<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): SEPTEMBER 3, 1999
THE TIMES MIRROR COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-13492 95-4481525
(State or Other Jurisdiction of (Commission File (IRS Employer
Incorporation) Number) Identification No.)
TIMES MIRROR SQUARE
LOS ANGELES, CALIFORNIA 90053
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (213) 237-3700
================================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
INTRODUCTION
On September 3, 1999, The Times Mirror Company (the "Company")
announced its decision to sell four of its non-core businesses (the "Proposed
Sales") in order to concentrate on its core strengths in newspapers, flight
information, and magazines. In addition, the Company announced that it had
consummated a transaction with its largest shareholders, Chandler Trust No. 1
and Chandler Trust No. 2 (collectively, the "Chandler Trusts"). The transaction
with the Chandler Trusts (the "Transaction") effectively accelerated and
augmented the Company's previously announced stock purchase program, by retiring
12.4 million shares of common stock and, additionally, it retired most of the
Company's outstanding preferred stock, in each case for financial reporting
purposes. The Proposed Sales and the Transaction are expected to have a positive
impact on the Company's operating performance and earnings per share.
THE PROPOSED SALES
Over the past few years, the Company has divested certain companies
that were not strategically aligned with the Company's core businesses. In
furtherance of this strategic plan, on September 3, 1999 the Company decided to
sell the following businesses:
- AchieveGlobal, a professional training company;
- Allen Communication, an interactive software and training courseware
developer;
- The StayWell Company, a health improvement information company; and
- The Sporting News, a sports related magazine.
The Company has retained Goldman, Sachs & Co. to advise it on the sale
of AchieveGlobal and Allen Communication. In addition, the Company has retained
Salomon Smith Barney Inc. to advise it on the sale of StayWell. The Company has
also retained Donaldson, Lufkin & Jenrette Securities Corporation to advise it
on the sale of The Sporting News. The Company expects that the process of
completing the Proposed Sales will take approximately six months.
2
<PAGE> 3
THE TRANSACTION
The Transaction is similar in certain respects to the transaction
completed by the Company and the Chandler Trusts in August 1997 (and described
in the Company's Current Report on Form 8-K dated August 8, 1997). In each case,
the Company's objective was to achieve and enhance the benefits associated with
its stock purchase program, without reducing the public float, and thus
liquidity, for the public stockholders or indirectly increasing the Chandler
Trusts' voting and ownership interest. Another of the Company's objectives was
to effectively retire a substantial portion of its outstanding preferred stock,
in order to further improve its capital structure.
In the Transaction, (a) the Company (including two of its
subsidiaries), (b) its affiliates Eagle New Media Investments, LLC and Eagle
Publishing Investments, LLC (collectively, the "Eagle Companies"), and (c) the
Chandler Trusts became members of TMCT II, LLC, a new Delaware limited liability
company ("LLC"), pursuant to an Amended and Restated Limited Liability Company
Agreement (the "LLC Agreement") and a Contribution Agreement (the "Contribution
Agreement"), each dated as of September 3, 1999. Copies of the LLC Agreement and
the Contribution Agreement are filed herewith as exhibits.
Pursuant to the Contribution Agreement, the Company, the Eagle
Companies and the Chandler Trusts (collectively, the "Members") contributed the
following assets to the capital of LLC:
(1) the Company contributed (a) preferred units issued by the
operating partnerships of eight unrelated real estate
investment trusts (the "OP REIT Interests"); and (b) $2.0
million in cash;
(2) the Eagle Companies contributed a total of $633.3 million in
cash (or cash equivalents);
(3) Chandler Trust No. 1 contributed (a) 4,947,296 shares of the
Company's Series A Common Stock; and (b) 2,454,984 shares of
the Company's Series C Common Stock; and
(4) Chandler Trust No. 2 contributed (a) 4,358,328 shares of the
Company's Series A Common Stock; (b) 3,780,608 shares of the
Company's Series C Common Stock; (c) 380,972 shares of the
Company's Series C-1 Preferred Stock; and (d) 245,100 shares
of the Company's Series C-2 Preferred Stock.
In total, the Chandler Trusts contributed 15,541,216 shares of common
stock and 626,072 shares of preferred stock (collectively, the "Contributed
Shares"). For purposes of determining the value of the assets contributed to
LLC, the Contributed Shares were valued at $1.235 billion, based on negotiations
between the parties, with reference to valuations provided by their advisors.
The OP REIT Interests were contributed at $600 million, the purchase price paid
by the Company. The $635.3 million of cash contributed to LLC will be used by
LLC to make direct and indirect investments in a variety of securities (the
"Portfolio").
3
<PAGE> 4
LLC is the legal and beneficial owner of the Contributed Shares, the OP
REIT Interests and the Portfolio. The Members 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 OP REIT Interests 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 and the Eagle Companies. For
more specific information regarding the LLC allocations, reference is made to
the LLC Agreement, filed as an exhibit hereto.
As a result of the allocations of the economic benefits in LLC,
approximately 80% of the Contributed Shares will be considered treasury stock
for financial reporting purposes for the life of LLC, as set forth below:
<TABLE>
<CAPTION>
Class and Series of Shares to be Treated
Contributed Shares as Treasury Shares
------------------ ------------------
<S> <C>
Series A Common Stock 7,444,499 shares
Series C Common Stock 4,988,474 shares
-----------------
Total Common 12,432,973 shares
Series C-1 Preferred Stock 304,778 shares
Series C-2 Preferred Stock 196,080 shares
-----------------
Total Preferred 500,858 shares
</TABLE>
The shares set forth in the table above are collectively referred to
herein as the "Treasury Shares."
The effective retirement of the Treasury Shares will reduce the number
of common shares outstanding for financial reporting purposes by 12.4 million
shares (or 17.3% of the common shares outstanding as of August 31, 1999).
Additionally, the Transaction eliminates common and preferred dividend payments
on the Treasury Shares for financial reporting purposes. As a result, based on
current dividend rates, total common dividends will be reduced by $9.9 million,
and total preferred dividends will be reduced by $13.6 million annually for
financial reporting purposes. The Company expects the foregoing changes to have
a beneficial impact on its earnings per share for financial reporting purposes
for a number of years.
The Company purchased the OP REIT Interests for approximately $600
million, funded with the proceeds of a $550 million short-term bank line of
credit provided by Citicorp and the Company's existing commercial paper program.
The Company is considering various alternatives with respect to refinancing the
short-term line of credit, which matures on November 30, 1999. Currently, the
Company expects to refinance approximately $350 million of such debt with a
hybrid security and to refinance the remainder with medium-term debt financing.
The Company expects to use substantially all proceeds from the Proposed Sales,
and any other asset dispositions, to reduce short-term debt.
4
<PAGE> 5
IMPACT OF THE PROPOSED SALES AND TRANSACTION
Item 7 hereof contains pro forma financial statements for the year
ending December 31, 1998 and the six months ended June 30, 1999 reflecting
AchieveGlobal, Allen Communication and StayWell (the "Discontinued Businesses")
as discontinued operations and giving effect to the Transaction. The proposed
sale of The Sporting News does not qualify for discontinued operations treatment
and as a result has not been treated as a discontinued operation in the pro
forma presentation. The pro forma financial statements contained herein have
been prepared assuming that the Discontinued Businesses became discontinued
operations, and that the Transaction occurred, on January 1, 1998 or June 30,
1999, as indicated therein.
As shown in the pro forma financial statements, had the Transaction
occurred, and the Discontinued Businesses been reclassified, as of January 1,
1998, diluted earnings per share for continuing operations for the year ended
December 31, 1998 and the six months ended June 30, 1999 would have been $1.23
and $1.80, rather than $0.83 and $1.64, respectively. The positive impact to
earnings per share for the six months ended June 30, 1999 is primarily due to
the deemed reduction in the number of shares of common stock outstanding by 12.4
million shares and the effective net reduction of dividends on preferred stock.
For 1998, the positive impact is primarily due to the reclassification of the
net losses of the Discontinued Businesses, offset in part by the increase in
net interest expense due to this Transaction.
As a result of the Transaction, the direct equity interest of the
Chandler Trusts in the Company has been reduced from 41.8% to 24.4% and their
voting power has been reduced from 73.1% to 64.6%. The particulars of these
changes are as follows:
- Prior to the Transaction, the Chandler Trusts directly owned
9,305,624 shares (19.9%) of the Series A Common Stock,
20,757,246 shares (82.8%) of the Series C Common Stock,
380,972 shares (100%) of the Series C-1 Preferred Stock, and
245,100 shares (100%) of the Series C-2 Preferred Stock.
- As a result of the Transaction, the Chandler Trusts now
directly own no shares of the Series A Common Stock,
14,521,654 shares (77.1%) of the Series C Common Stock, and no
shares of Preferred Stock.
All of the pre-Transaction percentages regarding the Company's common
stock set forth above are based on the number of common shares outstanding for
financial reporting purposes on August 31, 1999: 72.0 million shares, consisting
of 46.9 million shares of Series A Common Stock and 25.1 million 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. The foregoing does not attribute to the
Chandler Trusts any interest in the portion (i.e., 20%) of the shares
contributed to LLC (or to the similar entity created in the 1997 transaction)
that are not deemed to be retired.
5
<PAGE> 6
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 July 1999 to evaluate and make recommendations with respect
to the Transaction, consisted of directors Donald R. Beall, John E. Bryson and
Dr. Alfred E. Osborne, Jr. (none of whom has any family or business relationship
with the Chandler family or is a member of management).
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 to the Company from a financial point of view.
ADDITIONAL INFORMATION
In connection with the Transaction, the Company announced that Thomas
Unterman, Times Mirror's Executive Vice President and Chief Financial Officer,
will become a principal of the general partner of TMCT Ventures, L.P., an
investment fund created to invest approximately $500 million of the funds
contributed to LLC in the Transaction. Mr. Unterman will retain his current
position with Times Mirror until the end of 1999, at which time he will devote
substantially all of his time to TMCT Ventures, L.P., although Mr. Unterman will
continue to have an ongoing advisory relationship with Times Mirror, advising
the Company on financial, tax and other corporate matters.
The Company and the Chandler Trusts will each pay their own expenses
(including, in the case of the Company, those of the Special Committee) with
respect to the Transaction.
The Contributed 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 Company will account for its
investment in LLC on the equity method.
The summaries herein of the Transaction are qualified in their entirety
by reference to the LLC Agreement and the Contribution Agreement, each of which
is filed as an exhibit hereto.
The Company commenced its stock purchase 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 purchase program, the Company
and its affiliates have purchased approximately 47 million shares of its common
stock from its public stockholders, at an aggregate purchase price of $2.3
billion. In addition, as a result of the Transaction and the similar 1997
transaction, the Company has retired shares held by the Chandler Trusts with a
value of $1.4 billion for financial reporting purposes. After giving effect to
the Transaction and board approvals relating to the same, management of the
Company currently has the authority to purchase an additional 4.2 million shares
of the Company's common stock.
6
<PAGE> 7
In connection with the Transaction, the Company also has agreed to use
its reasonable best efforts (subject to certain conditions) to replace the
outstanding Series C-1 and C-2 Preferred Stock (all of which is now owned by
LLC) with a new Series D-1 Preferred Stock and Series D-2 Preferred Stock. The
Series D-1 and D-2 Preferred Stock will be identical to the Company's existing
Series C-1 and C-2 Preferred Stock, with the exception that the dividend rate on
the new Series D-1 and D-2 will increase pursuant to a fixed and certain
schedule. Currently, the annual dividend rate on the 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 Series D-1 and D-2 will also have a
dividend rate of 5.8% until 2001, when it will begin increasing at the rate of
3.56% per year, until the dividend rate reaches the maximum rate of 8.4% (which
will occur in 2012). These provisions are designed to deliver a substantially
similar yield to maturity as the existing Series C-1 and C-2 Preferred Stock. As
with the Series C-1 Preferred Stock and Series C-2 Preferred Stock, the new
Series D-1 and D-2 Preferred Stock are convertible into Series A Common Stock in
2025 at the earliest. In addition, as with the Series C-2 Preferred Stock, the
number of shares of Series A Common Stock into which the Series D-2 Preferred
Stock can be converted is limited. The exchange of the preferred stock will not
affect the percentage that is deemed retired as a result of the Transaction.
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 including Roger Goodan, a director of
the Company.
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Any forward-looking statements contained herein are subject to risks
and uncertainty. There can be no assurance that these future results will be
achieved. For example, there can be no assurances that the Company will be able
to locate buyers for the businesses to be sold or otherwise complete the
Proposed Sales or to refinance the $550 million short-term line of credit on
terms and conditions that are acceptable to the Company. In addition, there can
be no assurance that the expected impact of the Transaction and the Proposed
Sales on operating performance or earnings per share will be achieved. Readers
are cautioned that the achievement of such expectations, 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 8 to the Company's 1999 condensed
consolidated financial statements included in the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999.
7
<PAGE> 8
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION
Index to pro forma financial statements:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999.... 9
Unaudited Pro Forma Condensed Consolidated Statements of Income for the
year ended December 31, 1998 and the six months ended June 30, 1999............. 11
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements........ 13
</TABLE>
8
<PAGE> 9
THE TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(IN THOUSANDS)
The unaudited pro forma condensed consolidated balance sheet has been
derived from the historical consolidated balance sheet of the Company adjusted
to reclassify the assets and liabilities to reflect the discontinuation of
AchieveGlobal, Allen Communication and The StayWell Company as well as for the
contribution of assets to TMCT II, LLC and the replacement of the Company's
outstanding Series C-1 and C-2 Preferred Stock with a new Series D-1 and D-2
Preferred Stock as a result of the Transaction. The unaudited pro forma
condensed consolidated balance sheet of the Company has been prepared assuming
the restatement for discontinued operations and the Transaction occurred on June
30, 1999.
The unaudited 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, 1998, filed with the Company's
Annual Report on Form 10-K for such year, and the quarter ended June 30, 1999,
filed with the Company's Quarterly Report on Form 10-Q for such quarter. The
unaudited 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 restatement for discontinued operations and the
Transaction been consummated on June 30, 1999.
<TABLE>
<CAPTION>
DISCONTINUED OPERATIONS LLC TRANSACTION
TIMES PRO FORMA ADJUSTMENTS DISCONTINUED PRO FORMA ADJUSTMENTS
MIRROR ------------------------ OPERATIONS -------------------------- TRANSACTION
HISTORICAL DEBIT CREDIT PRO FORMA DEBIT CREDIT PRO FORMA
------------ ---------- ---------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........ $ 812,697 $ 1,932(a) $ 810,765 $635,252(e)
16,000(f) $ 159,513
Accounts receivable, net......... 362,077 36,708(a) 325,369 325,369
Net assets of discontinued
operations..................... - $189,356(a) 189,356 189,356
Other current assets............. 186,951 23,809(a) 163,142 163,142
---------- ---------- ---------
Total current assets......... 1,361,725 1,488,632 837,380
Property, plant and
equipment, net................. 934,553 11,986(a) 922,567 922,567
Goodwill, net.................... 665,376 58,521(a) 606,855 606,855
Investment in TMCT II, LLC....... - - $1,235,252(e) 988,202(f) 247,050
OP REIT interests................ - - 600,000(d) 600,000(e) -
Other noncurrent assets.......... 1,261,489 87,595(a) 1,173,894 1,173,894
---------- ---------- ----------
Total assets..................... $4,223,143 $4,191,948 $3,787,746
========== ========== ==========
</TABLE>
9
<PAGE> 10
THE TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
DISCONTINUED
OPERATIONS LLC TRANSACTION
TIMES PRO FORMA ADJUSTMENTS DISCONTINUED PRO FORMA ADJUSTMENTS
MIRROR --------------------- OPERATIONS -------------------------- TRANSACTION
HISTORICAL DEBIT CREDIT PRO FORMA DEBIT CREDIT PRO FORMA
----------- ---------- -------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities................. $ 935,888 $24,147(a) $ 911,741 $ 911,741
Noncurrent liabilities.............. 1,013,770 7,048(a) 1,006,722 1,006,722
Long-term debt...................... 956,108 956,108 $600,000(d) 1,556,108
----------- ----------- -----------
Total liabilities............... 2,905,766 2,874,571 3,474,571
Common stock subject to put
options........................... 8,455 8,455 8,455
Shareholders' equity
Series A preferred stock......... 411,784 411,784 411,784
Series C-1 preferred stock....... 190,486 190,486 $190,486(g) -
Series C-2 preferred stock....... 122,550 122,550 122,550(g) -
Series D-1 preferred stock....... - - 190,486(g) 190,486
Series D-2 preferred stock....... - - 122,550(g) 122,550
Series A common stock............ 87,033 87,033 6,236(f) 93,269
Series C common stock............ 25,087 25,087 6,236(f) 18,851
Additional paid-in capital....... 1,295,657 1,295,657 1,295,657
Retained earnings................ 1,709,217 1,709,217 1,709,217
Accumulated other
comprehensive income............ 9,662 9,662 9,662
Less treasury stock, at cost..... (2,542,554) (2,542,554) 1,004,202(f) (3,546,756)
------------ ------------ ------------
Total shareholders' equity...... 1,308,922 1,308,922 304,720
----------- ----------- -----------
Total liabilities and
shareholders' equity.............. $ 4,223,143 $ 4,191,948 $ 3,787,746
=========== =========== ===========
</TABLE>
10
<PAGE> 11
THE TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The unaudited pro forma condensed consolidated statements of income of the
Company have been derived from the historical consolidated statements of income
of the Company adjusted to reclassify the results of operations to reflect the
discontinuation of AchieveGlobal, Allen Communication and The StayWell Company
as well as changes to interest income and expense, equity income, income taxes,
preferred dividend requirements and weighted average shares expected to result
from the Transaction. The unaudited pro forma condensed consolidated statements
of income of the Company have been prepared assuming that restatement for
discontinued operations and the Transaction occurred on January 1, 1998.
The unaudited pro forma condensed consolidated statements of income should
be read in conjunction with the historical consolidated financial statements and
the notes thereto for the year ended December 31, 1998, filed with the Company's
Annual Report on 10-K for such year, and the quarter ended June 30, 1999, filed
with the Company's Quarterly Report on Form 10-Q for such quarter. The unaudited
pro forma condensed consolidated statements of income are not necessarily
indicative of the financial results of the Company that would have actually been
obtained had the restatement for discontinued operations and the Transaction
been consummated on January 1, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS LLC TRANSACTION
TIMES PRO FORMA ADJUSTMENTS DISCONTINUED PRO FORMA ADJUSTMENTS
MIRROR ------------------------ OPERATIONS ------------------------ TRANSACTION
HISTORICAL DEBIT CREDIT PRO FORMA DEBIT CREDIT PRO FORMA
------------ ----------- ---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $3,009,085 $225,097(b) $2,783,988 $2,783,988
Costs and expenses.................. 2,796,522 $260,332(b) 2,536,190 2,536,190
---------- ---------- ----------
Operating profit.................... 212,563 247,798 247,798
Interest expense.................... (76,154) 7,879(b) (68,275) $42,000(h) (110,275)
Interest income..................... 40,153 473(b) 39,680 33,539(i) 6,141
Equity income (loss)................ (8,191) (8,191) $17,170(j) 8,979
Other, net.......................... 32,481 1,511(b) 33,992 33,992
---------- ---------- ----------
Income from continuing operations
before income tax provision....... 200,852 245,004 186,635
Income tax provision................ 107,438 3,507(b) 110,945 23,785(k) 87,160
---------- ---------- ----------
Income from continuing
operations........................ 93,414 134,059 99,475
Discontinued operations:
Income (loss) from operations,
net of income taxes............. 7,238 40,645(b) (33,407) (33,407)
Net gain on disposal, net of
income taxes.................... 1,316,686 1,316,686 1,316,686
---------- ---------- ----------
Net income.......................... 1,417,338 1,417,338 1,382,754
Preferred dividend requirements..... 21,697 21,697 4,414(l) 18,056(m) 8,055
---------- ---------- ----------
Earnings applicable to common
shareholders...................... $1,395,641 $1,395,641 $1,374,699
========== ========== ==========
Basic earnings per common share:
Continuing operations............ $ .85 $ 1.32 $ 1.26
Discontinued operations.......... 15.61 15.14 17.73
---------- ---------- ----------
Basic earnings per share............ $ 16.46 $ 16.46 $ 18.99
========== ========== ==========
Diluted earnings per common
share:
Continuing operations............ $ .83 $ 1.29 $ 1.23
Discontinued operations.......... 15.23 14.77 17.22
---------- ----------- ----------
Diluted earnings per share.......... $ 16.06 $ 16.06 $ 18.45
========== =========== ==========
Weighted average shares:
Basic............................ 84,814 84,814 12,433(n) 72,381
Diluted.......................... 86,928 86,928 12,433(n) 74,495
</TABLE>
11
<PAGE> 12
THE TIMES MIRROR COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS LLC TRANSACTION
TIMES PRO FORMA ADJUSTMENTS DISCONTINUED PRO FORMA ADJUSTMENT
MIRROR ----------------------- OPERATIONS ----------------------- TRANSACTION
HISTORICAL DEBIT CREDIT PRO FORMA DEBIT CREDIT PRO FORMA
---------- ---------- ---------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ $1,547,315 $94,357(b) $1,452,958 $1,452,958
Costs and expenses.................. 1,319,228 $92,080(b) 1,227,148 1,227,148
---------- ---------- ----------
Operating profit.................... 228,087 225,810 225,810
Interest expense.................... (43,710) 3,172(b) (40,538) $21,000(h) (61,538)
Interest income..................... 24,117 308(b) 23,809 16,770(i) 7,039
Equity income (loss)................ (3,183) (3,183) $ 8,585(j) 5,402
Other, net.......................... 25,097 104(b) 25,201 25,201
---------- ---------- ----------
Income from continuing operations
before income tax provision....... 230,408 231,099 201,914
Income tax provision................ 96,281 210(b) 96,491 11,893(k) 84,598
---------- ---------- ----------
Income from continuing
operations........................ 134,127 134,608 117,316
Loss from discontinued
operations, net of income taxes... - 481(b) (481) (481)
---------- ---------- ----------
Net income.......................... 134,127 134,127 116,835
Preferred dividend requirements..... 10,848 10,848 2,207(l) 9,028(m) 4,027
---------- ---------- ----------
Earnings applicable to common
shareholders...................... $ 123,279 $ 123,279 $ 112,808
========== ========== ==========
Basic earnings (loss) per common
share:
Continuing operations............ $ 1.70 $ 1.71 $ 1.89
Discontinued operations.......... - (.01) (.01)
---------- ---------- ----------
Basic earnings per share............ $ 1.70 $ 1.70 $ 1.88
========== ========== ==========
Diluted earnings (loss) per common
share:
Continuing operations............ $ 1.64 $ 1.65 $ 1.80
Discontinued operations.......... - (.01) (.01)
---------- ---------- ----------
Diluted earnings per share.......... $ 1.64 $ 1.64 $ 1.79
========== ========== ==========
Weighted average shares:
Basic............................ 72,520 72,520 12,433(n) 60,087
Diluted.......................... 76,972 5,533(c) 82,505 17,966(n) 64,539
</TABLE>
12
<PAGE> 13
THE TIMES MIRROR COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(a) To reclassify the assets and liabilities of AchieveGlobal Inc., Allen
Communication and The StayWell Company (the "Discontinued Businesses") to net
assets of discontinued operations. On September 3, 1999, the Company decided to
sell these businesses. The dispositions of these businesses are anticipated to
be completed by the end of the first quarter of 2000.
(b) To reclassify results of operations for the Discontinued Businesses
from continuing operations to discontinued operations.
(c) To adjust the weighted average shares for the Series C-1 and C-2
convertible preferred shares, which are dilutive for the pro forma diluted
earnings per share calculation for the six months ended June 30, 1999 as a
result of the restatement of the Discontinued Businesses. These convertible
preferred shares were antidilutive for purposes of computing the historical
diluted earnings per share.
(d) To record the Company's acquisition of preferred units issued by the
operating partnerships of unrelated real estate investment trusts (the "OP REIT
Interests") of $600 million. The Company funded these acquisitions with the
proceeds of a new $550 million short-term bank line of credit and an existing
commercial paper program. The Company intends to refinance approximately $350
million with a hybrid security and $250 million with medium-term debt financing.
(e) To record the investment by the Company and its affiliates, Eagle New
Media Investments, LLC and Eagle Publishing Investments, LLC (the "Eagle
Companies"), in TMCT II, LLC ("LLC"), which is comprised of the following
(dollars in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents..................... $ 635,252
OP REIT Interests............................. 600,000
----------
$1,235,252
==========
</TABLE>
The cash and cash equivalents contributed to LLC were provided primarily
from available cash resources of the Eagle Companies.
(f) The Chandler Trusts contributed 15,541,216 shares of common stock and
626,072 shares of preferred stock of the Company to LLC. LLC allocates to the
Company and the Eagle Companies 80% of the dividends on these shares and a
substantial portion of any subsequent increase or decrease in the value of these
shares. As a result, the Company and the Eagle Companies are deemed to hold an
economic interest in 80% of these shares held by LLC or approximately 12.4
million shares of common stock and 501,000 shares of preferred stock. These
shares will be reported as treasury stock in the Company's consolidated balance
sheet. The cost of the treasury shares is based upon 80% of the value of the
common and preferred stock contributed by the Chandler Trusts or $988.2 million
in addition to approximately $16 million in estimated transaction costs. In
connection with the Transaction and pursuant to the terms of the Company's
Restated Certificate of Incorporation, the Series C Common Stock contributed to
LLC by the Chandler Trusts was converted into Series A Common Stock on a share
for share basis.
13
<PAGE> 14
THE TIMES MIRROR COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(g) To replace the Series C-1 and C-2 Preferred Stock with new Series D-1
and D-2 Preferred Stock which the Company intends to complete in the fourth
quarter of 1999. The new Series D-1 and D-2 Preferred Stock will be identical to
the existing Series C-1 and C-2 Preferred Stock except that the dividend rate on
the new Series D-1 and D-2 Preferred Stock will increase pursuant to a fixed and
certain schedule. See also note (l), below.
(h) To record interest expense related to the new debt, which has been
calculated assuming an interest rate of 7.0%.
(i) To record reduced interest income related to the cash and cash
equivalents contributed to LLC and cash paid for transaction expenses, which has
been calculated assuming an interest rate of 5.15%.
(j) To record the Company's proportionate equity share in the LLC's income.
The Company's income allocation is comprised of approximately 20% of the
ordinary profits and losses from the LLC's OP REIT Interests and the fixed
income and equity investments ("Portfolio"). The equity income recognized by the
Company excludes the Company's proportionate share of any dividends on the
Company's preferred and common stocks owned by LLC which are eliminated for
financial reporting purposes. As a result, the equity income recognized by the
Company is comprised of its 20% share of the OP REIT Interests and the
Portfolio, which is assumed to earn a 6.95% return per year for purposes of
these pro forma financial statements.
(k) To record the income tax effect of entries (h), (i) and (j) at the
Company's statutory rate of 40.75%.
(l) To adjust the preferred dividend requirements for the net dividend
differential for financial reporting purposes resulting from the planned
replacement of the existing Series C Preferred Stocks with the new Series D
Preferred Stocks. The new Series D Preferred Stocks have a fixed increasing
dividend rate whereas the existing Series C Preferred Stocks have a minimum
dividend rate with increases dependent on changes in the common dividend rate.
The provisions of the new Series D Preferred Stocks are designed to deliver a
substantially similar yield to maturity as the existing Series C Preferred
Stocks. Although both the new and existing Preferred Stocks have a current
dividend rate of 5.8%, increasing to a maximum of 8.4%, the new Series D
Preferred Stocks will reflect, for financial reporting purposes, an effective
dividend rate of 7.21% to account for the fixed increasing rate feature. Given
the uncertainty in estimating the Series C dividend rate increases, the
Series C dividends have been recorded at the current rate of 5.8%.
(m) To eliminate the preferred dividends for 80% of the Series D-1 and D-2
Preferred Stock owned by LLC, which is reflected as treasury stock assuming the
exchange of the Preferred and the Transaction occurred on January 1, 1998.
(n) To adjust weighted average shares to eliminate 80% of the shares owned
by LLC. The share adjustments are calculated assuming the Transaction occurred
on January 1, 1998.
14
<PAGE> 15
(c) EXHIBITS
The following exhibits are filed with this report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Amended and Restated Limited Liability Company
Agreement of TMCT II, LLC, dated September 3, 1999
10.2 Contribution Agreement among the Company, certain
subsidiaries thereof, the Eagle Companies and the
Chandler Trusts, dated September 3, 1999
99.1 Press Release regarding the Proposed Sales and the
Transaction, dated September 3, 1999
</TABLE>
15
<PAGE> 16
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/ ROGER H. MOLVAR
-------------------------------------
Date: September 3, 1999 Roger H. Molvar
Senior Vice President and Controller
16
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
TMCT II, LLC
Dated as of September 3, 1999
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE I DEFINED TERMS.....................................................................1
SECTION 1.1 DEFINITIONS.....................................................................1
SECTION 1.2 HEADINGS........................................................................8
ARTICLE II FORMATION AND TERM...............................................................8
SECTION 2.1 FORMATION.......................................................................8
SECTION 2.2 NAME............................................................................9
SECTION 2.3 TERM............................................................................9
SECTION 2.4 REGISTERED AGENT AND OFFICE.....................................................9
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS.....................................................9
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS............................................9
ARTICLE III PURPOSE AND POWERS OF THE COMPANY..............................................10
SECTION 3.1 PURPOSE........................................................................10
SECTION 3.2 POWERS OF THE COMPANY..........................................................10
SECTION 3.3 LIMITATIONS ON COMPANY POWERS..................................................12
SECTION 3.4 SPECIFIC AUTHORIZATION.........................................................12
ARTICLE IV CAPITAL CONTRIBUTIONS, INTERESTS AND CAPITAL ACCOUNTS..........................12
SECTION 4.1 CAPITAL CONTRIBUTIONS..........................................................12
SECTION 4.2 MEMBER'S INTEREST..............................................................12
SECTION 4.3 CAPITAL ACCOUNTS...............................................................12
ARTICLE V MEMBERS..........................................................................14
SECTION 5.1 POWERS OF MEMBERS..............................................................14
SECTION 5.2 REIMBURSEMENTS.................................................................14
SECTION 5.3 PARTITION......................................................................14
SECTION 5.4 ASSIGNMENTS BY AND WITHDRAWAL OF MEMBERS.......................................14
ARTICLE VI MANAGEMENT......................................................................16
SECTION 6.1 MANAGEMENT OF THE COMPANY......................................................16
SECTION 6.2 POWERS OF THE MANAGING MEMBER..................................................17
SECTION 6.3 INVESTMENT COMMITTEE...........................................................18
SECTION 6.4 TRUSTS PORTFOLIO COMMITTEE.....................................................19
SECTION 6.5 ACTIONS REQUIRING MUTUAL AGREEMENT.............................................20
SECTION 6.6 RELIANCE BY THIRD PARTIES......................................................21
ARTICLE VII MEETINGS OF MEMBERS............................................................21
SECTION 7.1 MEETINGS OF THE MEMBERS........................................................21
SECTION 7.2 PLACE OF MEETINGS; PARTICIPATION BY TELEPHONE..................................21
SECTION 7.3 NOTICE OF MEETINGS.............................................................22
SECTION 7.4 ACTION WITHOUT MEETING.........................................................22
ARTICLE VIII ALLOCATIONS...................................................................22
SECTION 8.1 INVESTMENT PORTFOLIO AND UPREIT PORTFOLIO......................................22
SECTION 8.2 TMC COMMON.....................................................................24
SECTION 8.3 TMC PREFERRED..................................................................25
SECTION 8.4 TRUSTS PORTFOLIO...............................................................26
SECTION 8.5 ALLOCATED EXPENSES.............................................................26
SECTION 8.6 OTHER TMC MEMBERS AND TRUSTS...................................................26
SECTION 8.7 REGULATORY ALLOCATIONS.........................................................26
SECTION 8.8 TAX ALLOCATIONS; SECTION 704(C) OF THE CODE....................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IX DISTRIBUTIONS...................................................................28
SECTION 9.1 INVESTMENT PORTFOLIO AND UPREIT PORTFOLIO......................................28
SECTION 9.2 TMC SHARES.....................................................................28
SECTION 9.3 TRUSTS PORTFOLIO...............................................................29
SECTION 9.4 TMC MEMBERS AND TRUSTS.........................................................29
SECTION 9.5 LIQUIDATING DISTRIBUTIONS......................................................30
SECTION 9.6 OTHER DISTRIBUTIONS............................................................31
SECTION 9.7 LIMITATION ON DISTRIBUTIONS....................................................31
ARTICLE X BOOKS AND RECORDS................................................................31
SECTION 10.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS.......................................31
SECTION 10.2 ACCOUNTING METHOD.............................................................32
SECTION 10.3 AUDIT.........................................................................32
ARTICLE XI TAX MATTERS.....................................................................33
SECTION 11.1 TAX MATTERS MEMBER............................................................33
SECTION 11.2 RIGHT TO MAKE SECTION 754 ELECTION............................................33
SECTION 11.3 TAXATION AS PARTNERSHIP.......................................................33
ARTICLE XII LIABILITY, EXCULPATION AND INDEMNIFICATION.....................................33
SECTION 12.1 LIABILITY......................................................................33
SECTION 12.2 EXCULPATION...................................................................34
SECTION 12.3 DUTIES AND LIABILITIES OF COVERED PERSONS.....................................34
SECTION 12.4 INDEMNIFICATION...............................................................35
SECTION 12.5 EXPENSES......................................................................35
SECTION 12.6 INSURANCE.....................................................................35
SECTION 12.7 OUTSIDE BUSINESS..............................................................35
ARTICLE XIII DISSOLUTION, LIQUIDATION AND TERMINATION......................................36
SECTION 13.1 DISSOLUTION....................................................................36
SECTION 13.2 NOTICE OF DISSOLUTION.........................................................36
SECTION 13.3 LIQUIDATION...................................................................36
SECTION 13.4 TERMINATION...................................................................36
SECTION 13.5 CLAIMS OF THE MEMBERS.........................................................37
ARTICLE XIV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MEMBERS.......................37
SECTION 14.1 REPRESENTATIONS...............................................................37
SECTION 14.2 CONFIDENTIALITY...............................................................38
ARTICLE XV MISCELLANEOUS...................................................................38
SECTION 15.1 AMENDMENTS....................................................................38
SECTION 15.2 NOTICES.......................................................................39
SECTION 15.3 FAILURE TO PURSUE REMEDIES....................................................39
SECTION 15.4 CUMULATIVE REMEDIES...........................................................39
SECTION 15.5 BINDING EFFECT................................................................39
SECTION 15.6 INTERPRETATION................................................................40
SECTION 15.7 SEVERABILITY..................................................................40
SECTION 15.8 COUNTERPARTS..................................................................40
SECTION 15.9 INTEGRATION...................................................................40
SECTION 15.10 GOVERNING LAW................................................................40
SECTION 15.11 CONSENT TO JURISDICTION AND FORUM SELECTION..................................40
SECTION 15.12 ATTORNEYS' FEES..............................................................41
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
TMCT II, LLC
This Amended and Restated Limited Liability Company Agreement of TMCT
II, LLC (the "Company") is made as of September 3, 1999 (this "Agreement"), by
and among:
A. The Times Mirror Company, a Delaware corporation ("TMC"),
Fortification Holdings Corporation, a Delaware corporation
("Fortification"), Wick Holdings Corporation, a Delaware
corporation ("Wick "), Eagle New Media Investments, LLC, a
Delaware limited liability company ("Eagle 1"), and Eagle
Publishing Investments, LLC, a Delaware limited liability
company ("Eagle 2," and collectively with TMC, Fortification,
Wick and Eagle 1, the "TMC Members"), and
B. Chandler Trust No. 1 ("Trust 1") and Chandler Trust No. 2
("Trust 2"),
as Members of the Company.
WHEREAS, TMC formed 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 on August 26, 1999 and entering into a Limited Liability Company
Agreement (the "Limited Liability Company Agreement"); and
WHEREAS, TMC wishes to amend and restate the Limited Liability Company
Agreement of the Company in its entirety and add Trust 1, Trust 2, Wick,
Fortification, Eagle 1 and Eagle 2 as Members.
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 trustees
or other legal representatives of such Person or any person or trust described
in clauses (A) or
1
<PAGE> 5
(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 Amended and Restated 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 UPREIT Portfolio or the
Investment Portfolio.
"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:
(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.
2
<PAGE> 6
"Company" means TMCT II, LLC, the limited liability company formed
under and pursuant to the Delaware Act and continued under this Agreement.
"Contribution Agreement" means that Contribution Agreement dated as
of September 3, 1999 among the Members pursuant to which they have agreed to
contribute cash and cash equivalents, TMC Shares and "OP Preferred Assets" (as
defined therein) 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 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.
"Direct Investments Portfolio" means those assets of the Investment
Portfolio, initially in the amount of $500 million, that are invested in TMCT
Ventures, L.P., a Delaware limited partnership, for which the investment
objective is to seek out opportunities that offer the possibility of long-term
capital gains through investments in a diversified portfolio of businesses
including venture capital investments and through leveraged or management
buyouts.
"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, 1999, (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 those assets of the Investment
Portfolio, initially in the amount of $75 million, that will be invested in debt
obligations or instruments in accordance with Section 6.3 under the direction of
the Investment Committee, purchased with the cash contributed by the Members
pursuant to the Contribution Agreement.
3
<PAGE> 7
"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.
"Harvested Capital Portfolio" means (i) the Securities and other
properties purchased by the Company with the cash proceeds received by the
Company in connection with the sale, exchange, redemption or other disposition
of all or any part of the assets held in the Direct Investments Portfolio and
the Venture Capital Portfolio, and (ii) the Securities bought and sold by the
Company thereafter with the proceeds of (i) all in accordance with Section 6.3
under the direction of the Investment Committee.
"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.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time and any successor statute thereto.
4
<PAGE> 8
"Investment Portfolio" means the Fixed Income Portfolio, the Direct
Investments Portfolio, the Venture Capital Portfolio and the Harvested Capital
Portfolio, together with any cash initially contributed by the Members to the
Company that has not yet been invested in assets comprising the Direct
Investments Portfolio or the Venture Capital Portfolio and is available for
investment in such assets.
"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 includes any other Person admitted to the Company as a Member of the
Company in accordance with this Agreement, and "Members" means Trust 1, Trust 2
and each of the TMC Members and includes any other Person admitted to the
Company as a Member of the Company in accordance with this Agreement,
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.
"Other TMC Members" means Eagle 1, Eagle 2, Fortification, Wick and
any successors in interest to Eagle 1, Eagle 2, Fortification or Wick who
acquire their interests in a Permitted Disposition.
"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 a 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.
"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
5
<PAGE> 9
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.
"Specified Disposition" means any of the following if approved by
the Investment Committee:
(i) any sale, exchange or disposition of all or part of the
preferred partnership interests in the UPREIT Portfolio ("UPREIT
Interest") or other assets in the UPREIT Portfolio if the amount of any
money and the fair market value of property to be received in exchange
therefor equals or exceeds: (x) in the case of any asset in the UPREIT
Portfolio on the date of this Agreement, the Gross Asset Value of such
asset on the date of this Agreement as set forth on Schedule A, or (y)
in the case of an asset acquired subsequent to the date of this
Agreement, the portion of the Gross Asset value of the assets of the
UPREIT Portfolio on the date of this Agreement, that is attributable to
such subsequently acquired assets:
(ii) any sale, exchange or disposition of all or part of an
UPREIT Interest or any other asset of the UPREIT Portfolio that is a
partnership or limited liability company interest if the Investment
Committee reasonably determines, based on the written advice of
nationally recognized tax counsel, that (a) either (x) there has been a
material increase in the percentage of the assets of the partnership or
limited liability company that issued such UPREIT Interest or other
interest (the "Issuer Partnership") constituting "stock or securities"
within the meaning of Section 351(e)(1) of the Code, or (y) the Issuer
Partnership or its general partner or managing member or the Investment
Committee has become aware of facts that will or likely will cause the
Issuer Partnership to become a publicly traded partnership within the
meaning of Section 7704(b) of the Code, and (b) the facts described in
(x) or (y) present a material risk of jeopardizing the status of the
contributions to the Company under Section 721 of the Code;
(iii) any sale, exchange or disposition of all or part of an
UPREIT Interest or any other asset of the UPREIT Portfolio that is a
partnership or limited liability
6
<PAGE> 10
company interest if the Company receives notice or the Investment
Committee reasonably determines that such UPREIT Interest or other
interest will represent more than 18% of the total profits or capital
interests in the Issuer Partnership;
(iv) any sale, exchange or disposition of all or a part of the
REIT stock acquired in exchange for UPREIT Interests or any other
assets in the UPREIT Portfolio that is a partnership or limited
liability company interest if the proceeds of such sale are to be
reinvested in assets that do not constitute "stock or securities"
within the meaning of Section 351(e)(1) of the Code; or
(v) any sale, exchange or disposition of all of an UPREIT
Interest or any other assets in the UPREIT Portfolio that is a
partnership or limited liability company interest, if the Company's
continued ownership of such interest would breach a representation or
covenant made by the Company to the Issuer Partnership relating to the
number of direct or indirect owners represented by the Company for
purposes of preventing the Issuer Partnership from becoming a publicly
traded partnership within the meaning of Section 7704(b) of the Code.
"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 $1.00 per
share, and the Series C Common Stock, par value $1.00 per share, of TMC.
"TMC Preferred" means the Preferred Stock, Series C-1, par value
$1.00 per share, of TMC and the Preferred Stock, Series C-2, par value $1.00 per
share, of TMC or any series of preferred stock of TMC for which either is
exchanged pursuant to Section 11.3 of the Contribution Agreement.
"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" or "Trusts" means Trust 1, Trust 2 and any
successors in interest to Trust 1 or Trust 2 who acquire their interests in a
Permitted Disposition.
7
<PAGE> 11
"Trust Termination" means the termination of Trust 1, Trust 2 and
any sub-trust thereof in accordance with their respective terms.
"Trusts Portfolio" means the properties purchased by the Company
with the cash transferred to such Trusts Portfolio pursuant to Section 9.3
hereof and other properties bought and sold by the Company thereafter in
accordance with Section 9.3 under the direction of the Trusts Portfolio
Committee.
"UPREIT Portfolio" means the preferred ownership interests in real
estate investment trust operating partnerships contributed to the Company
pursuant to the Contribution Agreement (and referred to therein as "OP Preferred
Assets"), any assets acquired by the Company in exchange or substitution for
such interests including, without limitation, REIT stock acquired pursuant to
the exchange of UPREIT interests, and other assets purchased by the Company with
the cash proceeds received by the Company in connection with the sale or other
disposition of such assets in accordance with Section 6.3 under the direction of
the Investment Committee.
"Venture Capital Portfolio" means those assets of the Investment
Portfolio, initially in the amount of $60 million, that will be invested in a
portfolio of venture capital funds in accordance with Section 6.3 under the
direction of the Investment Committee, purchased with the cash contributed by
the Members pursuant to the Contribution Agreement.
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) TMC formed the Company as a limited liability company under and
pursuant to the provisions of the Delaware Act and the Members 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,
Fortification, Wick, Eagle 1 and Eagle 2 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.
8
<PAGE> 12
(d) TMC, 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. The Managing 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 by
the filing of the Certificate is TMCT II, 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. 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, County of New Castle, 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 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.
9
<PAGE> 13
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 UPREIT Portfolio and the Investment
Portfolio and managing the assets of the Company in accordance with the
provisions of this 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. The Members
intend that the Company shall conduct its business in a manner that will cause
the Company to qualify at all times as an investment partnership within the
meaning of Section 731(c) of the Code.
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;
(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;
10
<PAGE> 14
(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, equity
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 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 or the Members pursuant to Section 6.5 or any other provisions of this
Agreement.
11
<PAGE> 15
(e) Nothing in this Section 3.2 shall be deemed to authorize the
officers, the Investment Committee or the Managing Member to authorize the
Company to acquire any assets or take any other action, without Mutual
Agreement, that would cause the Company not to qualify as an investment
partnership within the meaning of Section 731(c) of the Code.
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;
12
<PAGE> 16
(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 8.8); 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.
(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 8.8); 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, such adjustment shall be treated as gain or loss of the Company, and any
such 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 to the
minimum extent required to comply with such regulations; 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.
13
<PAGE> 17
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.
(a) Prohibited Transfers. No Member may resign or withdraw from the
Company without Mutual Agreement. No Member shall voluntarily or involuntarily
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. Notwithstanding any
other provisions of this Agreement, at any time prior to January 1, 2006 no
Member shall Transfer all or any part of its Interest if such Transfer would
violate the covenant set forth in Section 4(k) of (i) the Contribution Agreement
by and among TMC, the Company, Post Apartment Homes, L.P., a Georgia limited
partnership, and Post Properties, Inc., a Maryland corporation, dated as of
September 3, 1999, and (ii) the Contribution Agreement by and among TMC, the
Company, Summit Properties Partnership, L.P., a Delaware limited partnership,
and Summit Properties, Inc., a Maryland corporation, dated as of September 3,
1999.
(b) Conditions to Transfer. Any proposed 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 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
14
<PAGE> 18
any Transferor prior to compliance with Section 5.4 with respect to the Interest
or portion thereof that is the subject of any such 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 shall automatically become a Member with respect to
the Interest so transferred, 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 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;
(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
15
<PAGE> 19
(B) complies with all applicable laws and
regulations, including, without limitation, applicable federal
and state securities laws, the Investment Company Act 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 another TMC Member.
(g) Transfer of Control. TMC shall not, without Mutual Agreement,
Transfer Control of Fortification, Wick, Eagle 1 or Eagle 2 (so long as they are
Members), 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.
16
<PAGE> 20
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 Investment Portfolio and
the UPREIT Portfolio by the Investment Committee in accordance with Section 6.3
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 the 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.
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 unless otherwise specifically provided in this Agreement, deemed by the
Managing Member to be necessary or appropriate to effectuate the business,
purposes and objectives of the Company. Notwithstanding the foregoing, TMC shall
not be entitled to be compensated for serving as the Managing Member or for
providing administrative services to the Company; provided, however, if the cost
of the administrative services provided to the Company by TMC exceeds $150,000
in any year, TMC shall be entitled to cease providing such services and to
arrange for such services to be provided to the Company by a third party at the
expense 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,
17
<PAGE> 21
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 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 be 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 five. TMC shall have the right to designate
two members of the Investment Committee (the "TMC Designated Investment
Committee Members"), of which the initial members shall be Roger H. Molvar and
Rajender K. Chandhok. Trust 1 and Trust 2 shall have the right to designate
three members (the "Trust Designated Investment Committee Members"), of which
the initial members shall be Warren B. Williamson, William Stinehart, Jr. and
Roger Goodan; provided, however, that following the Trust Termination, the Trust
Designated Investment Committee Members 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.
18
<PAGE> 22
(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. Subject to Section 6.5, the
Investment Committee shall have full, exclusive and complete authority with
respect to the management of the Investment Portfolio and the UPREIT Portfolio
within the investment guidelines set forth in Exhibit B hereto. The investment
guidelines may be changed only by Mutual Agreement. If the Company sells an
UPREIT Interest (or the stock for which such UPREIT Interest was exchanged)
within three (3) years from the date hereof and such sale is a Specified
Disposition, any acquisition of replacement assets shall required the consent of
the TMC Designated Investment Committee Members, which shall not be unreasonably
withheld.
(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
19
<PAGE> 23
Committee and (ii) a number of Trust Designated Investment Committee Members
equal or 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 Members 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, without Mutual Agreement:
(a) Any Transfer or other distribution or encumbrance of assets of
the Company (provided, however that (i) distributions under Article IX, and (ii)
Specified Dispositions and dispositions or encumbrances of investments in the
Investment Portfolio that have been approved by the Investment Committee shall
not require Mutual Agreement);
(b) Any acquisition of assets by the Company (provided, however that
acquisitions of assets (i) for the Investment Portfolio or (ii) for the UPREIT
Portfolio if such acquisitions meet the guidelines set forth in Exhibit B hereto
or are acquisitions of stock pursuant to exchange rights associated with the
UPREIT Interests or any other asset in the UPREIT Portfolio that is a
partnership or limited liability company interest, that in either case have been
approved by the Investment Committee, shall not require Mutual Agreement);
(c) Any transaction relating to the TMC Shares;
(d) The incurrence of any indebtedness by the Company (provided,
however that indebtedness incurred in the management of the Investment Portfolio
and the UPREIT Portfolio that has been approved by the Investment Committee
shall not require Mutual Agreement);
(e) To the extent permitted by law, the liquidation or dissolution
of the Company;
20
<PAGE> 24
(f) Any change in the business purpose of the Company;
(g) Any merger, consolidation or reorganization of the Company with
any other Person;
(h) Any change in the investment guidelines set forth in Exhibit B
hereto;
(i) Any issuance of an equity interest in the Company or any
admission of a new Member (other than pursuant to Section 5.4(d) or 5.4(e), in
connection with a Transfer in conformity with Section 5.4);
(j) Arrangements not contemplated by (or any amendments or other
changes to such arrangements, or any arrangements that are contemplated by) this
Agreement between the Company, on the one hand, and any Member, TMCT Ventures,
L.P. or Affiliate thereof, on the other hand, providing for pecuniary benefits
to any Member or Affiliate thereof;
(k) Any action that would jeopardize the status of the Company as an
investment partnership under Section 731(c) of the Code;
(l) Any action that would jeopardize the qualification of the
contributions to the Company under Section 4.1 as tax-free exchanges under
Section 721 of the Code; or
(m) Any action or decision by a Member in its capacity as Tax
Matters 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
of the Company 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 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.
21
<PAGE> 25
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 U.S. 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 or cable. 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.
22
<PAGE> 26
ARTICLE VIII
ALLOCATIONS
SECTION 8.1 INVESTMENT PORTFOLIO AND UPREIT PORTFOLIO. All items with
respect to the Investment Portfolio and the UPREIT 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 Investment Portfolio (other than the Fixed Income Portfolio) and the
UPREIT Portfolio, and any items of capital gain allocated to the Company by the
Issuer Partnerships with respect to the assets in the UPREIT Portfolio, for such
Fiscal Year, and all related items of ordinary deduction or expense, shall be
allocated 80% to the Trusts, 1% to TMC and 19% to the Other TMC Members. All
items of interest, original issue discount, market discount, dividends and other
items of ordinary income from the Fixed Income Portfolio and all related items
of ordinary deduction or expense shall be allocated 78.5% to the Trusts, 1% to
TMC and 20.5% to the Other TMC Members.
(b) Gains from UPREIT Portfolio. All items of gain from any sale,
exchange, redemption, extraordinary dividends, partial or complete liquidation
or similar transactions relating to the assets in the UPREIT Portfolio shall be
allocated as follows:
(i) 80% to the Trusts, 1% to TMC and 19% to the Other 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)(v);
(ii) 1% to TMC and 99% to the Other 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)(iv);
(iii) 50% to the Trusts, 1% to TMC and 49% to the Other TMC
Members until the aggregate amount allocated under this Section
8.1(b)(iii) is equal to (x) $42,000,000 plus (y) the aggregate losses
allocated under Section 8.1(c)(iii);
(iv) 1% to TMC and 99% to the Other TMC Members until the
aggregate amount allocated under this Section 8.1(b)(iv) is equal to
(x) $99,000,000 plus (y) the aggregate losses allocated under Section
8.1(c)(ii); and
(v) thereafter, 80% to the Trusts, 1% to TMC and 19% to the
Other TMC Members.
(c) Losses from UPREIT Portfolio. All items of loss, expense or
deduction from any sale, exchange, redemption, partial or complete liquidation
or similar transactions relating to the assets in the UPREIT Portfolio shall be
allocated as follows:
(i) 80% to the Trusts, 1% to TMC and 19% to the Other 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)(v);
23
<PAGE> 27
(ii) 1% to TMC and 99% to the Other 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)(iv);
(iii) 50% to Trusts, 1% to TMC and 49% to the Other TMC
Members until the aggregate amount allocated under this Section
8.1(c)(iii) is equal to (x) $42,000,000 plus (y) the aggregate gains
allocated under Section 8.1(b)(iii);
(iv) 1% to TMC and 99% to the Other TMC Members until the
aggregate amount allocated under this Section 8.1(c)(iv) is equal to
(x) $99,000,000 plus (y) the aggregate gain allocated under Section
8.1(b)(ii); and
(v) thereafter, 80% to the Trusts, 1% to TMC and 19% to the
Other TMC Members.
(d) Gains From Investment Portfolio. All items of gain from any
sale, exchange, redemption, partial or complete liquidation, extraordinary
dividends or similar transactions relating to the assets in the Investment
Portfolio shall be allocated 80% to the Trusts, 1% to TMC and 19% to the Other
TMC Members.
(e) Losses From Investment Portfolio. All items of loss, expense or
deduction from any sale, exchange, redemption, partial or complete liquidation
or similar transactions relating to the assets in the Investment Portfolio shall
be allocated 80% to the Trusts, 1% to TMC and 19% to the Other TMC Members.
(f) Gains From Fixed Income Portfolio. All items of gain from any
sale, exchange, redemption, partial or complete liquidation, extraordinary
dividends or similar transactions relating to the assets in the Fixed Income
Portfolio shall be allocated 78.5% to the Trusts 1% to TMC and 20.5% to the
Other TMC Members.
(g) Losses From Fixed Income Portfolio. All items of loss expense
or deductions from any sale, exchange redemption, partial or complete
liquidation or similar transactions relating to the assets in the Fixed Income
Portfolio shall be allocated 78.5% to the Trusts 1% to TMC and 20.5% to the
Other TMC Members.
SECTION 8.2 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, 78% to TMC and 2% to the Other TMC
Members.
(b) Gains. All items of gain from any sale, exchange, redemption,
partial or complete liquidation, extraordinary dividends or similar transactions
relating to the TMC Common shall be allocated as follows:
(i) 13% to the Trusts, 10% to TMC and 77% to the Other TMC
Members until the aggregate amount allocated under this Section
8.2(b)(i) is equal to the aggregate items of loss, expense or deduction
allocated under Section 8.2(c)(iv);
(ii) 100% to the Trusts until the aggregate amount allocated
under this Section 8.2(b)(ii) is equal to the aggregate items of loss,
expense or deduction allocated under Section 8.2(c)(iii);
24
<PAGE> 28
(iii) 100% to the Trusts until the aggregate amount allocated
to the Trusts under this Section 8.2(b)(iii) is equal to (x)
$184,443,151 plus (y) the aggregate losses allocated under Section
8.2(c)(ii); and
(iv) thereafter, 13% to the Trusts, 10% to TMC and 77% to the
Other TMC Members.
(c) Losses. All items of loss, expense or deduction from any sale,
exchange, redemption, partial or complete liquidation or similar transactions
relating to the TMC Common shall be allocated as follows:
(i) 13% to the Trusts, 10% to TMC and 77% to the Other TMC
Members until the aggregate amount allocated under this Section
8.2(c)(i) is equal to the aggregate gains allocated under Section
8.2(b)(iv);
(ii) 100% to the Trusts until the aggregate amount allocated
under this Section 8.2(c)(ii) is equal to the aggregate gains allocated
under Section 8.2(b)(iii);
(iii) 100% to the Trusts until the aggregate amount allocated
to the Trusts under this Section 8.2(c)(iii) is equal to (x)
$184,443,151 plus (y) the aggregate gain allocated under Section
8.2(b)(ii); and
(iv) thereafter, 13% to the Trusts, 10% to TMC and 77% to the
Other TMC Members.
SECTION 8.3 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, 78% to TMC and 2% to the Other TMC
Members.
(b) Gains. All items of gain from any sale, exchange, redemption,
partial or complete liquidation, extraordinary dividends or similar transactions
relating to the TMC Preferred shall be allocated as follows:
(i) 20% to the Trusts and 80% to TMC 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 (x)
$62,607,200 plus (y) the aggregate losses allocated under Section
8.3(c)(ii); and
25
<PAGE> 29
(iv) thereafter, 20% to the Trusts and 80% to TMC.
(c) Losses. All items of loss, expense or deduction from any sale,
exchange, redemption, partial or complete liquidation or similar transactions
relating to the TMC Preferred shall be allocated as follows:
(i) 20% to the Trusts and 80% to TMC 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 (x)
$62,607,200 plus (y) the aggregate gain allocated under Section
8.3(b)(ii); and
(iv) thereafter, 20% to the Trusts and 80% to TMC.
SECTION 8.4 TRUSTS PORTFOLIO. All items including all expenses with
respect to the Trusts Portfolio shall be allocated 100% to the Trusts in
accordance with the percentages set forth in Schedule 8.6.
SECTION 8.5 ALLOCATED EXPENSES. Allocated Expenses for any Fiscal Year
shall be apportioned among the Investment Portfolio, the UPREIT Portfolio, the
Fixed Income Portfolio, 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 (treating as gross revenues for this purpose the net income
allocated to the Members hereunder attributable to distributions to the Company
on assets in the UPREIT Portfolio and on any other assets of the Company
consisting of partnership interests, and excluding gross revenue attributable to
the Trusts Portfolio) for such Fiscal Year. Amounts so apportioned (hereinafter
"Investment Portfolio and UPREIT Portfolio Allocated Expenses," "Fixed Income
Allocated Expenses," "TMC Common Allocated Expenses," and "TMC Preferred
Allocated Expenses," respectively) shall be allocated in accordance with
Sections 8.1(a), 8.2(a) and 8.3(a), respectively, among the Members.
SECTION 8.6 OTHER TMC MEMBERS AND TRUSTS.
(a) Allocations among the Other TMC Members shall be pro rata based
upon the percentages set forth in Schedule 8.6.
(b) Allocations to the Trusts pursuant to Sections 8.1(a), 8.2(a)
and 8.3(a) for each Fiscal Year shall be allocated first to Trust 2 until the
amount allocated to Trust 2 for such year is equal to $26,400,000 and the
remainder of the amount allocated to the Trusts pursuant to Sections 8.1(a),
8.2(a) and 8.3(a) in such year shall be divided among the Trusts based upon the
percentages set forth in Schedule 8.6. With respect to 1999, such allocations
shall be in
26
<PAGE> 30
accordance with the previous sentence except that $6,600,000 shall be
substituted for $26,400,000.
(c) Allocations to the Trusts pursuant to Sections 8.1(b),
8.1(c), 8.1(d), 8.1(e), 8.1(f), 8.1(g), 8.2(b), 8.2(c), 8.3(b) and 8.3(c) shall
be divided among the Trusts based upon the percentages set forth in Schedule
8.6.
SECTION 8.7 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 an Adjusted 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 8.7(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 8.7(b) were not in the
Agreement.
(c) The allocations set forth in Sections 8.7(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 8.7. 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 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 8.7(a) and (b)).
SECTION 8.8 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
27
<PAGE> 31
(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 for federal income tax purposes 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 8.8, 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).
(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 INVESTMENT PORTFOLIO AND UPREIT PORTFOLIO.
(a) Cash generated in each Fiscal Year from interest, original issue
discount, market discount, dividends, and other items of ordinary income from
the Investment Portfolio (other than the Fixed Income Portfolio) and the UPREIT
Portfolio and from items of capital gain allocated to the Company by the Issuer
Partnership on assets in the UPREIT Portfolio less (i) expenses related to the
administration of the Investment Portfolio (other than the Fixed Income
Portfolio) and the UPREIT Portfolio and (ii) Investment Portfolio and UPREIT
Portfolio Allocated Expenses, shall be distributed 80% to the Trusts, 1% to TMC
and 19% to the Other TMC Members. Notwithstanding the foregoing provisions of
this Section 9.1(a), so long as the UPREIT Portfolio includes any partnership
interest, the amount of cash to be distributed under this Section 9.1(a) in any
Fiscal Year with respect to such partnership interest shall not be less than the
amount of taxable income allocated to the Company by that partnership for such
fiscal year. Cash generated in any Fiscal Year from interest, original issue
discount, market discount dividends, and other items of ordinary income from
the Fixed Income Portfolio less (i) expenses related to the administration of
the Fixed Income Portfolio and (ii) Fixed Income Allocated Expenses shall be
allocated 78.5% to the Trusts, 1% to TMC and 20.5% to Other TMC Members.
(b) Cash, if any, generated from any taxable gain on sale, exchange,
extraordinary dividends, redemption, partial or complete liquidation or similar
transactions relating to any assets of the UPREIT Portfolio and corresponding to
items allocated to the Members under Sections 8.1(b)(iii)(x), (b)(iv)(x) and
(b)(v) (in each case less any related expense or deduction allocated under
Section 8.1(c)) shall be distributed to such Members in the order and in
proportion to the amounts of such taxable gain corresponding to items allocated
under Sections 8.1(b)(iii)(x), (b)(iv)(x) and (b)(v).
28
<PAGE> 32
(c) Cash, if any, generated from any taxable gain on sale, exchange,
extraordinary dividends, redemption, partial or complete liquidation or similar
transactions relating to any assets of the Investment Portfolio (less any
related expense or deduction) shall be distributed 80% to the Trusts, 1% to TMC
and 19% to the Other TMC Members.
SECTION 9.2 TMC SHARES.
(a) 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, 78% to TMC and 2% to the Other TMC Members.
(b) Cash, if any, generated from any taxable gain on sale, exchange,
extraordinary dividends, redemption, partial or complete liquidation or similar
transactions relating to the TMC Common and corresponding to items allocated to
the Members under Sections 8.2(b)(iii)(x) and (b)(iv) (in each case less any
related expense or deduction allocated under Section 8.2(c)) shall be
distributed to such Members in the order and in proportion to the amounts of
such taxable gain corresponding to items allocated under Sections 8.2(b)(iii)(x)
and (b)(iv).
(c) Cash, if any, generated from any taxable gain on sale, exchange,
extraordinary dividends, redemption, partial or complete liquidation or similar
transactions relating to the TMC Preferred and corresponding to items allocated
to the Members under Sections 8.3(b)(iii)(x) and (b)(iv) (in each case less any
related expense or deduction allocated under Section 8.3(c)) shall be
distributed to such Members in the order and in proportion to the amounts of
such taxable gain corresponding to items allocated under Sections 8.3(b)(iii)(x)
and (b)(iv).
SECTION 9.3 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
in accordance with the percentages set forth in Schedule 8.6.
SECTION 9.4 TMC MEMBERS AND TRUSTS.
(a) Distributions to the Other TMC Members pursuant to Sections 9.1
and 9.2 shall be divided among the Other TMC Members based upon the percentages
set forth in Schedule 8.6.
(b) Distributions to the Trusts pursuant to Sections 9.1(a) and
9.2(a) hereof shall be divided among the Trust Members as follows:
29
<PAGE> 33
(i) (x) cash distributed to the Trusts pursuant to Sections
9.1(a) and 9.2(a) in the first quarter of any Fiscal Year shall be
distributed first to Trust 2 until such time as the amount of cash
distributed to Trust 2 in such quarter under this Section 9.4(b)(i)(x)
is equal to $6,600,000, and (y) the remainder of the cash distributed
to the Trusts pursuant to Sections 9.1(a) and 9.2(a) in such quarter
shall be divided among the Trusts based upon the percentages set forth
in Schedule 8.6; and
(ii) (x) cash distributed to the Trusts pursuant to Sections
9.1(a) and 9.2(a) in the second quarter of any Fiscal Year shall be
distributed first to Trust 2 until such time as the amount of cash
distributed to Trust 2 in such Fiscal Year under Section 9.4(b)(i)(x)
and this Section 9.4(b)(ii)(x) is equal to $13,200,000; and (y) the
remainder of the cash distributed to the Trusts pursuant to Sections
9.1(a) and 9.2(a) in such quarter shall be divided among the Trusts
based upon the percentages set forth in Schedule 8.6; and
(iii) (x) cash distributed to the Trusts pursuant to Sections
9.1(a) and 9.2(a) in the third quarter of any Fiscal Year shall be
distributed first to Trust 2 until such time as the amount of cash
distributed to Trust 2 in such Fiscal Year under Sections 9.4(b)(i)(x),
and 9.4(b)(ii)(x) and this Section 9.4(b)(iii)(x) is equal to
$19,800,000; and (y) the remainder of the cash distributed to the
Trusts pursuant to Sections 9.1(a) and 9.2(a) in such quarter shall be
divided among the Trusts based upon the percentages set forth in
Schedule 8.6; and
(iv) (x) cash distributed to the Trusts pursuant to Sections
9.1(a) and 9.2(a) in the fourth quarter of any Fiscal Year shall be
distributed first to Trust 2 until such time as the amount of cash
distributed to Trust 2 in such Fiscal Year under Sections 9.4(b)(i)(x),
9.4(b)(ii)(x) and 9.4(b)(iii)(x) and this Section 9.4(b)(iv)(x) is
equal to $26,400,000; and (y) the remainder of the cash distributed to
the Trusts pursuant to Sections 9.1(a) and 9.2(a) in such quarter shall
be divided among the Trusts based upon the percentages set forth in
Schedule 8.6; and
(v) Notwithstanding the other provisions of this Section
9.4(b), (x) cash distributed to the Trusts pursuant to Sections 9.1(a)
and 9.2(a) in 1999 shall be distributed first to Trust 2 until such
time as the amount of cash distributed to Trust 2 in 1999 is equal to
$6,600,000 and (y) the remainder of the cash distributed to the Trusts
pursuant to Sections 9.1(a) and 9.2(a) in 1999 shall be divided among
the Trusts based on the percentages set forth in Schedule 8.6.
(c) Distributions to the Trusts pursuant to Sections 9.1(b), 9.1(c),
9.2(b), 9.2(c) and 9.3 shall be divided among the Trusts based upon the
percentages set forth in Schedule 8.6.
(d) The amounts to be distributed to the Members pursuant to
Sections 9.1 through 9.3 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
30
<PAGE> 34
their distributive shares of Company income and as current distributions made on
the last day of the Company's taxable year.
SECTION 9.5 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 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 9.6 OTHER DISTRIBUTIONS. Any other distributions of cash and
property shall be made only to the extent provided for by Mutual Agreement.
SECTION 9.7 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
31
<PAGE> 35
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 (or such later date as necessary due to the timing of the receipt
of similar information from partnerships the interests in which are
held by the Company in the UPREIT Portfolio):
(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;
(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.
32
<PAGE> 36
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.
(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 and state income and franchise tax purposes.
33
<PAGE> 37
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.
(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
34
<PAGE> 38
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.
35
<PAGE> 39
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 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) at any time there are no Members of the Company, unless the
Company is continued in accordance with the Delaware Act;
(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 and 9.4; 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 9.5
after satisfaction of the liabilities of the Company, whether by payment or the
making of reasonable provision for the payment thereof.
36
<PAGE> 40
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 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.
37
<PAGE> 41
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 or the beneficiaries of the Trusts
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 or beneficiary 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.
(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.
38
<PAGE> 42
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
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Peter F. Ziegler, Esq.
(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 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.
39
<PAGE> 43
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 remedies 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 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. 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 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
40
<PAGE> 44
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.
41
<PAGE> 45
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/ ROGER H. MOLVAR
----------------------------------------
Name: Roger H. Molvar
Title: Senior Vice President and Controller
Fortification Holdings Corporation,
a Delaware corporation
By: /s/ WILLIAM A. NIESE
----------------------------------------
Name: William A. Niese
Title: President
Wick Holdings Corporation,
a Delaware corporation
By: /s/ WILLIAM A. NIESE
----------------------------------------
Name: William A. Niese
Title: President
LLC Agreement
<PAGE> 46
Eagle New Media Investments, LLC,
a Delaware limited liability company
By: The Times Mirror Company, its Manager
By: /s/ ROGER H. MOLVAR
------------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
and Controller
Eagle Publishing Investments, LLC,
a Delaware limited liability company
By: The Times Mirror Company, its Manager
By: /s/ ROGER H. MOLVAR
------------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
and Controller
<PAGE> 47
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
LLC Agreement
<PAGE> 48
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
LLC Agreement
<PAGE> 1
EXHIBIT 10.2
================================================================================
CONTRIBUTION AGREEMENT
Among
The Times Mirror Company,
Fortification Holdings Corporation,
Wick Holdings Corporation,
Eagle New Media Investments, LLC,
Eagle Publishing Investments, LLC,
Chandler Trust No. 1,
Chandler Trust No. 2,
and
TMCT II, LLC
Dated September 3, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <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...................3
3.3 Contribution of OP Preferred Assets by TMC.....................3
3.4 Contribution of Cash Asset by Eagle 1,
Eagle 2, Fortification and Wick................................3
3.5 Securities Assets Contributed Ex-Dividend......................3
3.6 No Liabilities.................................................3
4. INSTRUMENTS OF CONVEYANCE AND TRANSFER......................................3
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE TMC MEMBERS..................4
5.1 Organization, Corporate Power and Authority....................4
5.2 Authorization of Agreements....................................5
5.3 No Conflicts...................................................5
5.4 Effect of Agreement............................................5
5.5 Title to OP Preferred Assets...................................5
5.6 Commissions....................................................5
5.7 Investment Company.............................................6
5.8 No Registration; Investment Intent.............................6
5.9 Taxes........................................................ 6
6. REPRESENTATIONS AND WARRANTIES OF TRUST 1...................................7
6.1 Authorization of Agreement.....................................7
6.2 No Conflicts...................................................7
6.3 Effect of Agreement............................................7
6.4 Title to Trust 1's Securities Assets...........................7
6.5 Commissions....................................................8
6.6 Investment Company.............................................8
6.7 No Registration; Investment Intent.............................8
6.8 Agreements with TMCT Ventures, L.P.............................8
7. REPRESENTATIONS AND WARRANTIES OF TRUST 2...................................9
7.1 Authorization of Agreement.....................................9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
7.2 No Conflicts...................................................9
7.3 Effect of Agreement............................................9
7.4 Title to Trust 2's Securities Assets..........................10
7.5 Commissions...................................................10
7.6 Investment Company............................................10
7.7 No Registration; Investment Intent............................10
7.8 Agreements with TMCT Ventures, L.P............................11
8. REPRESENTATIONS AND WARRANTIES OF LLC......................................11
8.1 Organization, Corporate Power and Authority...................11
8.2 Authorization of Agreements...................................11
8.3 No Conflicts..................................................11
8.4 Effect of Agreement...........................................11
8.5 Commissions...................................................12
8.6 Agreements with TMCT Ventures, L.P............................12
8.7 Actions Since Formation.......................................12
9. CONDITIONS.................................................................12
9.1 Conditions to Obligations of All the Parties..................12
9.1.1 Execution of the LLC Agreement..................12
9.2 Additional Conditions to Obligations of the TMC Members.......12
9.2.1 Opinion of Latham & Watkins.....................12
9.2.2 Board Approval..................................12
9.3 Additional Conditions to Obligations of the Trusts............13
9.3.1 Opinion of Gibson, Dunn & Crutcher LLP..........13
9.3.2 Opinion of Richards, Layton & Finger............13
10. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS.............................13
10.1 Survival of Representations..................................13
10.2 Agreements to Indemnify......................................13
10.2.1 Trust 1 Indemnity..............................13
10.2.2 Trust 2 Indemnity..............................14
10.2.3 TMC Indemnity..................................14
10.2.4 LLC Indemnity..................................14
10.2.5 Indemnification Threshold......................14
10.2.6 Subrogation....................................14
10.3 Conditions of Indemnification................................14
10.3.1 Notice.........................................14
10.3.2 Failure to Assume Defense......................15
10.3.3 Claim Adverse to Indemnifying Party............15
10.3.4 Cooperation....................................15
10.4 Damages......................................................15
11. COVENANTS.................................................................16
11.1 Cooperation..................................................16
11.2 Tax Cooperation..............................................16
11.3 Exchange of Series C-1 and Series C-2 Preferred Stock........16
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
11.4 Tax Status...................................................16
11.5 Actions With Respect to OP Preferred Assets..................17
12. MISCELLANEOUS.............................................................17
12.1 Waivers......................................................17
12.2 Entire Agreement.............................................17
12.3 Binding Effect, Benefits.....................................17
12.4 Assignability................................................17
12.5 Notices......................................................18
12.6 Governing Law; Jurisdiction..................................19
12.7 Attorneys' Fees..............................................19
12.8 Rules of Construction........................................19
12.8.1 Headings.......................................19
12.8.2 Tense and Case.................................19
12.8.3 Severability...................................19
12.9 Counterparts.................................................19
12.10 Expenses....................................................20
12.11 Construction of Agreement...................................20
12.12 Consent to Jurisdiction and Forum Selection.................20
</TABLE>
iii
<PAGE> 5
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (together with the exhibits and schedules
hereto, the "Agreement") is entered into as of September 3, 1999 by and among:
(A) (i) The Times Mirror Company, a Delaware corporation ("TMC");
(ii) Eagle New Media Investments, LLC, a Delaware limited
liability company ("Eagle 1"); (iii) Eagle Publishing
Investments, LLC, a Delaware limited liability company ("Eagle
2"); (iv) Fortification Holdings Corporation, a Delaware
corporation ("Fortification"); (v) Wick Holdings Corporation, a
Delaware corporation ("Wick" and collectively with TMC, Eagle 1,
Eagle 2 and Fortification, the "TMC Members");
(B) (i) Chandler Trust No. 1 ("Trust 1"); and (ii) Chandler Trust
No. 2 ("Trust 2," and together with Trust 1, the "Trusts"); and
(C) TMCT II, LLC, a Delaware limited liability company ("LLC"),
with reference to the following facts:
RECITALS
A. The Trusts and the TMC Members intend to enter into the Amended
and Restated Limited Liability Company Agreement of LLC substantially in the
form attached hereto as Exhibit A (the "LLC Agreement").
B. Under the LLC Agreement, (i) TMC is obligated to contribute to
LLC, as a capital contribution, assets referred to herein as the OP Preferred
Assets and (ii) Eagle 1, Eagle 2, Fortification and Wick are obligated to
contribute to LLC, as a capital contribution, cash and cash equivalents in the
amount of $233,251,757, $400,000,000, $1,000,000 and $1,000,000, respectively
(collectively, 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.
D. The parties wish to enter into this Agreement to govern certain
matters with respect to the foregoing contributions.
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:
1
<PAGE> 6
"Assets" shall mean the Cash Asset, the OP Preferred 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.
"Encumbrances" 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.
"Indemnifying Party" shall mean, with respect to any Losses, the party
from whom indemnity is being sought hereunder.
"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.
"OP Preferred Assets" shall mean the Cumulative Redeemable Preferred
Units described on Schedule 3.3 hereof.
"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 9
of this Agreement, the closing (the "Closing") of the contribution of assets to
LLC contemplated hereby shall take place at the offices of Gibson, Dunn &
Crutcher LLP, 333 S. Grand Avenue, Los Angeles, California 90071, at 9:00 a.m.
on September 3, 1999, or such other place, time and date as TMC and the Trusts
may mutually select.
2
<PAGE> 7
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"). The parties agree that, as of the Closing,
Trust 1 shall be deemed to have contributed the Trust 1 Securities Assets to the
capital of LLC in satisfaction of its capital contribution obligations under the
LLC Agreement.
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 3.2
(the "Trust 2 Securities Assets"). The parties agree that, as of the Closing,
Trust 2 shall be deemed to have contributed the Trust 2 Securities Assets to
the capital of LLC in satisfaction of its capital contribution obligations
under the LLC Agreement.
3.3 CONTRIBUTION OF OP PREFERRED ASSETS BY TMC. Subject to the terms
and conditions of this Agreement, at the Closing, TMC shall convey, transfer,
assign and deliver to LLC, as a contribution, all of TMC's right, title and
interest in and to the OP Preferred Assets set forth on Schedule 3.3 and all of
its rights under any contribution agreement, partnership agreement, registration
rights agreement, charter and other document related to TMC's acquisition and
ownership of such OP Preferred Assets, true and correct copies of which have
been delivered to LLC (collectively, the "OP Preferred Agreements"). The
parties agree that, as of the Closing, the amount of the OP Preferred Assets
contributed by TMC shall be as set forth on Schedule 3.3, and TMC shall be
deemed to have contributed the sum of $600,000,000.00, in the aggregate, to the
capital of LLC in satisfaction of its capital contribution obligations under
the LLC Agreement.
3.4 CONTRIBUTION OF CASH ASSET BY EAGLE 1, EAGLE 2, FORTIFICATION
AND WICK.
Subject to the terms and conditions of this Agreement, at the Closing,
each of Eagle 1, Eagle 2, Fortification and Wick shall contribute, convey,
transfer, assign and deliver to LLC its respective portion of the Cash Asset.
The parties agree that, as of the Closing, each of Eagle 1, Eagle 2,
Fortification and Wick shall be deemed to have contributed $233,251,757,
$400,000,000, $1,000,000 and $1,000,000 in cash or cash equivalents,
respectively to the capital of LLC in satisfaction of their respective capital
contribution obligations under the LLC Agreement.
3.5 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 with a record date prior to the Closing shall belong and be paid to Trust
1 and Trust 2, respectively, and not to LLC.
3.6 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. INSTRUMENTS OF CONVEYANCE AND TRANSFER.
3
<PAGE> 8
At the Closing, the Trusts, TMC, Eagle 1, Eagle 2, Fortification and
Wick shall execute and deliver to LLC any and all such documents as may
reasonably requested by any other party in order to effect the transfers and
otherwise carry out the transactions contemplated herein, including without
limitation, stock powers executed in blank with respect to the OP Preferred
Assets and the Securities Assets contributed.
5. 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:
5.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. Each of the TMC
Members is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of its state of organization, has
all requisite power and authority, corporate or other, 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 or a foreign
limited liability company in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect upon the TMC Members, taken as a
whole. All of the outstanding stock of Fortification and Wick is owned, directly
or indirectly, beneficially and of record, by TMC.
5.2 AUTHORIZATION OF AGREEMENTS. Each of the TMC Members has all
requisite corporate or limited liability company power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby and all corporate or limited liability company
action other than approval of the Board of Directors of TMC necessary for such
execution, delivery, performance and consummation has been duly taken.
4
<PAGE> 9
5.3 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, certificate of formation, bylaws, or operating 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 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 the TMC Members, taken as a whole).
5.4 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.
5.5 TITLE TO OP PREFERRED ASSETS. Upon the Closing, LLC shall have
good and valid title to all of the OP Preferred Assets, free and clear of all
Encumbrances and the benefit of any and all representations, warranties,
covenants and agreements relating thereto as provided in the OP Preferred
Agreements and any assets received in respect thereof, as the contributor and
holder thereunder and such representations, warranties, covenants and agreements
are assignable to LLC.
5.6 COMMISSIONS. 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, except as disclosed to the other parties hereto.
5.7 INVESTMENT COMPANY. None of the TMC Members is an investment
company as such term is defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"). For purposes of Section 3(c)(1) of the
Investment Company Act, LLC has no more than the number of beneficial holders of
its outstanding securities as are set forth on Schedule 5.7 hereto on account of
the TMC Members.
5.8 NO REGISTRATION; INVESTMENT INTENT. (i) Each of the TMC Members
understands that its interest in the LLC is 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 its interest 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) each of the TMC Members agrees that it
shall not sell, transfer, assign, pledge or otherwise dispose of
5
<PAGE> 10
its interest in the LLC unless pursuant to Article V of the LLC Agreement and
(a) pursuant to an effective registration statement or (b) the TMC Member
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) each of the TMC Members understands that it
may be deemed an "affiliate" of LLC, as such term is used for purposes of Rule
144 under the Act, in which case any disposition of its interest in the LLC by
such TMC Member may be subject to the requirements of such rules; (iv) each of
the TMC Members is acquiring its interest 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) each of the TMC Members acknowledges that
it has had the right to ask questions of and receive answers from the parties
hereto and their officers and representatives and to obtain such information
concerning the parties hereto and the transactions contemplated hereby as each
of the TMC Members deems necessary prior to making an investment decision with
respect to the transactions contemplated hereby, including with respect to the
interest in the LLC; (vi) each of the TMC Members has such knowledge and
experience in financial and business matters so as to enable such TMC Member to
evaluate the merits and risks of an investment in the interest in the LLC; (vii)
each of the TMC Members is able to bear the economic risk of the investment in
the interest in the LLC.
5.9 TAXES. Each of the TMC Members has filed all required franchise
tax returns, if any, and paid all required taxes, if any, under the California
Revenue & Taxation Code, subject to additional amounts that may have to be paid
as a result of Federal audit adjustments.
6. 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:
6.1 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.
6
<PAGE> 11
6.2 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).
6.3 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 enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general equitable principles.
6.4 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.
6.5 COMMISSIONS. 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, except as disclosed
to the other parties hereto.
6.6 INVESTMENT COMPANY. Trust 1 is not an investment company as such
term is defined in the Investment Company Act. For purposes of Section 3(c)(1)
of the Investment Company Act, LLC has no more than the number of beneficial
holders of its outstanding securities set forth on Schedule 6.6 hereto on
account of Trust 1.
6.7 NO REGISTRATION; INVESTMENT INTENT. (i) Trust 1 understands that
the interest in the LLC is being offered and sold without registration under 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 interest 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 interest in the LLC unless
pursuant to Article V of the LLC Agreement and (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 LLC, as such term is used
for purposes of Rule 144 under the Act, in which case any disposition of its
interest in the LLC by Trust 1 may be subject to the requirements of such rules;
(iv) Trust 1 is acquiring the interest 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
7
<PAGE> 12
questions of and receive answers from the parties hereto and their officers and
representatives and to obtain such information concerning the parties hereto 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 interest in the LLC; (vi) 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 interest in the LLC;
(vii) Trust 1 is able to bear the economic risk of the investment in the
interest in the LLC; and (viii) Trust 1 is domiciled in the State of California,
and to the extent it and its subtrusts file income tax returns, each files
income tax returns as a person or entity that is domiciled in that State.
6.8 AGREEMENTS WITH TMCT VENTURES, L.P.
All agreements between (i) Trust 1 and any of its affiliates, on the one
hand, and (ii) TMCT Ventures, L.P., a Delaware limited partnership, or any of
the partners of such partnership, on the other hand, have been disclosed to each
of the parties hereto in writing.
7. 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:
7.1 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 herein to be untrue or incorrect or cause this
Agreement to be unenforceable against Trust 2; (ii) each Trustee of Trust 2 has
accepted appointment as a Trustee of Trust 2 under the Declaration relating to
Trust 2, 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.
7.2 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 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)
8
<PAGE> 13
immediately above, such breaches, violations, defaults, terminations,
forfeitures or accelerations as would not have a Material Adverse Effect upon
Trust 2).
7.3 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.
7.4 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.
7.5 COMMISSIONS. 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, except as disclosed
to the other parties hereto.
7.6 INVESTMENT COMPANY. Trust 2 is not an investment company as such
term is defined in the Investment Company Act. For purposes of Section 3(c)(1)
of the Investment Company Act, LLC has no more than the number of beneficial
holders of its outstanding securities set forth on Schedule 7.6 hereto on
account of Trust 2.
7.7 NO REGISTRATION; INVESTMENT INTENT. (i) Trust 2 understands that
the interest in the LLC is being offered and sold without registration under 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 interest in the LLC unless
pursuant to Article V of the LLC Agreement and (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
other disposition is exempt from registration under the Act; (iii) Trust 2
understands that it may be deemed an "affiliate" of LLC, as such term is used
for purposes of Rule 144 under the Act, in which case any disposition of its
interest in the LLC by Trust 2 may be subject to the requirements of such rules;
(iv) Trust 2 is acquiring the interest 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 their
officers and representatives to obtain such information concerning the parties
hereto 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 interest in the LLC; (vi) 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 interest in the LLC;
(vii) Trust 2 is able to bear the economic risk of the investment in the
interest in the LLC; and (viii) Trust 2 is domiciled in the State of California,
and to the extent it and its subtrusts file income tax returns,
9
<PAGE> 14
each files income tax returns as a person or entity that is domiciled in that
State.
7.8 AGREEMENTS WITH TMCT VENTURES, L.P.
All agreements between (i) Trust 2 and any of its affiliates, on the one
hand, and (ii) TMCT Ventures, L.P., a Delaware limited partnership, or any of
the partners of such partnership, on the other hand, have been disclosed to each
of the parties hereto in writing.
8. 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:
8.1 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.
8.2 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.
8.3 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).
8.4 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.
8.5 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, except as
disclosed to the other parties hereto.
10
<PAGE> 15
8.6 AGREEMENTS WITH TMCT VENTURES, L.P. All agreements between (i)
LLC, on the one hand, and (ii) TMCT Ventures, L.P., a Delaware limited
partnership, or any of the partners of such partnership, on the other hand, have
been disclosed to each of the parties hereto in writing.
8.7 ACTIONS SINCE FORMATION. LLC has provided the TMC Members and
the Trusts with true, correct and complete copies of its Certificate of
Formation and Limited Liability Company Agreement, and has advised the TMC
Members and the Trusts of all actions it has taken since its formation.
9. CONDITIONS.
9.1 CONDITIONS TO OBLIGATIONS OF ALL 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:
9.1.1 EXECUTION OF THE LLC AGREEMENT. The LLC Agreement shall
have been executed and delivered by all the parties hereto.
9.2 ADDITIONAL 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:
9.2.1 OPINION OF LATHAM & WATKINS. The TMC Members shall have
received an opinion of Latham & Watkins, counsel to the Trusts, substantially in
the form previously provided to Latham & Watkins.
9.2.2 BOARD APPROVAL. The Board of Directors of TMC shall have
approved this Agreement and the LLC 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.
9.3 ADDITIONAL 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 conditions:
9.3.1 OPINION OF GIBSON, DUNN & CRUTCHER LLP. 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.
9.3.2 OPINION OF RICHARDS, LAYTON & FINGER. The Trusts shall
have received an opinion of Richards, Layton & Finger, counsel to the TMC
Members, substantially in the form previously provided to Richards, Layton &
Finger.
11
<PAGE> 16
10. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS.
10.1 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 10. The representations and warranties of TMC, the Trusts and
LLC set forth in this Agreement, and their indemnity obligations under this
Article 10, 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 6.4 and 7.4) and by TMC relating to the OP Preferred Assets
(including the representations and warranties regarding title set forth in
Section 5.5) shall continue as long as LLC owns any of the Securities Assets or
the OP Preferred Assets, respectively, and thereafter to the extent that LLC may
have any liabilities or potential liability relating thereto.
10.2 AGREEMENTS TO INDEMNIFY.
10.2.1 TRUST 1 INDEMNITY. Subject to the terms and conditions
of this Section 10, 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.
10.2.2 TRUST 2 INDEMNITY. Subject to the terms and conditions
of this Section 10, 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, trustees and agents
resulting from a breach of any representation, warranty or covenant of Trust 2
made in this Agreement.
10.2.3 TMC INDEMNITY. Subject to the terms and conditions of
this Section 10, 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 a breach of any representation, warranty or covenant of
the TMC Members made in this Agreement.
10.2.4 LLC INDEMNITY. Subject to the terms and conditions of
this Section 10, 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.
10.2.5 INDEMNIFICATION THRESHOLD. No claim for indemnification
will be made by any party hereunder unless the aggregate of all Losses incurred
by such party otherwise
12
<PAGE> 17
indemnified against hereunder exceeds $250,000 and only to the extent of any
such Losses in excess of $250,000.
10.2.6 SUBROGATION. If the Indemnifying Party makes any payment
under this Section 10 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 Indemnified Party or any of its affiliates or any of its or
its affiliates' officers, directors, agents or employees.
10.3 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 10.2 shall be subject to the following terms and conditions:
10.3.1 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 10 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.
10.3.2 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
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.
10.3.3 CLAIM ADVERSE TO INDEMNIFYING PARTY. Notwithstanding
anything to the contrary in this Section 10.3, 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
13
<PAGE> 18
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.
10.3.4 COOPERATION. In connection with any such
indemnification, the Indemnified Party will cooperate in all reasonable requests
of the Indemnifying Party.
10.4 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. 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. Notwithstanding the foregoing, any rights
under the OP Preferred Agreements that are assigned to LLC and the assignment of
such rights, are not subject to this Section 10.4 hereto.
11. COVENANTS.
11.1 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).
11.2 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 transactions contemplated hereby.
Any information obtained pursuant to this Section 11.2 relating to taxes shall
be kept confidential by the other parties. The parties hereto intend that the
transactions contemplated hereby be treated as contributions to the LLC
qualifying for nonrecognition of gain or loss under Section 721 of the Internal
Revenue Code of 1986, as amended, and each of the parties hereto agrees to
report the transactions contemplated hereby for federal and state income tax
purposes in a manner consistent with such characterization.
11.3 EXCHANGE OF SERIES C-1 AND SERIES C-2 PREFERRED STOCK. Following
the Closing, TMC shall use its reasonable best efforts to obtain a waiver from
the New York Stock Exchange in order to exchange, without obtaining the approval
of the stockholders of TMC, its Series C-1 Preferred Stock and its Series C-2
Preferred Stock contributed to LLC by Trust 2 for a new series of TMC preferred
stock to be issued to LLC, on the terms attached hereto on Schedule 11.3. If
such waiver is obtained, TMC shall use its reasonable best efforts to effect
such exchange.
14
<PAGE> 19
11.4 TAX STATUS. None of the Trusts or the TMC Members shall take any
action with respect to, in connection with or relating to the LLC to jeopardize
its status as an investment partnership under Section 731(c) of the Internal
Revenue Code of 1986, as amended.
11.5 ACTIONS WITH RESPECT TO OP PREFERRED ASSETS. TMC agrees that, it
will take such actions under the OP Preferred Agreements and any assets received
in respect thereof, as directed by the Investment Committee in its sole
discretion, to the extent the LLC is delayed, impaired or prevented from doing
so.
12. MISCELLANEOUS.
12.1 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. 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. No variation, 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.
12.2 ENTIRE AGREEMENT. This Agreement, the LLC Agreement and the
agreements to which LLC and TMC are parties with respect to the contribution of
the OP Preferred Assets 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.
12.3 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.
12.4 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.
12.5 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
15
<PAGE> 20
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 12.5):
(a) If to LLC: TMCT II, LLC
c/o The Times Mirror Company
Managing Member
Times Mirror Square
Los Angeles, CA 90053
Attention: General Counsel
(b) If to TMC: The Times Mirror Company
Times Mirror Square
Los Angeles, California 90053
Attention: General Counsel
With a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Peter F. Ziegler, Esq.
(c) If to the Trusts: Chandler Trust No. 1 and/or
Chandler Trust No. 2
350 West Colorado Boulevard, Suite 230
Pasadena, CA 91105
Attention: Warren B. Williamson, Trustee
and
William Stinehart, Jr., Trustee
Gibson, Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, California 90067-3026
With a copy to: Latham & Watkins
633 West Fifth Street
Los Angeles, California 90071-2007
Attention: Edward Sonnenschein, Jr., Esq.
12.6 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.
12.7 ATTORNEYS' FEES. If any party to this Agreement shall bring any
action, suit, counterclaim, appeal or arbitration for any relief against another
party to enforce the terms hereof
16
<PAGE> 21
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 another party's payment of the sums allegedly due
or performance of the covenants allegedly breached, or who obtains substantially
the relief sought by it.
12.8 RULES OF CONSTRUCTION.
12.8.1 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.
12.8.2 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.
12.8.3 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.
12.9 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.
12.10 EXPENSES. Except as otherwise set forth herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
12.11 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.
12.12 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 personal jurisdiction and venue over
each of them for the purpose of litigating any dispute, controversy, or
proceeding arising out of or
17
<PAGE> 22
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.
18
<PAGE> 23
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/ ROGER H. MOLVAR
-------------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
and Controller
EAGLE NEW MEDIA INVESTMENTS, LLC
By: The Times Mirror Company, Manager
By: /s/ ROGER H. MOLVAR
--------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
and Controller
EAGLE PUBLISHING INVESTMENTS, LLC
By: The Times Mirror Company, Manager
By: /s/ ROGER H. MOLVAR
--------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
and Controller
FORTIFICATION HOLDINGS CORPORATION
By: /s/ WILLIAM A. NIESE
-------------------------------------
Name: William A. Niese
Title: President
WICK HOLDINGS CORPORATION
By: /s/ WILLIAM A. NIESE
-------------------------------------
Name: William A. Niese
Title: President
19
<PAGE> 24
TMCT II, LLC
By: THE TIMES MIRROR COMPANY, its
Managing Member
By: /s/ ROGER H. MOLVAR
-------------------------------------
Name: Roger H. Molvar
Title: Senior Vice President
and Controller
20
<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
21
<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
22
<PAGE> 1
EXHIBIT 99.1
For Immediate Release
Times Mirror Announces Strategic Actions
LOS ANGELES, CALIFORNIA, September 3, 1999 -- The Times Mirror Company
announced today a series of strategic actions, including the completion of a
transaction that significantly changes the capitalization of the company. The
combined effect of these actions will be to clearly focus the company on its
core strengths in newspapers, its Jeppesen Sanderson flight information
subsidiary, and magazines, and to improve its capital structure by effectively
retiring preferred stock and accelerating share retirement.
The strategic actions include:
- A decision to sell AchieveGlobal, a professional training company;
Allen Communication, an interactive software and training courseware
developer; and StayWell, a health improvement information company.
Times Mirror will now concentrate its professional information
resources on the expansion of Jeppesen Sanderson, one of its most
profitable companies.
- A decision to sell the properties of The Sporting News, including
sportingnews.com, one of the major sports sites on the Internet. Times
Mirror has concluded that The Sporting News must now compete in an
environment in which sports-related print, television and Internet
properties are increasingly linked together under common ownership.
The sale will allow Times Mirror Magazines to focus resources on its
19 other magazines.
- Completion of a transaction with Times Mirror's largest shareholders,
the Chandler Trusts, in which Times Mirror, including its affiliates,
and the Chandler Trusts each contributed assets worth $1.235 billion
to TMCT II, LLC ("TMCT"), a limited liability company formed by the
Company and the Trusts. The transaction will, for financial reporting
purposes, reduce the Company's outstanding common stock by
approximately
(more)
<PAGE> 2
12.4 million shares, and reduce the Company's outstanding Series C
preferred stock by approximately 501,000 shares. These reductions will
result in a decrease, for financial reporting purposes, in preferred
dividend requirements by 63 percent from $21.7 million to $8.1 million
annually.
"The anticipated sales will result in a highly focused company
building on our core strengths in newspapers, Jeppesen Sanderson, and
magazines," said Mark H. Willes, Times Mirror chairman, president and chief
executive officer. "The anticipated cumulative effect of all these actions, and
in particular, the accelerated share retirement for financial reporting
purposes, will be an increase in next year's earnings per share growth rate to
the mid-teen levels. We expect earnings per share growth will return to a
normalized rate in 2001."
"Over the past four years, we have focused on reinventing Times Mirror
to significantly improve our financial performance and have divested companies
that were not strategically aligned with our core businesses. At the same time,
we have invested about $580 million in new businesses to strengthen and grow our
core base. After these transactions, we will have substantial capacity and cash
flow to seek out growth opportunities and continue to invest in our businesses.
"This second transaction with the Chandler Trusts accomplishes several
important objectives. The main objective, similar to the first transaction
completed in 1997, is to maximize the benefits of our stock purchase plan in a
manner that will not reduce the float and liquidity for our public shareholders,
and will not indirectly increase the voting or ownership interests of the
Chandler Trusts. This transaction allows the company to retire, for financial
reporting purposes, a portion of the company stock held by the Trusts. Since we
initiated our active stock purchase program, a total of $2.3 billion has been
transferred to public shareholders via common share purchases and we have, for
financial reporting purposes, retired common and preferred shares valued at $1.4
billion in the two transactions with the Chandler Family, maintaining our
historic balance of public and family ownership."
The company also announced that Thomas Unterman, Times Mirror
executive vice president and chief financial officer, will become a principal of
the general partner of TMCT Ventures, an investment fund partnership created to
invest up to $500 million of the contributed funds in private
2
<PAGE> 3
equity transactions. Unterman will continue as Times Mirror's CFO until the end
of 1999, and will have a continuing advisory relationship with Times Mirror
thereafter, advising the company on financial, tax and other corporate issues.
"Tom has made invaluable contributions to Times Mirror," said Willes.
"He has played a key role in the reinvention of the company over these past few
years and we are delighted that we will continue to have the benefit of his
counsel in key areas. At the same time we recognize that his role as general
partner of TMCT Ventures presents a unique opportunity to apply his exceptional
talents to benefit both Times Mirror and the Chandler Trusts."
Focus on Jeppesen Sanderson
"Jeppesen Sanderson is the leader in aviation information worldwide
and its performance in the first half of 1999 has been outstanding. Our
investments in new services and technologies over the past four years are paying
off, with operating profit margin expansion and overall growth," said Willes.
"While we believe that AchieveGlobal, Allen Communication and StayWell have good
future growth opportunities, we decided that the time was right to sell these
businesses to allow us to focus our professional information resources entirely
on Jeppesen, which is growing at double digit rates and provides the greatest
opportunities in the future," said Willes.
Times Mirror said that the commercial aviation market has once again
entered a growth period. Since 1989, worldwide passenger traffic has increased a
total of 69 percent and air freight traffic a total of 84 percent.
Several factors are contributing to Jeppesen's strong growth in 1999:
- Traditional charting services -- Jeppesen's core product line -- is
outpacing the growth in this dynamic industry. Commercial airlines,
corporate and general aviation services are all contributing to the
increased demand.
- Data management services and document management services are
performing well.
- New product launches in software technologies, FlitePro software and
Flite Simulator, have been successful.
3
<PAGE> 4
Jeppesen's products and services include print and electronic flight
information services, consisting of computerized flight planning, aviation
information management, weather and navigation data, maintenance information,
pilot training systems and supplies. Jeppesen provides services to all U.S.
airlines and the majority of airlines worldwide. Headquartered in Englewood,
Colorado, Jeppesen was founded in 1934 by Captain Elrey B. Jeppesen, one of the
nation's first air mail pilots, and was acquired by Times Mirror in 1961.
Jeppesen employs about 1270 people with offices in the U.S. and around the
world, including the United Kingdom, Germany, Australia and China.
Transaction with the Chandler Trusts
Similar to the 1997 transaction with the Chandler Trusts, the current
transaction with the Chandler Trusts involves the formation of TMCT. The
Chandler Trusts contributed to TMCT a total of approximately 9.3 million shares
of Series A Common Stock, and 6.2 million shares of Series C Common Stock,
381,000 shares of Series C-1 Preferred, and 245,000 shares of Series C-2
Preferred, valued in the aggregate at $1.235 billion.
Times Mirror contributed to TMCT preferred interests in the operating
partnerships of various unrelated real estate investment trusts, with an
aggregate value of approximately $600 million. The preferred units were acquired
with proceeds from a new $550 million short-term bank line of credit and $50
million in commercial paper. In addition, a total of $635 million in cash or
cash equivalents was contributed to TMCT by Times Mirror and its affiliates,
Eagle New Media Investments, LLC, and Eagle Publishing Investments, LLC. All of
the cash contributed to TMCT will be used to purchase securities of unrelated
issuers, $500 million of which has been earmarked for private equity investments
by TMCT Ventures.
Times Mirror, the Eagle companies and the Chandler Trusts will share
in the cash flow, profits and losses from the assets in TMCT in accordance with
the allocation provisions set forth in the operating agreement for TMCT.
As a result of the transaction, of the shares contributed by the
Trusts, Times Mirror will effectively have retired, for financial reporting
purposes, 80 percent of the Series A and Series C Common Stock, or a total of
approximately 12.4 million shares, and 80 percent of the Series C-1 and Series
C-2 Preferred Stock, or approximately 501,000 shares.
4
<PAGE> 5
This will reduce the number of common shares outstanding based on the
number of shares outstanding as of August 31, 1999, by 17 percent, or 12.4
million for financial reporting purposes. After the transaction, common shares
outstanding for financial reporting purposes will be 59.5 million, of which 39.4
million will be Series A Common Stock and 20.1 million will be Series C Common
Stock. Prior to the transaction, based on outstanding shares on August 31, 1999,
total shares outstanding for financial reporting purposes were 72.0 million, of
which 46.9 million were Series A Common Stock and 25.1 million were Series C
Common Stock. In addition, for financial reporting purposes, the transaction
will effectively eliminate the dividend payments on all the retired shares.
Based on the current dividend rate, the transaction will effectively reduce
common dividends paid by $9.9 million per year and will effectively reduce
preferred dividends paid by $13.6 million per year.
After giving effect to the transaction, the Chandler Trusts will not
directly own any of the Series A Common Stock and will directly own 72 percent
of the Series C Common Stock, representing 65 percent of the total voting power
on all outstanding shares of common stock.
A special committee of independent directors reviewed the fairness of
this transaction to Times Mirror and unanimously recommended approval of the
transaction to the board of directors which unanimously approved it (with the
directors affiliated with the Chandler Trusts not participating).
Background on Times Mirror Companies
AchieveGlobal is a leading skills training and consulting services
company, serving more than 450 of the Fortune 500 companies. The company was
formed by the merger of Times Mirror's three separate training companies - Kaset
International, Learning International and Zenger Miller. AchieveGlobal has a
combined 80 years of experience in training and consulting worldwide. Areas of
specialization include sales performance, customer service, leadership skills
and organizational effectiveness. Headquartered in Tampa, Florida, the company
has about 740 employees.
Allen Communication, acquired in 1994, is one of the largest
developers of technology-based custom courseware in the country. Headquartered
in Salt Lake City, it employs 130 people.
5
<PAGE> 6
The StayWell Company is a premier provider of integrated health
education and behavior change programs serving large employers, managed care
organizations, American Red Cross and Canadian Red Cross, among others. StayWell
was formed when Times Mirror merged several prominent consumer health
businesses, including Mosby Consumer Health and Krames Communications.
Headquartered in San Bruno, California, the company employs about 420 people.
Times Mirror acquired The Sporting News in 1977. Headquartered in St.
Louis, The Sporting News is the country's oldest sports publication, debuting in
1886. In 1997, the magazine launched a dramatic redesign to strengthen its
position in the highly competitive sports field and has also developed one of
the leading sports sites on the Internet. The Sporting News employs 120 people
in its print and online operations.
Times Mirror has retained Goldman Sachs to handle the sale of
AchieveGlobal and Allen Communication, Salomon Smith Barney for the sale of
StayWell, and Donaldson, Lufkin, Jenrette for the sale of The Sporting News.
Background on Thomas Unterman
Thomas Unterman, 54, joined Times Mirror in 1992 as vice president and
general counsel and was promoted to senior vice president and chief financial
officer in 1995 and executive vice president in 1998. He is responsible for the
company's finance functions, including accounting, audit, strategic planning,
tax and investor relations. In addition, he oversees Times Mirror's legal
department, Times Mirror Resource Management Company, and Times Mirror's venture
capital investment program. His other responsibilities include coordinating the
company's information technology efforts and companywide support for new media
endeavors. He also oversees the management of Eagle New Media Investments, LLC
and Eagle Publishing Investments, LLC, Times Mirror's affiliates. He is a
director of Ticketmaster Online-CitySearch, Big Entertainment, Worldres and
Target Media Partners, as well as several charitable and community
organizations.
Prior to joining Times Mirror, Unterman was a partner in the Los
Angeles office of Morrison & Foerster where he specialized in corporate and
securities law. He began his career with Orrick, Herrington & Sutcliffe, a San
Francisco-based law firm, where he was a partner until 1986 when he left to
become a partner at Morrison & Foerster.
6
<PAGE> 7
He received his bachelor of arts degree from Princeton University and
his law degree from the University of Chicago.
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, The Hartford Courant, The Morning Call, The
(Stamford) Advocate and Greenwich Time. Jeppesen Sanderson is a leading provider
of print and electronic flight information services and Times Mirror Magazines
publishes leading consumer magazines, including Field & Stream, Popular Science,
GOLF Magazine and Outdoor Life. More information about Times Mirror is available
on the company's Web site, www.tm.com.
# # #
Press Information: Investor Information:
Martha H. Goldstein Jean M. Jarvis
(213) 237-3727 (213) 237-3955
- --------------------------------------------------------------------------------
Any forward-looking statements contained herein are subject to risk and
uncertainty. There can be no assurance that these future results will be
achieved. For example, there can be no assurances that the statements contained
herein with respect to expected growth in operating profit, earnings per share,
aviation markets or the expected sales of businesses, refinancing of amounts
borrowed, maintenance of credit ratings, investments in businesses, availability
of substantial resources and cash flows, and opportunities for growth will be
achieved. Readers are cautioned that the achievement of such expectations, 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 8 to the
consolidated financial statements included in the company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999.
7
