time during its usual business hours, together with
written notice by the holder of such Series C-1 Preferred Stock stating that
such holder desires to convert the shares of Series C-1 Preferred Stock, or a
stated number of such shares, represented by such certificate or certificates,
which notice shall also specify the name or names (with addresses) and
denominations in which the certificate or certificates for the Series A Common
Stock shall be issued and shall include instructions for delivery thereof. Any
conversion pursuant to this Section 4 shall be deemed to have been effected as
of the close of business on the date on which such certificate or certificates
shall have been surrendered and such notice shall have been received, and at
such time (the "Conversion Time") the rights of the holder of Series C-1
Preferred Stock (or specified portion thereof) as such holder shall cease and
the person or persons in whose name or names any certificate or certificates for
shares of Series A Common Stock are to be issued upon conversion shall be deemed
to have become the holder or holders of record of the shares of Series A Common
Stock represented thereby. In the case of lost or destroyed certificates
evidencing ownership of shares of Series C-1 Preferred Stock to be converted,
the holder shall submit proof of loss or destruction and such indemnity as shall
be required by the Company.
(c) Issuance of Certificates for Series A Common Stock. As soon as
practicable after its receipt of any certificate or certificates evidencing
ownership of shares of
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Series C-1 Preferred Stock to be converted pursuant to this Section 4, the
Company shall issue and shall deliver to the person for whose account such
shares of Series C-1 Preferred Stock were so surrendered, or on his, her or its
written order, a certificate or certificates for the number of full shares of
Series A Common Stock issuable upon the conversion of such shares of Series C-1
Preferred Stock and a check or cash payment (if any) to which such holder is
entitled with respect to fractional shares as determined by the Company, in
accordance with Section 4(d) hereof.
(d) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
C-1 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series C-1 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(e) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series C-1
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(f) Common Stock Reserved for Conversion. The Company shall at all
times from and after the Conversion Time reserve and keep available out of its
authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series C-1 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series C-1
Preferred Stock.
5. Voting Rights.
(a) General Voting Rights. Except as expressly provided
hereinafter in this Section 5, or as otherwise from time to time required by
applicable law, the Series C-1 Preferred Stock shall have no voting rights.
(b) Voting Rights Upon Dividend Arrears.
(i) Right to Elect Directors. In the event that an amount
equal to six quarterly dividend payments on the Series C-1 Preferred Stock shall
have accrued and be unpaid (the occurrence of such contingency marking the
beginning of a period herein referred to as the "Default Period," which shall
extend until such time as all accrued and unpaid dividends for all previous
Dividend Periods and for the current Dividend Period on all shares of Series C-1
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Preferred Stock then outstanding shall have been declared and paid or declared
and a sum sufficient for such full payment set apart for payment), the holders
of the Series C-1 Preferred Stock shall have the right, voting separately as a
class together with holders of shares of the Series C-2 Preferred Stock and any
other Parity Stock upon which like voting rights have been conferred and are
exercisable (such shares of Series C-1 Preferred Stock, shares of Series C-2
Preferred Stock, and other shares of Parity Stock are hereinafter referred to as
"Voting Parity Stock"), to elect two members of the Board of Directors, each
member to be in addition to the then authorized number of directors, at the next
annual meeting of stockholders or at a special meeting called as described below
and thereafter until the Default Period shall have ended.
(ii) Special Meeting; Written Consent. Whenever such voting
right shall vest, it may be exercised initially by the vote of the holders of a
plurality of the voting power of Series C-1 Preferred Stock and Voting Parity
Stock present and voting as a single class, in person or by proxy, at a special
meeting of holders of the Series C-1 Preferred Stock and Voting Parity Stock or
at the next annual meeting of stockholders. A special meeting for the exercise
of such right shall be called by the Secretary of the Company as promptly as
possible, and in any event within 10 days after receipt of a written request
signed by the holders of record of at least 25% of the outstanding shares of the
Series C-1 Preferred Stock and Voting Parity Stock, subject to any applicable
notice requirements imposed by law or regulation. Notwithstanding the provisions
of this paragraph, no such special meeting shall be required to be held during
the 90-day period preceding the date fixed for the annual meeting of
stockholders. Any action required or permitted to be taken at any such special
meeting of such holders may be taken by a consent or consents in writing of such
stockholders, setting forth the action so taken, which consent or consents shall
be signed by the holders of Series C-1 Preferred Stock and Voting Parity Stock
representing a majority of the voting power of shares of such Series C-1
Preferred Stock and Voting Parity Stock and shall be delivered to the Company in
the manner set forth from time to time in the DGCL.
(iii) Term of Office of Directors. Any director who shall have
been elected by holders of the Series C-1 Preferred Stock and Voting Parity
Stock entitled to vote in accordance with this subparagraph (b) shall hold
office for a term expiring (subject to the earlier expiry of such term, as set
forth below) at the annual meeting of stockholders at which the term of office
of his class shall expire and during such term may be removed at any time, only
for cause, by, and only by, the affirmative vote of the holders of record of a
majority of the voting power of the Series C-1 Preferred Stock and Voting Parity
Stock present and voting as a single class, in person or by proxy, at a special
meeting of such stockholders called for such purpose, and any vacancy created by
such removal may also be filled at such meeting. A meeting for the removal of a
director elected by the holders of the Series C-1 Preferred Stock and Voting
Parity Stock and the filling of the vacancy created thereby shall be called by
the Secretary of the Company as promptly as possible and in any event within 10
days after receipt of a request therefor signed by the holders of not less than
25% of the aggregate outstanding voting power of the Series C-1 Preferred Stock
and Voting Parity Stock, subject to any applicable notice requirements imposed
by law or regulation. Such meeting shall be held at the earliest practicable
date thereafter, provided that no such meeting shall be required to be held
during the 90-day period preceding the date fixed for the annual meeting of
stockholders. Simultaneously with the
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expiration of the Default Period, the terms of office of all directors elected
by the holders of the shares of Series C-1 Preferred Stock and the Voting Parity
Stock pursuant hereto then in office shall, without further action, thereupon
terminate unless otherwise required by law. Upon such termination the number of
directors constituting the Board of Directors of the Company shall, without
further action, be reduced by two, subject always to the increase of the number
of directors pursuant to the foregoing provisions in the case of the future
right of holders of the shares of Series C-1 Preferred Stock and Voting Parity
Stock to elect directors as provided above.
(iv) Vacancies. Any vacancy caused by the death, resignation
or removal of a director who shall have been elected in accordance with this
subparagraph (b) may be filled by the remaining director so elected or, if not
so filled, by a vote of holders of a plurality of the voting power of the Series
C-1 Preferred Stock and Voting Parity Stock present and voting as a single
class, in person or by proxy, at a meeting called for such purpose. Unless such
vacancy shall have been filled by the remaining director as aforesaid, such
meeting shall be called by the Secretary of the Company at the earliest
practicable date after such death or resignation, and in any event within 10
days after receipt of a written request signed by the holders of record of at
least 25% of the outstanding shares of the Series C-1 Preferred Stock and Voting
Parity Stock, subject to any applicable notice requirements imposed by law or
regulation. Notwithstanding the provisions of this paragraph, no such special
meeting shall be required to be held during the 90-day period preceding the date
fixed for the annual meeting of stockholders.
(v) Stockholders' Right to Call Meeting. If any meeting of the
holders of the Series C-1 Preferred Stock and Voting Parity Stock required by
this subparagraph (b) to be called shall not have been called within 30 days
after personal service of a written request therefor upon the Secretary of the
Company or within 30 days after mailing the same within the United States of
America by registered mail addressed to the Secretary of the Company at its
principal executive offices, subject to any applicable notice requirements
imposed by law or regulation, then the holders of record of at least 25% of the
outstanding shares of the Series C-1 Preferred Stock and Voting Parity Stock may
designate in writing one of their number to call such meeting at the expense of
the Company, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders or such shorter notice
(but in no event shorter than permitted by law or regulation) as may be
acceptable to the holders of a majority of the total voting power of the Series
C-1 Preferred Stock and Voting Parity Stock. Any holder of Series C-1 Preferred
Stock and Voting Parity Stock so designated shall have access to the Series C-1
Preferred Stock and Voting Parity Stock books of the Company for the purpose of
causing such meeting to be called pursuant to these provisions.
(vi) Quorum. At any meeting of the holders of the Series C-1
Preferred Stock called in accordance with the provisions of this subparagraph
(b) for the election or removal of directors, the presence in person or by proxy
of the holders of a majority of the total voting power of the Series C-1
Preferred Stock and Voting Parity Stock shall be required to constitute a
quorum; in the absence of a quorum, the holders of a majority of the total
number of votes present in person or by proxy shall have power to adjourn the
meeting from time to time without notice other than an announcement at the
meeting, until a quorum shall be present.
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(c) Voting Rights on Extraordinary Matters.
(i) So long as any shares of Series C-1 Preferred Stock shall
be outstanding, the holders of the Series C-1 Preferred Stock shall have the
right, voting separately as a class together with holders of shares of any
Voting Parity Stock (with two-thirds of the voting power of such stock at the
time outstanding given in person or by proxy at a meeting at which the holders
of such shares shall be entitled to vote separately as a class, or by a consent
or consents in writing setting forth such approval, which consent shall be
delivered to the Company in the manner set forth from time to time in the DGCL,
required for approval by such holders), to vote on: (i) the liquidation or
dissolution of the Company; (ii) any proposal to authorize, create or issue, or
increase the authorized or issued amount of, any class or series of capital
stock ranking pari passu with, or prior to, the shares of the Series C-1
Preferred Stock in powers, rights or preferences upon the liquidation,
dissolution or winding up of the affairs of the Company or as to dividends; and
(iii) any proposal to amend by merger, amendment or otherwise (or otherwise
alter or repeal) the Certificate of Incorporation (or this resolution) if such
amendment, alteration or repeal would increase or decrease the aggregate number
of authorized shares of Series C-1 Preferred Stock or any Voting Parity Stock,
increase or decrease the par value of the shares of Series C-1 Preferred Stock
or any Voting Parity Stock, or alter or change the powers, preferences, or
special rights of the shares of Series C-1 Preferred Stock or any Voting Parity
Stock so as to affect them adversely. An amendment that increases the number of
authorized shares of any class or series of Preferred Stock or authorizes the
creation or issuance of other classes or series of Preferred Stock, in each case
ranking junior to the Series C-1 Preferred Stock with respect to the payment of
dividends and distribution of assets upon liquidation, dissolution or winding up
shall not be considered to be such an adverse change.
(ii) So long as any shares of Series C-1 Preferred Stock shall
be outstanding and unless the consent or approval of a greater number of shares
shall then be required by applicable law, without first obtaining the approval
of the holders of at least two-thirds of the voting power of the Series C-1
Preferred Stock at the time outstanding (voting separately as a class together
with the holders of shares of Voting Parity Stock) given in person or by proxy
at a meeting at which the holders of such shares shall be entitled to vote
separately as a class (or by a consent or consents in writing setting forth such
approval, which consent shall be delivered to the Company in the manner set
forth from time to time in the DGCL), the Company shall not either directly or
indirectly or through merger or consolidation with any other entity, (i)
authorize, create or issue, or increase the authorized or issued amount of, any
class or series of capital stock that would place or have the effect of placing
restrictions on the obligation of the Company to pay dividends to the holders of
Series C-1 Preferred Stock or to perform any of its obligations to the holders
of Series C-1 Preferred Stock at any time; or (ii) authorize, enter into or
permit to exist any covenant or agreement that would place or have the effect of
placing restrictions on the obligations of the Company to pay dividends to
holders of Series C-1 Preferred Stock or to perform any of its other obligations
to the holders of Series C-1 Preferred Stock at any time; provided, however,
that notwithstanding the foregoing, the Company may from time to time enter into
credit agreements and indentures that provide for limitations on the ability of
the Company to pay dividends on its capital stock generally, so long as the
Board of
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Directors determines, in its sole discretion, that such limitation is necessary
in order to obtain financing on commercially reasonable terms.
(d) One Vote Per Share. In connection with any matter on which
holders of the Series C-1 Preferred Stock are entitled to vote as provided in
subparagraphs (b) and (c) above, or any other matter on which the holders of the
Series C-1 Preferred Stock are entitled to vote as one class or otherwise
pursuant to applicable law or the provisions of the Certificate of
Incorporation, each holder of Series C-1 Preferred Stock shall be entitled to
one vote for each share of Series C-1 Preferred Stock held by such holder.
(e) Except as otherwise required by law, the holders of Series C-1
Preferred Stock and holders of Series C-2 Preferred Stock will vote together as
a single class.
6. No Sinking Fund. No sinking fund will be established for the
retirement or redemption of shares of Series C-1 Preferred Stock.
7. Liquidation Rights: Priority.
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series C-1 Preferred Stock shall be entitled to
receive, out of the assets of the Company, whether such assets are capital or
surplus and whether or not any dividends as such are declared, $500 per share
plus an amount equal to all accrued and unpaid dividends for the then-current
plus all prior Dividend Periods, and no more, before any distribution shall be
made to the holders of the Common Stock or any other class of stock or series
thereof ranking junior to the Series C-1 Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Company. The Series C-2 Preferred Stock and, unless specifically designated as
junior or senior to the Series C-1 Preferred Stock with respect to the
liquidation, dissolution or winding up of the affairs of the Company or as to
dividends, all other series or classes of Preferred Stock of the Company shall
rank on a parity with the Series C-1 Preferred Stock with respect to the
distribution of assets.
(b) Nothing contained in this Section 7 shall be deemed to prevent
conversion of shares of the Series C-1 Preferred Stock by the Company in the
manner provided in Section 3. Neither the merger nor consolidation of the
Company into or with any other entity, nor the merger or consolidation of any
other entity into or with the Company, nor a sale, transfer or lease of all or
any part of the assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section 7.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series C-1 Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
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(d) If the amounts available for distribution with respect to the
Series C-1 Preferred Stock and all other outstanding stock of the Company
ranking on a parity with the Series C-1 Preferred Stock upon liquidation,
dissolution or winding up are not sufficient to satisfy the full liquidation
rights of all the outstanding Series C-1 Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amount (which in the case of the Series C-1 Preferred Stock shall
mean the amounts specified in Section 7(a) and in the case of any other series
of preferred stock may include accumulated dividends if contemplated by such
series) to which they are entitled.
8. Status of Shares Converted. Shares of Series C-1 Preferred
Stock converted or purchased or otherwise acquired for value by the Company,
shall, after such event, have the status of authorized and unissued shares of
Preferred Stock without designation and may be reissued by the Company at any
time as shares of any series of Preferred Stock.
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IN WITNESS WHEREOF, The Times Mirror Company has caused this
Certificate to be signed by Thomas Unterman, its Senior Vice President and Chief
Financial Officer, and attested by William A. Niese, its Assistant Secretary,
this 8th day of August, 1997.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Thomas Unterman
--------------------------------------------
Name: Thomas Unterman
Title: Senior Vice President and Chief Financial
Officer
Attest:
By: /s/ William A. Niese
--------------------------
Name: William A. Niese
Title: Assistant Secretary
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EXHIBIT 4.2
CERTIFICATE OF DESIGNATION
OF THE
PREFERRED STOCK, SERIES C-2
(PAR VALUE $1.00 PER SHARE)
OF
THE TIMES MIRROR COMPANY
-------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------
The undersigned duly authorized officer of The Times Mirror Company, a
corporation organized and existing under the General Corporation Law (the
"DGCL") of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the Company, the Board of Directors
of the Company (the "Board" or "Board of Directors") on August 8, 1997 adopted
the following resolution creating 245,100 shares of Preferred Stock, Series C-2
(in addition to the shares of Preferred Stock, Series C-1, which were also
created on such date), par value $1.00 per share, each designated as set forth
below:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by provisions of the Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), and the DGCL,
the issuance of a series of the Company's preferred stock, par value $1.00 per
share (the "Preferred Stock"), which shall consist of 245,100 of the shares of
Preferred Stock, be, and the same hereby is, authorized, and the Board of
Directors hereby fixes the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions, of the shares of such series (in addition to the
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions, set forth
in the Certificate of Incorporation that may be applicable to the Preferred
Stock) as follows:
1. Designation and Rank. The designation of such series of the
Preferred Stock authorized by this resolution shall be the Preferred Stock,
Series C-2 (the "Series C-2 Preferred Stock"). The number of shares of Series
C-2 Preferred Stock shall be 245,100. The Series C-2 Preferred Stock shall rank
prior to the Common Stock (as hereinafter defined) of the Company
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and to all other classes and series of equity securities of the Company now or
hereafter authorized, issued or outstanding (the Common Stock and such other
classes and series of equity securities not expressly designated as ranking on a
parity with or senior to the Series C-2 Preferred Stock collectively may be
referred to herein as the "Junior Stock") as to dividend rights and rights upon
liquidation, winding up or dissolution of the Company, other than (a) the
Company's (i) 8% Cumulative Convertible Preferred Stock, Series A (the "Series A
Preferred Stock") and (ii) Series C-1 Preferred Stock (the "Series C-1 Preferred
Stock"), with respect to which the Series C-2 Preferred Stock is expressly
designated as ranking on a parity as to dividend rights and rights upon
liquidation, winding up or dissolution of the Company; and (b) any other classes
or series of equity securities of the Company expressly designated as ranking on
a parity with (collectively with the Series A Preferred Stock and the Series C-2
Preferred Stock, the "Parity Stock") or senior to (the "Senior Stock") the
Series C-2 Preferred Stock as to dividend rights and rights upon liquidation,
winding up or dissolution of the Company. The Series C-2 Preferred Stock shall
be subject to creation of Senior Stock, Parity Stock and Junior Stock, to the
extent not expressly prohibited by the Certificate of Incorporation or Section
5(c)(i) or 5(c)(ii) hereof, with respect to the payment of dividends and upon
liquidation.
2. Cumulative Dividends; Priority.
(a) Payment of Dividends.
(i) The holders of record of shares of Series C-2 Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, cumulative cash dividends
from the date of issuance of such shares at the rate per annum per share of 5.8%
(i.e., $29 per annum), as adjusted from time to time pursuant to Section 2(c)
hereof (the "Dividend Rate"). Dividends shall be payable quarterly on the tenth
day of March, June, September and December in each year (or if such day is a
non-business day, on the next business day) with respect to the quarter ending
on the last day of such month, commencing on September 10, 1997 (each of such
dates a "Dividend Payment Date"). No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series C-2 Preferred Stock that may be in arrears. Notwithstanding the
foregoing, for purposes of calculating the dividend to be paid with respect to
the period (the "Initial Dividend Period") from the date of issuance of such
shares through September 30, 1997 (payable September 10, 1997) it shall be
assumed that the shares of the Series C-2 Preferred Stock were issued on
September 10, 1997.
(ii) Each declared dividend shall be payable to holders of
record as they appear on the stock books of the Company at the close of business
on such record dates, not more than 60 calendar days preceding the applicable
Dividend Payment Dates therefor, as are determined by the Board of Directors
(each of such dates a "Record Date"). Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of January,
April, July, and October of each year and shall end on and include the last day
of March, June, September and December, respectively of such year. Dividends on
the shares of Series C-2 Preferred Stock shall be fully cumulative and shall
accrue (whether or not declared) from the first
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<PAGE> 3
day of each Dividend Period; provided, however, that the amount of any dividend
payable for any Dividend Period shorter than a full Dividend Period (other than
the Initial Dividend Period, which shall be calculated as set forth in Section
2(a)(i) hereof) shall be computed on the basis of a 360-day year composed of
twelve 30-day months and the actual number of days elapsed in the relevant
Dividend Period.
(b) Priority as to Dividends.
(i) Subject to the provisions hereof, no cash dividend or
other distribution (other than in Common Stock or other Junior Stock) shall be
declared or paid or set apart for payment on Preferred Stock that constitutes
Parity Stock or Junior Stock with respect to dividends for any Dividend Period
unless full dividends on the Series C-2 Preferred Stock for the immediately
preceding Dividend Period have been or contemporaneously are declared and paid
(or declared and a sum sufficient for the payment thereof set apart for such
payment). When dividends are not paid in full (or declared and a sum sufficient
for such full payment not so set apart) upon the Series C-2 Preferred Stock and
any Parity Stock, all dividends declared upon shares of Series C-2 Preferred
Stock and any Parity Stock shall be declared pro rata with respect thereto, so
that in all cases the amount of dividends declared per share on the Series C-2
Preferred Stock and such Parity Stock shall bear to each other the same ratio
that accrued dividends for the then-current Dividend Period per share on the
shares of Series C-2 Preferred Stock (which shall include any accumulation in
respect of unpaid dividends for prior Dividend Periods) and dividends, including
accumulations, if any, of such Parity Stock, bear to each other.
(ii) Except as provided in the preceding paragraph, full
dividends on the Series C-2 Preferred Stock must be declared and paid or set
apart for payment for the immediately preceding Dividend Period before (A) any
cash dividend or other distribution (other than in Common Stock or other Junior
Stock) shall be declared or paid or set aside for payment upon the Common Stock
or any other Junior Stock of the Company or (B) any Common Stock or any other
Junior Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock), except by redemption into
or exchange for Junior Stock or (C) any Series C-2 Preferred Stock or Parity
Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock). The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company if under the preceding
sentence, the Company would be prohibited from purchasing or otherwise acquiring
such shares at such time and in such manner.
(iii) No dividend shall be paid or set aside for holders of
the Series C-2 Preferred Stock for any Dividend Period unless full dividends on
any Preferred Stock that constitutes Senior Stock with respect to dividends for
that period have been or contemporaneously are declared and paid (or declared
and a sum sufficient for the payment thereof set apart for such payment).
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<PAGE> 4
(c) Adjustment to Dividend Rate.
(i) The Dividend Rate shall not be adjusted prior to the end
of the Dividend Period ending on December 31, 2000.
(ii) The Dividend Rate for each subsequent year (commencing
with the year that begins on January 1, 2001) (each an "Adjustment Year") shall
be adjusted upward by an amount equal to the product of (A) the Dividend Rate
for the year immediately prior to the relevant Adjustment Year multiplied by (B)
the Adjustment Percentage (as defined immediately below). The "Adjustment
Percentage" is equal to the percentage by which (A) the dividend paid by the
Company on its Common Stock for the fiscal year (the "Comparison Year")
immediately prior to the Adjustment Year exceeds (B) the dividend paid by the
Company on its Common Stock for the fiscal year (the "Base Year") immediately
prior to the Comparison Year (such percentage being the "Common Dividend
Percentage Increase"). If the dividend paid on the Common Stock in the
Comparison Year does not exceed the dividend paid on the Common Stock in the
Base Year (i.e., if there is no Common Dividend Percentage Increase), the
Adjustment Percentage for such Year shall be zero. The Adjustment Percentage for
2001 and each subsequent Adjustment Year shall be calculated by the Company
prior to (and notice shall be given to holders at their registered addresses on
or promptly after) the first Dividend Payment Date for such Adjustment Year.
Absent manifest error, the Company's calculations hereunder shall be final and
conclusive.
(iii) Increases in the Dividend Rate are subject to the
following limitations: (A) the Adjustment Percentage shall, under no
circumstances, exceed 15% prior to the Adjustment Year beginning January 1,
2005, and (B) the Dividend Rate shall, under no circumstances, exceed 8.4% per
annum (the "Maximum Dividend Rate").
(iv) If the Dividend Rate has not increased to the Maximum
Dividend Rate by the Adjustment Year commencing on January 1, 2005, then for
such and all future Adjustment Years until the Maximum Dividend Rate is reached,
the Adjustment Percentage shall be increased to equal 150% of the Common
Dividend Percentage Increase for the relevant fiscal years (and the limitation
set forth in section 2(c)(iii)(A) above shall not apply).
3. Conversion at Option of the Company.
(a) General.
(i) The shares of the Series C-2 Preferred Stock shall not be
convertible at the option of the Company except upon the later to occur of (x)
the date on which a written notice has been mailed or otherwise distributed by
the Company to each record holder of the Series C-2 Preferred Stock stating that
the assets of either Chandler Trust No. 1 or Chandler Trust No. 2 have been
distributed to the beneficiaries thereof and (y) February 1, 2025 (such later
date being the "Convertibility Date"). Subject to and upon compliance with the
provisions of this Section 3, shares of Series C-2 Preferred Stock may be
converted, in whole or in part, at the election of the Company by resolution of
the Board of Directors, upon notice as provided in Section 3(b), at any time or
from time to time on or after the Convertibility Date. Conversion
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<PAGE> 5
shall be made by delivering to the holders of Series C-2 Preferred Stock, in
respect of the conversion of each share of Series C-2 Preferred Stock so
converted, certificates representing the number of fully paid and non-assessable
shares (the "Conversion Shares") of Series A Common Stock, par value $1.00 per
share, of the Company ("Series A Common Stock," which, together with the Series
B Common Stock, par value $1.00 per share, and Series C Common Stock, par value
$1.00 per share, of the Company are referred to herein as the "Common Stock")
equal to (subject to Section 3(h) hereof) the quotient of (1) $500 plus accrued
and unpaid dividends on such shares of Series C-2 Preferred Stock to the
Conversion Date (as hereinafter defined) divided by (2) the Common Share Value
(as hereinafter defined). The aggregate number of shares of Common Stock (and,
if applicable, "Conversion Preferred," as such term is defined below) that a
holder of shares of Series C-2 Preferred Stock that have been converted is
entitled to receive pursuant to this Section 3 or Section 4 is hereinafter
referred to as the "Aggregate Conversion Shares."
(ii) The "Common Share Value" shall mean the average of the
closing prices of the Series A Common Stock for the 20 days during which trades
of Series A Common Stock occurred immediately preceding the Valuation Date (as
defined below), as reported in The Wall Street Journal, Western Edition, or, if
no closing prices were so reported, the average of the mean between the high bid
and low asked price per share of Series A Common Stock for each of the 20 days
during which trades of Series A Common Stock occurred immediately preceding the
Valuation Date in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if the Series A Common Stock is not then quoted by any
such organization, the average of the mean between the closing bid and asked
prices per share of Series A Common Stock for each of the 20 days during which
trades of Series A Common Stock occurred immediately preceding the Valuation
Date, as furnished by a professional market maker making a market in the Series
A Common Stock, or, if there is no such market maker, the fair market value of a
share of Series A Common Stock determined by whatever method the Board of
Directors reasonably determines to use. In the case of a conversion pursuant to
this Section 3, the "Valuation Date" shall mean the Conversion Notice Date (as
defined in Section 3(b)), and in the case of any conversion pursuant to Section
4, the "Valuation Date" shall mean the Conversion Time (as hereinafter defined).
(b) Notice of Conversion. Notice of any conversion, setting forth
(i) the Conversion Date (as defined in Section 3(c) hereof), (ii) a statement
that dividends on the shares of Series C-2 Preferred Stock to be converted will
cease to accrue on such Conversion Date, and (iii) the method(s) by which the
holders may surrender the certificates representing shares of Series C-2
Preferred Stock that have been converted and obtain the Conversion Shares
therefor, shall be mailed, postage prepaid, on a date (the "Conversion Notice
Date") that is at least 15 days but not more than 45 days prior to said
Conversion Date to each holder of record of the Series C-2 Preferred Stock to be
converted at his, her or its address as the same shall appear on the books of
the Company. If less than all the shares of the Series C-2 Preferred Stock owned
by such holder are then to be converted, the notice shall specify the number of
shares thereof that are to be converted and the numbers of the certificates
representing such shares. If applicable, the notice shall also specify the
"Maximum Number" applicable to, and the amount of "Conversion
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<PAGE> 6
Cash" to be received by (absent an election pursuant to Section 3(h)(v) hereof
to receive "Conversion Preferred") such holder (as such terms are defined
below).
(c) Method of Conversion. The surrender of any certificate
evidencing shares of Series C-2 Preferred Stock that have been converted shall
be made by the holder thereof by the surrender of the certificate or
certificates formerly representing the shares of Series C-2 Preferred Stock
converted (with proper endorsement or instruments of transfer) to the Company at
the principal office of the Company (or such other office or agency of the
Company as the Company may designate in writing to the holder or holders of the
Series C-2 Preferred Stock) at any time during its usual business hours. Shares
of Series C-2 Preferred Stock called for conversion shall be deemed to have been
converted, and the shares of Series A Common Stock (and, if applicable,
Conversion Preferred) to be issued in respect of the shares of Series C-2
Preferred Stock converted shall be deemed to have been issued, as of the close
of business on the date fixed for conversion (the "Conversion Date"), without
regard to when certificates evidencing such Series C-2 Preferred Stock are
surrendered pursuant to this Section 3(c) or certificates evidencing such Series
A Common Stock (and, if applicable, Conversion Preferred) are issued pursuant to
Section 3(d). The rights of the holder of Series C-2 Preferred Stock that has
been converted, except for the right to receive the Aggregate Conversion Shares
therefor in accordance herewith (and any cash payments to which such holder is
entitled pursuant to Sections 3(e) and (h) hereof), shall cease on the
Conversion Date. In the case of lost or destroyed certificates evidencing
ownership of shares of Series C-2 Preferred Stock that have been converted, the
holder shall submit proof of loss or destruction and such indemnity as shall be
required by the Company.
(d) Issuance of Certificates for Series A Common Stock. As soon as
practicable after its receipt of any certificate or certificates formerly
evidencing ownership of shares of Series C-2 Preferred Stock that have been
converted, the Company shall issue and shall deliver to the person for whose
account such certificates formerly representing shares of Series C-2 Preferred
Stock were so surrendered, or on his, her or its written order, a certificate or
certificates for the number of full shares of Series A Common Stock (and, if
applicable, Conversion Preferred) issuable upon the conversion of such shares of
Series C-2 Preferred Stock and a check or cash payment (if any) to which such
holder is entitled with respect to fractional shares or Conversion Cash as
determined by the Company, in accordance with Sections 3(e) and (h) hereof,
respectively.
(e) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
C-2 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series C-2 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(f) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series C-2
Preferred Stock. The
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<PAGE> 7
Company shall not, however, be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of stock in any
name other than that of the holder of the shares converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of any such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(g) Common Stock Reserved for Conversion. The Company shall at all
times from and after the Conversion Date reserve and keep available out of its
authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series C-2 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series C-2
Preferred Stock.
(h) Limitation of the Number of Shares of Series A Common Stock
(i) The number of shares of Series A Common Stock into which
the Series C-2 Preferred Stock may be converted into shall be limited, as set
forth herein.
(ii) The maximum number of shares of Series A Common Stock
into which the Series C-2 Preferred Stock may be converted into is, in the
aggregate, 2,956,942 shares of Series A Common Stock (the "Maximum Number"). If
the Company in any manner subdivides or combines the outstanding shares of
Series A Common Stock, then the Maximum Number shall be adjusted appropriately.
(iii) On conversion, no holder shall be entitled to receive
more shares of Series A Common Stock than its pro rata share of the Maximum
Number (a holder's "Pro Rata Number"), which shall be calculated by dividing (A)
the number of shares of Series C-2 Preferred Stock held by such holder which are
then being converted, by (B) 245,100.
(iv) If, as a result of Section 3(h)(iii), immediately above,
a holder's Pro Rata Number is less than the number of shares of Series A Common
Stock to which such holder would otherwise be entitled (a holder's "Unrestricted
Number"), then, such holder shall be entitled to receive from the Company a cash
payment ("Conversion Cash") equal to:
(A) the Common Share Value, multiplied by
(B) the positive difference between (a) such holder's
Unrestricted Number minus (b) such holder's Pro Rata Number.
(v) In lieu of Conversion Cash, a holder may elect, by
providing written notice to the Company, which notice must be received by the
Company at least five days prior to the Conversion Date, to exchange, in lieu of
conversion, the number of shares of Series C-2 Preferred Stock held by such
holder which as a result of Section 3(h)(iii) cannot be fully converted into
such holder's Unrestricted Number, for a like number of shares of a new series
of
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<PAGE> 8
preferred stock of the Company (the "Conversion Preferred") which shall be
identical to the Series C-2 Preferred Stock, except that it shall (A) not be
convertible into or exchangeable for Common Stock and (B) be redeemable, at
liquidation value plus accrued but unpaid dividends, by the Company at any time.
4. Conversion at the Option of Holders.
(a) General. After the later to occur of (i) the date on which a
written notice has been mailed or otherwise distributed by the Company to each
record holder of the Series C-2 Preferred Stock stating that the assets of
either Chandler Trust No. 1 or Chandler Trust No. 2 have been distributed to the
beneficiaries thereof and (ii) February 1, 2025, the holder of any Series C-2
Preferred Stock may convert pursuant to this Section 4 all or any part (in whole
number of shares only) of the Series C-2 Preferred Stock held by such holder
into fully paid and non-assessable shares of Series A Common Stock. Subject to
Section 4(g) below, the number of shares of Series A Common Stock into which a
share of Series C-2 Preferred Stock may be converted shall be equal to the
quotient of (1) $500 plus accrued and unpaid dividends on such share of Series
C-2 Preferred Stock to the Conversion Time divided by (2) the Common Share
Value.
(b) Method of Conversion. Each conversion of Series C-2 Preferred
Stock shall be effected by the surrender of the certificate or certificates
representing the shares of Series C-2 Preferred Stock to be converted (with
proper endorsement or instruments of transfer) to the Company at the principal
office of the Company (or such other office or agency of the Company as the
Company may designate in writing to the holder or holders of the Series C-2
Preferred Stock) at any time during its usual business hours, together with
written notice by the holder of such Series C-2 Preferred Stock stating that
such holder desires to convert the shares of Series C-2 Preferred Stock, or a
stated number of such shares, represented by such certificate or certificates,
which notice shall also specify the name or names (with addresses) and
denominations in which the certificate or certificates for the Series A Common
Stock (and, if applicable, Conversion Preferred) shall be issued and shall
include instructions for delivery thereof. If such holder desires to receive
Conversion Preferred in lieu of any Conversion Cash that may be payable to such
holder, the notice shall so state. Any conversion pursuant to this Section 4
shall be deemed to have been effected as of the close of business on the date on
which such certificate or certificates shall have been surrendered and such
notice shall have been received, and at such time (the "Conversion Time") the
rights of the holder of Series C-2 Preferred Stock (or specified portion
thereof) as such holder shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Series A Common Stock (and,
if applicable, Conversion Preferred) are to be issued upon conversion shall be
deemed to have become the holder or holders of record of the shares of Series A
Common Stock (and, if applicable, Conversion Preferred) represented thereby. In
the case of lost or destroyed certificates evidencing ownership of shares of
Series C-2 Preferred Stock to be converted, the holder shall submit proof of
loss or destruction and such indemnity as shall be required by the Company.
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<PAGE> 9
(c) Issuance of Certificates for Series A Common Stock. As soon as
practicable after its receipt of any certificate or certificates evidencing
ownership of shares of Series C-2 Preferred Stock to be converted pursuant to
this Section 4, the Company shall issue and shall deliver to the person for
whose account such shares of Series C-2 Preferred Stock were so surrendered, or
on his, her or its written order, a certificate or certificates for the number
of full shares of Series A Common Stock (and, if applicable, Conversion
Preferred) issuable upon the conversion of such shares of Series C-2 Preferred
Stock and a check or cash payment (if any) to which such holder is entitled with
respect to fractional shares or Conversion Cash as determined by the Company, in
accordance with Sections 4(d) and (g) hereof, respectively.
(d) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series
C-2 Preferred Stock, but the holder thereof will receive in cash an amount equal
to the value of such fractional share of Series A Common Stock based on the
Common Share Value. If more than one share of Series C-2 Preferred Stock shall
be converted at one time for the account of the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of such shares so surrendered.
(e) Payment of Taxes. The Company shall pay any tax in respect of
the issuance of stock certificates on conversion of shares of Series C-2
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(f) Common Stock Reserved for Conversion. The Company shall at all
times from and after the Conversion Time reserve and keep available out of its
authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series C-2 Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series C-2
Preferred Stock.
(g) Limitation of the Number of Shares of Series A Common Stock
(i) The number of shares of Series A Common Stock into which
the Series C-2 Preferred Stock may be converted into shall be limited, as set
forth herein.
(ii) On conversion, no holder shall be entitled to receive
more shares of Series A Common Stock than its Pro Rata Number.
(iii) If, as a result of Section 4(g)(ii), immediately above,
a holder's Pro Rata Number is less than such holder's Unrestricted Number, then
such holder shall be entitled to receive from the Company the Conversion Cash.
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(iv) In lieu of Conversion Cash, a holder may elect, by
providing notice of such election in the notice of conversion delivered pursuant
to Section 4(b), to exchange, in lieu of conversion, the number of shares of
Series C-2 Preferred Stock held by such holder which as a result of Section
4(g)(iii) cannot be fully converted into such holder's Unrestricted Number, for
a like number of shares of Conversion Preferred.
5. Voting Rights.
(a) General Voting Rights. Except as expressly provided hereinafter
in this Section 5, or as otherwise from time to time required by applicable law,
the Series C-2 Preferred Stock shall have no voting rights.
(b) Voting Rights Upon Dividend Arrears.
(i) Right to Elect Directors. In the event that an amount
equal to six quarterly dividend payments on the Series C-2 Preferred Stock shall
have accrued and be unpaid (the occurrence of such contingency marking the
beginning of a period herein referred to as the "Default Period," which shall
extend until such time as all accrued and unpaid dividends for all previous
Dividend Periods and for the current Dividend Period on all shares of Series C-2
Preferred Stock then outstanding shall have been declared and paid or declared
and a sum sufficient for such full payment set apart for payment), the holders
of the Series C-2 Preferred Stock shall have the right, voting separately as a
class together with holders of shares of the Series C-2 Preferred Stock and any
other Parity Stock upon which like voting rights have been conferred and are
exercisable (such shares of Series C-2 Preferred Stock, shares of Series C-2
Preferred Stock, and other shares of Parity Stock are hereinafter referred to as
"Voting Parity Stock"), to elect two members of the Board of Directors, each
member to be in addition to the then authorized number of directors, at the next
annual meeting of stockholders or at a special meeting called as described below
and thereafter until the Default Period shall have ended.
(ii) Special Meeting; Written Consent. Whenever such voting
right shall vest, it may be exercised initially by the vote of the holders of a
plurality of the voting power of Series C-2 Preferred Stock and Voting Parity
Stock present and voting as a single class, in person or by proxy, at a special
meeting of holders of the Series C-2 Preferred Stock and Voting Parity Stock or
at the next annual meeting of stockholders. A special meeting for the exercise
of such right shall be called by the Secretary of the Company as promptly as
possible, and in any event within 10 days after receipt of a written request
signed by the holders of record of at least 25% of the outstanding shares of the
Series C-2 Preferred Stock and Voting Parity Stock, subject to any applicable
notice requirements imposed by law or regulation. Notwithstanding the provisions
of this paragraph, no such special meeting shall be required to be held during
the 90-day period preceding the date fixed for the annual meeting of
stockholders. Any action required or permitted to be taken at any such special
meeting of such holders may be taken by a consent or consents in writing of such
stockholders, setting forth the action so taken, which consent or consents shall
be signed by the holders of Series C-2 Preferred Stock and Voting Parity Stock
representing a majority of the voting power of shares of such Series C-2
Preferred Stock and
10
<PAGE> 11
Voting Parity Stock and shall be delivered to the Company in the manner set
forth from time to time in the DGCL.
(iii) Term of Office of Directors. Any director who shall have
been elected by holders of the Series C-2 Preferred Stock and Voting Parity
Stock entitled to vote in accordance with this subparagraph (b) shall hold
office for a term expiring (subject to the earlier expiry of such term, as set
forth below) at the annual meeting of stockholders at which the term of office
of his class shall expire and during such term may be removed at any time, only
for cause, by, and only by, the affirmative vote of the holders of record of a
majority of the voting power of the Series C-2 Preferred Stock and Voting Parity
Stock present and voting as a single class, in person or by proxy, at a special
meeting of such stockholders called for such purpose, and any vacancy created by
such removal may also be filled at such meeting. A meeting for the removal of a
director elected by the holders of the Series C-2 Preferred Stock and Voting
Parity Stock and the filling of the vacancy created thereby shall be called by
the Secretary of the Company as promptly as possible and in any event within 10
days after receipt of a request therefor signed by the holders of not less than
25% of the aggregate outstanding voting power of the Series C-2 Preferred Stock
and Voting Parity Stock, subject to any applicable notice requirements imposed
by law or regulation. Such meeting shall be held at the earliest practicable
date thereafter, provided that no such meeting shall be required to be held
during the 90-day period preceding the date fixed for the annual meeting of
stockholders. Simultaneously with the expiration of the Default Period, the
terms of office of all directors elected by the holders of the shares of Series
C-2 Preferred Stock and the Voting Parity Stock pursuant hereto then in office
shall, without further action, thereupon terminate unless otherwise required by
law. Upon such termination the number of directors constituting the Board of
Directors of the Company shall, without further action, be reduced by two,
subject always to the increase of the number of directors pursuant to the
foregoing provisions in the case of the future right of holders of the shares of
Series C-2 Preferred Stock and Voting Parity Stock to elect directors as
provided above.
(iv) Vacancies. Any vacancy caused by the death, resignation
or removal of a director who shall have been elected in accordance with this
subparagraph (b) may be filled by the remaining director so elected or, if not
so filled, by a vote of holders of a plurality of the voting power of the Series
C-2 Preferred Stock and Voting Parity Stock present and voting as a single
class, in person or by proxy, at a meeting called for such purpose. Unless such
vacancy shall have been filled by the remaining director as aforesaid, such
meeting shall be called by the Secretary of the Company at the earliest
practicable date after such death or resignation, and in any event within 10
days after receipt of a written request signed by the holders of record of at
least 25% of the outstanding shares of the Series C-2 Preferred Stock and Voting
Parity Stock, subject to any applicable notice requirements imposed by law or
regulation. Notwithstanding the provisions of this paragraph, no such special
meeting shall be required to be held during the 90-day period preceding the date
fixed for the annual meeting of stockholders.
(v) Stockholders' Right to Call Meeting. If any meeting of the
holders of the Series C-2 Preferred Stock and Voting Parity Stock required by
this subparagraph (b) to be called shall not have been called within 30 days
after personal service of a written request
11
<PAGE> 12
therefor upon the Secretary of the Company or within 30 days after mailing the
same within the United States of America by registered mail addressed to the
Secretary of the Company at its principal executive offices, subject to any
applicable notice requirements imposed by law or regulation, then the holders of
record of at least 25% of the outstanding shares of the Series C-2 Preferred
Stock and Voting Parity Stock may designate in writing one of their number to
call such meeting at the expense of the Company, and such meeting may be called
by such person so designated upon the notice required for annual meetings of
stockholders or such shorter notice (but in no event shorter than permitted by
law or regulation) as may be acceptable to the holders of a majority of the
total voting power of the Series C-2 Preferred Stock and Voting Parity Stock.
Any holder of Series C-2 Preferred Stock and Voting Parity Stock so designated
shall have access to the Series C-2 Preferred Stock and Voting Parity Stock
books of the Company for the purpose of causing such meeting to be called
pursuant to these provisions.
(vi) Quorum. At any meeting of the holders of the Series C-2
Preferred Stock called in accordance with the provisions of this subparagraph
(b) for the election or removal of directors, the presence in person or by proxy
of the holders of a majority of the total voting power of the Series C-2
Preferred Stock and Voting Parity Stock shall be required to constitute a
quorum; in the absence of a quorum, the holders of a majority of the total
number of votes present in person or by proxy shall have power to adjourn the
meeting from time to time without notice other than an announcement at the
meeting, until a quorum shall be present.
(c) Voting Rights on Extraordinary Matters.
(i) So long as any shares of Series C-2 Preferred Stock shall
be outstanding, the holders of the Series C-2 Preferred Stock shall have the
right, voting separately as a class together with holders of shares of any
Voting Parity Stock (with two-thirds of the voting power of such stock at the
time outstanding given in person or by proxy at a meeting at which the holders
of such shares shall be entitled to vote separately as a class, or by a consent
or consents in writing setting forth such approval, which consent shall be
delivered to the Company in the manner set forth from time to time in the DGCL,
required for approval by such holders), to vote on: (i) the liquidation or
dissolution of the Company; (ii) any proposal to authorize, create or issue, or
increase the authorized or issued amount of, any class or series of capital
stock ranking pari passu with, or prior to, the shares of the Series C-2
Preferred Stock in powers, rights or preferences upon the liquidation,
dissolution or winding up of the affairs of the Company or as to dividends; and
(iii) any proposal to amend by merger, amendment or otherwise (or otherwise
alter or repeal) the Certificate of Incorporation (or this resolution) if such
amendment, alteration or repeal would increase or decrease the aggregate number
of authorized shares of Series C-2 Preferred Stock or any Voting Parity Stock,
increase or decrease the par value of the shares of Series C-2 Preferred Stock
or any Voting Parity Stock, or alter or change the powers, preferences, or
special rights of the shares of Series C-2 Preferred Stock or any Voting Parity
Stock so as to affect them adversely. An amendment that increases the number of
authorized shares of any class or series of Preferred Stock or authorizes the
creation or issuance of other classes or series of Preferred Stock, in each case
ranking junior to the Series C-2 Preferred Stock with respect to the payment of
dividends and distribution of assets upon liquidation, dissolution or winding up
shall not be considered to be such an adverse change.
12
<PAGE> 13
(ii) So long as any shares of Series C-2 Preferred Stock shall
be outstanding and unless the consent or approval of a greater number of shares
shall then be required by applicable law, without first obtaining the approval
of the holders of at least two-thirds of the voting power of the Series C-2
Preferred Stock at the time outstanding (voting separately as a class together
with the holders of shares of Voting Parity Stock) given in person or by proxy
at a meeting at which the holders of such shares shall be entitled to vote
separately as a class (or by a consent or consents in writing setting forth such
approval, which consent shall be delivered to the Company in the manner set
forth from time to time in the DGCL), the Company shall not either directly or
indirectly or through merger or consolidation with any other entity, (i)
authorize, create or issue, or increase the authorized or issued amount of, any
class or series of capital stock that would place or have the effect of placing
restrictions on the obligation of the Company to pay dividends to the holders of
Series C-2 Preferred Stock or to perform any of its obligations to the holders
of Series C-2 Preferred Stock at any time; or (ii) authorize, enter into or
permit to exist any covenant or agreement that would place or have the effect of
placing restrictions on the obligations of the Company to pay dividends to
holders of Series C-2 Preferred Stock or to perform any of its other obligations
to the holders of Series C-2 Preferred Stock at any time; provided, however,
that notwithstanding the foregoing, the Company may from time to time enter into
credit agreements and indentures that provide for limitations on the ability of
the Company to pay dividends on its capital stock generally, so long as the
Board of Directors determines, in its sole discretion, that such limitation is
necessary in order to obtain financing on commercially reasonable terms.
(d) One Vote Per Share. In connection with any matter on which
holders of the Series C-2 Preferred Stock are entitled to vote as provided in
subparagraphs (b) and (c) above, or any other matter on which the holders of the
Series C-2 Preferred Stock are entitled to vote as one class or otherwise
pursuant to applicable law or the provisions of the Certificate of
Incorporation, each holder of Series C-2 Preferred Stock shall be entitled to
one vote for each share of Series C-2 Preferred Stock held by such holder.
(e) Except as otherwise required by law, the holders of Series C-2
Preferred Stock and holders of Series C-1 Preferred Stock will vote together as
a single class.
6. No Sinking Fund. No sinking fund will be established for the
retirement or redemption of shares of Series C-2 Preferred Stock.
7. Liquidation Rights: Priority.
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series C-2 Preferred Stock shall be entitled to
receive, out of the assets of the Company, whether such assets are capital or
surplus and whether or not any dividends as such are declared, $500 per share
plus an amount equal to all accrued and unpaid dividends for the then-current
plus all prior Dividend Periods, and no more, before any distribution shall be
made to the holders of the Common Stock or any other class of stock or series
thereof ranking junior to the Series C-2 Preferred Stock with respect
13
<PAGE> 14
to the distribution of assets upon liquidation, dissolution or winding up of the
Company. The Series C-2 Preferred Stock and, unless specifically designated as
junior or senior to the Series C-2 Preferred Stock with respect to the
liquidation, dissolution or winding up of the affairs of the Company or as to
dividends, all other series or classes of Preferred Stock of the Company shall
rank on a parity with the Series C-2 Preferred Stock with respect to the
distribution of assets.
(b) Nothing contained in this Section 7 shall be deemed to prevent
conversion of shares of the Series C-2 Preferred Stock by the Company in the
manner provided in Section 3. Neither the merger nor consolidation of the
Company into or with any other entity, nor the merger or consolidation of any
other entity into or with the Company, nor a sale, transfer or lease of all or
any part of the assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section 7.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series C-2 Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) If the amounts available for distribution with respect to the
Series C-2 Preferred Stock and all other outstanding stock of the Company
ranking on a parity with the Series C-2 Preferred Stock upon liquidation,
dissolution or winding up are not sufficient to satisfy the full liquidation
rights of all the outstanding Series C-2 Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amount (which in the case of the Series C-2 Preferred Stock shall
mean the amounts specified in Section 7(a) and in the case of any other series
of preferred stock may include accumulated dividends if contemplated by such
series) to which they are entitled.
8. Status of Shares Converted. Shares of Series C-2 Preferred Stock
converted or purchased or otherwise acquired for value by the Company, shall,
after such event, have the status of authorized and unissued shares of Preferred
Stock without designation and may be reissued by the Company at any time as
shares of any series of Preferred Stock.
14
<PAGE> 15
IN WITNESS WHEREOF, The Times Mirror Company has caused this
Certificate to be signed by Thomas Unterman, its Senior Vice President and Chief
Financial Officer, and attested by William A. Niese, its Assistant Secretary,
this 8th day of August, 1997.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Thomas Unterman
---------------------------------------------
Name: Thomas Unterman
Title: Senior Vice President and Chief Financial
Officer
Attest:
By: /s/ William A. Niese
-------------------------
Name: William A. Niese
Title: Assistant Secretary
15
<PAGE> 1
EXHIBIT 10.1
LIMITED LIABILITY COMPANY AGREEMENT
OF
TMCT, LLC
Dated as of August 8, 1997
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINED TERMS...............................................1
SECTION 1.1 DEFINITIONS................................................1
SECTION 1.2 HEADINGS...................................................6
ARTICLE II FORMATION AND TERM.........................................6
SECTION 2.1 FORMATION..................................................6
SECTION 2.2 NAME.......................................................6
SECTION 2.3 TERM.......................................................7
SECTION 2.4 REGISTERED AGENT AND OFFICE................................7
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS................................7
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS.......................7
ARTICLE III PURPOSE AND POWERS OF THE COMPANY..........................7
SECTION 3.1 PURPOSE....................................................7
SECTION 3.2 POWERS OF THE COMPANY......................................7
SECTION 3.3 LIMITATIONS ON COMPANY POWERS..............................9
SECTION 3.4 SPECIFIC AUTHORIZATION.....................................9
ARTICLE IV CAPITAL CONTRIBUTIONS, INTERESTS AND CAPITAL ACCOUNTS.....9
SECTION 4.1 CAPITAL CONTRIBUTIONS......................................9
SECTION 4.2 MEMBER'S INTEREST..........................................9
SECTION 4.3 CAPITAL ACCOUNTS..........................................10
ARTICLE V MEMBERS......................................................11
SECTION 5.1 POWERS OF MEMBERS.........................................11
SECTION 5.2 REIMBURSEMENTS............................................11
SECTION 5.3 PARTITION.................................................11
SECTION 5.4 ASSIGNMENTS BY AND WITHDRAWAL OF MEMBERS..................11
ARTICLE VI MANAGEMENT.................................................13
SECTION 6.1 MANAGEMENT OF THE COMPANY.................................13
SECTION 6.2 POWERS OF THE MANAGING MEMBER.............................13
SECTION 6.3 INVESTMENT COMMITTEE......................................14
SECTION 6.4 TRUSTS PORTFOLIO COMMITTEE................................15
SECTION 6.5 ACTIONS REQUIRING MUTUAL AGREEMENT........................16
SECTION 6.6 RELIANCE BY THIRD PARTIES.................................16
SECTION 6.7 PROPERTIES COMMITTEE......................................17
ARTICLE VII MEETINGS OF MEMBERS........................................18
SECTION 7.1 MEETINGS OF THE MEMBERS...................................18
SECTION 7.2 PLACE OF MEETINGS; PARTICIPATION BY TELEPHONE.............19
SECTION 7.3 NOTICE OF MEETINGS........................................19
SECTION 7.4 ACTION WITHOUT MEETING....................................19
ARTICLE VIII ALLOCATIONS...............................................19
SECTION 8.1 FIXED INCOME PORTFOLIO....................................19
SECTION 8.2 PROPERTIES................................................20
SECTION 8.3 TMC COMMON................................................20
SECTION 8.4 TMC PREFERRED.............................................21
SECTION 8.5 EQUITY PORTFOLIO..........................................22
SECTION 8.6 TRUSTS PORTFOLIO..........................................23
SECTION 8.7 ALLOCATED EXPENSES........................................23
SECTION 8.8 TMC MEMBERS AND TRUSTS....................................23
SECTION 8.9 REGULATORY ALLOCATIONS....................................23
SECTION 8.10 TAX ALLOCATIONS; SECTION 704(C) OF THE CODE..............24
ARTICLE IX DISTRIBUTIONS...............................................25
SECTION 9.1 PORTFOLIO AND REPLACEMENT PORTFOLIO.......................25
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.2 PROPERTIES................................................25
SECTION 9.3 TMC SHARES................................................25
SECTION 9.4 TRUSTS PORTFOLIO..........................................25
SECTION 9.5 TMC MEMBERS AND TRUSTS....................................26
SECTION 9.6 LIQUIDATING DISTRIBUTIONS.................................26
SECTION 9.7 OTHER DISTRIBUTIONS.......................................26
SECTION 9.8 LIMITATION ON DISTRIBUTIONS...............................26
ARTICLE X BOOKS AND RECORDS...........................................27
SECTION 10.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS..................27
SECTION 10.2 ACCOUNTING METHOD........................................27
SECTION 10.3 AUDIT....................................................28
ARTICLE XI TAX MATTERS................................................28
SECTION 11.1 TAX MATTERS MEMBER.......................................28
SECTION 11.2 RIGHT TO MAKE SECTION 754 ELECTION.......................28
SECTION 11.3 TAXATION AS PARTNERSHIP..................................28
ARTICLE XII LIABILITY, EXCULPATION AND INDEMNIFICATION................29
SECTION 12.1 LIABILITY.................................................29
SECTION 12.2 EXCULPATION..............................................29
SECTION 12.3 DUTIES AND LIABILITIES OF COVERED PERSONS................29
SECTION 12.4 INDEMNIFICATION..........................................30
SECTION 12.5 EXPENSES.................................................30
SECTION 12.6 INSURANCE................................................30
SECTION 12.7 OUTSIDE BUSINESS.........................................30
ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION..................31
SECTION 13.1 DISSOLUTION...............................................31
SECTION 13.2 NOTICE OF DISSOLUTION....................................31
SECTION 13.3 LIQUIDATION..............................................31
SECTION 13.4 TERMINATION..............................................31
SECTION 13.5 CLAIMS OF THE MEMBERS....................................31
ARTICLE XIV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MEMBERS...32
SECTION 14.1 REPRESENTATIONS..........................................32
SECTION 14.2 CONFIDENTIALITY..........................................32
ARTICLE XV MISCELLANEOUS..............................................33
SECTION 15.1 AMENDMENTS...............................................33
SECTION 15.2 NOTICES..................................................33
SECTION 15.3 FAILURE TO PURSUE REMEDIES...............................34
SECTION 15.4 CUMULATIVE REMEDIES......................................34
SECTION 15.5 BINDING EFFECT...........................................34
SECTION 15.6 INTERPRETATION...........................................34
SECTION 15.7 SEVERABILITY.............................................34
SECTION 15.8 COUNTERPARTS.............................................34
SECTION 15.9 INTEGRATION..............................................34
SECTION 15.10 GOVERNING LAW...........................................34
SECTION 15.11 CONSENT TO JURISDICTION AND FORUM SELECTION.............34
SECTION 15.12 ATTORNEYS' FEES.........................................35
</TABLE>
ii
<PAGE> 4
LIMITED LIABILITY COMPANY AGREEMENT
OF
TMCT, LLC
This Limited Liability Company Agreement of TMCT, LLC (the "Company")
is made as of August 8, 1997 (this "Agreement"), by and among The Times Mirror
Company, a Delaware corporation ("TMC"), Candle Holdings Corporation, a Delaware
corporation ("Sub 1"), Fortify Holdings Corporation, a Delaware corporation
("Sub 2"), Matthew Bender & Company, Incorporated, a New York corporation,
Mosby-Year Book, Inc., a Missouri corporation, Newsday, Inc., a New York
corporation, The Hartford Courant Company, a Connecticut corporation, and The
Baltimore Sun Company, a Maryland corporation (collectively, with TMC, Sub 1 and
Sub 2, the "TMC Members"), Chandler Trust No. 1 ("Trust 1") and Chandler Trust
No. 2 ("Trust 2"), as Members of the Company.
WHEREAS, Trust 1, Trust 2 and the TMC Members wish to form a limited
liability company pursuant to the Delaware Limited Liability Company Act, 6 Del.
C. Section 18-101, et seq., as amended from time to time (the "Delaware Act"),
by filing a Certificate of Formation of the Company with the office of the
Secretary of State of the State of Delaware and entering into this Agreement.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"Affiliate" means with respect to a specified Person, any
Person that directly or indirectly controls, is controlled by, or is under
common control with, the specified Person, including (A) all lineal descendants
and spouses of such Person; (B) all trusts for the benefit of such Person or any
person described in clause (A) and the trustees of such trusts; (C) all legal
representatives of such Person or any person or trust described in clauses (A)
or (B); (D) all partnerships, corporations, limited liability companies or other
entities controlling, controlled by or under common control with such Person or
any person, trust or other entity described in clauses (A), (B) or (C).
"Control" for these purposes shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of any
person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Limited Liability Company Agreement of
the Company, as amended, modified, supplemented or restated from time to time.
"Allocated Expenses" means those expenses of the Company that
are not directly attributable to the TMC Shares, the Portfolio, the Replacement
Portfolio or the Properties.
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
1
<PAGE> 5
(i) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to
be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
"Capital Account" means, with respect to any Member, the
account maintained for such Member in accordance with the provisions of Section
4.3 hereof.
"Capital Contribution" means, with respect to any Member, the
aggregate value of cash and the initial Gross Asset Value of any property (other
than cash) contributed to the Company pursuant to Section 4.1 which is set forth
in Schedule A attached hereto.
"Certificate" means the Certificate of Formation of the
Company, in the form attached hereto as Exhibit A, and any and all amendments
thereto and restatements thereof filed on behalf of the Company with the office
of the Secretary of State of the State of Delaware pursuant to the Delaware Act.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any corresponding federal tax statute enacted after the
date of this Agreement.
"Company" means TMCT, LLC, the limited liability company
formed under and pursuant to the Delaware Act and this Agreement.
"Contribution Agreement" means that Contribution Agreement
dated as of August 8, 1997 among the Members pursuant to which they have agreed
to contribute cash, TMC Shares and Properties to the Company and have agreed
upon the initial Gross Asset Value of contributions other than cash.
"Covered Person" means (i) any Member, any Affiliate of a
Member or any officers, directors, trustees, shareholders, beneficiaries,
partners, employees, representatives or agents of a Member or its respective
Affiliates, (ii) any officer of the Company, or (iii) any employee or agent of
the Company or its Affiliates who is designated as a Covered Person by the
Managing Member.
"Delaware Act" means the Delaware Limited Liability Company
Act, 6 Del. C. Section 18-101, et seq., as amended from time to time.
"Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable under the Code with respect to an asset for such Fiscal Year or other
period; provided, however, that if the Gross Asset Value of an asset differs
from its adjusted basis for federal income tax purposes at the beginning of such
Fiscal Year or other period, Depreciation shall be an amount that bears the same
ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction with respect to such
asset for such Fiscal Year or other period bears to such beginning adjusted tax
basis; and provided further, that if the federal income tax depreciation,
amortization or other cost recovery deduction for such Fiscal Year or
2
<PAGE> 6
other period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.
"Equity Portfolio" means the assets of the Portfolio other
than debt obligations or instruments.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute thereto.
"Fiscal Year" means (i) the period commencing upon the
formation of the Company and ending on December 31, 1997, (ii) any subsequent
twelve (12) month period commencing on January 1 and ending on December 31, or
(iii) any portion of the period described in clause (ii) of this sentence for
which the Company is required to allocate items of Company income, gain,
expense, loss or deduction pursuant to Article VIII hereof.
"Fixed Income Portfolio" means the assets of the Portfolio
consisting of debt obligations or instruments.
"Gross Asset Value" means, with respect to any asset, such
asset's adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market
value of such asset, as agreed among the Members in the Contribution
Agreement and set forth on Schedule A hereto;
(b) the Gross Asset Value of all Company assets shall
be adjusted to equal their respective gross fair market values, as
determined by Mutual Agreement, as of the following times: (i) the
distribution by the Company to a Member of more than a de minimis
amount of Company assets as consideration for part or all of such
Member's Interest; (ii) the contribution to the Company by a Member of
more than a de minimis amount of assets in exchange for an Interest;
and (iii) the liquidation of the Company within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(g); and
(c) the Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of such
asset on the date of distribution, as determined by Mutual Agreement.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraph (a) or paragraph (b) above, such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing items of income, gain, expense,
loss or deduction.
"Interest" means, with respect to any Member at any time, a
Member's limited liability company interest in the Company which represents a
Member's share of the items of income, gain, expense, loss or deduction of the
Company, as provided in Article VIII, and a Member's right to receive
distributions of the Company's assets, as provided in Article IX, including a
Member's right to any and all benefits to which such Member may be entitled as
provided in this Agreement, together with the obligations of such Member to act
in accordance with all of the terms and provisions of this Agreement and the
Delaware Act.
"Investment Committee" means the Investment Committee
appointed by the Members in accordance with Section 6.3.
3
<PAGE> 7
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time and any successor statute thereto.
"Lease" means the lease pursuant to which TMC, as initial
lessee, leases from the Company real property contributed to the Company by TMC
or an Affiliate.
"Managing Member" means the Member appointed to manage the
affairs of the Company pursuant to Section 6.1, which initially shall be TMC.
The Managing Member shall be deemed to be a "manager" within the meaning of the
Delaware Act.
"Member" means one or more of Trust 1, Trust 2 or any of the
TMC Members individually, when acting in the capacity of each as a member of the
Company, and "Members" means Trust 1, Trust 2 and each of the TMC Members,
collectively, when acting in their capacities as members of the Company. For all
purposes of the Delaware Act, all Members shall constitute a single class or
group of members.
"Mutual Agreement" means the agreement of (i) TMC, or, if TMC
is no longer a Member, its Affiliates who are Members or, if no TMC Affiliate is
a Member, the Members holding a majority in interest, if any, of the Interests
initially held by the TMC Members, and (ii) (A) each of Trust 1 and Trust 2,
until the Trust Termination, (B) thereafter, the Representatives; (C) provided,
however, if Trust 1 and Trust 2 and each of their respective Transferees through
a Permitted Disposition are no longer Members of the Company, the holders, if
any, of a majority in interest of the Interests initially held by the Trust
Members.
"Permitted Disposition" means a Transfer, in whole or in part,
(a) of a TMC Member's Interest by a TMC Member to another TMC Member or to one
or more Affiliates of such TMC Member, (b) by Trust 1 or Trust 2 to any
sub-trust with the same trustees as, and with a term measured by the same lives
as, Trust 1 or Trust 2, respectively, or (c) upon the Trust Termination, by
Trust 1 or Trust 2 or by any sub-trust that received its Interest pursuant to a
Permitted Disposition to the beneficiaries of such Trusts or sub-trusts.
"Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"Portfolio" means the Securities and other properties
purchased by the Company with the initial cash contributed by the Members
pursuant to the Contribution Agreement and the Securities bought and sold by the
Company thereafter all in accordance with Section 6.3 under the direction of the
Investment Committee.
"Properties" means the real property contributed to the
Company by the TMC Members pursuant to the Contribution Agreement, or any real
property which may be acquired by the Company in exchange or substitution for
any real property held by the Company.
"Properties Committee" means the Properties Committee
appointed by the Members in accordance with Section 6.7.
"Properties Committee Change Date" means the date on which TMC
ceases to be the lessee of the Properties and the Company continues to own the
Properties.
"Replacement Portfolio" means the Securities purchased by the
Company with any cash proceeds received upon the sale, exchange or other
disposition of all or part of any of the Properties, and the Securities bought
and sold by the Company thereafter all in accordance with Section 6.3 under the
direction of the Investment Committee.
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"Representatives" means no less than two and no more than five
Persons who shall act as representatives of the Trust Members with respect to
this Agreement and the rights of Trust Members hereunder following the Trust
Termination, who are Trust Members and who are elected as such by Trust Members
holding, in the aggregate, a majority of the interest in the Company initially
held by Trust 1 and Trust 2. The presence of Trust Members holding a majority in
interest of the Interests initially held by the Trust Members shall be required
to constitute a quorum for the transaction of business to elect Representatives.
All matters shall be deemed approved by the Trust Members at any meeting duly
called and held, a quorum being present, by the affirmative vote of Trust
Members holding a majority in interest of the Interests initially held by the
Trust Members. Any action required or permitted to be taken at any meeting of
the Trust Members may be taken without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by Trust
Members holding a majority in interest of the Interests initially held by the
Trust Members and such written consent is filed with the minutes of the Trust.
"SEC" means the Securities and Exchange Commission or any
successor entity charged with enforcing the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute thereto.
"Securities" shall mean capital stock, limited or general
partnership interests, limited liability company interests, bonds, notes,
debentures and other obligations, investment contracts and other instruments or
evidences of indebtedness commonly referred to as securities and any rights,
warrants and options related thereto.
"Tax Matters Member" shall be the Member designated to act as
Tax Matters Member pursuant to Section 11.1(b), which initially shall be TMC.
"TMC Common" means the Series A Common Stock, par value $.01
per share, of TMC.
"TMC Preferred" means the 8% Convertible Preferred Stock,
Series A, par value $.01 per share, of TMC.
"TMC Shares" means the TMC Common and the TMC Preferred
contributed to the Company by Trust 1 and Trust 2 pursuant to the Contribution
Agreement.
"Transfer" shall have the meaning set forth in Section 5.4 of
the Agreement. The terms "Transferring," "Transferor," "Transferee" and
"Transferred" shall have meanings correlative to the meaning of "Transfer."
"Treasury Regulations" means the income tax regulations,
including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
"Trust Interest" means the Interest held by Trust Members.
"Trust Members" means Trust 1, Trust 2 and any successors in
interest to Trust 1 or Trust 2 who acquire their interests in a Permitted
Disposition.
"Trust Termination" means the termination of Trust 1, Trust 2
and any sub-trust thereof in accordance with their respective terms.
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"Trusts Portfolio" means the properties purchased by the
Company with the cash transferred to such Trusts Portfolio pursuant to Section
9.4 hereof and other properties bought and sold by the Company thereafter in
accordance with Section 9.4 under the direction of the Trusts Portfolio
Committee.
SECTION 1.2 HEADINGS. The headings and subheadings in this Agreement
are included for convenience and identification only and are in no way intended
to describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
ARTICLE II
FORMATION AND TERM
SECTION 2.1 FORMATION.
(a) The Members hereby agree to form the Company as a limited
liability company under and pursuant to the provisions of the Delaware Act and
agree that the rights, duties and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided herein. Pursuant to
Section 18-201(d) of the Delaware Act, this Agreement shall be effective as of
the date hereof.
(b) Upon the execution of this Agreement, Trust 1, Trust 2 and
each of the TMC Members shall be automatically admitted as Members of the
Company.
(c) The name and mailing address of each Member and the amount
contributed to the capital of the Company shall be listed on Schedule A attached
hereto. Each Member is required to provide any changes to its information set
forth on Schedule A to the Managing Member who shall be required to update
Schedule A from time to time as necessary to accurately reflect the information
therein.
(d) Lisa Harding, as an "authorized person" within the meaning
of the Delaware Act, has executed, delivered and filed the Certificate with the
Secretary of State of the State of Delaware. Thomas Unterman, as an "authorized
Person" within the meaning of the Delaware Act, has executed, delivered and
filed the Certificate of Correction of the Certificate of the Company with the
Secretary of State of the State of Delaware. Upon such filing, Lisa Harding's
and Thomas Unterman's powers as "authorized persons" shall cease. Any Member of
the Company, as an authorized person within the meaning of the Delaware Act,
shall execute, deliver and file any and all amendments or restatements to the
Certificate.
SECTION 2.2 NAME. The name of the limited liability company formed
hereby and by the filing of the Certificate is TMCT, LLC. The business of the
Company may be conducted upon compliance with all applicable laws under any
other name designated by the Managing Member.
SECTION 2.3 TERM. The term of the Company shall commence on the date of
the filing of the Certificate in the office of the Secretary of State of the
State of Delaware and shall continue perpetually unless the Company is dissolved
in accordance with the provisions of this Agreement. Pursuant to Section
18-201(d) of the Delaware Act, this Agreement shall be effective as of the date
hereof. The existence of the Company as a separate legal entity shall continue
until cancellation of the Certificate in the manner required by the Delaware
Act.
SECTION 2.4 REGISTERED AGENT AND OFFICE. The Company's registered agent
and office in Delaware shall be Corporation Service Company, 1013 Centre Road,
Wilmington,
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County of Newcastle, Delaware 19805. At any time, the Managing Member may
designate another registered agent and/or registered office.
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall initially be at 1 Times Mirror Square, Los
Angeles, California 90053. At any time, the Managing Member may change the
location of the Company's principal place of business.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Managing Member
shall cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business in which such qualification, formation or
registration is required or desirable. The Managing Member, as an authorized
person within the meaning of the Delaware Act, shall execute, deliver and file
any certificates (and any amendments and/or restatements thereof) necessary for
the Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
SECTION 3.1 PURPOSE. The Company is formed for the object and purpose
of, and the nature of the business to be conducted and promoted by the Company
is, acquiring and owning the TMC Shares, the Properties and the Portfolio and
managing the assets of the Company in accordance with the provisions of the
Agreement, and engaging in any lawful act or activity for which limited
liability companies may be formed under the Delaware Act which is necessary,
convenient, desirable or incidental to the foregoing.
SECTION 3.2 POWERS OF THE COMPANY.
(a) The Company shall have the power and authority to take any
and all actions necessary, appropriate, proper, advisable, convenient or
incidental to or for the furtherance of the purpose set forth in Section 3.1,
including, but not limited to, the power:
(i) to conduct its business, carry on its operations
and have and exercise the powers granted to a limited liability company
by the Delaware Act, any other law, or this Agreement in any state,
territory, district or possession of the United States, or in any
foreign country that may be necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(ii) to acquire by purchase, lease, contribution of
property or otherwise, own, hold, operate, maintain, finance, improve,
lease, sell, convey, mortgage, transfer, demolish or dispose of any
real or personal property that may be necessary, convenient or
incidental to the accomplishment of the purpose of the Company;
(iii) to enter into, perform and carry out contracts
of any kind, including, without limitation, contracts with any Member
or any Affiliate thereof, or any agent of the Company necessary to, in
connection with, convenient to, or incidental to the accomplishment of
the purpose of the Company;
(iv) to invest and reinvest its funds, and to take
and hold real and personal property for the payment of funds so
invested;
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(v) to sue and be sued, complain and defend, and
participate in administrative or other proceedings, in its name;
(vi) to appoint employees and agents of the Company,
and define their duties and fix their compensation;
(vii) to indemnify any Person in accordance with the
Delaware Act and to obtain any and all types of insurance;
(viii) to negotiate, enter into, renegotiate, extend,
renew, terminate, modify, amend, waive, execute, acknowledge or take
any other action with respect to any lease, contract or security
agreement in respect of any assets of the Company;
(ix) to borrow money and issue evidences of
indebtedness, and to secure the same by a mortgage, pledge or other
lien on the assets of the Company;
(x) to pay, collect, compromise, litigate, arbitrate
or otherwise adjust or settle any and all other claims or demands of or
against the Company or to hold such proceeds against the payment of
contingent liabilities;
(xi) to make, execute, acknowledge and file any and
all documents or instruments necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(xii) to purchase, take, receive, subscribe for or
otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend,
pledge, or otherwise dispose of, and otherwise use and deal in and
with, share or other interests in or obligations of domestic or foreign
corporations, associations, general or limited partnerships (including
the power to be admitted as a partner thereof and to exercise the
rights and perform the duties created thereby), trusts, limited
liability companies (including the power to be admitted as a member or
appointed as a manager thereof and to exercise the duties created
thereby), or individuals or direct or indirect obligations of the
United States or of any government, state, territory, governmental
district or municipality or of any instrumentality of any of them;
(xiii) to lend money for any proper purpose, to
invest and reinvest its funds, and to take and hold real and personal
property for the payment of funds so loaned or invested; and
(xiv) to cease its activities and cancel its
Certificate.
(b) The Managing Member, subject to any limitations set forth
in this Agreement, may authorize any Person (including, without limitation, any
other Member) to enter into any agreement or instrument on behalf of the Company
and to perform or cause to be performed the Company's obligations thereunder.
(c) The Company may merge with, or consolidate into, another
Delaware limited liability company or other business entity (as defined in
Section 18-209(a) of the Delaware Act) upon Mutual Agreement.
(d) Nothing in this Section 3.2 shall be deemed to authorize
the officers, the Investment Committee, the Properties Committee or the Managing
Member to authorize the Company to take any action set forth above in this
Section 3.2 without the required approval of the members of the Investment
Committee pursuant to Section 6.3, the members of the
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Properties Committee pursuant to Section 6.7 or the Members pursuant to Section
6.5 or any other provisions of this Agreement.
SECTION 3.3 LIMITATIONS ON COMPANY POWERS. Notwithstanding the
foregoing provisions of Section 3.2, the Company shall not do business in any
jurisdiction that would jeopardize the limitation on liability afforded to the
Members under the Delaware Act or this Agreement.
SECTION 3.4 SPECIFIC AUTHORIZATION. The Company, and the Managing
Member on behalf of the Company, may enter into and perform the Contribution
Agreement without any further act, vote or approvals of any Member or other
Person, notwithstanding any provision of this Agreement, the Delaware Act or
other applicable law, rule or regulation. The authorization set forth in the
prior sentence shall not be deemed to be a restriction on the Managing Member's
entering into other agreements on behalf of the Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS, INTERESTS
AND CAPITAL ACCOUNTS
SECTION 4.1 CAPITAL CONTRIBUTIONS.
(a) Each Member has made its Capital Contribution, described
on Schedule A, pursuant to the terms of the Contribution Agreement.
(b) No Member shall be required to make any additional Capital
Contribution to the Company. A Member may make additional Capital Contributions
to the Company only upon Mutual Agreement.
SECTION 4.2 MEMBER'S INTEREST.
A Member's Interest shall for all purposes be personal property. A
Member has no interest in specific Company property. All property of the
Company, whether real or personal, tangible or intangible, shall be deemed to be
owned by the Company as an entity, and no Member, individually, shall have any
direct ownership in such property.
SECTION 4.3 CAPITAL ACCOUNTS.
(a) A separate Capital Account will be maintained for
each Member.
(b) Each Member's Capital Account will be increased by:
(i) The amount of cash contributed by the Member to
the Company;
(ii) The Gross Asset Value of real, personal,
tangible and intangible property (other than cash) contributed by the
Member to the Company pursuant to Section 4.1;
(iii) Allocations to the Member of items of income or
gain (other than allocations under Section 8.10); and
(iv) The amount of any liabilities of the Company
assumed by such Member or liabilities that are secured by any property
distributed to such Member.
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(c) Each Member's Capital Account will be decreased by:
(i) The amount of cash distributed to the Member by
the Company;
(ii) The Gross Asset Value of property (other than
cash) distributed to the Member by the Company;
(iii) Allocations to the Member of items of
deduction, loss or expense (other than allocations under Section 8.10);
and
(iv) The amount of any liabilities of such Member
assumed by the Company or liabilities that are secured by any property
contributed by such Member.
(d) In the event the Gross Asset Value of any asset of the
Company is adjusted as provided in paragraph (b) under the definition of Gross
Asset Value, any resulting gain or loss shall be allocated among the Members in
accordance with Article VIII.
(e) In the event of a sale or exchange of all or part of an
Interest, a pro rata portion of the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the
transferred Interest in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(l).
(f) The manner in which Capital Accounts are to be maintained
pursuant to this Section 4.3 is intended to comply with the requirements of Code
Section 704(b) and the Treasury Regulations promulgated thereunder, including,
without limitation, Treasury Regulation Section 1.704-1(b)(2)(iv). If the manner
in which Capital Accounts are to be maintained pursuant to this Article IV
should be modified to comply with Code Section 704(b) and the Treasury
Regulations thereunder, then, notwithstanding anything to the contrary, the
method in which Capital Accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining Capital Accounts shall not
alter the economic agreement between or among the Members without Mutual
Agreement.
ARTICLE V
MEMBERS
SECTION 5.1 POWERS OF MEMBERS. The Members shall have the power to
exercise any and all rights or powers granted to the Members pursuant to the
express terms of this Agreement. No Member shall have the power to act for or on
behalf of, or to bind, the Company without the prior written approval of the
Managing Member. All Members shall constitute one class or group of members of
the Company for all purposes of the Delaware Act.
SECTION 5.2 REIMBURSEMENTS. The Company shall reimburse the Members and
officers of the Company for all ordinary, reasonable and necessary out-of-pocket
expenses incurred by the Members or such officers on behalf of the Company with
the approval of the Managing Member. Such reimbursement shall be treated as an
expense of the Company and shall be allocated in accordance with Article VIII,
and shall not be deemed to constitute a distributive share of income or a
distribution or return of capital to any Member.
SECTION 5.3 PARTITION. Each Member waives any and all rights that it
may have to maintain an action for partition of the Company's property.
SECTION 5.4 ASSIGNMENTS BY AND WITHDRAWAL OF MEMBERS.
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(a) Prohibited Transfers. No Member may resign or withdraw
from the Company without Mutual Agreement. No Member shall sell, transfer,
assign, convey, pledge, mortgage, encumber, hypothecate or otherwise dispose of
or suffer the creation of an interest in or lien on (a "Transfer") all or any
part of its Interest without Mutual Agreement (which can be withheld by such
other Members in their sole and absolute discretion); provided, however, that
such consent shall not be necessary with respect to any proposed Transfer which
constitutes a Permitted Disposition.
(b) Conditions to Transfer. Any purported Transfer of all or
any part of its Interest by a Member shall require the Member to notify the
Company of such Transfer, including the name and address of the Transferee. Any
Transfer by the TMC Members shall also be conditioned on compliance with Section
5.4(f)(iv)(A).
(c) Nonconforming Transfers Void. Any actual or purported
Transfer of all or part of the Interest of any Member that does not comply with
the provisions of Section 5.4 shall be void and shall not bind the Company. The
Company shall incur no liability for distributions made to any Transferor prior
to compliance with Section 5.4 with respect to the Interest or portion thereof
that is the subject of any such actual or purported Transfer.
(d) Transferee of Trust Members. Subject to Subsection (f)
below, any Transferee of an Interest in the Company upon a Permitted Disposition
by the Trust Members shall automatically become a Member with respect to such
transferred Interest, subject to applicable law and upon execution of this
Agreement, a counterpart of this Agreement or other documents agreeing to be
bound by the provisions of this Agreement. Other than as provided in the
previous sentence, no Transferee of a Trust Member's Interest or portion thereof
shall be admitted as a Member without Mutual Agreement.
(e) Transferee of TMC Members. Subject to Subsection (f)
below, any Transferee of a TMC Member that is a Member shall automatically
become a Member with respect to the Interest so transferred. A Transferee of a
TMC Member that is not a Member shall not be admitted as a Member without Mutual
Agreement, provided that this restriction shall be automatically removed and
eliminated with respect to such a Transferee in a Permitted Disposition at such
time as all states in which the Company conducts business conform to the
"check-the-box" federal income tax rules relating to partnership classification,
and subject to Subsection (f) below and applicable law, and upon execution of
this Agreement, a counterpart of this Agreement or other documents agreeing to
be bound by the provisions of this Agreement, such Transferee in a Permitted
Deposition shall automatically become a Member with respect to such transferred
Interest. Other than as provided in the foregoing sentences, no Transferee of a
TMC Member's Interest or portion thereof shall be admitted as a Member without
Mutual Agreement.
(f) Conditions for Admissions. No Transferee shall be admitted
as a Member without satisfying the following conditions (any one or more of
which may be waived by Mutual Agreement):
(i) the Transferor or Transferee shall undertake to
pay all expenses incurred by the Company in connection therewith;
(ii) the Company shall receive from the Person to
whom such Transfer is to be made a counterpart of this Agreement
executed by or on behalf of such Person and such other documents,
instruments and certificates as may reasonably be requested by the
Managing Member pursuant to which such Transferee shall become bound by
this Agreement with respect to the Interest, or portion thereof, so
Transferred;
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(iii) the Company shall receive from the proposed
Transferor and Transferee such documents, opinions, instruments and
certificates as required by Mutual Agreement;
(iv) the Company shall receive an opinion of counsel
to the Company substantially to the effect that the admission of the
Transferee as a Member (or in the case of Section 5.4(b), the
consummation of such Transfer):
(A) will not cause the Company to be
terminated pursuant to Section 708 of the Code if such
termination would have a material adverse effect on any
Member, to lose its status as a partnership for United States
federal and state income tax purposes, or to be considered a
publicly traded partnership under Section 7704(b) of the Code;
and
(B) complies with all applicable laws and
regulations, including, without limitation, applicable federal
and state securities laws and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(v) The Members hereby waive the requirements of this
Subsection (f) with respect to any Transfer by any TMC Member of its
Interest to TMC.
(g) Transfer of Control. TMC shall not, without Mutual
Agreement, Transfer Control of Candle Holdings Corporations or Fortify Holdings
Corporation, or any other entity substantially all of the value of which is
attributable to its Interests in the Company, to any Person that is not an
Affiliate of TMC.
ARTICLE VI
MANAGEMENT
SECTION 6.1 MANAGEMENT OF THE COMPANY. TMC shall be the Managing Member
and, in such capacity, subject to the management of the Portfolio and the
Replacement Portfolio by the Investment Committee in accordance with Section 6.3
hereof, the management of the Properties by the Properties Committee in
accordance with Section 6.7 hereof and the requirements set forth in Section 6.4
hereof, shall manage the Company in accordance with this Agreement until such
time as TMC elects to resign as Managing Member (after providing not less than
three (3) months' prior written notice to all other Members), in which event the
Members shall elect a Managing Member by Mutual Agreement to replace TMC. Except
as otherwise set forth in this Agreement, the Managing Member shall have full,
exclusive and complete discretion to manage and control the business and affairs
of the Company, to make all decisions affecting the business and affairs of the
Company and to take all such actions as the Managing Member deems necessary or
appropriate to accomplish the purpose of the Company set forth herein. The
Managing Member may appoint individuals as officers or employees of the Company
with such titles as it may elect, including but not limited to President,
Treasurer and Secretary. Except as provided herein, the officers of the Company
shall have such powers and duties in the management of this Company as may be
prescribed in a resolution by the Managing Member and, to the extent not
provided as generally pertains to their respective offices, as if the Company
were a corporation governed by the General Corporation Law of the State of
Delaware, subject to the control and removal by the Managing Member.
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SECTION 6.2 POWERS OF THE MANAGING MEMBER. Subject to the limitations
otherwise set forth in this Agreement, the Managing Member shall have the right,
power and authority, in the management of the business and affairs of the
Company, to do or cause to be done any and all acts, at the expense of the
Company, deemed by the Managing Member to be necessary or appropriate to
effectuate the business, purposes and objectives of the Company. Without
limiting the generality of the foregoing, the Managing Member shall have the
power and authority to:
(a) establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including with
respect to allocations and distributions;
(b) bring and defend on behalf of the Company actions and
proceedings at law or in equity before any court or governmental, administrative
or other regulatory agency, body or commission or otherwise;
(c) execute all documents or instruments, perform all duties
and powers and do all things for and on behalf of the Company in all matters
necessary, desirable, convenient or incidental to the purpose of the Company,
including, without limitation, all documents, agreements and instruments related
thereto and the consummation of all transactions contemplated thereby; and
(d) in its sole discretion, provide for payment to any person
serving on the Investment Committee or the Properties Committee as compensation
for such person's services to the Company.
The expression of any power or authority of the Managing Member in this
Agreement shall not in any way limit or exclude any other power or authority
which is not specifically or expressly set forth in this Agreement.
It is acknowledged that the power and authority of the Managing Member
includes the power and authority to direct the vote of the TMC Shares (including
for purposes of this paragraph any other shares of the capital stock of TMC that
may be held by the Company from time to time) and that such TMC shares shall,
unless otherwise provided for herein, be voted at the direction of the Managing
Member. However, it is acknowledged, as a result of the foregoing and Section
160(c) of the Delaware General Corporation Law, and it is otherwise agreed by
the Members, that the TMC Shares shall not be entitled to vote or counted for
quorum purposes with respect to any proposal submitted to the stockholders of
TMC. If, the foregoing notwithstanding, it is determined by a court of competent
jurisdiction that the TMC Shares are eligible to vote and shall be counted for
quorum purposes then, with respect to any proposal submitted for approval to the
stockholders of TMC, the Managing Member shall cause the TMC Shares to be (and,
whether or not the Managing Member did so, TMC shall treat the TMC Shares as
having been) voted for or against, or abstained or withheld from voting, in the
same proportion as the capital stock of TMC held by TMC stockholders other than
the Company is voted with respect to such proposal.
SECTION 6.3 INVESTMENT COMMITTEE.
(a) Number of Investment Committee Members. The number of
members of the Investment Committee shall be three. TMC shall have the right to
designate one member of the Investment Committee (the "TMC Designated Investment
Committee Member"), of which the initial designee shall be Thomas Unterman.
Trust 1 and Trust 2 shall have the right to designate two members (the "Trust
Designated Investment Committee Members"), of which the initial members shall be
Warren B. Williamson and William Stinehart, Jr.; provided, however, that
following the Trust Termination, such Trust Designated Investment Committee
Members
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shall be designated by the Representatives. Each member of the Investment
Committee shall hold office until his or her successor shall have been
designated pursuant to paragraph (d) below or until such member of the
Investment Committee shall resign or shall have been removed in the manner
provided herein. All members of the Investment Committee shall be either (i)
Members of the Company, (ii) officers, directors, trustees, employees or
beneficiaries of a Member of the Company or (iii) after the Trust Termination,
the Representatives.
(b) Removal of Investment Committee Members. Any member of the
Investment Committee may be removed at any time, with or without cause, by the
Member(s) then entitled to designate such member of the Investment Committee.
(c) Resignation. Any Person may resign as a member of the
Investment Committee at any time by giving written notice to the Investment
Committee. Any such resignation shall take effect at the time specified therein,
or, if the time is not specified, immediately upon its receipt by the Investment
Committee. Acceptance of such resignation shall not be necessary to make it
effective.
(d) Vacancies. Any vacancy on the Investment Committee,
whether because of death, resignation, disqualification, removal, expiration of
term or any other cause shall be filled by designation by the Member(s) who
appointed the member of the Investment Committee whose departure created such
vacancy. Such designation shall be effected by notice delivered to the
Investment Committee. Each member of the Investment Committee so chosen to fill
a vacancy shall remain a member of the Investment Committee until his or her
successor shall have been designated or until he or she shall resign or shall
have been removed in the manner herein provided.
(e) Powers of Investment Committee. The Investment Committee
shall have full, exclusive and complete authority with respect to the management
of the Portfolio and the Replacement Portfolio within the investment guidelines
set forth in Exhibit B hereto. The investment guidelines may be changed only by
Mutual Agreement. The Portfolio and the Replacement Portfolio shall be
maintained separately so that each can be identified readily.
(f) Meetings; Place of Meetings; Telephonic Participation.
Meetings of the Investment Committee may be held at such times and places within
or without the State of Delaware as the Investment Committee may from time to
time by resolution designate or as shall be designated by the Person or Persons
calling the meeting in the notice or waiver of notice of any such meeting.
Regular meetings of the Investment Committee shall be held not less than
quarterly. Special meetings of the Investment Committee shall be held whenever
called by a member of the Investment Committee or the Managing Member. Notice of
the time and place of each such special meeting shall be sent by facsimile
transmission, telegraph or cable or be delivered personally or mailed to and
received by each member of the Investment Committee not less than 24 hours
before the time at which the meeting is to be held. Notice of the purpose of a
special meeting need not be given. Notice of any meeting of the Investment
Committee shall not be required to be given to any member of the Investment
Committee who waives such notice in writing or who is present at such meeting.
At the request of any Investment Committee member, any or all Investment
Committee members may participate in any meeting of the Investment Committee by
means of conference telephone or similar communications equipment pursuant to
which all Persons participating in the meeting of the Investment Committee can
hear each other, and such participation shall constitute presence in person at
such meeting. Minutes of the meetings shall be recorded.
(g) Manner of Acting and Quorum. Except as otherwise provided
in this Agreement or the Delaware Act, the presence of (i) a majority of the
members of the Investment Committee and (ii) a number of Trust Designated
Investment Committee Members equal or
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greater than the number of TMC Designated Investment Committee Members shall be
required to constitute a quorum for the transaction of business at any meeting
of the Investment Committee. The Investment Committee members shall act only as
an Investment Committee, and the individual members shall have no power as such.
Each member shall have one vote. All matters shall be deemed approved by the
Investment Committee at any meeting duly called and held, a quorum being
present, by the affirmative vote of a majority of the authorized number of
members of the Investment Committee.
(h) Action Without Meeting. Any action required or permitted
to be taken or which may be taken at any meeting of the Investment Committee may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
TMC Designated Investment Committee Member and at least one of the Trust
Designated Investment Committee Members and such written consent is filed with
the minutes of proceedings of the Investment Committee.
SECTION 6.4 TRUSTS PORTFOLIO COMMITTEE. The Trusts Portfolio Committee
shall consist of the Trust Designated Investment Committee Members and shall
have full, exclusive and complete authority with respect to the management of
the Trusts Portfolio.
SECTION 6.5 ACTIONS REQUIRING MUTUAL AGREEMENT. The following actions
and other actions so designated throughout this Agreement shall not be taken by
the Company, whether at the direction of the Managing Member or at the direction
of the Investment Committee or the Properties Committee, without Mutual
Agreement:
(a) Any Transfer or other distribution or encumbrance of
assets of the Company (other than distributions under Article IX, dispositions
or encumbrances of investments in the Portfolio and Replacement Portfolio
subject to approval by the Investment Committee, and dispositions or
encumbrances of Properties subject, on and after the Properties Committee Change
Date, to approval by the Properties Committee);
(b) Any acquisition of assets by the Company (other than
acquisitions of assets in the Portfolio and Replacement Portfolio, subject to
approval by the Investment Committee, and acquisitions of Properties subject, on
and after the Properties Committee Change Date, to approval by the Properties
Committee);
(c) The incurrence of any indebtedness by the Company (other
than indebtedness incurred in the management of the Portfolio and Replacement
Portfolio, subject to the approval of the Investment Committee, and indebtedness
incurred in the management of the Properties subject, on and after the
Properties Committee Change Date, to approval by the Properties Committee);
(d) To the extent permitted by law, the liquidation or
dissolution of the Company;
(e) Any change in the business purpose of the Company;
(f) Any merger, consolidation or reorganization of the Company
with any other Person;
(g) Any change in the investment guidelines set forth in
Exhibit B hereto;
(h) Any issuance of an equity interest in the Company or any
admission of a new Member (other than pursuant to Section 5.4(d), in connection
with a Transfer in conformity with Section 5.4); or
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(i) Arrangements not contemplated by this Agreement between
the Company and any Member providing for pecuniary benefits to any Member.
SECTION 6.6 RELIANCE BY THIRD PARTIES. Any Person dealing with the
Company may rely upon a certificate signed by the Managing Member or any officer
appointed by the Managing Member including, but not limited to, the President,
any Vice President, the Secretary or the Treasurer as to:
(a) the identity of the members of the Investment Committee or
Properties Committee or any Member hereof;
(b) the existence or non-existence of any fact or facts which
constitute a condition precedent to acts by the Company or in any other manner
germane to the affairs of the Company;
(c) the Persons who are authorized to execute and deliver any
instrument or document of or on behalf of the Company; or
(d) any act or failure to act by the Company or as to any
other matter whatsoever involving the Company or any Member.
SECTION 6.7 PROPERTIES COMMITTEE.
(a) Number of Properties Committee Members. The number of
members of the Properties Committee shall be three. TMC shall have the right to
designate two members of the Properties Committee (the "TMC Designated
Properties Committee Members"), of which the initial designees shall be Thomas
Unterman and Steven J. Schoch. Trust 1 and Trust 2 shall have the right to
designate one member of the Properties Committee (the "Trust Designated
Properties Committee Member"), who initially shall be William Stinehart, Jr.;
provided, however, that following the Trust Termination, such Trust Designated
Properties Committee Member shall be designated by the Representatives; and
provided, further, that on and after the Properties Committee Change Date, TMC
shall have the right to designate one member of the Properties Committee and
Trust 1 and Trust 2 (or the Representatives, as applicable) shall have the right
to designate two members of the Properties Committee. Each member of the
Properties Committee shall hold office until his or her successor shall have
been designated pursuant to paragraph (d) below or until such member of the
Properties Committee shall resign or shall have been removed in the manner
provided herein. All members of the Properties Committee shall be either (i)
Members of the Company, (ii) officers, directors, trustees, employees or
beneficiaries of a Member of the Company or (iii) after the Trust Termination,
the Representatives.
(b) Removal of Properties Committee Members. Any member of the
Properties Committee may be removed at any time, with or without cause, by the
Member(s) then entitled to designate such member of the Properties Committee.
(c) Resignation. Any Person may resign as a member of the
Properties Committee at any time by giving written notice to the Properties
Committee. Any such resignation shall take effect at the time specified therein,
or, if the time is not specified, immediately upon its receipt by the Properties
Committee. Acceptance of such resignation shall not be necessary to make it
effective.
(d) Vacancies. Any vacancy on the Properties Committee,
whether because of death, resignation, disqualification, removal, expiration of
term or any other cause shall be filled by designation by the Member(s) who
appointed the member of the Properties Committee whose departure created such
vacancy. Such designation shall be effected by notice delivered to the
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Properties Committee. Each member of the Properties Committee so chosen to fill
a vacancy shall remain a member of the Properties Committee until his or her
successor shall have been designated or until he or she shall resign or shall
have been removed in the manner herein provided.
(e) Powers of Properties Committee. The Properties Committee
shall have full, exclusive and complete authority with respect to the management
of the Properties.
(f) Meetings; Place of Meetings; Telephonic Participation.
Meetings of the Properties Committee may be held at such times and places within
or without the State of Delaware as the Properties Committee may from time to
time by resolution designate or as shall be designated by the Person or Persons
calling the meeting in the notice or waiver of notice of any such meeting.
Regular meetings of the Properties Committee shall be held not less than
quarterly. Special meetings of the Properties Committee shall be held whenever
called by a member of the Properties Committee or the Managing Member. Notice of
the time and place of each such special meeting shall be sent by facsimile
transmission, telegraph or cable or be delivered personally or mailed to and
received by each member of the Properties Committee not less than 24 hours
before the time at which the meeting is to be held. Notice of the purpose of a
special meeting need not be given. Notice of any meeting of the Properties
Committee shall not be required to be given to any member of the Properties
Committee who waives such notice in writing or who is present at such meeting.
At the request of any Properties Committee member, any or all Properties
Committee members may participate in any meeting of the Properties Committee by
means of conference telephone or similar communications equipment pursuant to
which all Persons participating in the meeting of the Properties Committee can
hear each other, and such participation shall constitute presence in person at
such meeting. Minutes of the meetings shall be recorded.
(g) Manner of Acting and Quorum. Except as otherwise provided
in this Agreement or the Delaware Act, the presence of a majority of the members
of the Properties Committee shall be required to constitute a quorum for the
transaction of business at any meeting of the Properties Committee; provided
that (a) the Trust Designated Properties Committee Member may act alone with
respect to declaration, prosecution or waiver of an "event of default" (as
defined in the Lease), and (b) waivers or consents with respect to the Lease,
and actions and decisions with respect to any renewals of the Lease or
purchasers of real property pursuant to the option set forth in the Lease shall
require unanimous consent of all members of the Properties Committee, and (c)
any TMC Designated Properties Committee Member may act alone with respect to any
actions or decisions relating to participation in business improvement districts
or similar programs. Except as otherwise set forth herein, the Properties
Committee members shall act only as a Properties Committee, and the individual
members shall have no power as such. Each member shall have one vote. Except as
otherwise provided herein, all matters shall be deemed approved by the
Properties Committee at any meeting duly called and held, a quorum being
present, by the affirmative vote of a majority of the authorized number of
members of the Properties Committee.
(h) Action Without Meeting. Any action required or permitted
to be taken or which may be taken at any meeting of the Properties Committee may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
Trust Designated Properties Committee Member and at least one of the TMC
Designated Properties Committee Members (or on or after the Properties Committee
Change Date, by the TMC Designated Properties Committee Member and at least one
of the Trust Designated Properties Committee Members) and such written consent
is filed with the minutes of proceedings of the Properties Committee.
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ARTICLE VII
MEETINGS OF MEMBERS
SECTION 7.1 MEETINGS OF THE MEMBERS. Meetings of the Members may be
called at any time by the Managing Member, Trust 1 or Trust 2 or, after the
Trust Termination, the Representatives, or within two days after written notice
requesting such a meeting is received by the Managing Member from any Member.
Each meeting of Members shall be conducted by such Person that the Managing
Member may designate or, if the Managing Member fails to do so, by such other
Person that a majority of the Members present in person or by proxy specify.
SECTION 7.2 PLACE OF MEETINGS; PARTICIPATION BY TELEPHONE. All meetings
of the Members of the Company shall be held at such places, within or without
the State of Delaware, as may from time to time be designated by the Managing
Member and specified in the respective notices or waivers of notice thereof.
Participation in any meeting may be by means of conference telephone or similar
communications equipment pursuant to which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting. Minutes of the meetings shall be recorded.
SECTION 7.3 NOTICE OF MEETINGS. Notice of each meeting of the Members
of the Company shall be given not less than ten (10) days nor more than sixty
(60) days before the date of the meeting to each Member of record entitled to
vote at such meeting by delivering a typewritten or printed notice thereof to
such Member personally, or by depositing such notice in the United States mail,
in a postage prepaid envelope, directed to such Member at such Member's post
office address furnished by such Member to the Secretary of the Company for such
purpose or, if such Member shall not have furnished to the Secretary of the
Company an address for such purpose, then at such Member's post office address
last known to the Company, or by transmitting a notice thereof to such Member at
such address by facsimile, telegraph, cable or wireless. Every notice of a
meeting of the Members shall state the place, date and hour of the meeting, and
the purpose or purposes for which the meeting is called. Notice of any meeting
of Members shall not be required to be given to any Member who shall have waived
such notice, and such notice shall be deemed waived by any Member who shall
attend such meeting in person or by proxy, except for any Member who shall
attend such meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Except as otherwise expressly required by law,
notice of any adjourned meeting of the Members need not be given if the time and
place thereof are announced at the meeting at which the adjournment is taken.
SECTION 7.4 ACTION WITHOUT MEETING. Any action required to be taken or
which may be taken at any meeting of Members of the Company may be taken without
a meeting, without prior notice and without a vote, if there is Mutual Agreement
in writing, setting forth the action so taken.
ARTICLE VIII
ALLOCATIONS
SECTION 8.1 FIXED INCOME PORTFOLIO. All items with respect to the Fixed
Income Portfolio for any Fiscal Year shall be allocated as follows:
(a) Ordinary Profits and Losses. All items of interest,
original issue discount, market discount, dividends and other items of ordinary
income from the Fixed Income Portfolio
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and all related items of ordinary deduction or expense shall be allocated 80% to
the Trusts and 20% to the TMC Members.
(b) Gains. All items of gain from any sale, exchange,
redemption or similar transactions relating to the assets in the Fixed Income
Portfolio shall be allocated as follows:
(i) 80% to the Trusts and 20% to the TMC Members
until the aggregate amount allocated under this Section 8.1(b)(i) is
equal to the aggregate items of loss, expense, or deductions allocated
under Section 8.1(c)(iv);
(ii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.1(b)(ii) is equal to the
aggregate items of loss, expense, or deductions allocated under section
8.1(c)(iii);
(iii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.1(b)(iii) is equal to
$40,350,826; and
(iv) Thereafter, 80% to the Trusts and 20% to the TMC
Members.
(c) Losses. All items of loss, expense or deduction from any
sale, exchange, redemption or similar transactions relating to the assets in the
Fixed Income Portfolio shall be allocated as follows:
(i) 80% to the Trusts and 20% to the TMC Members
until the aggregate amount allocated under this Section 8.1(c)(i) is
equal to the aggregate gains allocated under Section 8.1(b)(iv);
(ii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.1(c)(ii) is equal to the
aggregate gains allocated under section 8.1(b)(iii);
(iii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.1(c)(iii) is equal to
$40,350,826; and
(iv) Thereafter, 80% to the Trusts and 20% to the TMC
Members.
(d) Replacement Portfolio. All items with respect to the
Replacement Portfolio shall be allocated 85% to the Trusts and 15% to the TMC
Members.
SECTION 8.2 PROPERTIES. All items with respect to the Properties for
any Fiscal Year shall be allocated as follows:
(a) Ordinary Profits and Losses. All items of rent and other
ordinary income from the Properties and all related items of ordinary deduction
or expense, other than Depreciation, shall be allocated 80% to the Trusts and
20% to the TMC Members.
(b) Gains. All recapture of Depreciation and all items of gain
from any sale, exchange or similar transactions relating to the Properties shall
be allocated 80% to the Trusts and 20% to the TMC Members.
(c) Losses. All Depreciation and all items of loss, expense or
deduction from any sale, exchange, or similar transactions relating to the
Properties shall be allocated 80% to the Trusts and 20% to the TMC Members.
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SECTION 8.3 TMC COMMON. All items with respect to the TMC Common for
any Fiscal Year shall be allocated as follows:
(a) Ordinary Profits and Losses. All dividends and other items
of ordinary income from the TMC Common and all related items of deduction or
expense shall be allocated 20% to the Trusts and 80% to the TMC Members.
(b) Gains. All items of gain from any sale, exchange,
redemption, partial or complete liquidation, extraordinary dividend or similar
transactions relating to the TMC Common shall be allocated as follows:
(i) 10% to the Trusts and 90% to the TMC Members
until the aggregate amount allocated under this Section 8.3(b)(i) is
equal to the aggregate items of loss, expense or deduction allocated
under Section 8.3(c)(iv);
(ii) 100% to the Trusts until the aggregate amount
allocated under this Section 8.3(b)(ii) is equal to the aggregate items
of loss, expense or deduction allocated under Section 8.3(c)(iii);
(iii) 100% to the Trusts until the aggregate amount
allocated to the Trusts under this Section 8.3(b)(iii) is equal to
$50,763,540; and
(iv) Thereafter, 10% to the Trusts and 90% to the TMC
Members.
(c) Losses. All items of loss, expense or deduction from any
sale, exchange, redemption, partial or complete liquidation, extraordinary
dividend or similar transactions relating to the TMC Common shall be allocated
as follows:
(i) 10% to the Trusts and 90% to the TMC Members
until the aggregate amount allocated under this Section 8.3(c)(i) is
equal to the aggregate gains allocated under Section 8.3(b)(iv);
(ii) 100% to the Trusts until the aggregate amount
allocated under this Section 8.3(c)(ii) is equal to the aggregate gains
allocated under section 8.3(b)(iii);
(iii) 100% to the Trusts until the aggregate amount
allocated to the Trusts under this Section 8.3(c)(iii) is equal to
$50,763,540; and
(iv) Thereafter, 10% to the Trusts and 90% to the TMC
Members.
SECTION 8.4 TMC PREFERRED. All items with respect to the TMC Preferred
for any Fiscal Year shall be allocated as follows:
(a) Ordinary Profits and Losses. All dividends and other items
of ordinary income from the TMC Preferred and all related items of deduction or
expense shall be allocated 20% to the Trusts and 80% to the TMC Members.
(b) Gains. All items of gain from any sale, exchange,
redemption, partial or complete liquidation, extraordinary dividend or similar
transactions relating to the TMC Preferred shall be allocated as follows:
(i) 20% to the Trusts and 80% to the TMC Members
until the aggregate amount allocated under this Section 8.4(b)(i) is
equal to the aggregate items of loss, expense or deduction allocated
under Section 8.4(c)(iv);
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(ii) 100% to the Trusts until the aggregate amount
allocated under this Section 8.4(b)(ii) is equal to the aggregate items
of loss, expense or deduction allocated under Section 8.4(c)(iii);
(iii) 100% to the Trusts until the aggregate amount
allocated to the Trusts under this Section 8.4(b)(iii) is equal to
$44,259,600; and
(iv) Thereafter, 20% to the Trusts and 80% to the TMC
Members.
(c) Losses. All items of loss, expense or deduction from any
sale, exchange, redemption, partial or complete liquidation, extraordinary
dividend or similar transactions relating to the TMC Preferred shall be
allocated as follows:
(i) 20% to the Trusts and 80% to the TMC Members
until the aggregate amount allocated under this Section 8.4(c)(i) is
equal to the aggregate gains allocated under Section 8.4(b)(iv);
(ii) 100% to the Trusts until the aggregate amount
allocated under this Section 8.4(c)(ii) is equal to the aggregate gains
allocated under Section 8.4(b)(iii);
(iii) 100% to the Trusts until the aggregate amount
allocated to the Trusts under this Section 8.4(c)(iii) is equal to
$44,259,600; and
(iv) Thereafter, 20% to the Trusts and 80% to the TMC
Members.
SECTION 8.5 EQUITY PORTFOLIO. All items with respect to the Equity
Portfolio for any Fiscal Year shall be allocated as follows:
(a) Ordinary Profits and Losses. All dividends and other items
of ordinary income from the Equity Portfolio and all related items of ordinary
deduction or expense shall be allocated 80% to the Trusts and 20% to the TMC
Members.
(b) Gains. All items of gain from any sale, exchange,
redemption, partial or complete liquidation, extraordinary dividend or similar
transactions relating to the assets in the Portfolio shall be allocated as
follows:
(i) 80% to the Trusts and 20% to the TMC Members
until the aggregate amount allocated under this Section 8.5(b)(i) is
equal to the aggregate items of loss, expense or deduction allocated
under Section 8.5(c)(iv);
(ii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.5(b)(ii) is equal to the
aggregate items of loss, expense or deduction allocated under section
8.5(c)(iii);
(iii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.5(b)(iii) is equal to $9,502,314;
and
(iv) Thereafter, 80% to the Trusts and 20% to the TMC
Members.
(c) Losses. All items of loss, expense or deduction from any
sale, exchange, redemption, partial or complete liquidation, extraordinary
dividend or similar transactions relating to the assets in the Equity Portfolio
shall be allocated as follows:
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(i) 80% to the Trusts and 20% to the TMC Members
until the aggregate amount allocated under this Section 8.5(c)(i) is
equal to the aggregate gains allocated under Section 8.5(b)(iv);
(ii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.5(c)(ii) is equal to the
aggregate gains allocated under Section 8.5(b)(iii);
(iii) 100% to the TMC Members until the aggregate
amount allocated under this Section 8.5(c)(iii) is equal to $9,502,314;
and
(iv) Thereafter, 80% to the Trusts and 20% to the TMC
Members.
SECTION 8.6 TRUSTS PORTFOLIO. All items with respect to the Trusts
Portfolio shall be allocated 100% to the Trusts.
SECTION 8.7 ALLOCATED EXPENSES. Allocated Expenses for any Fiscal Year
shall be apportioned among the Portfolio, the Replacement Portfolio, the
Properties, the TMC Common and the TMC Preferred based on the ratio of the gross
revenues from each category of assets to the total gross revenue of the Company
(excluding gross revenue attributable to the Trusts Portfolio) for such Fiscal
Year. Amounts so apportioned (hereinafter "Portfolio Allocated Expenses,"
"Replacement Portfolio Allocated Expenses," "Properties Allocated Expenses,"
"TMC Common Allocated Expenses," and "TMC Preferred Allocated Expenses,"
respectively) shall be allocated in accordance with Sections 8.1(a), 8.1(d),
8.2(a), 8.3(a) and 8.4(a), respectively, among the Members.
SECTION 8.8 TMC MEMBERS AND TRUSTS. Allocations among the TMC Members
shall be pro rata based upon the percentages set forth in Schedule 8.8.
Allocations among the Trusts shall be pro rata based upon the percentages set
forth in Schedule 8.8.
SECTION 8.9 REGULATORY ALLOCATIONS. (a) The foregoing provisions of
this Article VIII shall be subject to the following limitation: no Member shall
be allocated any items of loss, expense or deduction hereunder if such
allocation results in a Capital Account deficit for such Member. Any balance of
such items of loss, expense or deduction shall be specially allocated to the
other Members in proportion to their positive Capital Account balances.
(b) Notwithstanding the foregoing provisions of this Article
VIII, in the event any Member unexpectedly receives any adjustments, allocations
or distributions described in Sections 1.704(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations,
items of income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section 8.9(b)
shall be made only if and to the extent that such Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
VIII have been tentatively made as if this Section 8.9(b) were not in the
Agreement.
(c) The allocations set forth in Sections 8.9(a) and (b) (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Treasury Regulations. It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of income,
gain, loss or deduction pursuant to this Section 8.9. Therefore, notwithstanding
any other provision of this Article VIII (other than the Regulatory
Allocations), the Members by Mutual Agreement shall make such offsetting special
allocations of income, gain, loss or deduction in
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whatever manner they determine is appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all items were
allocated pursuant to Article VIII (other than Sections 8.9(a) and (b)).
SECTION 8.10 TAX ALLOCATIONS; SECTION 704(c) OF THE CODE.
(a) In accordance with Section 704(c) of the Code and the
Treasury Regulations thereunder, income, gain, loss and deduction with respect
to any property contributed to the capital of the Company shall, solely for
income tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its initial Gross Asset Value (computed in accordance
with paragraph (a) of the definition of "Gross Asset Value" contained in Section
1.1 hereof).
(b) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to paragraph (b) of the definition of "Gross Asset Value"
contained in Section 1.1 hereof, subsequent allocations of income, gain, loss
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
Gross Asset Value in the same manner as under Section 704(c) of the Code and the
Treasury Regulations thereunder.
(c) Any elections or other decisions relating to allocations
under this Section 8.10, shall be made by the Managing Member in any manner that
reasonably reflects the purpose and intention of this Agreement. All items
relevant under Section 704(c) of the Code shall be allocated based on the
"traditional method" defined in Treasury Regulations Section 1.704-3(b), and the
excess of depreciation with respect to the Properties allowed for income tax
purposes over Depreciation shall be allocated to the TMC Members. Allocations
pursuant to this Section 8.10 are solely for purposes of federal, state and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account, other items or distributions pursuant
to any provision of this Agreement.
(d) The Members are aware of the income tax consequences of
the allocations made by this Article VIII and hereby agree to be bound by the
provisions of this Article VIII in reporting their shares of Company income and
loss for all income tax purposes.
ARTICLE IX
DISTRIBUTIONS
SECTION 9.1 PORTFOLIO AND REPLACEMENT PORTFOLIO.
(a) Cash generated from interest, original issue discount,
market discount, dividends, and other items of ordinary income from the Fixed
Income Portfolio and the Equity Portfolio less (i) expenses related to the
administration of the Fixed Income Portfolio and the Equity Portfolio and (ii)
Portfolio Allocated expenses, shall be distributed 80% to the Trusts and 20% to
the TMC Members.
(b) Cash, if any, generated from any taxable gain on
disposition of any assets of the Portfolio and corresponding to items allocated
to the Members under Sections 8.1(b)(iii) and (iv) and 8.5(b)(iii) and (iv) (in
each case less any related expense or deduction allocated under Sections 8.1(c)
and 8.5(c)) shall be distributed to such Members in the order and in
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proportion to the amounts of such taxable gain corresponding to items allocated
under Sections 8.1(b)(iii) and (iv) and 8.5(b)(iii) and (iv).
(c) Cash generated from interest, original issue discount,
market discount, dividends, and other items of ordinary income from the
Replacement Portfolio less (i) expenses related to the administration of the
Replacement Portfolio and (ii) Replacement Portfolio Allocated Expenses, shall
be distributed 85% to the Trusts and 15% to the TMC Members.
(d) Cash, if any, generated from any taxable gain on
disposition of any assets of the Replacement Portfolio less any related expense
or deduction shall be distributed 85% to the Trusts and 15% to the TMC Members.
SECTION 9.2 PROPERTIES.
(a) Cash generated from rent and other items of ordinary
income from the Properties less (i) any expenses related to the administration
of the Properties and (ii) Properties Allocated Expenses, shall be distributed
80% to the Trusts and 20% to the TMC Members.
(b) Cash, if any, generated from any gain from any sale,
exchange, disposition or similar transactions relating to the Properties shall
be distributed to the Members in the order and the proportion to the amount of
such gain allocated under Section 8.2(b). Any other amounts of cash received by
the Company upon the sale, exchange, disposition or similar transactions
relating to the Properties, shall be invested by the Investment Committee and
shall be accounted for separately as the "Replacement Portfolio."
SECTION 9.3 TMC SHARES. Cash generated from dividends and other items
of ordinary income from the TMC Shares less (i) any expenses related to the TMC
Shares, (ii) TMC Common Allocated Expenses, and (iii) TMC Preferred Allocated
Expenses, shall be distributed 20% to the Trusts and 80% to the TMC Members.
SECTION 9.4 TRUSTS PORTFOLIO. The Trusts shall have the right to have
the Company transfer any distributions to which the Trusts are otherwise
entitled under this Agreement to a separate Company account designated as the
Trusts Portfolio. The Trusts Portfolio shall be invested as determined by a
committee comprised of the Trust Designated Investment Committee Members (the
"Trusts Portfolio Committee"). The Trusts Portfolio Committee shall have the
right to require the distribution to the Trust Members of all or a portion of
the assets or proceeds in the Trusts Portfolio at any time and from time to
time.
SECTION 9.5 TMC MEMBERS AND TRUSTS. Distributions to the TMC Members
pursuant to Sections 9.1, 9.2 and 9.3 shall be divided among the TMC Members
based upon the percentages set forth in Schedule 8.8. Distributions to the
Trusts pursuant to Sections 9.1, 9.2 9.3 and 9.4 shall be divided among the
Trust Members based upon the percentages set forth in Schedule 8.8. The amounts
to be distributed to the Members pursuant to Sections 9.1 through 9.4 shall be
advanced by the Company to the Members at such times as are determined by Mutual
Agreement, but in no event less frequently than once per calendar quarter. The
amounts so advanced to the Members shall be treated as advances or drawings of
money against their distributive shares of Company income and as current
distributions made on the last day of the Company's taxable year.
SECTION 9.6 LIQUIDATING DISTRIBUTIONS. Liquidating distributions shall
be made in accordance with the Member's positive Capital Account balances. Prior
to any liquidating distributions, the assets of the Company shall be appraised
at fair market value by an appraiser selected by Mutual Agreement. Any items of
income, gain, loss, expense or deduction that would have resulted had such
assets been sold at such appraised fair market value shall be
24
<PAGE> 28
allocated to the Members in accordance with Article VIII. Each Member shall then
be entitled to receive cash and property with a fair market value equal to the
positive balance in such Member's Capital Account after the foregoing
allocations. No Member shall have the right to receive any particular asset of
the Company, and the nature of the assets to be distributed to each Member shall
be as agreed to by Mutual Agreement at such time; provided, however, that TMC
and the TMC Members will act in this regard through a special committee of the
Board of Directors of TMC, comprised solely of directors who are not trustees,
beneficiaries or Affiliates of Trust 1 and Trust 2. If the Members are unable to
agree upon the distribution of particular assets after a reasonable period of
negotiation, the Members, acting by Mutual Agreement, shall cause the orderly
sale of the assets of the Company, and after the allocation of all items of
income, gain, loss, expense or deduction from such sale of the assets in
accordance with Article VIII, shall distribute the proceeds from such sales,
proportionately among each class of assets to be distributed, to the Members in
accordance with their positive Capital Account balances. No Member shall have
the obligation to restore or repay any negative balance in its Capital Account.
SECTION 9.7 OTHER DISTRIBUTIONS. Any other distributions of cash and
property shall be made only to the extent provided for by Mutual Agreement.
SECTION 9.8 LIMITATION ON DISTRIBUTIONS. Notwithstanding any provision
to the contrary contained in this Agreement, the Company, and the Managing
Member on behalf of the Company, shall not be required to make a distribution to
any Member on account of its Interests if such distribution would violate
Sections 18-607 or 18-804(a)(1) of the Delaware Act or other applicable law.
ARTICLE X
BOOKS AND RECORDS
SECTION 10.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS.
(a) At all times during the continuance of the Company, the
Company shall maintain, at its principal place of business, separate books of
account for the Company that shall show a true and accurate record of all costs
and expenses incurred, all charges made, all credits made and received and all
income derived in connection with the operation of the Company business in
accordance with generally accepted accounting principles consistently applied,
and, to the extent inconsistent therewith, in accordance with this Agreement. In
accordance with Section 18-305 of the Delaware Act, such books of account,
together with a copy of this Agreement and of the Certificate, shall at all
times be open to inspection and examination at reasonable times by each Member
and its duly authorized representative for any purpose reasonably related to
such Member's interest as a member of the Company.
(b) The following financial information shall be transmitted
by the Managing Member to each Member:
(i) within three (3) months after the close of each
Fiscal Year:
(A) an audited balance sheet of the Company
as of the close of such Fiscal Year;
(B) an audited statement of Company profits
and losses for such Fiscal Year;
25
<PAGE> 29
(C) a statement of such Member's Capital
Account as of the close of such Fiscal Year, and
changes therein during such Fiscal Year; and
(D) a statement indicating such Member's
share of each item of Company income, gain, loss,
deduction or credit for such Fiscal Year for income
tax purposes.
(ii) within 90 days after the close of each quarter:
(A) an unaudited balance sheet as of the
close of such quarter; and
(B) an unaudited statement of Company
profits and losses for such quarter.
(iii) within 30 days after the close of each calendar
month, a report of Company profit and loss for such month.
SECTION 10.2 ACCOUNTING METHOD. For both financial and tax reporting
purposes and for purposes of determining profits and losses, the books and
records of the Company shall be kept on the accrual method of accounting applied
in a consistent manner and shall reflect all Company transactions and be
appropriate for the Company's business.
SECTION 10.3 AUDIT. At any time and in the sole discretion of the
Managing Member, the financial statements of the Company may be audited by TMC's
independent certified public accountants, with such audit to be accompanied by a
report of such accountant containing its opinion. The cost of such audits will
be an expense of the Company. A copy of any such audited financial statements
and accountant's report will be made available for inspection by the Members.
ARTICLE XI
TAX MATTERS
SECTION 11.1 TAX MATTERS MEMBER.
(a) The Tax Matters Member shall arrange for the preparation
of and timely filing of all returns relating to Company income, gains, losses,
deductions and credits, as necessary for federal, state and local income tax
purposes. Each Member agrees to furnish the Company with any representations and
forms as shall reasonably be requested by the Company to assist it in
determining the extent of and in fulfilling its tax obligations.
(b) TMC is hereby designated as "Tax Matters Member" of the
Company for purposes of Section 6231(a)(7) of the Code and is authorized and
required to represent the Company in connection with any administrative
proceeding at the Company level with the Internal Revenue Service relating to
the determination of any item of Company income, gain, loss, deduction or credit
for federal income tax purposes. If for any reason the Tax Matters Member
resigns or can no longer serve in that capacity, the Members may, by Mutual
Agreement, designate another Member to be the Tax Matters Member. Any action or
decision by a Member in its capacity as Tax Matters Member shall be taken or
made by Mutual Agreement.
26
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(c) The Tax Matters Member shall, within ten (10) days of the
receipt of any notice from the Internal Revenue Service in any administrative
proceeding at the Company level relating to the determination of any Company
item of income, gain, loss, deduction or credit, mail a copy of such notice to
each Member.
SECTION 11.2 RIGHT TO MAKE SECTION 754 ELECTION. The Tax Matters Member
may make or revoke, on behalf of the Company, all elections in accordance with
Section 754 of the Code, so as to adjust the basis of Company property in the
case of a distribution of property within the meaning of Section 734 of the
Code, and in the case of a transfer of a Company interest within the meaning of
Section 743 of the Code. Each Member shall, upon request of the Tax Matters
Member, supply the information necessary to give effect to such an election. Any
Trust Member or Representative has the right to require the Tax Matters Member
to make a Section 754 election.
SECTION 11.3 TAXATION AS PARTNERSHIP. The Company shall be treated as a
partnership for U.S. federal income tax purposes.
ARTICLE XII
LIABILITY, EXCULPATION AND INDEMNIFICATION
SECTION 12.1 LIABILITY. Except as otherwise provided by the Delaware
Act, the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Covered Person shall be obligated personally
for any such debt, obligation or liability of the Company solely by reason of
being a Covered Person.
SECTION 12.2 EXCULPATION.
(a) No Covered Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
SECTION 12.3 DUTIES AND LIABILITIES OF COVERED PERSONS.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person, a Covered Person acting under this
Agreement shall not be liable to the Company or to any other Covered Person for
its good faith reliance on the provisions of this Agreement. The provisions of
this Agreement, to the extent that they restrict the duties and liabilities of a
Covered Person otherwise existing at law or in equity, are agreed by the parties
hereto to replace such other duties and liabilities of such Covered Person.
27
<PAGE> 31
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between Covered Persons, or (ii) whenever
this Agreement or any other agreement contemplated herein provides that a
Covered Person shall act in a manner that is, or provides terms that are, fair
and reasonable to the Company or any Member, the Covered Person shall resolve
such conflict of interest, taking such action or providing such terms,
considering in each case the relative interest of each party (including its own
interest), such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. In the absence of bad faith by the Covered Person, the resolution,
action or term so made, taken or provided by the Covered Person shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of the Covered Person at law or in equity or
otherwise.
(c) Whenever in this Agreement a Covered Person is permitted
or required to make a decision (i) in its "discretion" or under a grant of
similar authority or latitude, the Covered Person shall be entitled to consider
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the Company or any other Person, or (ii) in its "good faith"
or under another express standard, the Covered Person shall act under such
express standard and shall not be subject to any other or different standard
imposed by this Agreement or other applicable law.
SECTION 12.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Covered Person by reason
of any act or omission performed or omitted by such Covered Person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such Covered Person by this Agreement; provided,
however, that any indemnity under this Section 12.4 shall be provided out of and
to the extent of Company assets only, and no Covered Person shall have any
personal liability on account thereof.
SECTION 12.5 EXPENSES. To the fullest extent permitted by applicable
law, expenses (including legal fees) incurred by a Covered Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or
on behalf of the Covered Person to repay such amount if it shall be determined
that the Covered Person is not entitled to be indemnified as authorized in
Section 12.4 hereof.
SECTION 12.6 INSURANCE. The Company may purchase and maintain
insurance, to the extent and in such amounts as the Managing Member shall deem
reasonable, on behalf of Covered Persons and such other Persons as the Managing
Member shall determine, against any liability that may be asserted against or
expenses that may be incurred by any such Person in connection with the
activities of the Company or such indemnities, regardless of whether the Company
would have the power to indemnify such Person against such liability under the
provisions of this Agreement. The Managing Member and the Company may enter into
indemnity contracts with Covered Persons and adopt written procedures pursuant
to which arrangements are made for the advancement of expenses and the funding
of obligations under Section 12.5 hereof and containing such other procedures
regarding indemnification as are appropriate.
SECTION 12.7 OUTSIDE BUSINESS. Any Member or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to
28
<PAGE> 32
such independent ventures or the income or profits derived therefrom, and the
pursuit of any venture, even if competitive with the business of the Company,
shall not be deemed wrongful or improper. No Member or Affiliate thereof shall
be obligated to present any particular investment opportunity to the Company
even if such opportunity is of a character that, if presented to the Company,
could be taken by the Company, and any Member or Affiliate thereof shall have
the right to take for its own account (individually or as a partner,
shareholder, fiduciary or otherwise) or recommend to others any such particular
investment opportunity.
ARTICLE XIII
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 13.1 DISSOLUTION. The Company shall be dissolved and its
affairs shall be wound up upon the occurrence of any of the following events:
(a) The death, insanity, bankruptcy or dissolution of the
Managing Member, or the occurrence of any other event that terminates the
continued membership of the Managing Member, unless remaining Members holding at
least a "majority in interest" (within the meaning of Revenue Procedure 94-46)
of the remaining Members agree to continue the Company within 90 days following
the occurrence of any such event;
(b) the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Act; or
(c) by Mutual Agreement.
SECTION 13.2 NOTICE OF DISSOLUTION. Upon the dissolution of the
Company, the Managing Member shall promptly notify the Members of such
dissolution.
SECTION 13.3 LIQUIDATION. Upon dissolution of the Company, such
person(s) who shall be selected by Mutual Agreement, as liquidating trustee(s),
shall immediately commence to wind up the Company's affairs; provided, however,
that a reasonable time shall be allowed for the orderly liquidation of the
assets of the Company and the satisfaction of liabilities to creditors so as to
enable the Members to minimize the normal losses attendant upon a liquidation.
In the period of dissolution and liquidation of the Company, the Members shall
be allocated all items as specified in Article VIII hereof, and shall receive
distributions of cash as provided by Sections 9.1, 9.2, 9.3, 9.4 and 9.5;
provided, however, that the liquidating trustees shall have the discretion to
set aside adequate reserves for the payment of the Company's expenses and
liabilities including all contingent, conditional or unmatured liabilities of
the Company. The proceeds of liquidation shall be distributed in accordance with
Section 9.6 after satisfaction of the liabilities of the Company, whether by
payment or the making of reasonable provision for the payment thereof.
SECTION 13.4 TERMINATION. The Company shall terminate when all of the
assets of the Company have been distributed in the manner provided for in this
Article XIII, and the Certificate shall have been canceled in the manner
required by the Delaware Act.
SECTION 13.5 CLAIMS OF THE MEMBERS. Members and former Members shall
look solely to the Company's assets for the return of their Capital
Contributions, and if the assets of the Company remaining after payment of or
due provision for all debts, liabilities and obligations
29
<PAGE> 33
of the Company are insufficient to return such Capital Contributions, the
Members and former Members shall have no recourse against the Company or any
other Member.
ARTICLE XIV
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE MEMBERS
SECTION 14.1 REPRESENTATIONS. Each Member represents and warrants to
and covenants with the other Members and the Company as follows:
(a) If such Member is an entity, it is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation with all requisite power and authority to enter into
this Agreement and to perform its obligations hereunder.
(b) This Agreement constitutes the legal, valid and binding
obligation of such Member enforceable against such Member in accordance with its
terms.
(c) No consents or approvals from, or notification of or
filings with any governmental authority or other Person are required for such
Member to enter into this Agreement. All action on the part of such Member
necessary for the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, have been duly taken.
(d) The execution and delivery of this Agreement by such
Member and the consummation of the transactions contemplated hereby by such
Member do not conflict with or contravene the provisions of any organizational
document, agreement or instrument by which such Member or such Member's
properties are bound or any law, rule, regulation, order or decree to which such
Member or such Member's properties are subject.
(e) Such Member's Interest in the Company is intended to be
and is being acquired solely for such Member's own account for investment and
with no present intention of distributing or reselling all or any part thereof;
such Member acknowledges that it is able and is prepared to bear the economic
risk of making all Capital Contributions contemplated hereby and to suffer a
complete loss thereof.
SECTION 14.2 CONFIDENTIALITY.
(a) CONFIDENTIAL INFORMATION. Each Member shall, except as may
be specifically permitted hereunder, (i) use its best efforts to protect the
proprietary or confidential information of the Company in the same manner it
protects its own proprietary or confidential information, (ii) not disclose to
any other Person (other than to Affiliates who have a legitimate need for or
right to such information and who are advised of the confidential nature of such
information; provided, however, that such Member shall be liable for any
disclosure or use of such information by such Affiliate as if such Member had so
disclosed or used such information) the existence or terms of this Agreement, or
any other contract or agreement between the Company, the Members or the Members'
Affiliates, unless the Managing Member has consented thereto, and (iii) not use
the confidential and proprietary information of the others except to the extent
and for the purposes contemplated in this Agreement or permitted by any other
contract or agreement between the Company, the Members or any of the Members'
Affiliates.
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(b) EXCEPTIONS. The obligations of confidentiality and nonuse
imposed under this Section 14.2 shall not apply to any confidential or
proprietary information of the disclosing party which:
(i) is or becomes public or available to the general
public otherwise than through any act or default of the non-disclosing
party;
(ii) is obtained or derived from a third party which,
to the best knowledge of the non-disclosing party, is lawfully in
possession of such information and does not hold such information
subject to any confidentiality or nonuse obligations; or
(iii) is required or appropriate to be disclosed by
one of the parties pursuant to applicable law (including, without
limitation, disclosure required or appropriate under the Securities Act
or the Securities Exchange Act); provided, however, that (A) the
obligations of confidentiality and nonuse shall continue to the fullest
extent not in conflict with such law or order, and (B) if and when a
party is required to disclose such confidential or proprietary
information pursuant to any such law or order, such party shall use its
best efforts to (1) give the other party prompt notice of such
requirement so as to permit such party time in which to appeal, oppose
or take other protective action and (2) obtain a protective order or
take such other actions as will prevent or limit, to the fullest extent
possible, public access to, or disclosure of, such confidential or
proprietary information.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 AMENDMENTS. Any amendment to this Agreement shall be
adopted and be effective as an amendment hereto if approved by Mutual Agreement;
provided, however, that no amendment shall be made, and any such purported
amendment shall be void and ineffective, to the extent the result thereof would
be to cause the Company to be treated as anything other than a partnership for
purposes of United States income taxation.
SECTION 15.2 NOTICES. All notices provided for in this Agreement shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows.
(a) If given to the Company, in care of the Managing Member at
the Company's mailing address set forth below:
The Times Mirror Company
Times Mirror Square
Los Angeles, CA 90053
Attention: General Counsel
(b) If given to any Member, at the address set forth on
Schedule A or, if a current address does not appear on Schedule A, on the books
and records of the Company.
All such notices shall be deemed to have been given when received.
SECTION 15.3 FAILURE TO PURSUE REMEDIES. The failure of any party to
seek redress for violation of, or to insist upon the strict performance of, any
provision of this
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Agreement shall not prevent a subsequent act, which would have originally
constituted a violation from having the effect of an original violation.
SECTION 15.4 CUMULATIVE REMEDIES. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
SECTION 15.5 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns.
SECTION 15.6 INTERPRETATION. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. All references herein to "Articles," "Sections"
and "Paragraphs" shall refer to corresponding provisions of this Agreement.
SECTION 15.7 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
SECTION 15.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document. All counterparts shall be construed together and shall constitute
one instrument.
SECTION 15.9 INTEGRATION. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
SECTION 15.10 GOVERNING LAW. This Agreement and the rights of the
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, and all rights and relies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 15.11 CONSENT TO JURISDICTION AND FORUM SELECTION. To the
fullest extent permitted by law, the parties hereto agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated exclusively in the State and Federal courts located in the County of
Los Angeles, State of California or the State of Delaware. The aforementioned
choice of venue is intended by the parties to be mandatory and not permissive in
nature, thereby precluding the possibility of litigation between the parties
with respect to or arising out of this Agreement in any jurisdiction other than
that specified in this paragraph. To the fullest extent permitted by law, each
party hereby waives any right it may have to assert the doctrine of forum non
conveniens or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this paragraph, and stipulates that the
State and Federal courts located in the County of Los Angeles, State of
California or the State of Delaware shall have in personam jurisdiction and
venue over each of them for the purpose of litigating any dispute, controversy,
or proceeding arising out of or related to this Agreement. To the fullest extent
permitted by law, each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this paragraph by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in this
Agreement.
SECTION 15.12 ATTORNEYS' FEES. If either party to this Agreement shall
bring any action, suit, counterclaim, appeal or arbitration for any relief
against the other to enforce the
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terms hereof or to declare rights hereunder (collectively, an "Action"), the
losing party shall pay to the prevailing party a reasonable sum for attorneys'
fees and costs incurred in bringing and prosecuting such Action and/or enforcing
any judgment, order, ruling, or award. For the purposes of this paragraph,
attorneys' fees shall include, without limitation, fees incurred in discovery,
postjudgment motions and collection actions, and bankruptcy litigation.
"Prevailing party" within the meaning of this paragraph includes, without
limitation, a party who agrees to dismiss an Action on the other party's payment
of the sums allegedly due or performance of the covenants allegedly breached, or
who obtains substantially the relief sought by it.
33
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date first above stated.
MEMBERS:
The Times Mirror Company,
a Delaware corporation
By: /s/ Thomas Unterman
-----------------------------------------------
Candle Holdings Corporation, a Delaware corporation
By: /s/ Thomas Unterman
-----------------------------------------------
Fortify Holdings Corporation, a Delaware corporation
By: /s/ Thomas Unterman
-----------------------------------------------
Matthew Bender & Company, Incorporated, a
New York corporation
By: /s/ Eric T. Weiss
-----------------------------------------------
Mosby-Year Book, Inc., a Missouri corporation
By: /s/ Eric T. Weiss
-----------------------------------------------
<PAGE> 38
Newsday, Inc., a New York corporation
By: /s/ Eric T. Weiss
-----------------------------------------------
The Hartford Courant Company, a Connecticut corporation
By: /s/ Eric T. Weiss
-----------------------------------------------
The Baltimore Sun Company, a Maryland corporation
By: /s/ Eric T. Weiss
-----------------------------------------------
<PAGE> 39
Chandler Trust No. 1
By: /s/ Gwendolyn Garland Babcock
-----------------------------------------------
Gwendolyn Garland Babcock, as trustee of Chandler
Trust No. 1 under Trust Agreement dated June 26,
1935
By: /s/ Bruce Chandler
-----------------------------------------------
Bruce Chandler, as trustee of Chandler Trust No. 1
under Trust Agreement dated June 26, 1935
By: /s/ William Stinehart, Jr.
-----------------------------------------------
William Stinehart, Jr., as trustee of Chandler
Trust No. 1 under Trust Agreement dated June 26,
1935
By: /s/ Warren B. Williamson
-----------------------------------------------
Warren B. Williamson, as trustee of Chandler Trust
No. 1 under Trust Agreement dated June 26, 1935
By: /s/ Camilla Chandler Frost
-----------------------------------------------
Camilla Chandler Frost, as trustee of Chandler
Trust No. 1 under Trust Agreement dated June 26,
1935
By: /s/ Douglas Goodan
-----------------------------------------------
Douglas Goodan, as trustee of Chandler Trust No. 1
under Trust Agreement dated June 26, 1935
By: /s/ Judy C. Webb
-----------------------------------------------
Judy C. Webb, as trustee of Chandler Trust No. 1
under Trust Agreement dated June 26, 1935
<PAGE> 40
Chandler Trust No. 2
By: /s/ Gwendolyn Garland Babcock
-----------------------------------------------
Gwendolyn Garland Babcock, as trustee of Chandler
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Bruce Chandler
-----------------------------------------------
Bruce Chandler, as trustee of Chandler Trust No. 2
under Trust Agreement dated June 26, 1935
By: /s/ William Stinehart, Jr.
-----------------------------------------------
William Stinehart, Jr., as trustee of Chandler
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Warren B. Williamson
-----------------------------------------------
Warren B. Williamson, as trustee of Chandler Trust
No. 2 under Trust Agreement dated June 26, 1935
By: /s/ Camilla Chandler Frost
-----------------------------------------------
Camilla Chandler Frost, as trustee of Chandler
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Douglas Goodan
-----------------------------------------------
Douglas Goodan, as trustee of Chandler Trust No. 2
under Trust Agreement dated June 26, 1935
By: /s/ Judy C. Webb
-----------------------------------------------
Judy C. Webb, as trustee of Chandler Trust No. 2
under Trust Agreement dated June 26, 1935
<PAGE> 1
EXHIBIT 10.2
================================================================================
CONTRIBUTION AGREEMENT
Among
The Times Mirror Company,
Candle Holdings Corporation,
Fortify Holdings Corporation,
Matthew Bender & Company, Incorporated,
Mosby-Year Book, Inc.,
Newsday, Inc.,
The Hartford Courant Company,
The Baltimore Sun Company,
Chandler Trust No. 1,
Chandler Trust No. 2,
and
TMCT, LLC
Dated August 8, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
RECITALS.................................................................................1
1. DEFINITIONS...........................................................................1
2. THE CLOSING...........................................................................2
3. CONTRIBUTION OF ASSETS................................................................2
3.1 Contribution of Securities Assets by Trust 1.................................2
3.2 Contribution of Securities Assets by Trust 2.................................2
3.3 Contribution of Cash Asset and Real Estate Assets by the TMC Members.........2
3.4 Securities Assets Contributed Ex-Dividend....................................3
3.5 No Liabilities...............................................................3
4. VALUE OF ASSETS.......................................................................3
4.1 Trust 1 Securities Assets....................................................3
4.2 Trust 2 Securities Assets....................................................3
4.3 Real Estate Assets...........................................................3
4.4 Cash Asset...................................................................3
4.5 Instruments of Conveyance and Transfer.......................................4
4.6 Taxes........................................................................4
5. LEASE OF REAL ESTATE ASSETS...........................................................4
5.1 Leaseback....................................................................4
6. REPRESENTATIONS AND WARRANTIES RELATING TO THE TMC MEMBERS............................4
6.1 Organization, Corporate Power and Authority..................................4
6.2 Authorization of Agreements..................................................4
6.3 No Conflicts.................................................................5
6.4 Effect of Agreement..........................................................5
6.5 Assets; Real Property........................................................5
6.6 Commissions..................................................................7
7. REPRESENTATIONS AND WARRANTIES OF TRUST 1.............................................7
7.1 Authorization of Agreement...................................................7
7.2 No Conflicts.................................................................8
7.3 Effect of Agreement..........................................................8
7.4 Title to Trust 1's Securities Assets.........................................8
7.5 Commissions..................................................................8
7.6 Investment Company...........................................................8
7.7 No Registration; Investment Intent...........................................9
7.8 Issuance of Preferred Stock..................................................9
8. REPRESENTATIONS AND WARRANTIES OF TRUST 2.............................................9
8.1 Authorization of Agreement...................................................9
8.2 No Conflicts................................................................10
8.3 Effect of Agreement.........................................................10
8.4 Title to Trust 2's Securities Assets........................................10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
8.5 Commissions.................................................................10
8.6 Investment Company..........................................................10
8.7 No Registration; Investment Intent..........................................10
8.8 Issuance of Preferred Stock.................................................11
9. REPRESENTATIONS AND WARRANTIES OF LLC................................................11
9.1 Organization, Corporate Power and Authority.................................11
9.2 Authorization of Agreements.................................................11
9.3 No Conflicts................................................................11
9.4 Effect of Agreement.........................................................12
9.5 Commissions.................................................................12
9.6 Issuance of Preferred Stock.................................................12
10. CONDITIONS..........................................................................12
10.1 Conditions to Obligations of the Parties...................................12
10.1.1 Execution of the LLC and Registration Rights Agreements...........12
10.1.2 Consummation of Merger............................................12
10.2 Conditions to Obligations of the TMC Members...............................12
10.2.1 Opinion...........................................................12
10.2.2 Board Approval....................................................12
10.3 Conditions to Obligations of the Trusts....................................13
10.3.1 Opinion...........................................................13
11. TERMINATION.........................................................................13
11.1 Termination by Mutual Consent..............................................13
11.2 Termination by TMC or the Trusts...........................................13
11.2.1 TMC Termination...................................................13
11.2.2 Trust Termination.................................................13
12. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS.......................................13
12.1 Survival of Representations................................................13
12.2 Agreements to Indemnify....................................................14
12.2.1 Trust 1 Indemnity.................................................14
12.2.2 Trust 2 Indemnity.................................................14
12.2.3 TMC Indemnity.....................................................14
12.2.4 LLC Indemnity.....................................................14
12.2.5 Indemnification Threshold.........................................14
12.2.6 Subrogation.......................................................15
12.3 Conditions of Indemnification..............................................15
12.3.1 Notice............................................................15
12.3.2 Failure to Assume Defense.........................................15
12.3.3 Claim Adverse to Indemnifying Party...............................15
12.3.4 Cooperation.......................................................16
12.4 Damages....................................................................16
12.4.1 Costs of Remediation and Removal of Hazardous Substances..........16
13. COVENANTS...........................................................................16
13.1 Cooperation................................................................16
13.2 Tax Cooperation............................................................16
14. MISCELLANEOUS.......................................................................17
</TABLE>
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<TABLE>
<S> <C>
14.1 Waivers....................................................................17
14.2 Entire Agreement...........................................................17
14.3 Binding Effect, Benefits...................................................17
14.4 Assignability..............................................................17
14.5 Notices....................................................................17
14.6 Governing Law; Jurisdiction................................................18
14.7 Attorneys' Fees............................................................18
14.8 Rules of Construction......................................................18
14.8.1 Headings..........................................................19
14.8.2 Tense and Case....................................................19
14.8.3 Severability......................................................19
14.9 Counterparts...............................................................19
14.10 Expenses..................................................................19
14.11 Construction of Agreement.................................................19
14.12 Consent to Jurisdiction and Forum Selection...............................19
</TABLE>
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Exhibits
Exhibit A LLC Agreement
<TABLE>
<CAPTION>
Schedules
- ---------
<S> <C>
Schedule 3.1 Securities Assets of Trust 1
Schedule 3.2 Securities Assets of Trust 2
Schedule 3.3.1 Real Estate Assets of TMC
Schedule 3.3.2 Real Estate Assets of TMC Operating Companies
Schedule 4.1 Trust 1 Gross Asset Values
Schedule 4.2 Trust 2 Gross Asset Values
Schedule 4.3.1 Appraised Value of Real Estate Assets of TMC
Schedule 4.3.2 Appraised Value of Real Estate Assets of TMC Operating
Companies
Schedule 6.5.1 Title to Real Estate Assets
</TABLE>
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CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (together with the exhibits and schedules
hereto, the "Agreement") is entered into as of August 8, 1997 by and among (i)
The Times Mirror Company, a Delaware corporation ("TMC"); (ii) Candle Holdings
Corporation, a Delaware corporation ("Sub 1"); (iii) Fortify Holdings
Corporation, a Delaware corporation ("Sub 2"); (iv) Matthew Bender & Company,
Incorporated, a New York corporation; (v) Mosby-Year Book, Inc., a Missouri
corporation; (vi) Newsday, Inc., a New York corporation; (vii) The Hartford
Courant Company, a Connecticut corporation; (viii) The Baltimore Sun Company, a
Maryland corporation (collectively with the companies listed in (iv) through
(vii), the "TMC Operating Companies" and collectively with TMC, Sub 1 and Sub 2,
the "TMC Members"); (ix) Chandler Trust No. 1 ("Trust 1"); (x) Chandler Trust
No. 2 ("Trust 2," and together with Trust 1, the "Trusts") and (xi) TMCT, LLC, a
Delaware limited liability company ("LLC"), with reference to the following
facts:
RECITALS
A. The Trusts and the TMC Members intend to form the LLC pursuant to the
Limited Liability Company Agreement of LLC substantially in the form attached
hereto as Exhibit A (the "LLC Agreement").
B. Under the LLC Agreement, TMC is obligated to contribute to LLC, as a
capital contribution, cash in the amount of $247,265,700.50 million (the "TMC
Cash Asset"), and a portion of the assets referred to herein as the Real Estate
Assets, the TMC Operating Companies are to contribute to LLC, as a capital
contribution, the remainder of the Real Estate Assets, and Sub 1 and Sub 2 are
obligated to contribute to LLC, as a capital contribution, cash in the amount of
$1 million each (collectively, the "Subs Cash Asset" and collectively with the
TMC Cash Asset, the "Cash Asset").
C. Under the LLC Agreement, the Trusts are obligated to contribute to
LLC, as a capital contribution, certain assets referred to herein as the
Securities Assets.
NOW, therefore, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
1. DEFINITIONS.
Unless otherwise indicated herein, capitalized terms used herein shall
have their respective meanings set forth in the LLC Agreement. In addition, the
following terms shall have the following meanings when used in this Agreement:
"Assets" shall mean the Cash Asset, the Real Estate Assets and the
Securities Assets.
"Cash Asset" shall have the meaning set forth in the Recitals hereto.
"Closing" shall have the meaning set forth in Section 2.
"Encumbrance" shall mean all title defects, objections, liens,
mortgages, pledges, charges, security interests, encumbrances, leases, options
to purchase, rights of first refusal, material restrictions or adverse claims of
any nature whatsoever.
"Indemnified Party" shall mean, with respect to any Losses, the party
seeking indemnity hereunder.
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"Indemnifying Party" shall mean, with respect to any Losses, the party
from whom indemnity is being sought hereunder.
"Lease Agreement" shall mean the leases described in Section 5.1 hereof.
"Losses" shall mean any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, remedies and penalties (including,
without limitation, interest, penalties, settlement costs and any legal,
accounting or other fees and expenses for investigating and/or defending any
claims or threatened actions) incurred by the Indemnified Party.
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, prospects, condition (financial or otherwise) or results of
operations of the person or entity to which reference is made. If such person or
entity has subsidiaries, such determination shall be made on a consolidated
basis.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger,
dated as of August 8, 1997, by and among TMC, Chandis Acquisition Corporation,
Chandis Securities Company ("CSC") and the shareholders of CSC.
"Real Estate Assets" shall mean the real property described on Schedules
3.3.1 and 3.3.2 hereof, all buildings, fixtures and improvements of every nature
thereon, and all easements, claims and other rights appurtenant thereto.
"Securities Assets" shall mean the Trust 1 Securities Assets and the
Trust 2 Securities Assets.
"Trust 1 Securities Assets" shall have the meaning set forth in Section
3.1.
"Trust 2 Securities Assets" shall have the meaning set forth in Section
3.2.
2. THE CLOSING. Upon the satisfaction or waiver of all conditions set
forth in Article 10 of this Agreement, the closing (the "Closing") of the
contribution of assets to the LLC contemplated hereby shall take place at the
offices of Gibson, Dunn & Crutcher LLP, 333 S. Grand Avenue, Los Angeles,
California 90071, at 5:00 p.m. on August 8, 1997, or such other place, time
and date as TMC, Trust 1 and Trust 2 may mutually select.
3. CONTRIBUTION OF ASSETS.
3.1 CONTRIBUTION OF SECURITIES ASSETS BY TRUST 1. Subject to the terms
and conditions of this Agreement, at the Closing, Trust 1 shall convey,
transfer, assign and deliver to LLC, as a contribution, all of such Trust's
right, title and interest in and to the securities set forth on Schedule 3.l
(the "Trust 1 Securities Assets").
3.2 CONTRIBUTION OF SECURITIES ASSETS BY TRUST 2. Subject to the terms
and conditions of this Agreement, at the Closing, Trust 2 shall convey,
transfer, assign and deliver to LLC, as a contribution, all of such Trust's
right, title and interest in and to the securities set forth on Schedule 3.1
(the "Trust 2 Securities Assets").
3.3 CONTRIBUTION OF CASH ASSET AND REAL ESTATE ASSETS BY THE TMC
MEMBERS. Subject to the terms and conditions of this Agreement, at the Closing,
(i) TMC shall convey, transfer, assign and deliver to LLC, as a contribution,
all of TMC's right, title and interest in and to the TMC Cash Asset and to the
portion of the Real Estate Assets indicated on Schedule 3.3.1; (ii) the TMC
Operating Companies shall convey, transfer, assign and deliver to LLC, as a
contribution, all of their right, title and interest in and to the portion of
the Real Estate
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Assets indicated on Schedule 3.3.2; and (iii) each of Sub 1 and Sub 2 shall
contribute, convey, transfer, assign and deliver to LLC its respective portion
of the Subs Cash Asset.
3.4 SECURITIES ASSETS CONTRIBUTED EX-DIVIDEND. Anything herein to the
contrary notwithstanding, it is agreed by the parties that any and all dividends
paid on the Trust 1 Securities Assets and the Trust 2 Securities Assets on or
prior to September 10, 1997 shall belong and be paid to Trust 1 and Trust 2,
respectively, and not to LLC.
3.5 NO LIABILITIES. In no event shall LLC assume any liabilities of
Trust 1, Trust 2 or the TMC Members in connection with contribution of Assets
and the transactions contemplated hereby.
4. VALUE OF ASSETS.
4.1 TRUST 1 SECURITIES ASSETS. The parties agree that, as of the
Closing, the Gross Asset Values (as defined in the LLC Agreement) of the assets
constituting the Trust 1 Securities Assets shall be as set forth on Schedule
4.1, and Trust 1 shall be deemed to have contributed the sum of $420,292,274,
the aggregate amount of such Gross Asset Values, to the capital of LLC in
satisfaction of its capital contribution obligations under the LLC Agreement.
4.2 TRUST 2 SECURITIES ASSETS. The parties agree that, as of the
Closing, the Gross Asset Values of the assets constituting the Trust 2
Securities Assets shall be as set forth on Schedule 4.2, and Trust 2 shall be
deemed to have contributed the sum of $54,823,426.50, the aggregate amount of
such Gross Asset Values, to the capital of LLC in satisfaction of its capital
contribution obligations under the LLC Agreement.
4.3 REAL ESTATE ASSETS.
4.3.1 The parties agree that, as of the Closing, the Gross Asset
Value of each Real Estate Asset contributed by TMC shall be as set forth on
Schedule 4.3.1, and TMC shall be deemed to have contributed the sum of
$32,800,000, the aggregate amount of such Gross Asset Values, to the capital of
LLC in (when considered together with the Cash Asset) satisfaction of its
capital contribution obligations under the LLC Agreement.
4.3.2 The parties agree that, as of the Closing, the Gross Asset
Value of each Real Estate Asset contributed by the TMC Operating Companies shall
be as set forth on Schedule 4.3.2, and the TMC Operating Companies shall be
deemed to have contributed the sum of $193,050,000, the aggregate amount of such
Gross Asset Values, to the capital of LLC in satisfaction of their capital
contribution obligations under the LLC Agreement.
4.4 CASH ASSET. The parties agree that, as of the Closing, the Gross
Asset Value of the Cash Asset shall be the amount of the Cash Asset, and TMC
shall be deemed to have contributed an amount equal to the Gross Asset Value of
the TMC Cash Asset, and each of Sub 1 and Sub 2 shall be deemed to have
contributed $1,000,000, to the capital of LLC in satisfaction of their
respective capital contribution obligations under the LLC Agreement.
4.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing, the Trusts,
TMC, the TMC Operating Companies, Sub 1 and Sub 2 shall execute and deliver to
LLC any and all such documents as may be reasonably requested by any other party
in order to effect the transfers and otherwise carry out the transactions
contemplated herein, including without limitation, deeds, in the form previously
provided to LLC, contributing the Real Estate Assets, and stock powers executed
in blank with respect to the Securities Assets contributed.
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4.6 TAXES. The parties hereto shall cooperate in preparing and filing
tax returns relating to the transactions contemplated hereby, TMC shall pay any
and all real estate, transfer or use taxes due with regard to, the contribution
of the Real Estate Assets to the LLC and the lease of the Real Estate Asset by
LLC to TMC. All real estate taxes relating to the Real Estate Assets shall be
pro-rated between LLC and the TMC Members.
5. LEASE OF REAL ESTATE ASSETS.
5.1 LEASEBACK. Subject to the terms and conditions of this Agreement, at
the Closing, LLC shall lease each of the Real Estate Assets described in
Schedule 3.3 to TMC. The lease shall be in substantially the form previously
provided to the parties hereto with the initial monthly rent as set forth
therein. The lease shall be fully executed by the parties thereto prior to the
contribution of the Real Estate Assets to the LLC. The term of such lease shall
commence concurrently with the contribution of the Real Estate Assets to the
LLC.
6. REPRESENTATIONS AND WARRANTIES RELATING TO THE TMC MEMBERS.
As an inducement for each of the Trusts and LLC to enter into this
Agreement, TMC represents and warrants to each of the Trusts and LLC that each
of the following statements is true and correct as of the date hereof:
6.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. Each of the TMC Members
is a corporation duly organized, validly existing and in good standing under the
laws of its state of organization, has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect upon TMC. All of the outstanding stock of
the TMC Operating Companies, Sub 1 and Sub 2 is owned, directly or indirectly,
beneficially and of record, by TMC.
6.2 AUTHORIZATION OF AGREEMENTS. Each of the TMC Members has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby and all corporate action other than approval of the Board of Directors of
TMC necessary for such execution, delivery, performance and consummation has
been duly taken.
6.3 NO CONFLICTS. The execution and delivery by any of the TMC Members
of this Agreement does not, and the performance and consummation of the
transactions contemplated hereby will not, result in or give rise to (with or
without the giving of notice or the lapse of time, or both) any conflict with,
breach or violation of, or default, termination, forfeiture or acceleration of
obligations under, any terms or provisions of (i) its certificate of
incorporation or bylaws, (ii) any statute, rule, regulation or any judicial,
governmental, regulatory or administrative decree, order or judgment applicable
to it or its assets, or (iii) any agreement, lease or other instrument to which
it is a party or by which it or any of its assets may be bound (other than, in
the case of items (ii) and (iii) immediately above, such breaches, violations,
defaults, terminations, forfeitures or accelerations as would not have a
Material Adverse Effect upon TMC).
6.4 EFFECT OF AGREEMENT. This Agreement, upon approval of the Board of
Directors of TMC, shall be the legal, valid and binding obligation of each of
the TMC Members, enforceable against each of them in accordance with the terms
hereof, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general equitable principles.
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6.5 ASSETS; REAL PROPERTY.
6.5.1 TITLE TO REAL ESTATE ASSETS. Upon due recordation in the
appropriate recording offices of the deeds transferring the Real Estate Assets
to LLC, as contemplated by Section 3.3 hereof, LLC will have good and marketable
fee simple absolute title to each of the Real Estate Assets (other than
easements and appurtenant rights which are not held in fee simple absolute),
free and clear of all Encumbrances, subject only to the "Permitted Exceptions."
As such term is used herein, the "Permitted Exceptions" are those exceptions
shown on Schedule B of the preliminary title reports described on Schedule 3.3.1
and Schedule 3.3.2 for each property constituting a Real Estate Asset, other
than those exceptions identified on Schedule 6.5.1, (provided that any exception
deleted by the title company in the final title policy shall be deleted from
Schedule 6.5.1) and any assessments imposed on the real property owned by The
Times Mirror Company by the Downtown Center Business Improvement District of the
City of Los Angeles and the Lease Agreements. Notwithstanding the foregoing, the
representations and warranties contained herein shall exclude any issue or
matter insured against by title insurance insuring the interest of the LLC in
the Real Estate Assets by the title company.
6.5.2 ENVIRONMENTAL.
6.5.2.1 No portion of the Real Estate Assets is currently
being used or has been used in any manner at any previous time for the
storage, disposal, treatment, processing, production, refinement,
generation or other handling of waste, contamination, oils or petroleum
products, PCBs, asbestos, or any other waste, compound, substance or
material the use, release, disposal, presence or storage of which is
restricted, or regulated, or required to be reported, or could give rise
to liability or an obligation to abate or remediate, under any
Environmental Protection Laws (hereinafter "Hazardous Substances").
6.5.2.2 There is not present at, under, in or emanating
from, any of the Real Estate Assets, any Hazardous Substances in soil,
ground water, improvements or otherwise.
6.5.2.3 No condition exists on or with respect to any of
the Real Estate Assets that violates any federal, state, local or other
law (including the common law), regulation, code, order, or rule (an
"Environmental Protection Law") or requires reporting to any
governmental authority or that may give rise to liability under any
Environmental Protection Law.
6.5.2.4 No portion of the Real Estate Assets contains
underground tanks of any type, or any materials containing PCBs or any
asbestos.
6.5.2.5 No portion of the Real Estate Assets contains any
above-ground, surface or sub-surface conditions that constitute, or that
through the passage of time may constitute if not abated, a public or
private nuisance or a trespass.
6.5.2.6 No portion of the Real Estate Assets has been
designated, listed or identified in any manner by the United States
Environmental Protection Agency (the "EPA") or any other federal, state
or local agency or governmental entity or under or pursuant to any
Environmental Protection Law, as a site which has been reported to have
had or which has had a release of Hazardous Substances or as a hazardous
waste or hazardous substance disposal or removal site, Superfund or
clean-up site or candidate for investigation or remediation or removal
or closure pursuant to any Environmental Protection Law.
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6.5.2.7 Neither TMC nor any of its affiliates has received
at any time prior to the date hereof a summons, citation, notice,
directive, letter or other communication, written or oral (an
"Environmental Notice"), from the EPA or any other federal, state, local
or other governmental agency or instrumentality related to any of the
Real Estate Assets, including, without limitation, actual or possible
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
dumping or disposing of Hazardous Substances, and there exist no facts
that would be the basis for TMC or any of its affiliates receiving any
such Environmental Notice.
6.5.3 COMPLIANCE WITH LAWS. Each Real Estate Asset complies with,
and is currently operated in accordance with, all applicable ordinances, laws,
rules, regulations, statutes, codes and orders affecting such Real Estate Asset
or the possession, use, occupancy or operation thereof promulgated by any
federal, state, local or other governmental agency or instrumentality
(including, without limiting the generality of the foregoing, the Americans With
Disabilities Act, health and safety codes, and all applicable zoning ordinances)
and any and all liens, encumbrances, agreements, covenants, conditions and
restrictions affecting the Real Estate Asset or the owner or occupant thereof.
Neither TMC nor any affiliate has received any notice from any governmental
agency or instrumentality requiring any repairs or changes to any Real Estate
Asset, except for notices which have been fully complied with.
6.5.4 CONDITION OF PROPERTY. All improvements on each Real Estate
Asset are in good condition, reasonable wear and tear excepted, and there are no
material defects in any such improvements which would be likely to preclude the
use of the improvements for the uses for which they are now being put. There are
no defects in any such improvements which would pose an unreasonable risk to the
life or health of any person.
6.5.5. APPRAISALS. TMC has heretofore provided Trust 1 and Trust
2 with true, correct and complete copies of appraisals, as of December 31, 1996,
of each of the Real Estate Assets prepared for TMC by Valuation Research
Corporation (the "Appraisals"), except for the Property located on Calvert
Street in Baltimore, Maryland and set forth on Schedule 3.3.2. The facts upon
which the Appraisals were based are accurate in all material respects, the
persons preparing the Appraisals have not informed TMC, either orally or in
writing, that they have modified their conclusions contained therein, and no
event has occurred since the date of the Appraisals which would materially
affect the conclusions contained therein. Schedules 3.3.1 and 3.3.2 show the
common description for each Real Estate Asset and the corresponding preliminary
title report number and Appraisal Number for such Real Estate Asset. The
preliminary title reports contain the accurate legal description of each Real
Estate Asset.
6.5.6. TAXES AND ASSESSMENTS. All taxes, assessments, charges and
impositions (collectively, "Real Estate Impositions") which now constitute or
may constitute a lien on any of the Real Estate Assets have been paid before
delinquency, except those Real Estate Impositions which are not yet payable.
6.5.7. EASEMENTS. The exercise of the right to use or maintain
any easement on or against any of the Real Estate Assets in accordance with the
terms of such easement, will not damage any of the improvements, including
lawns, shrubbery and trees, on or of any of the Real Estate Assets, and shall
not interfere with the use or occupancy of any of the Real Estate Assets.
6.5.8. CONTIGUITY; SUBDIVISION. Each of the parcels and property
identified on Schedule 3.3 was created in compliance with any subdivision laws
and all other statutes, ordinances, rules and regulations relating to the
creation of parcels of real property. The parcels and property which constitute
any single Real Estate Asset identified on Schedules 3.3.1 and 3.3.2 are
contiguous, and there are no gaps in the ownership, rights or interests between
any such parcels and properties.
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6.5.9. SURVIVAL DESPITE KNOWLEDGE AND INVESTIGATION. The
representations and warranties contained in this Section 6.5 shall survive and
continue to be enforceable notwithstanding any investigation, and any knowledge
of inaccuracy, by LLC or the Trusts, it being agreed that the Trusts and LLC are
entitled to be indemnified pursuant to Section 12 hereof against any Losses
resulting from an inaccuracy in the representations and warranties contained in
this Section 6.5 regardless of whether any or all of them has knowledge that
such representations and warranties are inaccurate. The parties hereto
acknowledge that they are aware that certain of the representations and
warranties made by TMC herein are inaccurate and that such representations and
warranties are not intended to attempt to represent that certain statements are
in fact true, but rather are intended to clarify that LLC is entitled to be
indemnified against any Losses resulting from any inaccuracies in such
representations and warranties.
6.6 COMMISSIONS. Except for fees or expenses payable to any broker or
finder retained by TMC and set forth in the Merger Agreement, none of the TMC
Members nor any of their respective directors, officers, employees or agents is
obligated for the payment of fees or expenses of any broker or finder in
connection with the origin, negotiation or execution of this Agreement or in
connection with the transactions contemplated hereby.
7. REPRESENTATIONS AND WARRANTIES OF TRUST 1.
As an inducement for the TMC Members, Trust 2 and LLC to enter into this
Agreement, Trust 1 represents and warrants to the TMC Members, Trust 2 and LLC
that each of the following statements is true and correct as of the date hereof:
7.1 AUTHORIZATION OF AGREEMENT. (i) Trust 1 has not been revoked,
modified, or amended in any manner which would cause the representations and
warranties made by Trust 1 herein to be untrue or incorrect or cause this
Agreement to be unenforceable against Trust 1; (ii) each trustee (a "Trustee")
of Trust 1 has accepted appointment as a Trustee of Trust 1 under the
declaration of trust relating to Trust 1 (the "Declaration"), and, by the terms
of Trust 1, is qualified and possesses the necessary trust powers to act, and
does act as a Trustee pursuant to such Declaration; (iii) the Trustees who have
executed and delivered this Agreement on behalf of Trust 1 possess the full
power and authority to execute and deliver the Agreement and to consummate the
transactions contemplated hereby, and, in so doing, are properly acting and
exercising their powers under such Declaration; (iv) the Trustees who have
executed and delivered this Agreement on behalf of Trust 1 constitute all of the
currently acting Trustees of Trust 1, and the signature of such Trustees is all
that is required for the execution and delivery of this Agreement and to
authorize the consummation of the Transactions; and (v) no other signature or
other proceedings on the part of Trust 1 or any of its Trustees or beneficiaries
is necessary to approve this Agreement or to authorize the execution and
delivery, and the performance of the terms, hereof and thereof.
7.2 NO CONFLICTS. The execution and delivery by Trust 1 of this
Agreement does not, and the performance and consummation of the transactions
contemplated hereby will not, result in or give rise to (with or without the
giving of notice or the lapse of time, or both) any conflict with, breach or
violation of, or default, termination, forfeiture or acceleration of obligations
under, any terms or provisions of (i) its declaration of trust, (ii) any
statute, rule, regulation or any judicial, governmental, regulatory or
administrative decree, order or judgment applicable to it or its assets, or
(iii) any material agreement, lease or other instrument to which it is a party
or by which it or any of its assets may be bound (other than, in the case of
items (ii) and (iii) immediately above, such breaches, violations, defaults,
terminations, forfeitures or accelerations as would not have a Material Adverse
Effect upon Trust 1).
7.3 EFFECT OF AGREEMENT. This Agreement is Trust 1's legal, valid and
binding obligation, enforceable against it in accordance with the terms hereof,
except as such
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<PAGE> 13
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and subject to
general equitable principles.
7.4 TITLE TO TRUST 1'S SECURITIES ASSETS. Trust 1 has good and valid
title to all of the Trust 1 Securities Assets, free and clear of all
Encumbrances.
7.5 COMMISSIONS. Except for fees and expenses payable to any broker or
finder retained by the "Company" or the "Shareholders" (as such terms are used
in the Merger Agreement) as set forth in the Merger Agreement, neither Trust 1
nor any of its respective trustees or agents is obligated for the payment of
fees or expenses of any broker or finder in connection with the origin,
negotiation or execution of this Agreement or in connection with the
transactions contemplated hereby.
7.6 INVESTMENT COMPANY. Trust 1 is not an investment company as such
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").
7.7 NO REGISTRATION; INVESTMENT INTENT. (i) Trust 1 understands that the
interest in the LLC are being offered and sold without registration under the
Securities Act of 1933, as amended (the "Act"), based upon an exemption provided
under the Act and without qualification or registration under the securities
laws of California, in reliance upon the representations and warranties made by
the parties hereto, and the interests in the LLC may not be re-sold,
transferred, assigned or otherwise disposed of other than pursuant to an
effective registration statement or pursuant to an exemption from such
registration requirements; (ii) Trust 1 agrees that it shall not sell, transfer,
assign, pledge or otherwise dispose of any interests in the LLC unless (a)
pursuant to an effective registration statement or (b) Trust 1 delivers to LLC
an opinion of counsel, reasonably acceptable to LLC, that such sale, transfer,
assignment, pledge or other disposition is exempt from registration under the
Act; (iii) Trust 1 understands that it may be deemed an "affiliate" of the
Company, as such term is used for purposes of Rules 144 and 145 under the Act,
in which case any disposition of its interests in the LLC by Trust 1 may be
subject to the requirements of such rules; (iv) Trust 1 is acquiring the
interests in the LLC for investment purposes for its own account and without a
view to distribution or resale thereof (except in compliance with applicable
law); (v) Trust 1 acknowledges that it has had the right to ask questions of and
receive answers from the parties hereto and its officers and representatives and
from the Company and its officers and representatives to obtain such information
concerning the parties hereto, and the LLC and the transactions contemplated
hereby as Trust 1 deems necessary prior to making an investment decision with
respect to the transactions contemplated hereby, including with respect to the
interests in the LLC. Trust 1 has such knowledge and experience in financial and
business matters so as to enable Trust 1 to evaluate the merits and risks of an
investment in the interests in the LLC. Trust 1 is able to bear the economic
risk of the investment in the interests in the LLC; and (vi) Trust 1 is
domiciled in the State of California, and files income tax returns as a person
or entity that is domiciled in that State.
7.8 ISSUANCE OF PREFERRED STOCK. Trust 1 in its capacity as a holder of
the Series A Preferred Stock approves the issuance of the Preferred Stock,
Series C-1 and Preferred Stock, Series C-2 of the TMC.
8. REPRESENTATIONS AND WARRANTIES OF TRUST 2.
As an inducement for the TMC Members, Trust 1 and LLC to enter into this
Agreement, Trust 2 represents and warrants to the TMC Members, Trust 1 and LLC
that each of the following statements is true and correct as of the date hereof:
8.1 AUTHORIZATION OF AGREEMENT. (i) Trust 2 has not been revoked,
modified, or amended in any manner which would cause the representations and
warranties made by Trust 2
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herein to be untrue or incorrect or cause this Agreement to be unenforceable
against Trust 2; (ii) each trustee (a "Trustee") of Trust 2 has accepted
appointment as a Trustee of Trust 2 under the declaration of trust relating to
Trust 2 (the "Declaration"), and, by the terms of Trust 2, is qualified and
possesses the necessary trust powers to act, an does act as a Trustee pursuant
to such Declaration; (iii) the Trustees who have executed and delivered this
Agreement on behalf of Trust 2 possess the full power and authority to execute
and deliver the Agreement and to consummate the transactions contemplated
hereby, and, in so doing, are properly acting and exercising their powers under
such Declaration; (iv) the Trustees who have executed and delivered this
Agreement on behalf of Trust 2 constitute all of the currently acting Trustees
of Trust 2, and the signature of such Trustees is all that is required for the
execution and delivery of this Agreement and to authorize the consummation of
the Transactions; and (v) no other signature or other proceedings on the part of
Trust 2 or any of its Trustees or beneficiaries is necessary to approve this
Agreement or to authorize the execution and delivery, and the performance of the
terms, hereof and thereof.
8.2 NO CONFLICTS. The execution and delivery by Trust 2 of this
Agreement does not, and the performance and consummation of the transactions
contemplated hereby will not, result in or give rise to (with or without the
giving of notice or the lapse of time, or both) any conflict with, breach or
violation of, or default, termination, forfeiture or acceleration of obligations
under, any terms or provisions of (i) its declaration of trust, (ii) any
statute, rule, regulation or any judicial, governmental, regulatory or
administrative decree, order or judgment applicable to it or its assets, or
(iii) any agreement, lease or other instrument to which it is a party or by
which it or any of its assets may be bound (other than, in the case of items
(ii) and (iii) immediately above, such breaches, violations, defaults,
terminations, forfeitures or accelerations as would not have a Material Adverse
Effect upon Trust 2).
8.3 EFFECT OF AGREEMENT. This Agreement is Trust 2's legal, valid and
binding obligation, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to general equitable principles.
8.4 TITLE TO TRUST 2'S SECURITIES ASSETS. Trust 2 has good and valid
title to all of the Trust 2 Securities Assets, free and clear of all
Encumbrances.
8.5 COMMISSIONS. Except for fees and expenses payable to any broker or
finder retained by the "Company" or the "Shareholders" (as such terms are used
in the Merger Agreement as set forth in the Merger Agreement), neither Trust 2
nor any of its respective trustees or agents is obligated for the payment of
fees or expenses of any broker or finder in connection with the origin,
negotiation or execution of this Agreement or in connection with the
transactions contemplated hereby.
8.6 INVESTMENT COMPANY. Trust 2 is not an investment company as such
term is defined in the Investment Company Act.
8.7 NO REGISTRATION; INVESTMENT INTENT. (i) Trust 2 understands that the
interest in the LLC are being offered and sold without registration under the
Securities Act of 1933, as amended (the "Act"), based upon an exemption provided
under the Act and without qualification or registration under the securities
laws of California, in reliance upon the representations and warranties made by
the parties hereto, and the interests in the LLC may not be re-sold,
transferred, assigned or otherwise disposed of other than pursuant to an
effective registration statement or pursuant to an exemption from such
registration requirements; (ii) Trust 2 agrees that it shall not sell, transfer,
assign, pledge or otherwise dispose of any interests in the LLC unless (a)
pursuant to an effective registration statement or (b) Trust 2 delivers to LLC
an opinion of counsel, reasonably acceptable to LLC, that such sale, transfer,
assignment, pledge or
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other disposition is exempt from registration under the
Act; (iii) Trust 2 understands that it may be deemed an "affiliate" of the
Company, as such term is used for purposes of Rules 144 and 145 under the Act,
in which case any disposition of its interests in the LLC by Trust 2 may be
subject to the requirements of such rules; (iv) Trust 2 is acquiring the
interests in the LLC for investment purposes for its own account and without a
view to distribution or resale thereof (except in compliance with applicable
law); (v) Trust 2 acknowledges that it has had the right to ask questions of and
receive answers from the parties hereto and its officers and representatives and
from the Company and its officers and representatives to obtain such information
concerning the parties hereto, and the LLC and the transactions contemplated
hereby as Trust 2 deems necessary prior to making an investment decision with
respect to the transactions contemplated hereby, including with respect to the
interests in the LLC. Trust 2 has such knowledge and experience in financial and
business matters so as to enable Trust 2 to evaluate the merits and risks of an
investment in the interests in the LLC. Trust 2 is able to bear the economic
risk of the investment in the interests in the LLC; and (vi) Trust 2 is
domiciled in the State of California, and files income tax returns as a person
or entity that is domiciled in that State.
8.8 ISSUANCE OF PREFERRED STOCK. Trust 2 in its capacity as a holder of
the Series A Preferred Stock approves the issuance of the Preferred Stock,
Series C-1 and Preferred Stock, Series C-2 of the TMC.
9. REPRESENTATIONS AND WARRANTIES OF LLC.
As an inducement for the TMC Members and the Trusts to enter into this
Agreement, LLC represents and warrants to the TMC Members and the Trusts that
each of the following statements is true and correct as of the date hereof:
9.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. LLC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, has all requisite power and authority to own,
operate and lease its properties and carry on its business as now, or
anticipated to be, conducted, and is duly qualified to do business and is in
good standing as a foreign limited liability company in each jurisdiction in
which the failure to so qualify would have a Material Adverse Effect upon LLC.
9.2 AUTHORIZATION OF AGREEMENTS. LLC has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby and all action necessary
for such execution, delivery, performance and consummation has been duly taken.
9.3 NO CONFLICTS. The execution and delivery by LLC of this Agreement
does not, and the performance and consummation of the transactions contemplated
hereby will not, result in or give rise to (with or without the giving of notice
or the lapse of time, or both) any conflict with, breach or violation of, or
default, termination, forfeiture or acceleration of obligations under, any terms
or provisions of (i) its Certificate of Formation or the LLC Agreement, (ii) any
statute, rule, regulation or any judicial, governmental, regulatory or
administrative decree, order or judgment applicable to it or its assets, or
(iii) any agreement, lease or other instrument to which it is a party or by
which it or any of its assets may be bound (other than, in the case of items
(ii) and (iii) immediately above, such breaches, violations, defaults,
terminations, forfeitures or accelerations as would not have a Material Adverse
Effect upon LLC).
9.4 EFFECT OF AGREEMENT. This Agreement is the legal, valid and binding
obligation of LLC, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and subject to general equitable principles.
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<PAGE> 16
9.5 COMMISSIONS. Neither LLC nor any of its managers, members, employees
or agents have employed, or incurred any liability to, any broker, finder or
agent for any brokerage fees, finder's fees, commissions or other amounts with
respect to the transactions contemplated hereby.
9.6 ISSUANCE OF PREFERRED STOCK. LLC in its capacity as a holder of the
Series A Preferred Stock hereby approves the issuance of the Preferred Stock,
Series C-1 and Preferred Stock, Series C-2 of TMC.
10. CONDITIONS.
10.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The obligations of each
of the parties hereto to consummate the transactions contemplated hereby are
subject to the satisfaction or waiver of the following conditions:
10.1.1 EXECUTION OF THE LLC AND REGISTRATION RIGHTS AGREEMENTS.
The LLC Agreement shall have been executed and delivered by all the parties
hereto. The Registration Rights Agreement shall have been executed and delivered
by TMC, Trust 2 and the other parties thereto.
10.1.2 Consummation of Merger. The merger of Chandis Securities
Company with and into Chandis Acquisition Corporation shall have been
consummated and the Certificate of Merger therefor shall have been filed with
the Secretary of State of the State of Delaware.
10.2 CONDITIONS TO OBLIGATIONS OF THE TMC MEMBERS. The obligations of
the TMC Members to consummate the transactions contemplated hereby are subject
to the satisfaction or waiver of the following conditions:
10.2.1 OPINION. The TMC Members shall have received an opinion of
Irell & Manella LLP, counsel to the Trusts, substantially in the form previously
provided to Irell & Manella LLP.
10.2.2 BOARD APPROVAL. The Board of Directors of TMC shall have
approved this Agreement, the LLC Agreement and the Merger Agreement and the
transactions contemplated thereby. TMC shall have received a fairness opinion of
Goldman, Sachs & Co. in form and substance reasonably satisfactory to the Board
of Directors of TMC.
10.3 CONDITIONS TO OBLIGATIONS OF THE TRUSTS. The obligations of the
Trusts to consummate the transactions contemplated hereby are subject to the
satisfaction or waiver of the following condition:
10.3.1 OPINION. The Trusts shall have received an opinion of
Gibson, Dunn & Crutcher LLP, counsel to the TMC members, substantially in the
form previously provided to Gibson, Dunn & Crutcher LLP.
11. TERMINATION
11.1 TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing,
this Agreement may be terminated by written consent of TMC, Trust 1 and Trust 2.
11.2 TERMINATION BY TMC OR THE TRUSTS.
11.2.1 TMC TERMINATION. TMC may terminate this Agreement at any
time prior to the Closing by delivery of written notice to Trust 1 and Trust 2,
if: (1) any court having
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<PAGE> 17
competent jurisdiction or other governmental body shall have issued an order,
decree or ruling or taken any other action which prevents, restrains, or enjoins
the transactions contemplated hereby and such order, decree or ruling shall have
become non-appealable; (2) either of Trust 1 or Trust 2 has breached or violated
this Agreement in any material respect; or (3) the Closing has not occurred by
11:59 p.m. Los Angeles time on August 10, 1997.
11.2.2 TRUST TERMINATION. Trust 1 or Trust 2 may terminate this
Agreement at any time prior to the Closing by delivery of written notice to TMC
if: (1) any court having competent jurisdiction or other governmental body shall
have issued an order, decree or ruling or taken any other action which prevents,
restrains, or enjoins the transactions contemplated hereby and such order,
decree or ruling shall have become non-appealable; (2) any TMC Member has
breached or violated this Agreement in any material respect; or (3) the Closing
has not occurred by 11:59 p.m. Los Angeles time on August 10, 1997.
12. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS.
12.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties,
covenants and agreements of TMC, the Trusts and LLC in this Agreement shall
survive the execution, delivery and performance of this Agreement in accordance
with this Article 12. The representations and warranties of TMC, the Trusts and
LLC set forth in this Agreement, and their indemnity obligations under this
Article 12, shall terminate on the second anniversary hereof (except to the
extent that claims have been made or notice of a claim has been provided prior
thereto) (the "Indemnity Termination Date"); provided, however, that all
representations and warranties and indemnity obligations by the Trusts relating
to the Securities Assets (including the representations and warranties set forth
in Sections 7.4 and 8.4) shall continue as long as LLC owns any of the
Securities Assets, and thereafter to the extent that LLC may have any
liabilities or potential liability relating thereto, and all representations and
warranties and indemnity obligations by TMC relating to the Real Estate Assets
(including the representations and warranties set forth in Section 6.5 and the
liabilities set forth under Section 11 of the Lease Agreement) shall continue so
long as LLC owns any of the Real Estate Assets, and thereafter to the extent
that LLC or any member of LLC may have any liability or potential liability
relating thereto.
12.2 AGREEMENTS TO INDEMNIFY.
12.2.1 TRUST 1 INDEMNITY. Subject to the terms and conditions of
this Section 12, Trust 1 hereby agrees to indemnify, defend and hold the
TMC Members, Trust 2 and LLC harmless from and against all Losses
incurred by the TMC Members, Trust 2 and LLC and their respective
employees, directors, officers, shareholders, beneficiaries, members,
managers, trustees and agents resulting from a breach of any
representation, warranty or covenant of Trust 1 made in this Agreement.
12.2.2 TRUST 2 INDEMNITY. Subject to the terms and conditions of
this Section 12, Trust 2 hereby agrees to indemnify, defend and hold the
TMC Members, Trust 1 and LLC harmless from and against all Losses
incurred by the TMC Members, Trust 1 and LLC and their respective
employees, directors, officers, shareholders, beneficiaries, members,
managers and agents resulting from a breach of any representation,
warranty or covenant of Trust 2 made in this Agreement.
12.2.3 TMC INDEMNITY. Subject to the terms and conditions of this
Section 12, TMC hereby agrees to indemnify, defend and hold LLC and the
Trusts harmless from and against all Losses incurred by LLC and the
Trusts and their respective employees, members, managers, beneficiaries,
trustees and agents resulting from: (i) a breach of any representation,
warranty or covenant of the TMC Members made in this Agreement and
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(ii) any Environmental Protection Laws or Hazardous Substances, to the
extent such Losses relate to facts or circumstances which existed at or
with respect to the Real Estate Assets on or prior to the date hereof.
Notwithstanding anything to the contrary contained in this Agreement,
including without limitation any representations and warranties of TMC
contained herein, TMC shall have no liability for, and no obligation to
indemnify, defend and hold LLC and the Trusts harmless from, any matter
insured against by title insurance insuring the interest of the LLC in
the Real Estate Assets.
12.2.4 LLC INDEMNITY. Subject to the terms and conditions of this
Section 12, LLC hereby agrees to indemnify, defend and hold the TMC
Members and the Trusts harmless from and against all Losses incurred by
the TMC Members and the Trusts and their respective employees,
directors, officers, shareholders, beneficiaries, trustees and agents
resulting from a breach of any representation, warranty or covenant of
LLC made in this Agreement.
12.2.5 INDEMNIFICATION THRESHOLD. No claim for indemnification
will be made by any party hereunder unless the aggregate of all Losses
incurred by such party otherwise indemnified against hereunder exceeds
$250,000 and only to the extent of any such Losses in excess of
$250,000.
12.2.6 SUBROGATION. If the Indemnifying Party makes any payment
under this Section 12 in respect of any Losses, the Indemnifying Party
shall be subrogated, to the extent of such payment, to the rights of the
Indemnified Party against any insurer or third party with respect to
such Losses; provided, however, that the Indemnifying Party shall not
have any rights of subrogation with respect to the other party hereto or
any of its affiliates or any of its or its affiliates' officers,
directors, agents or employees.
12.3 CONDITIONS OF INDEMNIFICATION. If any claim is asserted or action
commenced against an Indemnified Party by a third party, the respective
obligations and liabilities of the Indemnifying Party to the Indemnified Party
under Section 12.2 shall be subject to the following terms and conditions:
12.3.1 NOTICE. Within 15 days after receipt of notice of
commencement of any action or the assertion of any claim by a third
party (but in any event at least ten days preceding the date on which an
answer or other pleading must be served in order to prevent a judgment
by default in favor of the party asserting the claim), the Indemnified
Party shall give the Indemnifying Party written notice thereof together
with a copy of such claim, process or other legal pleading, and the
Indemnifying Party shall have the right to undertake the defense thereof
by representatives of its own choosing that are reasonably satisfactory
to the Indemnified Party. Any failure of an Indemnified Party to provide
timely notice to the Indemnifying Party of the commencement of any
action or the assertion of any claim shall not relieve an Indemnifying
Party of any liability hereunder (including liability for pre-notice
defense and investigation costs) except to the extent that the
Indemnifying Party was actually prejudiced by such failure.
12.3.2 FAILURE TO ASSUME DEFENSE. If the Indemnifying Party, by
the tenth day after receipt of notice of any such claim (or, if earlier,
by the fifth day preceding the day on which an answer or other pleading
must be served in order to prevent judgment by default in favor of the
person asserting such claim), does not elect to defend against such
claim, the Indemnified Party will (upon further notice to the
Indemnifying Party) have the right to undertake the defense, compromise
or settlement of such claim on behalf of and for the account and risk of
the Indemnifying Party; provided, however, that the Indemnified Party
shall not settle or compromise such claim without the Indemnifying
Party's consent, which consent shall not be unreasonably withheld; and
provided further
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that, the Indemnifying Party shall have the right to assume the defense
of such claim with counsel of its own choosing at any time prior to
settlement, compromise or final determination thereof.
12.3.3 CLAIM ADVERSE TO INDEMNIFYING PARTY. Notwithstanding
anything to the contrary in this Section 12.3, if there is a reasonable
probability that a claim may materially adversely affect the
Indemnifying Party other than as a result of money damages or other
money payments, the Indemnifying Party shall have the right, at its own
cost and expense, to compromise or settle such claim, but the
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the
entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect of such claim.
12.3.4 COOPERATION. In connection with any such indemnification,
the Indemnified Party will cooperate in all reasonable requests of the
Indemnifying Party.
12.4 DAMAGES. Notwithstanding anything to the contrary elsewhere in this
Agreement or the LLC Agreement, no party (or its affiliates) shall, in any
event, be liable to any other party (or its affiliates) for any consequential
damages, including, but not limited to, loss of revenue or income, cost of
capital, or loss of business reputation or opportunity relating to the breach or
alleged breach of this Agreement; provided, however, that notwithstanding the
foregoing, TMC may be liable for the extent of the loss of market value of or
income on the Real Estate Assets, relating to the breach of any representation
or warranty set forth in Section 6.5 herein. Each party agrees that it will not
seek punitive damages as to any matter under, relating to or arising out of the
transactions contemplated hereby.
12.4.1 COSTS OF REMEDIATION AND REMOVAL OF HAZARDOUS SUBSTANCES.
In addition to its obligations under Section 12.2.3, TMC shall be
obligated to pay all costs of remediation, monitoring, removal or
abatement of Hazardous Substances on or with respect to any of the Real
Estate Assets if such remediation, monitoring, removal or abatement (a)
is required by any Environmental Protection Law or any order or decree
of any court or governmental body, (b) is reasonably necessary to
protect LLC or any of its Members against potential liability to third
parties, (c) is reasonably necessary to protect the marketability of
value of the Real Estate Asset in question; or (d) to the extent
required under the Lease.
13. COVENANTS.
13.1 COOPERATION. Each party hereto agrees to execute any and all
further documents and writings and perform such other reasonable actions which
may be or become necessary or expedient to effectuate and carry out the
transactions contemplated hereby, including, without limitation, taking such
actions and executing such instruments as may reasonably be required to
consummate the contributions contemplated hereby (but which shall not include
any obligation to make payments).
13.2 TAX COOPERATION. The parties shall, and shall cause their
respective affiliates to, cooperate with each other in the preparation of all
tax returns, to the extent related to the transactions contemplated hereby, and
shall provide, or cause to be provided, to such other party any records and
other information reasonably requested by such party in connection therewith as
well as access to, and the cooperation of, the auditors of such other party and
its affiliates. The parties shall, and shall cause their respective affiliates
to, cooperate with the other party in connection with any tax investigation, tax
audit or other tax proceeding relating to the
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transactions contemplated hereby. Any information obtained pursuant to
this Section 13.2 relating to taxes shall be kept confidential by the
other party.
14. MISCELLANEOUS.
14.1 WAIVERS. Any party may, by written notice to the other parties, (a)
extend the time for the performance of any of the obligations or other actions
of the other parties under this Agreement; (b) waive any inaccuracies in the
representations or warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement; (c) waive compliance
with any of the conditions or covenants of the other contained in this
Agreement; or (d) waive performance of any of the obligations of the others
under this Agreement. With regard to any power, remedy or right provided herein
or otherwise available to any party hereunder, (i) no waiver or extension of
time will be effective unless expressly contained in a writing signed by the
waiving party, and (ii) no alteration, modification or impairment will be
implied by reason of any previous waiver, extension of time, or delay or
omission in exercise of rights or other indulgence.
14.2 ENTIRE AGREEMENT. This Agreement, the LLC Agreement, the Lease
Agreement and the exhibits and schedules hereto and thereto and the documents
referred to herein and therein constitute the final, exclusive and complete
understanding of the parties with respect to the subject matter hereof and
supersede any and all prior agreements, understandings and discussions with
respect thereto. No variation or modification of this Agreement or the LLC
Agreement and no waiver of any provision or condition hereof or thereof, or
granting of any consent contemplated hereby or thereby, shall be valid unless in
writing and signed by the party against whom enforcement of any such variation,
modification, waiver or consent is sought.
14.3 BINDING EFFECT, BENEFITS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective permitted
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
14.4 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party without the prior written
consent of all parties, except that TMC may assign this Agreement, or its rights
hereunder, to any affiliate of TMC. No assignment shall relieve the assignor of
its obligations hereunder without the consent of the other parties.
14.5 NOTICES. Unless otherwise provided, all notices or other
communications required or permitted to be given to the parties hereto shall be
in writing and shall be deemed to have been given if personally delivered,
including personal delivery by facsimile, provided that the sender receives
telephonic or electronic confirmation that the facsimile was received by the
recipient and that such facsimile is followed the same day by mailing by
certified or registered mail, return receipt requested, first class postage
prepaid (a "Mailing"), upon receipt of courier delivery or the third day
following a Mailing, addressed as follows (or at such other address as the
addressed party may have substituted by notice pursuant to this Section 14.5):
(a) If to LLC: c/o The Times Mirror Company,
Managing Member
Times Mirror Square
Los Angeles, CA 90053
Attention: General Counsel
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(b) If to TMC: Times Mirror Square
Los Angeles, California 90053
Attention: General Counsel
With a copy to: Karen E. Bertero, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
(c) If to the Trust: 350 West Colorado Boulevard, Suite 230
Pasadena, CA 91105
Attention: Warren B. Williamson
and
William Stinehart, Jr., Esq.
Gibson, Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, California 90067-3026
With a copy to: Alvin G. Segel, Esq.
Irell & Manella LLP
1800 Avenue of the Stars
Los Angeles, California 90067-4276
14.6 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of California as applied
to contracts between California residents made and to be performed entirely
within the State of California.
14.7 ATTORNEYS' FEES. If either party to this Agreement shall bring any
action, suit, counterclaim, appeal or arbitration for any relief against the
other to enforce the terms hereof or to declare rights hereunder (collectively,
an "Action"), the losing party shall pay to the prevailing party a reasonable
sum for attorneys' fees and costs incurred in bringing and prosecuting such
Action and/or enforcing any judgment, order, ruling, or award. For the purposes
of this paragraph, attorneys' fees shall include, without limitation, fees
incurred in discovery, postjudgment motions and collection actions, and
bankruptcy litigation. "Prevailing party" within the meaning of this paragraph
includes, without limitation, a party who agrees to dismiss an Action on the
other party's payment of the sums allegedly due or performance of the covenants
allegedly breached, or who obtains substantially the relief sought by it.
14.8 RULES OF CONSTRUCTION.
14.8.1 HEADINGS. The section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit,
or extend or interpret the scope of this Agreement or of any particular
section.
14.8.2 TENSE AND CASE. Throughout this Agreement, as the context
may require, references to any word used in one tense or case shall
include all other appropriate tenses or cases.
14.8.3 SEVERABILITY. The validity, legality or enforceability of
the remainder of this Agreement will not be affected even if one or more
of the provisions of this Agreement will be held to be invalid, illegal
or unenforceable in any respect.
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14.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
14.10 EXPENSES. Except as otherwise set forth herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
14.11 CONSTRUCTION OF AGREEMENT. No party hereto, nor its respective
counsel, shall be deemed the drafter of this Agreement for purposes of
construing the provisions of this Agreement, and all provisions of this
Agreement shall be construed in accordance with their fair meaning, and not
strictly for or against any party hereto.
14.12 CONSENT TO JURISDICTION AND FORUM SELECTION. The parties hereto
agree that all actions or proceedings arising in connection with this Agreement
shall be tried and litigated exclusively in the State and Federal courts located
in the County of Los Angeles, State of California. The aforementioned choice of
venue is intended by the parties to be mandatory and not permissive in nature,
thereby precluding the possibility of litigation between the parties with
respect to or arising out of this Agreement in any jurisdiction other than that
specified in this paragraph. Each party hereby waives any right it may have to
assert the doctrine of forum non conveniens or similar doctrine or to object to
venue with respect to any proceeding brought in accordance with this paragraph,
and stipulates that the State and Federal courts located in the County of Los
Angeles, State of California shall have in personal jurisdiction and venue over
each of them for the purpose of litigating any dispute, controversy, or
proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this paragraph by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement.
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IN WITNESS WHEREOF, this Contribution Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto as of the
date first above written.
THE TIMES MIRROR COMPANY
By: /s/ Thomas Unterman
--------------------------------
Name: Thomas Unterman
--------------------------------
Title: Senior Vice President and
Chief Financial Officer
--------------------------------
CANDLE HOLDINGS CORPORATION
By: /s/ Thomas Unterman
--------------------------------
Name: Thomas Unterman
--------------------------------
Title: President
--------------------------------
FORTIFY HOLDINGS CORPORATION
By: /s/ Thomas Unterman
--------------------------------
Name: Thomas Unterman
--------------------------------
Title: President
--------------------------------
TMCT, LLC
By: THE TIMES MIRROR COMPANY, its
Managing Member
By: /s/ Thomas Unterman
--------------------------------
Name: Thomas Unterman
--------------------------------
Title: Senior Vice President and
Chief Financial Officer
--------------------------------
MATTHEW BENDER & COMPANY, INCORPORATED
By: /s/ Eric T. Weiss
--------------------------------
Name: Eric T. Weiss
--------------------------------
Title: Assistant Secretary
--------------------------------
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MOSBY-YEAR BOOK, INC.
By: /s/ Eric T. Weiss
--------------------------------
Name: Eric T. Weiss
--------------------------------
Title: Assistant Secretary
--------------------------------
NEWSDAY, INC.
By: /s/ Eric T. Weiss
--------------------------------
Name: Eric T. Weiss
--------------------------------
Title: Assistant Secretary
--------------------------------
THE HARTFORD COURANT COMPANY
By: /s/ Eric T. Weiss
--------------------------------
Name: Eric T. Weiss
--------------------------------
Title: Assistant Secretary
--------------------------------
THE BALTIMORE SUN COMPANY
By: /s/ Eric T. Weiss
--------------------------------
Name: Eric T. Weiss
--------------------------------
Title: Assistant Secretary
--------------------------------
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<PAGE> 25
CHANDLER TRUST NO. 1
By: /s/ Gwendolyn Garland Babcock
------------------------------------
Gwendolyn Garland Babcock, as trustee of
Chandler Trust No. 1 under Trust Agreement
dated June 26, 1935
By: /s/ Bruce Chandler
------------------------------------
Bruce Chandler, as trustee of Chandler
Trust No. 1 under Trust Agreement dated
June 26, 1935
By: /s/ William Stinehart, Jr.
------------------------------------
William Stinehart, Jr., as trustee of
Chandler Trust No. 1 under Trust Agreement
dated June 26, 1935
By: /s/ Warren B. Williamson
------------------------------------
Warren B. Williamson, as trustee of
Chandler Trust No. 1 under Trust Agreement
dated June 26, 1935
By: /s/ Camilla Chandler Frost
------------------------------------
Camilla Chandler Frost, as trustee of
Chandler Trust No. 1 under Trust Agreement
dated June 26, 1935
By: /s/ Douglas Goodan
------------------------------------
Douglas Goodan, as trustee of Chandler
Trust No. 1 under Trust Agreement dated
June 26, 1935
By: /s/ Judy C. Webb
------------------------------------
Judy C. Webb, as trustee of Chandler Trust
No. 1 under Trust Agreement dated June 26,
1935
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<PAGE> 26
CHANDLER TRUST NO. 2
By: /s/ Gwendolyn Garland Babcock
------------------------------------
Gwendolyn Garland Babcock, as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Bruce Chandler
------------------------------------
Bruce Chandler, as trustee of Chandler
Trust No. 2 under Trust Agreement dated
June 26, 1935
By: /s/ William Stinehart, Jr.
------------------------------------
William Stinehart, Jr., as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Warren B. Williamson
------------------------------------
Warren B. Williamson, as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Camilla Chandler Frost
------------------------------------
Camilla Chandler Frost, as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Douglas Goodan
------------------------------------
Douglas Goodan, as trustee of Chandler
Trust No. 2 under Trust Agreement dated
June 26, 1935
By: /s/ Judy C. Webb
------------------------------------
Judy C. Webb, as trustee of Chandler Trust
No. 2 under Trust Agreement dated June 26,
1935
21
<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of August 8, 1997 (this
"Agreement"), is entered into by and among (i) The Times Mirror Company, a
Delaware corporation ("TMC"), (ii) Gwendolyn Garland Babcock, Bruce Chandler,
William Stinehart, Jr., Warren B. Williamson, Camilla Chandler Frost, Douglas
Goodan and Judy C. Webb, as trustees of Chandler Trust No. 2 under Trust
Agreement dated June 26, 1935 ("Trust No. 2"), and (iii) the other stockholders
of Chandis Securities Company, all of which are listed on the signature pages
hereof (the "Other Stockholders" and, collectively with Trust No. 2, the
"Stockholders").
RECITALS
A. TMC, Chandis Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of TMC ("Acquisition Sub"), the Stockholders and Chandis
Securities Company, a California corporation ("Chandis"), have entered into that
certain Agreement and Plan of Merger dated as of an even date herewith (the
"Merger Agreement"), pursuant to which Chandis will merge with and into
Acquisition Sub (the "Merger").
B. Subject to the terms and conditions of the Merger Agreement, upon the
Effective Time (as defined therein), the Stockholders shall receive such shares
of (i) Series A Common Stock, par value $1.00 per share, of TMC ("Series A
Common Stock"), (ii) Series C Common Stock, par value $1.00 per share, of TMC
("Series C Common Stock" and together with the Series A Common Stock, the
"Common Stock"), (iii) Series C-1 Preferred Stock of TMC ("Series C-1 Preferred
Stock") and (iv) Series C-2 Preferred Stock of TMC ("Series C-2 Preferred Stock"
and together with the Series C-1 Preferred Stock, the "Series C Preferred
Stock") as are set forth on Exhibit C to the Merger Agreement. The Common Stock
and the Series C Preferred Stock received by the Stockholders in the Merger are
sometimes referred to collectively herein as the "TMC Merger Shares".
C. As a condition precedent to the consummation of the Merger, TMC has
agreed to grant the Stockholders certain registration rights, as set forth
herein, with respect to certain of the TMC Merger Shares, as well as certain
other shares into which certain of the TMC Merger Shares may be converted.
Specifically, the registration rights are being granted with respect to (i) the
Series A Common Stock issued in the Merger, (ii) the Series A Common Stock that
may be received by the Stockholders upon conversion of the Series C Common Stock
issued in the Merger (collectively with the Series A Common Stock referenced in
clause (i) of this Recital C, the "Common Stock"), and (iii) the Series C
Preferred Stock issued in the Merger, together with any Shares of Series A
Common Stock into which such shares may be converted (the "Preferred Stock").
The Common Stock and the Preferred Stock are collectively referred to herein as
the "Registrable Shares".
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<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and covenants and
promises contained herein and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
REGISTRATION RIGHTS
1.1 Demand Registration Rights of Trust No. 2.
(a) On not more than six occasions, TMC shall promptly prepare and file,
and thereafter use its best efforts to cause to become effective, a registration
statement (a "Trust No. 2 Registration Statement") under and complying with the
Securities Act of 1933, as amended (the "Securities Act"), covering such number
of Registrable Shares as shall be specified in a request (a "Trust No. 2
Request") signed by "Trust No. 2 Stockholders" (as defined below) holding the
required amount of Registrable Shares (as set forth below). For purposes hereof,
"Trust No. 2 Stockholders" means Trust No. 2, any sub-trust thereof, or, after a
termination of Trust No. 2 or any sub-trust thereof in accordance with its
terms, beneficiaries of Trust No. 2 or such sub-trust.
(b) If any Trust No. 2 Request relates, in whole or in part, to Common
Stock, it must be signed by Trust No. 2 Stockholders holding at least 1,600,000
shares (subject to adjustments for any stock splits, reverse stock splits or
similar events) of Common Stock.
(c) If any Trust No. 2 Request relates, in whole or in part, to
Preferred Stock, it must be signed by Trust No. 2 Stockholders holding at least
60,000 shares (subject to adjustments for any stock splits, reverse stock splits
or similar events) of Preferred Stock. For the purposes of the previous
sentence, if a Trust No. 2 Request hereunder includes Series A Common Stock that
was received upon conversion of Series C Preferred Stock, such shares shall be
counted (in order to determine whether the threshold stated in this Section
1.1(c) has been met) as if they had not been so converted.
(d) Promptly after receiving a Trust No. 2 Request, TMC shall provide
written notice of the Trust No. 2 Request to the Trust No. 2 Stockholders who
did not sign such Trust No. 2 Request, who will have 15 business days after the
receipt of such notice in which to inform TMC in writing of their intention to
have Registrable Shares included in the Trust No. 2 Registration Statement.
1.2 Demand Registration Rights of the Other Stockholders. On not more
than one occasion, on request by any Other Stockholder (the "Shelf Request"),
TMC shall promptly prepare and file, and thereafter use its best efforts to
cause to become effective, and maintain the effectiveness thereof until August
8, 1998, a registration statement under and complying with the Securities Act
covering all of the Registrable Shares held by the Other Stockholders for an
offering to be made on a delayed on continuous basis pursuant to Rule 415 under
the Securities Act (the "Shelf Registration Statement").
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<PAGE> 3
1.3 Certain Procedures and Limitations
(a) TMC shall not be obligated to file the Shelf Registration Statement
or any Trust No. 2 Registration Statement (each, a "Demand Registration
Statement") within 90 days of the closing of an underwritten primary offering by
TMC of any class or series of its equity securities.
(b) Each Demand Registration Statement shall be on the Securities and
Exchange Commission (the "Commission") registration statement form selected by
TMC and which TMC shall then be eligible to use to effect the Demand
Registrations.
(c) Any Trust No. 2 Request or Shelf Request (each, a "Request") shall
specify the intended method(s) of distribution of the Registrable Shares. If an
underwritten offering is contemplated, TMC and the "Selling Shareholders" (as
defined in the next sentence) shall enter into such customary underwriting
agreements as the managing underwriter shall reasonably request. With respect to
any given Demand Registration Statement, the "Selling Shareholders" shall
consist of all Stockholders (i) which request such Demand Registration
Statement; (ii) which, in the case of a Trust No. 2 Registration Statement,
notify the Company pursuant to Section 1.1(d) that such Stockholders wish to
include Registrable Shares therein; or (iii) which, in the event of a Shelf
Registration, sell or intend to sell Registrable Shares pursuant thereto.
(d) TMC may delay the filing of any Demand Registration Statement, or,
by notice to the Selling Stockholders, prohibit sales under the Shelf
Registration Statement or any other effective Demand Registration Statement (an
"Effective Registration Statement"), for a reasonable period not to exceed 90
days if, in the good faith judgment of the Board of Directors of TMC (i) TMC
would be required to include in such Demand Registration Statement or any
prospectus contained therein material business information that at that time
cannot be publicly disclosed without material disruption of a major corporate
development or transaction then pending or in progress or without other material
adverse consequence or (ii) the filing of any Demand Registration Statement or
sales under any Effective Registration Statement would have a material adverse
effect on a significant financing transaction, business combination or
acquisition or other significant matter that is pending or proposed, in
connection with which TMC is or is expected to be a party; provided, however,
that TMC shall promptly make such filing, or notify the Other Shareholders that
sales under the Effective Registration Statement may resume, after the earlier
of (x) the end of such 90-day period and (y) the date as of which the conditions
that caused TMC to delay such filing or to prohibit such sales no longer exist.
In the event of any delay in the filing of a Demand Registration Statement, the
Requesting Stockholders shall have the right to withdraw their request for
registration if all Requesting Stockholders who requested such registration join
in such withdrawal; such withdrawn request shall not be considered a Demand
Registration pursuant to Section 1.1(a) or Section 1.2 (as applicable).
(e) If (i) the effective date of any Demand Registration Statement would
otherwise be at least 45 calendar days, but fewer than 90 calendar days, after
the end of TMC's fiscal year, and (ii) the Securities Act requires TMC to
include audited financials as of the end of such fiscal year or the Securities
Act permits the use of, and the Selling Stockholders have requested that such
Demand Registration Statement include, audited financials as of the end of such
fiscal year,
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<PAGE> 4
TMC may delay the filing of such Demand Registration Statement for such period
as is reasonably necessary to include therein its audited financial statements
for such fiscal year.
(f) TMC shall have no obligation to register any Preferred Stock
hereunder on or before August 8, 2000.
(g) TMC shall have no obligation to include, in any given Demand
Registration Statement, any shares of Preferred Stock or Common Stock if , at
anytime prior to the time that such Demand Registration Statement becomes
effective, TMC provides any Selling Stockholder that sought to include such
shares in the Demand Registration Statement with an opinion of counsel,
reasonably acceptable to such Selling Stockholder, to the effect that all of the
shares that such Selling Stockholder sought to include in the Demand
Registration Statement can be sold by such Selling Stockholder without
registration, pursuant to Rule 144 under the Securities Act.
(h) Until the earlier of (i) 90 days after the effective date of any
Trust No. 2 Registration Statement, or (ii) the period necessary to complete the
marketing of Registrable Shares after the effective date of a Trust No. 2
Registration Statement, TMC shall not register under the Securities Act an
offering of shares of Common Stock, Preferred Stock or other equity securities
for sale to the public for the account of TMC and/or third parties, except for
registrations (i) on Commission Form S-8 or Form S-4 (or the then equivalent
forms) or (ii) pursuant to (A) the Registration Rights Agreement dated as of
April 15, 1997 between TMC and Merrill Lynch & Co. (entered into in connection
with TMC's issuance of convertible Liquid Yield Option Notes due 2017) or (B)
Section 8.03 (Registration Rights) of the Agreement and Plan of Merger dated as
of July 24, 1996 among TMC, a subsidiary thereof, Apartment Search, Inc., and
certain shareholders thereof.
1.4 Preparation and Filing Pursuant to Demand. So long as TMC is under
an obligation pursuant to the provisions of Section 1.1 or 1.2, TMC shall:
(a) prepare and file with the Commission such amendments and supplements
to any Demand Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Demand Registration Statement
effective for such period as shall be necessary to complete the marketing of
Registrable Shares included therein, but in no event (i) in the case of a Trust
No. 2 Registration Statement, for more than 90 consecutive days after the
effective date thereof; or (ii) in the case of the Shelf Registration Statement,
beyond the first anniversary of the date hereof;
(b) upon the request of any Selling Stockholder (i) use its best efforts
to provide copies of the Demand Registration Statement, the prospectus used in
connection therewith, and all amendments and supplements thereto at least three
business days prior to the filing of the same with the Commission; and (ii)
provide such number of copies of a prospectus, including, without limitation, a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the Selling Stockholders may reasonably request
in order to facilitate the public sale or other disposition of such Registrable
Shares;
4
<PAGE> 5
(c) use its best efforts to register or qualify Registrable Shares
covered by any Demand Registration Statement under the securities or blue sky
laws of such jurisdictions within the United States as the Selling Stockholders
may reasonably request (provided, however, that TMC shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified or to qualify in any jurisdiction in which it is not
then qualified) and to do any and all other acts or things that may be necessary
or advisable to enable the Selling Stockholders to consummate the public sale or
other disposition in such jurisdiction of Registrable Shares; and
(d) promptly notify the Selling Stockholders, at any time when a
prospectus relating to Registrable Shares being distributed is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in any Demand Registration Statements as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and, at
the request of the Selling Stockholders, promptly prepare, file with the
Commission and furnish to the Selling Stockholders a reasonable number of copies
of a supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of Registrable Shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
1.5 Standstill Obligations of the Stockholders. Each Stockholder shall
agree, if requested by the managing underwriter of a Demand Registration, in
order to facilitate the distribution of Registrable Shares proposed to be sold
pursuant thereto, not to sell or otherwise transfer any shares of TMC capital
stock (including any Registrable Shares) held by such Stockholder in the public
market for a period not to exceed 180 days after the effective date of such
Demand Registration Statement.
1.6 Expenses. In connection with any Demand Registration Statement, all
expenses incurred by TMC in complying with its obligation hereunder including,
without limitation, all registration and filing fees, fees and expenses of
complying with securities and blue sky laws, listing fees, printing expenses and
fees and disbursements of accountants and counsel shall be paid by TMC; provided
however, that the Selling Stockholders shall pay all underwriting discounts and
selling commissions. The reasonable fees and expenses of one special counsel
(reasonably satisfactory to TMC) to the Selling Stockholders shall also be paid
by TMC.
1.7 Provision of Information. In connection with any Demand
Registration, each Selling Stockholder shall furnish to TMC in writing such
information regarding such Selling Stockholder, its holdings of Registrable
Shares and the facts regarding the proposed sale or distribution of Registrable
Shares and such documents as TMC shall reasonably request and as shall be
required in connection with the actions to be taken by TMC pursuant to this
Article 1.
1.8 Suspension of Sales. If TMC gives any notice to the Selling
Stockholders pursuant to Sections 1.3(d) or 1.4(d) hereof, the Selling
Stockholders shall not effect sales of
5
<PAGE> 6
Registrable Securities pursuant to any Demand Registration Statement until such
time as TMC has either notified the Selling Stockholders pursuant to Section
1.3(d) that sales may resume or notified the Selling Stockholders that the
corrective action required by Section 1.4(d) has been taken, as applicable.
1.9 Underwritten Offerings. In connection with any underwritten offering
to be effected pursuant to a Demand Registration Statement,
(i) Selling Stockholders holding a majority of the Registrable Shares to
be included therein may designate one or more of the Selling Stockholders to
manage the offering, including to select the managing underwriter(s), and to
determine the timing, offering price, underwriting discounts and selling
commissions, the terms of the underwriting agreement, special counsel to the
Selling Stockholders, and any administrative matters relating to such offering.
The selection of the managing underwriter(s) and the terms of the underwriting
agreement shall be subject to the reasonable approval of the Company.
(ii) If the managing underwriters determine, in their sole discretion,
that the number of Registrable Shares which are to be included in the offering
should be limited due to market conditions or marketing considerations, then the
Selling Stockholders shall participate in such offering as they shall agree, or
failing such agreement, pro rata, according to the number of Registrable Shares
that each Selling Stockholder sought to include therein.
(iii) Upon request of the managing underwriter(s), TMC shall use its
best efforts to furnish an opinion of legal counsel to TMC (covering such
matters as are typically covered by opinions of issuer's counsel in underwritten
offerings under the Securities Act and similar in form and substance to those
furnished in connection with prior offerings of Common Stock or Preferred
Stock), as the managing underwriter(s) may reasonably request.
(iv) Upon request by TMC or the managing underwriter(s), the Selling
Stockholders shall use their best efforts to furnish one or more opinions of
counsel (covering such matters as are typically covered by opinions of counsel
to selling stockholders in underwritten offerings under the Securities Act) as
TMC or the managing underwriter(s) may reasonably request.
ARTICLE 2
OTHER MATTERS
2.1 Legend. Each certificate representing TMC Merger Shares shall bear a
legend to the following effect:
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER UNDER APPLICABLE SECURITIES LAWS AND ARE TRANSFERABLE ONLY IN
ACCORDANCE THEREWITH."
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<PAGE> 7
2.2 Further Assurances. Each of the parties hereto shall execute such
documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
ARTICLE 3
INDEMNIFICATION
3.1 Indemnification by TMC.
TMC shall indemnify and hold the Selling Stockholders and their
respective officers, directors, stockholders, trustees, beneficiaries,
affiliates, bankers, attorneys or other agents (collectively, the
"Representatives") harmless from and against all claims, costs, losses,
liabilities, damages or expenses (including attorneys' fees and any income taxes
payable as a result of the indemnification provided hereunder), joint or
several, to the fullest extent provided, and subject to the limitations imposed,
by applicable Delaware law, which any of them may incur or be alleged to have
incurred under the Securities Act or the Securities Exchange Act or 1934, as
amended (the "Exchange Act") or otherwise, insofar as such losses, costs,
claims, damages, expenses or liabilities (or actions in respect thereof) arise
out of any filing with the Commission pursuant to Article 1 hereof; provided,
however, that TMC shall not be obligated to indemnify the Selling Stockholders
or any Representative pursuant to this Section 3.1 if such losses, costs,
claims, damages, expenses or liabilities (or actions in respect thereof) arise
out of or are based upon (a) any untrue statement of a material fact furnished
by or on behalf of a Selling Stockholder contained in any such filing that was
known by such Selling Stockholder to be untrue when made, or (b) the knowing
omission or alleged knowing omission by a Selling Stockholder to advise TMC with
respect to a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. Without limiting the foregoing, the Company shall advance
all expenses (including attorney's fees) incurred by the Selling Stockholders
and Representatives in defending or preparing to defend any pending or
threatened civil, criminal, administrative or investigative action, suit or
proceeding as to which they may claim a right of indemnification hereunder
subject to an undertaking by each of them to repay such amounts in the event of
a final nonappealable judicial determination that such Selling Stockholder or
Representative is not entitled to indemnification hereunder. In the absence of
such a determination, the Selling Stockholders and the Representatives shall
conclusively be presumed to be entitled to such expense advancement without
reimbursement. The contractual rights of indemnification and advancement of
expenses provided herein shall be in addition to and independent of any and all
other rights to indemnification or advancement of expenses otherwise available
to any of the Selling Stockholders and Representatives in any of their
capacities under applicable law, the TMC's Certificate of Incorporation or
Bylaws, any other indemnification agreement or policy of insurance.
3.2 Indemnification by the Selling Stockholders. Each Selling
Stockholder, severally and not jointly, shall indemnify, defend and hold
harmless TMC, each of its officers and directors and each other person, if any,
who controls any of the foregoing within the meaning of the Exchange Act against
any losses, costs, claims, damages, expenses or liabilities, joint or
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<PAGE> 8
several, to which any of the foregoing may become subject under the Securities
Act or the Exchange Act or otherwise, insofar as such losses, costs, claims,
damages, expenses or liabilities (or actions in respect thereof) arise primarily
out of or are based primarily upon (a) any untrue statement of a material fact
furnished by or on behalf of a Selling Stockholder contained in any filing with
the Commission pursuant to Article 1 known by the Selling Stockholder to be
untrue when made, or (b) the knowing omission or alleged knowing omission by a
Selling Stockholder to advise TMC with respect to a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that such
Selling Stockholder was primarily responsible for such intentional
misrepresentation or intentional omission, and the Selling Stockholder shall
reimburse TMC and each such officer, director and controlling person for any
legal or any other expenses reasonably incurred by any of them in connection
with defending or preparing to defend any such loss, claim, damage, liability or
action.
3.3 Notification of Claims; Actions by the Selling Stockholders. For the
purpose of this Article 3, the term "Indemnifying Party" shall mean the party
having an obligation hereunder to indemnify the other party pursuant to this
Article 3, and the term "Indemnified Party" shall mean the party having the
right to be indemnified pursuant to this Article 3. Whenever any claim shall
arise for indemnification under this Article 3, the Indemnified Party shall
promptly notify the Indemnifying Party in writing of such claim and, when known,
the facts constituting the basis for such claim (in reasonable detail). Failure
by the Indemnified Party to so notify the Indemnifying Party shall not relieve
the Indemnifying Party of any liability hereunder unless such failure materially
prejudices the Indemnifying Party.
3.4 Indemnification Procedure. After receipt of the notice required by
Section 3.3, if the Indemnifying Party undertakes to defend any such claim, then
the Indemnifying Party 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 the
Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnified Party of such election, which notice acknowledges the Indemnifying
Party's obligation to provide indemnification hereunder. The Indemnifying Party
shall not settle any third-party claim that is the subject of indemnification
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided, however, that the Indemnifying Party may settle
a claim without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party and
(iii) does not require the Indemnified Party to make any payment or forego,
relinquish or take any action or right. The Indemnified Party, subject to
reimbursement of expenses as required hereby, shall cooperate in all reasonable
respects with the Indemnifying Party 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 the Indemnified Party's name
of appropriate cross claims and counterclaims). The Indemnified Party may, at
its own cost, participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal arising
therefrom. If, after receipt of a claim notice pursuant to Section 3.3, the
Indemnifying Party does not undertake to defend any such claim the Indemnified
Party may, but shall have no obligation to, contest any
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<PAGE> 9
lawsuit or action with respect to such claim and the Indemnifying Party shall be
bound by the result obtained with respect thereto by the Indemnified Party
(including, without limitation, the settlement thereof without the consent of
the Indemnifying Party). If the Indemnified Party reasonably believes that there
are one or more legal defenses available to the Indemnified Party that conflict
or may conflict with those available to the Indemnifying Party, or if the
interest of the Stockholders may not be entirely coextensive or identical with
those of TMC, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to select its own counsel and assume the defense of the
lawsuit or action; provided, however, that the Indemnified Party may not settle
such lawsuit or action without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. At any time after the commencement
of defense of any lawsuit or action, the Indemnifying Party may request the
Indemnified Party to agree in writing to the abandonment of such contest or to
the payment or compromise by the Indemnifying Party of such claim, whereupon
such action shall be taken unless the Indemnified Party determines that the
contest should be continued and so notifies the Indemnifying Party in writing
within 15 days of such request from the Indemnifying Party. If the Indemnified
Party determines that the contest should be continued, the Indemnifying Party
shall be liable hereunder only to the extent of the lesser of (i) the amount
which the other party(ies) to the contested claim had agreed to accept in
payment or compromise as of the time the Indemnifying Party made its request
therefor to the Indemnified Party or (ii) such amount for which the Indemnifying
Party would otherwise be liable with respect to such claim by reason of the
provisions hereof.
3.5 Remedies. If any Indemnifying Party were to deny any request for
indemnification or advancement of expenses hereunder, or otherwise failed to
advance any expenses due pursuant to such a request in a timely manner, such
party acknowledges and agrees that the Indemnified Parties shall have an
inadequate remedy at law and that, accordingly, the Indemnified Parties shall be
entitled, in addition to any other available remedy, to seek immediate
enforcement of this Agreement by way of an action to compel such performance
and, if such Indemnifying Party's denial or failure to perform any request for
indemnification or advancement of expenses hereunder is found in such an action
to have been improper or a breach of this Agreement, the Indemnified Parties
shall be entitled to receive all reasonable fees and expenses incurred by them
in securing performance of this Agreement.
3.6 Contribution. If the Indemnification provided for in Section 3.1 or
3.2 hereof shall for any reason or to any extent be unavailable to the
Indemnified Party (other than by reason of the exceptions provided for therein)
in respect of any loss, claim, damage, expense, cost or liability, or action
referred to herein, or any portion thereof, then the Indemnifying Party shall,
in lieu of indemnifying the Indemnified Party, contribute to the amount paid or
payable by the Indemnified Party as a result of such loss, claim, damage,
expense, cost or liability, or action in respect thereof or any such portion, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other with
respect to the actions, conduct, statements or omissions that resulted in such
loss, claim, damage, expense, cost or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to whether the untrue or alleged untrue statement or
omission of a material fact relates to information supplied by the Indemnifying
Party on the one hand or the Indemnified Party on the other, the intent of the
9
<PAGE> 10
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by the
Indemnified Party as a result of the loss, claim, damage, expense or liability,
or action in respect thereof, referred to above in this paragraph shall be
deemed to include, for purposes of this paragraph, any legal or other expenses
reasonably incurred by the Indemnified Party in connection with investigating or
defending any such action or claim. 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.
ARTICLE 4
MISCELLANEOUS
4.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the addresses set forth in the Merger
Agreement, or to such other address as the party to whom notice is given may
have previously furnished to the others in writing in the manner set forth
above. Any notice or communication delivered in person shall be deemed effective
on delivery. Any notice or communication sent by telecopy shall be deemed
effective on the first business day at the place of which such notice or
communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the place
from which such notice or communication was mailed following the day in which
such notice or communication was mailed.
4.2 Governing Law; Forum; Consent to Jurisdiction. This Agreement shall
be construed, interpreted and the rights of the parties determined in accordance
with the internal laws of the State of California without regard to the conflict
of law principles thereof. The parties hereto agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated exclusively in the State and Federal courts located in the County of
Los Angeles, State of California. The aforementioned choice of venue is intended
by the parties to be mandatory and not permissive in nature, thereby precluding
the possibility of litigation between the parties with respect to or arising out
of this Agreement in any jurisdiction other than that specified in this
paragraph. Each party hereby waives any right it may have to assert the doctrine
of forum non conveniens or similar doctrine or to object to venue with respect
to any proceeding brought in accordance with this paragraph, and stipulates that
the State and Federal courts located in the County of Los Angeles, State of
California shall have in personal jurisdiction and venue over each of them for
the purpose of litigating any dispute, controversy, or proceeding arising out of
or related to this Agreement. Each party hereby authorizes and accepts service
of process sufficient for personal jurisdiction in any action against it as
contemplated by this paragraph by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices as set
forth in this Agreement.
4.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same
10
<PAGE> 11
instrument. Upon execution of this Agreement, counterpart signature pages may be
delivered by facsimile transmission; provided, that original signature pages are
delivered within five days thereafter.
4.4 Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
4.5 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
4.6 Legal Fees and Costs. If any party hereto institutes any action or
proceeding, whether before a court or arbitrator, to enforce any provision of
this Agreement, the prevailing party therein shall be entitled to received from
the losing party reasonable attorneys, fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to judgment.
4.7 Assignment. This Agreement shall not be assignable by the
Stockholders (except, upon a termination of Trust No. 2 or any subtrust thereof
in accordance with its terms, to the beneficiaries thereof) without the written
consent of TMC.
4.8 Amendments and Waivers. The provisions of this agreement shall not
be amended, modified or waived without the written consent of (a) TMC and (b)
Stockholders holding a majority of the voting interest represented by the TMC
Merger Shares which are then held by the Stockholders (treating any Series C
Preferred Stock on an as-converted basis).
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers or representatives thereunto duly authorized, as of
the day and year first above written.
TMC:
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Thomas Unterman
----------------------------------
Name: Thomas Unterman
Title: Senior Vice President and Chief
Financial Officer
<PAGE> 13
THE STOCKHOLDERS:
CHANDLER TRUST NO. 2
By: /s/ Gwendolyn Garland Babcock
------------------------------------------
Gwendolyn Garland Babcock, as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Bruce Chandler
------------------------------------------
Bruce Chandler, as trustee of Chandler
Trust No. 2 under Trust Agreement dated
June 26, 1935
By: /s/ William Stinehart, Jr.
------------------------------------------
William Stinehart, Jr., as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Warren B. Williamson
------------------------------------------
Warren B. Williamson, as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Camilla Chandler Frost
------------------------------------------
Camilla Chandler Frost, as trustee of
Chandler Trust No. 2 under Trust Agreement
dated June 26, 1935
By: /s/ Douglas Goodan
------------------------------------------
Douglas Goodan, as trustee of Chandler
Trust No. 2 under Trust Agreement dated
June 26, 1935
By: /s/ Judy C. Webb
------------------------------------------
Judy C. Webb, as trustee of Chandler Trust
No. 2 under Trust Agreement dated June 26,
1935
13
<PAGE> 14
THE SHAREHOLDERS OF CHANDIS SECURITIES COMPANY:
Torrey Pacific Corporation, a California
corporation
By: /s/ Jim Staver
-------------------------------------------
Title: President
------------------------------------------
Address:
c/o Mrs. Marian Staver
110 Stratford Court
Del Mar, California 92014
Kathryn Kirkpatrick Matheu Trust U/T/A Dated
8/26/92
By: /s/ Kathryn Kirkpatrick Snyder
--------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
--------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
--------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
--------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
2921 Laurel Drive
Sacramento, California 95864
Nairn Kirkpatrick Trust U/T/A Dated 8/26/82
By: /s/ Kathryn Kirkpatrick Snyder
--------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
--------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
--------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
14
<PAGE> 15
By: /s/ Wendy Kirkpatrick Branscum
--------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
7677 Greenridge Way
Fair Oaks, California 95628
Francesca Kirkpatrick Trust U/T/A Dated 8/26/82
By: /s/ Kathryn Kirkpatrick Snyder
--------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
--------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
--------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
--------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
1071 4th Avenue
Napa, California 94559
Wendy Kirkpatrick Branscum Trust U/T/A Dated
8/26/82
By: /s/ Kathryn Kirkpatrick Snyder
--------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
--------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
--------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
--------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
Address:
1050 45th Street
Sacramento, California 95864
15
<PAGE> 16
Harry C. Kirkpatrick Grandchildren's Irrevocable
Trust U/T/A Dated 2/24/95
By: /s/ Kathryn Kirkpatrick Snyder
--------------------------------------------
Kathryn Kirkpatrick Snyder, Co-Trustee
By: /s/ Nairn Kirkpatrick Dorer
--------------------------------------------
Nairn Kirkpatrick Dorer, Co-Trustee
By: /s/ Wendy Kirkpatrick Branscum
--------------------------------------------
Wendy Kirkpatrick Branscum, Co-Trustee
By: /s/ Francesca Kirkpatrick Chasuk
--------------------------------------------
Francesca Kirkpatrick Chasuk, Co-Trustee
Address:
Bank of America, Attn: Mr. Kielborn
P. O. Box 471
Sacramento, California 95814
Kirkpatrick Community Property Trust
U/T/A Dated 9/11/96
By: /s/ Harry C. Kirkpatrick
--------------------------------------------
Harry C. Kirkpatrick, Co-Trustee
By: /s/ Rosanne E. Kirkpatrick
--------------------------------------------
Rosanne E. Kirkpatrick, Co-Trustee
Address:
9641 Spring Valley Road
Marysville, California 95901
16
<PAGE> 1
EXHIBIT 10.4
LEASE AGREEMENT
BY AND BETWEEN
TMCT, LLC
AS LANDLORD
AND
THE TIMES MIRROR COMPANY
AS TENANT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Lease..............................................................................1
2. Use ..............................................................................1
3. Term ..............................................................................2
4. Rent ..............................................................................2
5. Maintenance and Repair.............................................................4
6. Alterations and Additions..........................................................4
7. Liens..............................................................................5
8. Assignment and Subletting..........................................................5
9. Exemption of Landlord from Liability...............................................7
10 Triple Net Lease...................................................................7
11 Tenant's Environmental Representations and Indemnification of Landlord.............7
12. Indemnification of Landlord.......................................................9
13. Insurance.........................................................................9
14. Waiver of Subrogation............................................................11
15. Utilities and Services...........................................................11
16. Real Property Taxes..............................................................11
17. Damage or Destruction............................................................12
18. Condemnation.....................................................................13
19. Default..........................................................................14
20. Remedies.........................................................................15
21. Interest on Past-Due Obligations; Late Charge....................................17
22. Holding Over.....................................................................17
23. Quiet Enjoyment..................................................................17
24. Estoppel Certificate.............................................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
25. Surrender of Premises............................................................17
26. Notices..........................................................................18
27 Option to Purchase...............................................................18
28. Defined Terms and Headings.......................................................20
29. Enforceability...................................................................20
30. Commissions......................................................................20
31. Attorneys' Fees..................................................................20
32. Time and Applicable Law..........................................................20
33. Successors and Assigns...........................................................21
34. Entire Agreement.................................................................21
35. Recordation......................................................................21
36. Exhibits.........................................................................21
37. Covenants and Conditions.........................................................21
38. Survival.........................................................................21
39. No Joint Venture.................................................................21
40. Calendar Days and Business Days..................................................21
41. Subordination, Nondisturbance and Attornment.....................................21
42. Counterparts.....................................................................22
43. Waiver...........................................................................22
44. Landlord's Access................................................................22
45. Business Improvement Districts...................................................22
</TABLE>
Exhibits
--------
Exhibit A - Legal Description
Exhibit B - Memorandum of Lease
ii
<PAGE> 4
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into as of August 8,
1997 ("Commencement Date"), by and between THE TIMES MIRROR COMPANY, a Delaware
corporation ("Tenant"), and TMCT, LLC, a Delaware limited liability company
("Landlord").
R E C I T A L S
WHEREAS, concurrent herewith Landlord is obtaining the fee interest in
the Premises from Tenant's subsidiaries in the form of a capital contribution;
WHEREAS, as a condition to such capital contribution, Tenant is
requiring that Landlord lease the Premises to Tenant; and
WHEREAS, Landlord is only willing to lease the Premises to Tenant on the
terms set forth below.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:
AGREEMENT
1. LEASE. Landlord hereby leases to Tenant and Tenant leases from
Landlord certain real estate owned by Landlord and located in the states of
California, Connecticut, Maryland, Missouri and New York (each parcel of real
property a "Parcel", collectively "Parcels"), together with all buildings,
improvements, equipment and fixtures located on or attached to said real estate
now or during the Term of this Lease (each Parcel, together with the
improvements, equipment and fixtures located on or attached to said parcel, a
"Property" and collectively the "Premises"), which Properties are listed in
Exhibit A and which Parcels are more particularly described in Exhibits A-1
through Exhibits A-8 attached hereto and incorporated herein by this reference.
Tenant acknowledges that its subsidiaries have occupied the Premises for an
extended period of time prior to the Commencement Date and Tenant agrees to
lease the Premises on an "as-is" and "with all faults" basis.
2. USE. The Premises may be used by Tenant in the manner used by
Tenant's subsidiaries prior to the Commencement Date. The Premises may also be
used by Tenant for any use permitted by applicable zoning and other applicable
law, so long as any such new use does not reduce the fair market value of the
Premises. Tenant shall not allow the Premises to be used for any unlawful
purpose, nor shall Tenant cause or maintain or permit any nuisance in, on, or
about the Premises. Tenant shall not commit or suffer the commission of any
waste in, on, or about the Premises. Tenant shall comply with all governmental
laws, ordinances, regulations, directives, covenants and restrictions of record
("Regulations") applicable to the use and its occupancy of the Premises, and
shall promptly comply with the Regulations for the prevention and abatement of
any violations or nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense. If, as a result of any change in the Regulations, the
Premises must be altered to lawfully accommodate Tenant's use and occupancy,
such alterations shall be made solely at Tenant's expense. Tenant shall not do
or permit anything to be done on or about the Premises or bring or keep anything
therein which will in any way jeopardize the coverage of insurance thereon.
<PAGE> 5
3. TERM. The term (the "Term") of this Lease shall be for the period
commencing upon the Commencement Date (as defined in the initial paragraph of
this Lease) and ending twelve (12) years thereafter (the "Initial Term") or the
last day of any Additional Term (the "Termination Date"), unless sooner
terminated as herein provided. At Tenant's option, Tenant may extend the Term
for up to two (2) additional terms (each an "Additional Term", and,
collectively, the "Additional Terms") if but only if (i) this Lease shall not
have been terminated pursuant to any of the provisions hereof, and (ii) Tenant
is not in default hereunder unless such default is commercially impractical to
cure. Tenant may exercise such options by giving Landlord written notice (the
"Extension Notice") at least one (1) year prior to the expiration of the current
term. Each Additional Term shall be for twelve (12) years and commence (i) on
the expiration of the Initial Term, with respect to the first Additional Term,
and (ii) on the expiration of the first Additional Term with respect to the
second Additional Term.
3.1 Upon the giving by Tenant to Landlord of the Extension
Notice, the current Term shall be deemed to be automatically extended
upon all the covenants, agreements, terms, provisions and conditions set
forth in this Lease (excluding any previously exercised or extinguished
option to extend) except that Rent during such extension shall be
determined as provided in Section 4.
3.2 If Tenant fails or omits to give Landlord the Extension
Notice, it shall be deemed, without further notice and without further
agreement between the parties hereto, that Tenant elected not to
exercise the options granted Tenant pursuant to this Section 3 to extend
the Term. Failure by Tenant to exercise any option to extend the Term
for an Additional Term shall result in expiration and termination of any
and all subsequent options to extend the Term hereof.
4. RENT.
4.1 For the period beginning on the Commencement Date through and
including the Termination Date, Tenant shall pay as rent (the "Rent")
for the Premises: (i) the amount (the "Base Rent") each calendar month
as provided in this Section 4, (ii) the cost of all utilities and
services as set forth herein, (iii) the cost of insurance as set forth
herein and (iv) the cost of the Real Property Tax as set forth in
Section 16. Each payment of Base Rent made pursuant to this Section 4
shall be made in advance on the first day of each calendar month. If the
Term commences or ends on a date other than the first day of the month,
the installment for any partial month shall be prorated on the basis of
thirty (30) calendar days per month.
4.2. The Base Rent shall be paid in monthly installments as set
forth herein, without deduction or offset, in such currency of the
United States as at the time shall be legal tender for the payment of
public and private debts, at such place as Landlord may designate from
time to time.
4.3 The Base Rent payable by Tenant during the Initial Term shall
be Two Million Seventy Thousand Two Hundred Ninety-One Dollars and
Seventy Cents ($2,070,291.70) per month ($24,843,500.00 per year).
4.4 The Base Rent payable during each Additional Term shall be at
Fair Market Rental Value, which shall be determined as follows:
2
<PAGE> 6
4.4.1 Within thirty (30) days after Landlord receives
Tenant's Extension Notice, Landlord and Tenant shall mutually
agree upon and appoint one appraiser to determine the fair market
rental value of the Premises. If Landlord and Tenant are unable
to agree upon a single appraiser to appraise the fair market
rental value of the Premises within such thirty day period, then
Landlord and Tenant shall each appoint an appraiser within sixty
(60) days after Landlord receives Tenant's Extension Notice to
determine the fair market rental value of each Property (a single
appraiser may appraise more than one Property and Landlord and
Tenant shall each use best efforts to minimize the total number
of appraisers appointed), and notice of each such appointment
shall be given to the other party. For each Property, the
appraisers thus appointed shall proceed to determine such fair
market rental value for such Property within thirty (30) days
after notice of their appointment.
4.4.2 If the parties were unable to agree on a single
appraiser to appraise the fair market rental value of the
Premises, then within fifteen (15) days after the parties have
each appointed appraisers pursuant to Subsection 4.4.1, the
appraisers appointed for each Property shall join to appoint a
third appraiser to appraise such Property and if they fail so to
appoint such third appraiser within such period, the third
appraiser shall be appointed by the court exercising such
functions in the jurisdiction in which the Property is located
except that if the court will not do so the third appraiser shall
be appointed by the American Arbitration Association or similar
organization performing such functions, and such third appraiser
shall then individually determine the fair market rental value
for such Property within thirty (30) days of notice of
appointment.
4.4.3 If Landlord and Tenant fail to appoint a single
appraiser to appraise the fair market rental value of the
Premises, then the average of the fair market rental values
contained in the two closest appraisals shall constitute the fair
market rental value of such Property, and such determination
shall be binding upon each of the parties. In the event that
there are not two closest appraisals (e.g., if the middle
appraisal is exactly halfway between the highest and lowest
appraisals), then the middle appraisal shall be binding upon each
of the parties. The fair market rental value of the Premises
shall be equal to the sum of the fair market rental values of
each Property.
4.4.4 All appraisers appointed hereunder shall be
competent, qualified by training and experience in the County in
which the Property(ies) they are appraising is located,
disinterested and independent and shall be members in good
standing of the American Institute of Real Estate Appraisers or
its successor and all appraisal reports shall be rendered in
writing and signed by the appraiser or appraisers making the
report.
4.4.5 For purposes of this Section 4, the term "fair
market rental value" means the rental rate, including all
escalations, at which tenants lease comparable space as of the
commencement of the Option Term. In determining the fair market
rental value, an appraiser shall take into account the terms of
this Lease, including but not limited to such terms as the option
to purchase and the triple net lease provisions. For this
purpose, "comparable space" shall be space that is:
3
<PAGE> 7
(a) Not subject to another tenant's expansion rights;
(b) Not leased to a tenant that holds an ownership
interest in the landlord;
(c) Not leased to a tenant under a renewal or an extension
of a lease;
(d) Comparable in size, location, and quality to the
Property; provided, however, that the size and quality of the
Property shall be determined as if any capital improvements (as
that term is defined in Subsection 27.3.3) made by Tenant or a
subtenant had not been made and, instead, any improvements
replaced by a capital improvement had remained and had been
maintained, repaired and/or replaced as required under this
Lease;
(e) Leased for a term comparable to the Additional Term;
and
(f) Suitable for the tenant's use in an "as-is" condition
without the need for any tenant improvement allowance.
4.4.6 Landlord and Tenant shall each be solely responsible
for the costs, fees and expenses of the appraisers that they
appoint pursuant to Subsection 4.4.1. All costs, fees and
expenses of the appraisers appointed pursuant to Paragraph 4.4.2
shall be divided equally between Landlord and Tenant.
5. MAINTENANCE AND REPAIR. Tenant shall at all times keep in good
condition and repair the Premises and every part thereof, structural and
non-structural, including, without limiting the generality of the foregoing, all
plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities and equipment within the Premises, fixtures, walls (interior and
exterior), foundations, ceilings, roofs (interior and exterior), floors,
windows, doors, plate glass and skylights located within the Premises, and all
gardening, landscaping, driveways, parking lots, fences and signs located on the
Premises and sidewalks and parkways adjacent to the Premises. Notwithstanding
the foregoing, Tenant shall have the rights specified in Sections 6 and 17
below. It is hereby understood and agreed that other than its obligations under
Section 17 below, Landlord has no other obligation to repair and maintain the
Premises or any part thereof, all of which obligations are intended to be that
of Tenant. Tenant expressly waives to the extent permitted by law the benefit of
any statute or other law or regulation now or hereafter in effect which would
otherwise afford Tenant the right to make repairs at Landlord's expense or to
terminate this Lease because of Landlord's failure to keep the Premises in good
order, condition and repair.
6. ALTERATIONS AND ADDITIONS. Tenant shall be permitted to make any
alterations, improvements, additions, or installations ("Improvements") in, on
or about the Premises; provided, however, that Tenant shall not make any of the
following Improvements without the consent of Landlord, which consent shall not
be unreasonably withheld, conditioned or delayed: (i) any Improvement which will
result in a modification to the footprint of any load bearing exterior wall of
any building or any material portion thereof located on any Parcel; (ii) any
single project of which one or more Improvements is a part costing (including
all costs that are capitalized according to GAAP standards) in excess of Fifteen
Million Dollars ($15,000,000); (iii) any Improvement which will render any
building on any Parcel unusable for the general purpose for which such building
was
4
<PAGE> 8
used prior to the construction of such Improvement. Tenant shall be responsible
for payment of all governmental fees and costs imposed in connection with the
Improvements and/or the use of the Premises by Tenant, and Landlord shall not
have any obligation in that regard. Tenant shall properly construct any and all
Improvements in compliance with all applicable laws and shall not make
Improvements which reduce the fair market value of the Premises. Promptly after
the completion of any Improvements, Tenant shall provide Landlord with as-built
plans and specifications for such Improvements. All Improvements which may be
made on the Premises by Tenant or any subtenant shall be made in compliance with
all applicable Regulations, and any such Improvements shall be the sole and
exclusive property of Tenant during the Term of this Lease; provided that any
such Improvements (other than Tenant's trade fixtures and personal property,
which Tenant may elect to remove at the expiration or earlier termination of
this Lease pursuant to Section 25) shall become the property of Landlord and
remain upon and be surrendered with the Premises at the expiration or prior
termination of the Lease.
7. LIENS. Tenant shall keep the Premises and Tenant's interest in the
Premises free from any liens arising out of any work performed, materials
furnished, or obligations incurred by Tenant. In the event that Tenant shall
not, within thirty (30) days following the imposition of any such lien, cause
the same to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but not the obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All such sums paid by Landlord and all expenses, including attorneys'
fees, incurred by it in connection therewith shall be payable to Landlord by
Tenant on demand. If Tenant shall, in good faith, contest the validity of any
such lien, then Tenant shall, after prior written notice to Landlord, at its
sole cost and expense, defend itself and Landlord against the same and shall pay
and satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against Landlord or the Premises, provided that (i) neither
the Premises nor any part thereof would be in any danger of being sold,
forfeited, lost or interfered with, and (ii) Tenant shall furnish to Landlord a
surety bond in form and from a surety reasonably satisfactory to Landlord in an
amount equal to one hundred fifty percent (150%) of such contested lien
indemnifying Landlord against liability for the same and holding the Premises
free from the effect of such lien.
8. ASSIGNMENT AND SUBLETTING.
8.1 Tenant may not assign the Lease without the prior written consent of
Landlord, which consent may be withheld in Lessor's sole discretion.
Notwithstanding this limitation, Tenant may assign the Lease without the consent
of Lessor to an affiliate of Tenant (provided, however, that any event or
combination of events which results in such entity ceasing to be an affiliate of
Tenant shall be considered to be an assignment, requiring the consent of
Landlord hereunder) or to an entity acquiring the entire business of Tenant (and
its affiliates) as carried out in the Premises. Any assignee of Tenant must
assume Tenant's obligations under the Lease in a form acceptable to Landlord and
Tenant shall not be relieved from its liability under the Lease by reason of any
assignment. Tenant shall provide Lessor with a copy of any assignment of the
Lease.
8.2 Tenant shall have the right to sublease any portion of the Premises
with the consent of Lessor, which consent shall not be unreasonably withheld,
conditioned or delayed. Lessor's consent to sublease a portion of the Premises
shall not be required (i) if the sublease is to an affiliate of Tenant
(provided, however, that any event or combination of events which results in
such entity
5
<PAGE> 9
ceasing to be an affiliate of Tenant shall be considered to be a sublease to a
non-affiliate of Tenant, requiring the consent of Landlord hereunder) or an
entity acquiring the entire business of Tenant or Tenant's affiliate
6
<PAGE> 10
being conducted at the portion of the Premises so sublet, or (ii) if the
space to be sublet, plus any other space previously sublet to non-affiliates
without Landlord's consent, together total not more than ten percent (10%) of
the square footage of the structures located on the Parcels.
9. EXEMPTION OF LANDLORD FROM LIABILITY. Except with respect to its
obligations under Section 17 below with respect to casualties, Landlord shall
not be liable to Tenant and Tenant hereby assumes all risks and waives all
claims against Landlord for any damage to any property or any injury to or death
of any person in or about the Premises by or from any cause whatsoever arising
at any time, and without limiting the generality of the foregoing, whether
caused by fire, steam, electricity, gas, water, or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant. Landlord shall not be liable or
responsible for any loss or damage to any property or person occasioned by
theft, fire, act of God, acts of third parties, public enemy, injunction, riot,
strike, insurrection, war, court order, requisition or order of governmental
body or authority, or other matter beyond the control of Landlord. In further
explanation of and not in limitation of the foregoing provisions of this Section
9, Landlord shall only remain liable for any damage to any property or any
injury to or death of any person in or about the Premises which may result from
the active negligence or willful acts or omissions of Landlord, or its agents,
or employees or contractors.
10. TRIPLE NET LEASE. This Lease is intended to be a "triple net" lease
and it should be interpreted accordingly.
11. TENANT'S ENVIRONMENTAL REPRESENTATIONS AND INDEMNIFICATION OF
LANDLORD. Tenant hereby agrees that:
11.1 Tenant acknowledges that its subsidiaries have owned the
Premises for an extended period of time prior to the Commencement Date.
Accordingly, it is Tenant's obligation at its sole cost and expense to
comply with all Environmental Laws with respect to Hazardous Substances
existing on the Premises on or prior to the Commencement Date whether or
not such is currently known. Such obligation, and any liability that
Tenant may have for any breach thereof, shall survive the termination or
expiration of this Lease.
11.2 In the event Tenant discovers or determines the existence on
the Premises of any condition resulting from Hazardous Substances that
were disposed, discharged, leaked, handled or otherwise present on the
Premises prior to the Commencement Date, the presence of which may
require investigation, removal or remedial action pursuant to any law,
Environmental Law or may be the basis for the assertion of any third
party claims, including claims of governmental entities, Tenant shall
promptly notify Landlord thereof and Tenant shall, at its sole cost and
expense, proceed with all due diligence as may be required by applicable
Environmental Laws with respect to Hazardous Substances existing on or
prior to the Commencement Date. In the event that Tenant fails to
proceed with due diligence, Landlord may, at its option, proceed to take
the appropriate action and shall be reimbursed by Tenant therefor.
11.3 Any Hazardous Substances used by Tenant or its agents,
employees, contractors, subtenants, assignees and invitees on, in, or
about the Premises will be contained,
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treated, stored, used and disposed of in a safe manner and in accordance
with all Environmental Laws.
11.4 Tenant will use, keep and maintain the Premises in
compliance with, and shall not cause or permit the Premises to be in
violation of, any Environmental Laws.
11.5 Neither Tenant nor its agents, employees, contractors,
subtenants, assignees and invitees will use the Premises in a manner
which causes any Hazardous Substance to be deposited, and will not
deposit any Hazardous Substance, except in compliance with Environmental
Laws, into the atmosphere, into the soil or into the ground water of the
Premises. If Tenant or its agents, employees, contractors, subtenants,
assignees or invitees shall cause or permit a "release," as such term is
defined in the Environmental Laws, unless the release occurs after
termination of the Lease, or from off-site, Tenant, upon actual
knowledge thereof, will promptly notify Landlord in writing of such
release and begin investigation and remediation of such release and
complete such remediation at Tenant's own cost and expense as required
by the Environmental Laws.
11.6 Tenant shall indemnify, defend and hold harmless Landlord,
its officers, directors, employees, shareholders, affiliates, successors
and assigns (the "Indemnitees") against any and all damages, claims
(including without limitation, third party claims of personal injury or
real or personal property damages), costs, losses (including losses of
value and income), legal, accounting, actions, causes of action,
consulting, engineering, investigation, remediation and removal costs,
and other expenses whether at law, in equity, or administrative
(including without limitation attorneys' fees and court costs)
(hereinafter collectively referred to as "Claims"), which may be imposed
upon, incurred by or asserted against any of the Indemnitees by any
other party or parties, including without limitation a governmental
entity, arising out of or in connection with the breach by Tenant of
Tenant's covenants in this Section 11. This obligation by Tenant to
indemnify, defend, and hold harmless the Landlord includes, without
limitation, costs incurred by the Indemnitees for or in connection with
any investigation of site conditions or any cleanup, remedial,
monitoring, restoration or closure work required by any federal, state,
or local governmental agency or political subdivision, or any third
party action, because of any Hazardous Substances present in the soil,
air, surface or ground water, on, under, or about the Premises,
including, without limitation, any sums paid in settlement of claims,
penalties, attorneys' fees, court costs, consultant and laboratory fees,
as a result of Tenant's and its agents', employees', contractors',
subtenants', assignees' and invitees' activities on or in connection
with the Premises, but excluding that portion of any damages to the
extent caused by Indemnitees or any of their respective agents.
11.7 Promptly upon becoming aware of any matter described above
to which the indemnity applies, Landlord shall provide Tenant with
notice of the same provided that any delay in providing such notice
shall not impair the indemnity hereunder unless the delay actually
causes prejudice to the Tenant, and the Indemnitees shall reasonably
cooperate with Tenant in the defense of the matter. Tenant's obligations
pursuant to the indemnity in Subsection 11.4 above shall survive the
termination or expiration of this Lease.
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11.8 As used herein, the term "Hazardous Substances" shall mean
all hazardous substances, hazardous wastes, hazardous materials, toxic
materials, or toxic substances and any other substances, including
asbestos, petroleum and its by-products, the remediation, disposal,
storage, production, or use of which is regulated by federal, state or
local laws, ordinances, regulations, permit conditions, administrative
orders and similar requirements pertaining to health, safety and the
environment, including, but not limited to, substances listed under the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, 42 U.S.C. Section 9601 et seq.; the Hazardous Materials
Transportation Act, 42 U.S.C. Section 1801 et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Water
Act, 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq.; the Clean Air Act, 42 U.S.C. Section 7401
et seq.; the California Hazardous Waste Control Law, Cal. Health and
Safety Code Section 25100 et seq.; and the Porter-Cologne Water Quality
Control Act, Cal. Water Code Section 13000 et seq., as each may be
amended from time to time (herein referred to as "Environmental Laws").
12. INDEMNIFICATION OF LANDLORD. Tenant shall defend, indemnify and hold
Landlord harmless from any and all claims, demands, judgments, damages,
liabilities, costs, expenses and losses, including attorneys' fees and court
costs, arising from Tenant's use of the Premises or use of the Premises by any
party holding under Tenant, or from the conduct of Tenant's business, or from
the conduct of the business of any party holding under Tenant, or from any
activity, work or things done in or about the Premises except to the extent
caused by the active negligence or willful misconduct of Landlord. Tenant
further agrees to defend, indemnify and hold Landlord harmless from any and all
claims, demands, judgments, damages, liabilities, costs, expenses and losses
arising from any breach or default on the part of Tenant in the performance of
any covenant or agreement on the part of Tenant to be performed pursuant to the
terms of this Lease. If any action or proceeding is brought against Landlord by
reason of any such matters, Tenant agrees to defend such action or proceeding at
Tenant's sole expense by counsel reasonably satisfactory to Landlord. If
Landlord receives insurance proceeds with respect to any claim or loss for which
it is insured pursuant to the terms of this Lease, Tenant shall reduce its
payment to Landlord pursuant to this Section 12 to the extent of such proceeds.
The provisions of this Section 12 shall survive the expiration or prior
termination of this Lease with respect to any claims or liability relating to
matters occurring after the Commencement Date and prior to such expiration or
termination.
13. INSURANCE.
13.1 Tenant shall, at Tenant's expense, obtain and keep in force
during the entire term of this Lease a Comprehensive General Liability
policy (including Premises Liability and Contractual Liability,
Occurrence form) insuring Landlord and Tenant against covered liability
arising out of the Premises or its use, occupancy or maintenance,
including all areas appurtenant thereto. Such insurance shall name
Landlord as an additional insured and shall provide coverage in limits
of at least $5,000,000 combined single limit for bodily injury or death
to any one person, $20,000,000 for bodily injury or death to any number
of persons in respect of any one accident or occurrence and $1,000,000
for property damage in respect of one accident or occurrence. Tenant may
maintain up to a $2,000,000 deductible on the insurance required in this
Subsection 13.1. The insurance coverage limits required under this
Section 13.1 shall be increased every three years to reflect any
increases in the Consumer
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Price Index for All Urban Consumers U.S. City Average, All Items (base
years 1982-84 = 100), published by the United States Department of
Labor, Bureau of Labor Statistics.
13.2 Tenant shall, at Tenant's expense, obtain and keep in force
during the entire term of this Lease a policy of insurance covering loss
or damage to all improvements, fixtures and equipment located upon or
affixed to the Parcels, including, without limitation, walls (interior
and exterior), foundations, ceilings, roofs (interior and exterior),
floors, windows, doors, plate glass and skylights located within the
Premises, all plumbing, electrical, elevator and lighting facilities and
equipment in, on or about the Parcels, all landscaping, driveways,
parking lots, fences and signs located on the Parcels and sidewalks and
parkways adjacent to the Parcels, and any personal property or fixtures
of Tenant located on or affixed to the Parcels, in the amount of the
full replacement value thereof, as the same may exist from time to time,
against (i) all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, and special extended
perils ("all risk" as such term is used in the insurance industry), and
(ii) flooding. Said insurance shall name Landlord as loss payee and
shall provide for payment of loss thereunder to Landlord and Tenant as
their interests may appear. Tenant may maintain up to a $500,000
deductible on the insurance required in this Subsection 13.2.
13.3 Tenant shall, at Tenant's expense, obtain and keep in force
during the entire term of the Lease a policy or policies of boiler and
machinery insurance, if applicable, in an amount not less than one
hundred percent (100%) of the actual replacement value thereof
(including the cost of debris removal but excluding foundations and
excavations and land).
13.4 Tenant may self-insure for the insurance required in
Subsections 13.1, 13.2 and 13.3 in an aggregate amount not to exceed
five percent (5%) of Tenant's tangible net worth (as determined by
certified financial statements not more than twelve (12) months old)
upon providing notice to Landlord and Tenant shall, to the extent
self-insured, be responsible for all amounts which would have been
payable by an insurer if Tenant had not elected to self-insure. All
deductibles shall be considered self-insurance and shall be subject to
all provisions in this Lease governing insurance coverage, including any
provisions concerning a waiver of subrogation.
13.5 Tenant shall, at Tenant's expense, obtain and keep in force
during the entire term of the Lease a policy or policies of Workers'
Compensation Insurance, including Employers' Liability Insurance, or
qualified self-insurance, which is in full compliance with the
applicable Workers' Compensation or similar laws.
13.6 Tenant shall deliver to Landlord certificates evidencing the
existence and amounts of such insurance, with loss payable clauses as
required by this Section 13. No such policy shall be cancelable or
subject to reduction of coverage or other modification except after
thirty (30) days' prior written notice to Landlord. Tenant shall, at
least thirty (30) days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, or if Tenant fails to
furnish such renewals, then Landlord may, upon ten days written notice
to Tenant, order such insurance and charge the cost thereof to Tenant,
which amount shall be payable by Tenant upon demand.
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13.7 Tenant shall not carry concurrent insurance insuring against
the risks against which insurance is required hereunder unless such
concurrent insurance satisfies all of the requirements for Tenant's
insurance set forth in this Lease (including but not limited to naming
Landlord as an additional insured).
13.8 So long as there exists a sublessee of any portion of the
Premises which is required, by the terms of its sublease, to carry
insurance which is no less comprehensive than that described above, and
which names Landlord as an additional insured thereon or loss payee
thereof, as the case may be, then Tenant shall have no obligation during
the term of such sublease to carry the insurance required hereunder with
respect to such portion of the Premises as long as such sublessee
actually maintains such required insurance.
14. WAIVER OF SUBROGATION. Except as otherwise provided in this Lease,
to the extent they receive payment for any loss or damage arising out of or
incident to perils occurring in, on or about the Premises, Tenant and Landlord
each hereby release and relieve the other, and waive their entire right of
recovery against the other for such loss or damage, whether due to the
negligence of Landlord or Tenant or their agents, employees, contractors and/or
invitees, but only to the extent permitted by the parties' insurance carriers.
Tenant and Landlord shall use their best efforts to obtain waiver of subrogation
endorsements from such carrier or carriers.
15. UTILITIES AND SERVICES. Tenant shall, during the entire term of this
Lease, procure and pay for all utilities and services supplied to the Premises,
including but not limited to water, gas, heat, light, power, telephone,
security, and janitorial services, together with any taxes thereon.
16. REAL PROPERTY TAXES. Tenant shall pay directly to each County Tax
Collector, or other appropriate assessing authority, as it becomes due and not
less than ten (10) days before delinquency, the amount of the Real Property Tax,
as defined in Subsection 16.1, applicable to the Premises during the term of
this Lease. Notwithstanding the foregoing, Tenant shall have no obligation to
pay for the Real Property Taxes due for the period prior to the Commencement
Date, even if those Real Property Taxes are not assessed until after the
Commencement Date. Further, Tenant shall have no obligation to pay any penalties
or interest assessed with respect to the Premises for a period prior to the
Commencement Date, even if such penalties or interest are not assessed until
after the Commencement Date. If payments made by Tenant are applied by the
assessing authority to unpaid Real Property Taxes (including without limitation,
any interest or penalties thereon) respecting a period prior to the Commencement
Date, then Landlord shall be responsible for the Real Property Taxes (and all
resulting interest and penalties thereon) which Tenant had attempted to pay, but
which were diverted to pay earlier Real Property Taxes (including without
limitation, all interest and penalties included therein). If any Real Property
Taxes constituting assessments are, at the election of the taxpayer, payable in
installments, Landlord shall make an election to make such payments in
installments and Tenant shall be responsible for the payment of the installments
of such Real Property Taxes as shall be due and payable during the term of this
Lease.
16.1 As used herein, "Real Property Tax" shall mean any form of
real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement
bond or bonds, levy or tax (other than inheritance, personal income or
estate taxes) imposed on the Premises by any authority having the direct
or indirect power to tax, including any city, state or federal
government or any school, agricultural, sanitary, fire,
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street, drainage or other improvement district thereof, as against any
legal or equitable interest of Landlord in the Premises or in the real
property of which the Premises are a part, as against Landlord's right
to rent or other income therefrom, and as against Landlord's business of
leasing the Premises, including any tax, fee, levy, assessment or charge
(i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included, (ii) the nature of which was
hereinbefore included within this definition, or (iii) which is imposed
by reason of this lease transaction, any modifications or changes
hereto, or any transfers hereof.
16.2 During the term of this Lease, Tenant shall reimburse to
Landlord, upon presentation of a written invoice therefor, any and all
taxes payable by Landlord (other than net income taxes) whether or not
now customary or within the contemplation of the parties hereto: (i)
upon, allocable to, or measured by or on the gross or net rent payable
hereunder, including without limitation any gross income tax or excise
tax levied by any State, any political subdivision thereof, or the
Federal Government with respect to the receipt of such rent; or (ii)
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion thereof; or (iii) upon or measured by the
Tenant's gross receipts or payroll or the value of Tenant's equipment,
furniture, fixtures, and other personal property of Tenant or leasehold
improvements, alterations, additions, located in the Premises.
16.3 Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all
other personal property of Tenant contained in the Premises or
elsewhere. Tenant shall cause such trade fixtures, furnishings,
equipment and all other personal property to be assessed and billed
separately from the real property of Landlord. If any of Tenant's said
personal property shall be assessed with Landlord's real property,
Tenant shall pay Landlord the taxes attributable to Tenant within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Tenant's property.
16.4 Tenant may contest the imposition of any taxes, including
without limitation, the current assessment, and if required by law,
Landlord shall join in any such proceedings brought by Tenant. However,
Tenant shall pay the costs and fees of the proceedings. Upon the final
determination of any proceeding or contest, Tenant shall pay the taxes
due, together with all costs, charges, interest and penalties incidental
to the proceedings if Tenant does not pay the taxes when due and
contests such taxes. Tenant shall not be in default under the Lease for
nonpayment of such taxes so long as the taxes are paid under protest if
such payment under protest is necessary to prevent the property from
being sold under a "tax sale" or similar enforcement proceeding.
17. DAMAGE OR DESTRUCTION.
17.1 In the event that any structure located on the Parcels is
damaged or destroyed, then Tenant shall repair or rebuild such structure
to substantially the condition in which it was immediately prior to the
casualty, but in no event shall Tenant be required to repair or rebuild
non-functional or decorative items (e.g., statues).
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17.2 Tenant shall commence to rebuild or repair the Premises
promptly after such damage or destruction, provided that all permits
required for such work have been obtained at the time necessary with the
Tenant using reasonable diligence to obtain such permits, and shall
proceed with diligence to complete the restoration. If Tenant is not
able to obtain permits to restore the Premises as required hereunder,
then Tenant shall repair or rebuild the Premises as required hereunder
to the maximum extent to which it can obtain permits to do so. Tenant
shall not have the right to terminate this Lease as the result of any
damage to or destruction of the Premises, and Tenant hereby waives the
right to do so under any applicable statute, code, case law or other
legal doctrine. This Lease shall remain in full force and effect, and
Tenant shall be entitled to an equitable abatement of the Rent during
the time and to the extent any portion of the Premises is unfit for
occupancy; provided, however, that the amount of such abatement shall
not exceed the amount of loss of rents or business interruption
insurance proceeds, if any, payable to Landlord by reason of such damage
or destruction. In the event Tenant is obligated to rebuild the Premises
pursuant to this Section 17, then all insurance proceeds arising out of
insurance coverage procured by Landlord (other than loss of rents
insurance or business interruption insurance), if any, shall be made
available to Tenant to pay for the cost of such repair, rebuilding or
restoration.
18. CONDEMNATION.
18.1 In the event that all or any portion of the Premises shall
be lawfully condemned or taken in any manner for any public or
quasi-public use, or conveyed by Landlord in lieu thereof (a "Taking"),
Tenant may require that Landlord rebuild or repair the portion of the
Premises taken so that the same will be in substantially the same
condition it was prior to the Taking. Notwithstanding the foregoing,
Landlord shall only be obligated to rebuild or restore the portion of
the Premises subject to the Taking to the extent of the award Landlord
receives for such Taking pursuant to Section 18.2.
18.2 Upon a permanent Taking, Landlord and Tenant shall be
entitled to the following portions of the award (less the costs and fees
incurred in the collection thereof) in no order of priority:
(a) To Tenant, an amount equal to the fair market value of
its personal property and fixtures that it is entitled to remove
at the expiration or earlier termination of this Lease and that
are condemned as part of the Taking;
(b) To Tenant, an amount equal to the damages Tenant
suffers as a result of the interruption of its business from the
Taking; and
(c) To Landlord, the balance of the award.
In no event shall Tenant be entitled to any award for the value of its
leasehold interest. If Landlord and Tenant are not able to obtain
separate awards from the condemning authority for the above amounts,
then such amounts shall be determined by the mutual agreement of the
parties, or if the parties are unable to agree, then by binding
arbitration in accordance with the rules of the American Arbitration
Association then in effect.
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18.3 In the event of a permanent Taking, the Rent shall be
equitably abated in proportion to the Base Rent fairly allocable to the
part of the Premises so taken, and Landlord shall be obligated to
restore the Premises only to the extent of any severance damages
received as part of the condemnation award. The amount of the abatement
shall be determined by the mutual agreement of the parties, or if the
parties are unable to agree, then by binding arbitration in accordance
with the rules of the American Arbitration Association then in effect.
18.4 No temporary Taking of the Premises and/or of Tenant's
rights therein or under this Lease shall terminate this Lease or give
Tenant any right to abatement of Rent hereunder. Any award made to
Tenant by reason of any such temporary Taking shall belong entirely to
Tenant and Landlord shall not be entitled to share therein.
19. DEFAULT.
19.1 The following events shall be deemed to be events of default
by Tenant under this Lease:
(a) Tenant shall fail to make any payment of Rent or any
other payment required to be made by Tenant hereunder, as and
when due, and such failure shall continue for a period of five
(5) business days after receiving written notice of said failure;
or
(b) Tenant shall fail to comply with any term, provision
or covenant of this Lease other than a default pursuant to
Subsection (a) of this Section, and shall not cure such failure
within thirty (30) days of receiving written notice of such
failure provided, however, that if the default cannot reasonably
be cured within such 30-day period, including by reason of having
to regain possession of the Premises from a sublessee, Tenant
shall not be in default of this Lease if Tenant shall commence to
cure the default, including commencing an action to regain
possession of the Premises, within said 30-day period and
diligently continues to prosecute the cure; or
(c) The leasehold interest of Tenant shall be levied upon
under execution or be attached by process of law or Tenant shall
fail to contest diligently the validity of any lien or claimed
lien and give sufficient security to Landlord to insure payment
thereof or shall fail to satisfy any judgment rendered thereon
and have the same released, and such default shall continue for
thirty (30) days after written notice thereof to Tenant; or
(d) Tenant shall become insolvent, admit in writing its
inability to pay its debts generally as they become due, file a
petition in bankruptcy or a petition to take advantage of any
insolvency statute, make an assignment for the benefit of
creditors, make a transfer in fraud of creditors, apply for or
consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or file a petition
or answer seeking reorganization or arrangement under the federal
or any state bankruptcy laws, as now in effect or hereafter
amended, or any other applicable law or statute of the United
States or any state thereof, or have filed against it a case or
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proceeding under any such law or statute which is consented to or
acquiesced in by Tenant, results in the entry of an order for
relief, or remains undismissed for ninety (90) days; or
(e) A court of competent jurisdiction shall enter an
order, judgment or decree adjudicating Tenant a bankrupt, or
appointing a receiver of Tenant, or of the whole or any
substantial part of its property, without the consent of Tenant,
or approving a petition filed against Tenant seeking
reorganization or arrangement of Tenant under the bankruptcy laws
of the United States, or any state thereof, as now in effect or
hereafter amended, and such order, judgment or decree shall not
be vacated or set aside or stayed within ninety (90) days from
the date of entry thereof.
19.2 Landlord's failure to perform any of its obligations under
this Lease shall constitute a default by Landlord under the Lease if the
failure shall continue for thirty (30) days after written notice of the
failure from Tenant to Landlord. If the required performance cannot be
completed within thirty (30) days, Landlord's failure to perform shall
constitute a default under the Lease unless Landlord undertakes to cure
the failure within thirty (30) days and diligently prosecutes the cure
to completion as soon as reasonably possible.
20. REMEDIES.
20.1 In case of an event of default by Tenant hereunder (as
defined in Section 19), Landlord shall not terminate this Lease unless
such default is not cured as provided herein and is a "material
default." For purposes of this Lease, a "material default" shall mean
(i) a default described in Subsection 19.1(a), (ii) the failure to carry
insurance required hereunder to be carried by Tenant, (iii) the failure
to repair or maintain the Premises as required under the Lease, (iv) a
default described in Subsection 19.1(b-e) that is likely to result in a
cost, loss of value or liability to Landlord of five million dollars
($5,000,000) or more, or (v) a material incurable default. In
circumstances where Landlord has no right to terminate this Lease or
where Landlord chooses not to terminate this Lease, Landlord shall have
all other remedies available at law or in equity, including the right to
sue for rent as it comes due and the right to obtain damages from Tenant
for breach of contract.
20.2 Upon the occurrence of any material default (as defined in
Subsection 20.1), Landlord shall have, in addition to any other remedies
available to Landlord at law or in equity, the option to terminate this
Lease by written notice thereof to Tenant, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it may
have for possession or arrearages in rent, enter upon and take
possession of the Premises and expel or remove Tenant and any other
person who may be occupying the Premises or any part thereof in
accordance with applicable state law, without being liable for
prosecution or any claim or damages therefor; and Landlord may recover
from Tenant the following:
(a) The worth at the time of award of any unpaid Rent
which has been earned at the time of such termination (as used in
this subparagraph (a) and (b) of this Section 20, the "worth at
the time of award" shall be computed by allowing interest from
the date the sums became due at the lesser of (i) the 30-day
LIBOR rate (as
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published in the Wall Street Journal) plus 600 basis points (the
"Default Interest Rate"), or (ii) the maximum rate permitted by
law); plus
(b) The worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus
(c) The worth at the time of award of the amount by which
the unpaid Rent for the balance of the Term after the time of
award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided (as used in this subparagraph
(c), the "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus 1%); plus
(d) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom,
specifically including, but not limited to, attorneys' fees and
court costs, brokerage commissions and advertising expenses
incurred; and
(e) At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to
time by applicable law.
20.3 In addition to the remedies provided above, Landlord has the
remedy described in California Civil Code Section 1951.4 (lessor may
continue lease in effect after lessee's breach and abandonment and
recover rent as it becomes due, if lessee has right to sublet or assign,
subject only to reasonable limitations).
20.4 Upon a default of Tenant hereunder, Landlord, upon ten (10)
days written notice, may cure such default of Tenant and Tenant shall,
immediately upon demand, reimburse Landlord for any and all reasonable
expenses incurred by Landlord to cure such default.
20.5 No act by Landlord shall terminate this Lease other than the
written notice specified above. No waiver by Landlord of any violation
or breach of any of the terms, provisions and covenants herein contained
shall be deemed or construed to constitute a waiver of any other or
later violation or breach of the same or any other of the terms,
provisions, and covenants herein contained. Delay by Landlord in
enforcement of one or more of the remedies herein provided upon an event
of default shall not be deemed or construed to constitute a waiver of
such default. The acceptance of any Rent hereunder by Landlord following
the occurrence of any default, whether or not known to Landlord, shall
not be deemed a waiver of any such default, except only a default in the
payment of the Rent so accepted.
20.6 Tenant waives any right to terminate this Lease or to
withhold Rent on Landlord's default under this Lease.
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21. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly provided
herein, any amount due to Landlord which is not paid when due shall bear
interest at the Default Interest Rate (as defined in Section 20.2(a)), but in no
event greater than the maximum amount permitted to be contracted for under
applicable law. Payment of such interest shall not excuse or cure any default by
Tenant under this Lease.
22. HOLDING OVER. Tenant shall pay Landlord for each day Tenant retains
possession of the Premises or part thereof after termination hereof by lapse of
time or otherwise the Rent prorated on a daily basis and all damages and
expenses sustained by Landlord by reason of such retention as provided in this
Lease. Tenant hereby indemnifies and holds Landlord harmless from any loss or
liability resulting from such holding over and delay in surrender. If Landlord
gives notice to Tenant of Landlord's election thereof, such holding over shall
constitute renewal of this Lease for a period of time from month-to-month at One
Hundred Twenty Percent (120%) of the Base Rent, but if the Landlord does not so
elect, acceptance by Landlord of rent after such termination shall not
constitute a renewal. This provision shall not be deemed to waive Landlord's
right of reentry or any other right hereunder or at law.
23. QUIET ENJOYMENT. Landlord represents and warrants that it has full
right and authority to enter into this Lease and that Tenant, while paying the
rental and performing its other covenants and agreements herein set forth, shall
peaceably and quietly have, hold and enjoy the Premises for the Term without
interference from Landlord subject to the terms and provisions of this Lease.
Landlord shall not be liable for any interference or disturbance by third
persons, nor shall Tenant be released from any of the obligations of this Lease
because of such interference or disturbance.
24. ESTOPPEL CERTIFICATE. Within fifteen (15) days following any written
request which Landlord may make from time to time, Tenant shall execute and
deliver to Landlord or Landlord's mortgagee or prospective mortgagee, a sworn
statement certifying: (a) the Commencement Date, (b) the fact that this Lease is
unmodified and in full force and effect (or, if there have been modifications
hereto, that this Lease is in full force and effect, as modified, and stating
the date and nature of such modifications), (c) the date to which the Rent and
other sums payable under this Lease have been paid, (d) the fact that, to
Tenant's actual knowledge, there are no current defaults under this Lease by
either Landlord or Tenant except as specified in Tenant's statement, and (e)
such other matters reasonably requested by Landlord. Landlord and Tenant intend
that any statement delivered pursuant to this Section 24 may be relied upon by
any mortgagee, beneficiary, or purchaser of the Premises or any interest
therein. Within fifteen (15) days following any written request which any
mortgagee or prospective mortgagee may make from time to time (but not more
often than twice in any twelve (12) month period), Landlord shall execute and
deliver to such mortgagee or prospective mortgagee, a sworn statement certifying
as to the same matters described above, except that clause (e) shall refer to
matters requested by the mortgagee or prospective mortgagee. Failure to comply
with the provisions of this Section 24 shall constitute an event of default
under this Lease.
25. SURRENDER OF PREMISES. Tenant shall, upon the expiration or prior
termination of the Term, surrender to Landlord the Premises and all repairs,
changes, alterations, fixtures, additions, and improvements thereto in good
order and condition, reasonable wear and tear excepted. Notwithstanding the
foregoing, Tenant shall have the option, in its sole discretion, to remove any
or all personal property owned by Tenant and any or all fixtures installed on
the Premises by Tenant,
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provided that Tenant shall restore any damage to the Premises resulting from
such removal. Tenant shall indemnify Landlord against any loss or liability
resulting from delay by Tenant in so surrendering the Premises, including
without limitation any claims made by any succeeding tenant founded on such
delay.
26. NOTICES. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing. All notices
and demands by the Landlord to the Tenant shall be personally delivered or sent
by United States certified mail, postage prepaid, or by prepaid express mail or
overnight courier addressed to The Times Mirror Company, 1 Times Mirror Square,
Los Angeles, California 90053, Attention: Thomas Unterman, or such other
person(s) or to such other place(s) as Tenant may from time to time designate in
a notice to Landlord. All notices and demands to Landlord shall be personally
delivered or sent by United States certified mail, postage prepaid, or by
prepaid express mail or overnight courier addressed to TMCT, LLC, C/O The Times
Mirror Company, 1 Times Mirror Square, Los Angeles, California 90053, Attention:
Steve Schoch, with a copy to William Stinehart, Jr., C/O Gibson, Dunn & Crutcher
LLP, 333 South Grand Avenue, Los Angeles, California 90071-3197, or such other
person(s) or to such other place(s) as Landlord may from time to time designate
in a notice to Landlord. Notices and demands delivered personally shall be
deemed given on the date of delivery; notices and demands delivered by mail
shall be deemed given three (3) days after deposit in the United States mail;
and notices and demands delivered by express mail or overnight courier shall be
deemed given one (1) day after deposit.
27. OPTION TO PURCHASE.
27.1 Tenant shall have the option to purchase the entire Premises
(but not less than the entirety) upon the expiration or earlier
termination of this Lease; provided, however, that Tenant shall not have
the Option to purchase the Premises if this Lease terminates due to a
default of Tenant unless such termination was the result of a default of
Tenant that was commercially impracticable to cure.
27.2 To exercise the option to purchase the Premises, Tenant must
provide written notice to Landlord not more than eighteen (18) months
and not less than three (3) months prior to the expiration of the Lease;
except that in the event of the early termination of the Lease due to an
uncured default of Tenant that was commercially impractical to cure,
Tenant may exercise the option within thirty (30) days following such
termination.
27.3 Tenant's purchase of the Premises pursuant the option shall
be in cash at fair market value, which shall be determined as follows:
27.3.1 Within thirty (30) days after Landlord receives
Tenant's written notice exercising the option, Landlord and
Tenant shall mutually agree upon and appoint one appraiser to
determine the fair market value of the Premises. If Landlord and
Tenant are unable to agree upon a single appraiser to appraise
the Premises within such thirty day period, then Landlord and
Tenant shall each appoint an appraiser within sixty (60) days
after Landlord receives Tenant's written notice exercising the
option to determine the fair market value of each Property (a
single appraiser may appraise more than one Property and Landlord
and Tenant shall each use best efforts to minimize the total
number of appraisers appointed), and notice of each such
appointment shall be given
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to the other party. For each Property, the appraisers thus
appointed shall proceed to determine such fair market value for
such Property within thirty (30) days after notice of their
appointment.
27.3.2 If the parties were unable to agree on a single
appraiser to appraise the Premises, then within fifteen (15) days
after the parties have each appointed appraisers pursuant to
Subsection 27.3.1, the appraisers appointed for each Property
shall join to appoint a third appraiser to appraise such Property
and if they fail so to appoint such third appraiser within such
period, the third appraiser shall be appointed by the court
exercising such functions in the jurisdiction in which the
Property is located unless otherwise agreed in writing by the
parties, and such third appraiser shall then individually
determine the fair market value for such Property within thirty
(30) days of notice of appointment.
27.3.3 When calculating the fair market value for any
Property, each appraiser shall appraise the Property as if any
capital improvements made to the Property by Tenant had not been
made. For purposes of this Lease only, the term "capital
improvements" shall exclude repairs and replacements which are
intended to preserve the continued functionality of the
improvements located on the Property at issue without
substantially upgrading the functionality of such improvements or
the Property, but shall include improvements which (i) are
identifiable new improvements, or (ii) are replacements of
existing improvements located on the Property that so
substantially upgrade the functionality of the replaced
improvements as to be substantially equivalent to an identifiable
new improvement. For example, the replacement of the roof on a
building located on a Property with a roof of similar quality, or
the renovation of existing office space, would not be considered
a capital improvement for purposes of this Section 27.
Conversely, the installation of a kitchen in a vacant basement
(an identifiable new improvement), or the complete renovation of
an auditorium including a substantial increase in seating
capacity, stage size and quality (substantially equivalent to an
identifiable new improvement), would be considered capital
improvements for purposes of this Lease.
27.3.4 If Landlord and Tenant fail to appoint a single
appraiser to appraise the Premises, then the average of the fair
market values contained in the two closest appraisals shall
constitute the fair market value of such Property, and such
determination shall be binding upon each of the parties. In the
event that there are not two closest appraisals (e.g., if the
middle appraisal is exactly halfway between the highest and
lowest appraisals), then the middle appraisal shall be binding
upon each of the parties. The fair market value of the Premises
shall be equal to the sum of the fair market values of each
Property.
27.3.5 All appraisers appointed hereunder shall be
competent, qualified by training and experience in the County in
which the Property(ies) they are appraising is located,
disinterested and independent and shall be members in good
standing of the American Institute of Real Estate Appraisers or
its successor and all appraisal reports shall be rendered in
writing and signed by the appraiser or appraisers making the
report.
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27.4 The conveyance of the Premises shall be to Tenant or its
designated nominee(s), shall be on an "as-is" and "with all faults"
basis without warranties of any kind (except that Landlord shall
represent and warrant that there are no liens, mortgages or other
encumbrances on the Premises that were not present when Landlord
obtained title to the Premises, other than those created by, caused by
or approved by Tenant or suffered by Landlord through no fault of
Landlord), and shall occur at the expiration of the Lease or, in the
case of the earlier termination thereof, as soon as reasonably possible
after such termination.
27.5 Landlord shall be solely responsible for all transfer and
recording fees and costs in conjunction with a conveyance of the
Premises to Tenant. Tenant shall be solely responsible for the cost of
any title insurance if the same is desired by Tenant.
28. DEFINED TERMS AND HEADINGS. The Section and paragraph headings
herein are for convenience of reference and shall in no way define, increase,
limit, or describe the scope or intent of any provision of this Lease. The term
"Landlord" in these presents shall include Landlord, its successors, and
assigns. Any indemnification of, insurance of, or option granted to Landlord
shall also benefit, include or be exercisable by Landlord's trustee,
beneficiary, agents and employees, as the case may be. The term "Tenant" shall
include Tenant and its successors and assigns, subject to any limitation on
assignment provided in this Lease. Tenant agrees to furnish promptly upon demand
a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of Tenant to enter
into this Lease.
29. ENFORCEABILITY. If for any reason whatsoever any of the provisions
hereof shall be unenforceable or ineffective, all of the other provisions shall
be and remain in full force and effect.
30. COMMISSIONS. Each of the parties (i) represents and warrants to the
other that neither party has dealt with any broker or finder in connection with
this Lease; and (ii) indemnifies and holds the other harmless from any and all
losses, liability, costs or expenses (including attorneys' fees), incurred as a
result of an alleged breach of the foregoing warranty.
31. ATTORNEYS' FEES. In the event that any action or proceeding is
brought to enforce any term, covenant or condition of this Lease on the part of
Landlord or Tenant, the prevailing party in such litigation shall be entitled to
reasonable attorneys' fees to be fixed by the court in such action or
proceeding.
32. TIME AND APPLICABLE LAW. Time is of the essence of this Lease and
all of its provisions. This Lease shall in all respects be governed by the laws
of the State of California (except for its choice of law provisions) to the
fullest extent permitted by each State in which a Parcel is located. Landlord
and Tenant each have their principal places of business located in the State of
California.
33. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions
contained herein shall be binding upon and inure to the benefit of the permitted
heirs, successors, executors, administrators, and assigns of the parties hereto.
In the event Landlord sells the Premises or any portion thereof, Landlord shall
automatically be relieved of liability for obligations under this Lease arising
on and after the date title is conveyed to the purchaser.
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34. ENTIRE AGREEMENT. This Lease, together with its exhibits, contains
all agreements of the parties hereto and supersedes any previous negotiations.
There have been no representations made by the Landlord or understandings made
between the parties regarding the leasing of the Premises by Tenant other than
those set forth in this Lease and its exhibits. This Lease may not be modified
except by a written instrument duly executed by the parties hereto.
35. RECORDATION. Tenant may record this Lease or any memorandum hereof
without the prior written consent of Landlord. If requested by Tenant, Landlord
shall execute a memorandum of this Lease in recordable form in the form of
Exhibit B hereto.
36. EXHIBITS. Attached to this Lease and a part hereof are exhibits
identified as follows: Exhibit A (Legal Description), Exhibit B (Memorandum of
Lease).
37. COVENANTS AND CONDITIONS. Each provision of this Lease performable
by Tenant shall be deemed both a covenant and a condition.
38. SURVIVAL. Except as otherwise expressly provided herein, all
obligations, covenants, warranties and representations shall survive the
expiration or prior termination of this Lease.
39. NO JOINT VENTURE. The parties intend by this Lease to establish the
relationship of Landlord and Tenant only, and do not intend to create a
partnership, joint venture, joint enterprise or any business relationship other
than that of Landlord and Tenant.
40. CALENDAR DAYS AND BUSINESS DAYS. All time periods described in this
Lease in terms of days shall mean calendar days unless otherwise provided
herein. If any last day for performance of any act falls upon a day either of
the parties is not open for business, such last day will be the next following
business day.
41. SUBORDINATION, NONDISTURBANCE AND ATTORNMENT. Tenant shall upon
demand execute, acknowledge and deliver to Landlord, any and all instruments
that may be reasonably necessary to subordinate this Lease and all rights of
Tenant hereunder to the lien of any mortgage or deed of trust on the Premises
created pursuant to a new loan or refinancing of an existing loan entered into
by Landlord after the date hereof provided that the beneficiary thereunder
executes a nondisturbance agreement in recordable form and in form and substance
acceptable to Tenant and any Mortgagee whereby the beneficiary agrees (a) that
in the event it should become necessary to foreclose said deed of trust it will
cause the sale of the Premises to be made subject to this Lease, including
without limitation, the provisions for the Additional Terms (provided that the
Tenant is not in default past any applicable notice and grace period under this
Lease at the time of such foreclosure), and (b) in the event of condemnation or
damage by fire, casualty or other causes as covered by fire and extended
coverage insurance, the condemnation award or proceeds of such insurance shall
be used for reconstruction or otherwise disbursed as provided in this Lease
notwithstanding any provision in the mortgage or deed of trust to the contrary.
42. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
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43. WAIVER. Neither Landlord nor Tenant shall be deemed to have waived
the default or breach of any term, covenant or condition of this Lease by the
other party unless such waiver shall be in writing and signed by the party
charged with such waiver. The acceptance of Rent or any other payment by
Landlord shall not be deemed a waiver of any default or breach by Tenant. No
waiver by Landlord or Tenant of any default or breach of any term, covenant or
condition of this Lease by the other party shall be deemed to be a waiver of any
other term, covenant or condition of this Lease, or of any subsequent default or
breach by the other party of the same term, covenant or condition of this Lease.
44. LANDLORD'S ACCESS. Landlord and Landlord's agents shall have the
right to enter the Premises at any time, in the case of an emergency, and
otherwise at reasonable times and upon reasonable notice for the purpose of
showing the same to prospective purchasers, lenders, or lessees, and for other
reasonable and proper purposes.
45. BUSINESS IMPROVEMENT DISTRICTS.
45.1 One of the Properties located in California is currently
subject to an annual assessment by the City of Los Angeles because the
Property is part of a business improvement district which has as its
primary purpose the improvement of the neighborhood in which such
Property is located (a "Business Improvement District"). The Property is
subject to such Business Improvement District pursuant to a vote in
which landowners in the neighborhood voted to form the Business
Improvement District and subject their properties to the annual
assessment.
45.2 Tenant may, with Landlord's consent (which shall not be
unreasonably withheld, delayed or conditioned), vote in favor of
establishing, continuing or terminating any Business Improvement
District with respect to any Property. Landlord agrees to promptly
execute any documentation or take any other action reasonably necessary
to vote to establish, continue or terminate any Business Improvement
District pursuant to the terms of this Section 45. Tenant acknowledges
that it is required to pay all fees, costs and assessments associated
with any Business Improvement District which accrue during the Term of
this Lease.
The parties hereto have executed this Lease as of the date first above
written.
"LANDLORD"
TMCT, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
By: THE TIMES MIRROR COMPANY, its
Managing Member
By: /s/ Thomas Unterman
--------------------------------------------
Name: Thomas Unterman
---------------------------------------
Title: Senior Vice President and Chief
Financial Officer
--------------------------------------
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"TENANT"
THE TIMES MIRROR COMPANY,
A DELAWARE CORPORATION
By: /s/ Thomas Unterman
-------------------------------------------
Name: Thomas Unterman
--------------------------------------
Title: Senior Vice President and
Chief Financial Officer
-------------------------------------
23
<PAGE> 1
EXHIBIT 20.1
Times Mirror Outstanding Common Stock To Be Reduced by 6 Million
Shares in Transaction with Chandler Trusts
August 8, 1997 9:00 AM EDT
LOS ANGELES--(BUSINESS WIRE)--Aug. 8, 1997--Times Mirror announced today that
it has executed agreements with its largest shareholders, the Chandler Trusts,
with respect to a transaction that will, for financial reporting purposes,
reduce the Company's outstanding Series A Common Stock by 6 million shares and
the Company's outstanding 8% Series A Preferred Stock by $367 million of stated
value. Completion of the transaction is subject to approval by Times Mirror's
Board of Directors, which will meet to consider the transaction later today.
"All shareholders will benefit from this transaction," said Mark H. Willes,
Times Mirror chairman, president and chief executive officer. "This reduction
in common and preferred shares will enable us to achieve our target capital
structure, and we will continue to use our active open market share repurchase
program to maintain this capitalization. We expect the transaction to be
accretive to earnings per share in 1997 and add more than 10 cents per share
in 1998."
The Transaction
The pending transaction consists of two parts: First, Times Mirror and the
Chandler Trusts will make equal capital contributions to form a limited
liability company ("LLC"). Second, Chandis Securities, a holding company
principally owned by one of the Chandler Trusts, will be merged into a
subsidiary of Times Mirror.
Limited Liability Company (LLC)
In forming the LLC, Times Mirror will contribute to the LLC certain of its real
property, having a market value of $226 million, and $249 million in cash. The
real estate will be leased back to the Company under long-term leases, and the
cash will be invested in a portfolio of securities of unrelated issuers. The
Chandler Trusts will contribute 5 million shares of Series A Common Stock,
valued at $254 million, and $221 million stated value of 8% Series A Preferred
Stock.
As a result of the allocations of the economic benefits in the LLC, for
financial reporting purposes the Company will be considered to have acquired 80
percent of the shares of the Series A Common Stock contributed to the LLC, or
approximately 4 million shares, and 80 percent of the 8% Series A Preferred
Stock contributed to the LLC, or approximately $177 million of stated value.
Due to the LLC allocations, the dividends on such shares are effectively
eliminated.
Merger
The merger will result in a reduction of 2 million shares of Series A Common
Stock outstanding and the acquisition of $190 million stated value of 8% Series
A Preferred Stock. In the merger, a subsidiary of the Company will become the
owner of all of Chandis Securities' assets, including approximately 8.6 million
shares of the Company's Series A Common Stock, approximately 9.7 million shares
of the Company's Series C Common Stock, approximately $190 million stated value
of the Company's 8% Series A Preferred Stock, and $21 million of real estate,
cash and other miscellaneous assets. As consideration for the merger, the
Company will issue to the former Chandis Securities shareholders 6.6 million
shares of Series A Common Stock, 9.7 million of shares of Series C Common Stock
and an aggregate of $313 million stated value of newly authorized participating
preferred stock. The annual dividend rate of the participating preferred stock
will be 5.8 percent commencing October 1, 1997 through December 31, 2000, and is
subject to possible upward adjustment thereafter in the same proportion as the
percentage increase in the Company's common stock dividend rate, to a maximum
dividend rate of 8.4 percent.
Times Mirror (TMC - New York and Pacific stock exchanges), a Los Angeles-based
news and information company,publishes the Los Angeles Times, Newsday, The
Baltimore Sun, and other newspapers; a wide array of
<PAGE> 2
professional information for the legal, health sciences, aviation and training
markets and consumer magazines.
This press release contains certain forward-looking statements that are subject
to risk and uncertainty. There can be no assurance that such statements will be
accurate. Readers are cautioned to refer to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 filed with the Securities and
Exchange Commission for a description of factors which could affect the
Company's performance.
