<PAGE> 1
As filed with the Securities and Exchange Commission on January 27, 1995
REGISTRATION NO. 33 -
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
TELE-COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Delaware 84-1260157
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
5619 DTC Parkway
Englewood, Colorado 80111-3000
(303) 267-5500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Stephen M. Brett, Esq.
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
(303) 267-5500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
<TABLE>
<S> <C>
Copies to: Copies to:
Robert W. Murray Jr., Esq. Eric M. Lerner, Esq.
Baker & Botts, L.L.P. Rosenman & Colin
885 Third Avenue 575 Madison Avenue
New York, New York 10022-4834 New York, New York 10022-2585
(212) 705-5000 (212) 940-8800
----------------
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [x]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class of Proposed maximum Proposed maximum Amount of
securities to be registered Amount to be offering price per Unit aggregate offering registration
Registered (1) price (2) fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
par value $1.00 per share 3,403,405 Shares $21.50 $73,173,208 $25,232.32
</TABLE>
(1) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(c) on the basis of the average of the high and low
prices of the Class A Common Stock, par value $1.00 per share, of
Tele-Communications, Inc. on January 24, 1995.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 27, 1995
PROSPECTUS 3,403,405 SHARES
Tele-Communications, Inc.
Class A Common Stock
($1.00 Par Value)
This Prospectus relates to 3,403,405 shares (the "Shares") of the
Class A Common Stock, par value $1.00 per share (the "Class A Common Stock"),
of Tele-Communications, Inc., a Delaware corporation (the "Company"), to be
offered and sold from time to time by Acclaim Entertainment, Inc., a Delaware
corporation ("Acclaim" or the "Selling Stockholder"). All of the Shares were
originally issued by the Company to the Selling Stockholder in a
privately-negotiated transaction. See "Selling Stockholder."
Shares of the Class A Common Stock and the Company's Class B Common
Stock, par value $1.00 per share (the "Class B Common Stock"), are traded on
the Nasdaq National Market under the symbols "TCOMA" and "TCOMB," respectively.
The Class A Common Stock and the Class B Common Stock are identical in all
respects, except that (i) each share of Class B Common Stock has ten votes per
share and each share of Class A Common Stock has one vote per share and (ii)
each share of Class B Common Stock is convertible, at the option of the holder,
into one share of Class A Common Stock. The Class A Common Stock is not
convertible into Class B Common Stock. See "Description of Capital Stock."
The Shares may be offered for sale and sold by the Selling Stockholder
from time to time in varying amounts, including in block transactions, on the
Nasdaq National Market at then prevailing prices or in private transactions at
prices and on terms to be determined at the time of sale. The Shares may be
sold by the Selling Stockholder directly, through an underwritten offering,
through agents designated from time to time or to or through broker-dealers
designated from time to time. To the extent required, the number of Shares to
be sold, the purchase price, the public offering price, if applicable, the name
of any such agent or broker-dealer, and any applicable commissions, discounts
or other items constituting compensation to such underwriters, agents or
broker-dealers with respect to a particular offering will be set forth in a
supplement or supplements to this Prospectus (each, a "Prospectus Supplement").
The aggregate proceeds to the Selling Stockholder from the sale of the Shares
so offered will be the purchase price of the Shares sold less (i) the aggregate
commissions, discounts and other compensation, if any, paid by the Selling
Stockholder to underwriters, agents or broker-dealers and (ii) certain other
expenses of the offering and sale of the Shares that will be the responsibility
of the Selling Stockholder. See "Selling Stockholder". The Selling
Stockholder may also sell all or a portion of the Shares pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), to the extent that such sales may be made in compliance with such Rule.
See "Plan of Distribution". The Company will not receive any proceeds from the
sale of the Shares. The Company knows of no selling arrangement between any
underwriter, agent or broker-dealer and the Selling Stockholder.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Selling Stockholder and any broker-dealers or agents that
participate with the Selling Stockholder in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any discount or commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The date of this Prospectus is January 27, 1995.
<PAGE> 3
The Company was incorporated in 1994 under the name "TCI/Liberty
Holding Company" for the purpose of combining the Company's predecessor,
Tele-Communications, Inc. (renamed "TCI Communications, Inc." and referred to
herein as "TCIC"), and Liberty Media Corporation ("Liberty"). On August 4,
1994, the mergers of TCIC and Liberty with separate wholly-owned subsidiaries
of the Company were consummated and each of TCIC and Liberty became
wholly-owned subsidiaries of the Company. In connection with such mergers, the
Company changed its name to Tele-Communications, Inc. and TCIC changed its name
to TCI Communications, Inc. Unless the context indicates otherwise, as used in
this Prospectus the term "Company" means, on and after August 4, 1994,
Tele-Communications, Inc. (formerly named "TCI/Liberty Holding Company") and,
before August 4, 1994, TCIC (formerly named "Tele-Communications, Inc."), and
their respective consolidated subsidiaries.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a registration statement on Form S-3 (together
with all amendments and exhibits, referred to as the "Registration Statement")
under the Securities Act, with respect to the Shares. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information pertaining to the Shares and the Company,
reference is made to the Registration Statement. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and
at Suite 1300, 7 World Trade Center, New York, New York 10048; and copies of
such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
CERTAIN CONSIDERATIONS
The Company incurred a net loss in each of the three fiscal years in
the period ended December 31, 1993, and losses from continuing operations in
the fiscal years ended December 31, 1993 and December 31, 1991. The Company had
net earnings for the nine-month periods ended September 30, 1994 and 1993.
Notwithstanding the losses it has incurred, the Company has been able to, and
expects to continue to be able to, satisfy its debt service and other
obligations as and when they become due. The Company's Operating Cash Flow
(operating income before depreciation, amortization and other non-cash credits
or charges) ($1,858 million, $1,637 million and $1,430 million for the years
ended December 31, 1993, 1992 and 1991, respectively, and $1,339 million and
$1,409 million for the nine-month periods ended September 30, 1994 and 1993,
respectively) has historically been sufficient to cover its interest expense
($731 million, $718 million and $826 million for the years ended December 31,
1993, 1992 and 1991, respectively, and $568 million and $549 million for the
nine-month periods ended September 30, 1994 and 1993, respectively). The
Company's interest coverage ratio for the years ended December 31, 1993, 1992
and 1991 was 254%, 228%, and 173%, respectively, and for the nine months ended
September 30, 1994 and 1993 was 236% and 257%, respectively. Operating Cash
Flow is a measure of value and borrowing capacity within the cable television
industry and is not intended to be a substitute for cash flows provided by
operating activities, a measure of performance prepared in accordance with
generally accepted accounting principles, and should not be relied upon as
such.
-2-
<PAGE> 4
THE COMPANY
The Company is a Delaware corporation with executive offices at Terrace
Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000; telephone (303)
267-5500.
The Company, through its subsidiaries and affiliates, is principally
engaged in the construction, acquisition, ownership and operation of cable
television systems and the provision of satellite-delivered video
entertainment, information and home shopping programming services to various
video distribution media, principally cable television systems. The Company
believes that, measured by the number of basic subscribers, it is the largest
provider of cable television services in the United States. The Company also
has investments in cable and telecommunications operations and television
programming in certain international markets as well as investments in
companies and joint ventures involved in developing and providing programming
for new television and telecommunications technologies.
SELLING STOCKHOLDER
All of the Shares being offered hereby were acquired by the Selling
Stockholder in accordance with the terms of an Exchange Agreement, dated as of
October 19, 1994 (the "Exchange Agreement"), among the Company, TCI GameCo
Holdings, Inc., a Colorado corporation and an indirect wholly owned subsidiary
of the Company, and Acclaim. A copy of the Exchange Agreement is filed as an
exhibit to the Registration Statement.
The Shares received by the Selling Stockholder constitute restricted
securities and cannot be offered or sold except pursuant to an effective
registration statement covering such offer and sale or pursuant to an
applicable exception from the registration requirements of the Securities Act.
Pursuant to the Exchange Agreement, the Company has filed the Registration
Statement (of which this Prospectus forms a part) under the Securities Act for
the purpose of permitting the Selling Stockholder to offer and sell the Shares,
in whole or in part and from time to time, under this Prospectus. The Company
is obligated to keep the Registration Statement effective for a period of up to
two years (or until all of the Shares are disposed of by the Selling
Stockholder, if earlier).
The Shares may be offered and sold in an underwritten offering (see
"Plan of Distribution"), in which case the Selling Stockholder shall have the
right to select the lead managing underwriter, whose selection shall be subject
to approval by the Company (which approval shall not be unreasonably withheld).
The Company is required to pay all expenses in connection with the registration
of the offer and sale of the Shares (including, without limitation, all
registration and filing fees incurred in connection the filing of this
Registration Statement with the Commission and state securities commissioners),
other than (i) discounts and commissions and transfer taxes attributable to the
sale of any of the Shares; (ii) in the case of any underwritten offering, fees
and disbursements of underwriters and underwriters counsel (other than fees and
expenses of such counsel incurred in connection the "blue sky" qualification of
any of the Shares); and (iii) fees and disbursements of counsel or of any
experts retained by Acclaim in connection with the registration of the offer
and sale of the Shares.
-3-
<PAGE> 5
The Company has agreed to indemnify Acclaim against certain
liabilities that may arise in connection with any offer and sale of the Shares,
including liabilities under the Securities Act, and to contribute to payments
that Acclaim may be required to make in respect thereof.
Neither the Company nor any of its affiliates has had within the past
three years any material relationship with Acclaim or any of its affiliates.
Pursuant to the Exchange Agreement, the Company acquired 4,348,795 shares of
Acclaim's common stock, par value $.02 per share ("Acclaim Common Stock"),
which, as of the date of this Prospectus, represented 9.79% of the issued and
outstanding shares of Acclaim Common Stock. The Company also has entered into a
joint venture with Acclaim to develop, acquire (by purchase or license), and
merchandize, and to sell, license, distribute and transmit, interactive
entertainment programming for distribution by electronic means principally to
or through telecommunications networks, including cable television systems.
The joint venture will seek to promote a standard for broadband network
interactive games to be incorporated into the next generation of set-top boxes.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 1,100,000,000 shares of Class A
Common Stock and 150,000,000 shares of Class B Common Stock. In addition, it is
authorized to issue up to 12,375,096 shares of Preferred Stock, par value $.01
per share ("Preferred Stock"), divided into 700,000 shares of Class A Preferred
Stock, par value $.01 per share ("Class A Preferred Stock"), 1,675,096 shares
of Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock, par
value $.01 per share ("Class B Preferred Stock"), and 10,000,000 shares of
Series Preferred Stock, par value $.01 per share (the "Series Preferred
Stock"). The following summary of certain provisions of the Company's Restated
Certificate of Incorporation and Bylaws does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all provisions of
such Restated Certificate of Incorporation and Bylaws, copies of which are
filed as exhibits to this Registration Statement.
COMMON STOCK
Each share of Class A Common Stock has one vote and each share of
Class B Common Stock has 10 votes per share. The Class A and Class B Common
Stock are otherwise identical in all respects, except that each share of Class
B Common Stock is convertible into one share of Class A Common Stock at the
option of the holder. A number of shares of Class A Common Stock equal to the
number of shares of Class B Common Stock outstanding from time to time are set
aside and reserved for issuance upon conversion of shares of Class B Common
Stock. The Class A Common Stock is not convertible into Class B Common Stock.
Subject to the preferential rights of holders of any then outstanding Preferred
Stock, the holders of the Class A and Class B Common Stock are entitled to
receive dividends when and as declared by the Board of Directors out of funds
legally available for such payment. Holders of Class A and Class B Common Stock
have no preemptive rights to purchase additional shares. Subject to the
preferential rights of holders of any then outstanding Preferred Stock, the
holders of Class A and Class B Common Stock are entitled to share ratably in
the assets of the Company available for distribution to stockholders in the
event of the Company's liquidation, dissolution or winding up.
The holders of the Class A and Class B Common Stock vote as one class
for the election of directors and have no cumulative voting rights in the
election of directors. The Company's Restated Certificate of Incorporation
-4-
<PAGE> 6
also provides that the Board of Directors be divided into three classes of
approximately equal size, with one class to be elected for a three-year term at
each annual meeting of stockholders.
The Restated Certificate of Incorporation may be amended or repealed
only upon a vote of the holders of 66 2/3% of the total voting power of the
outstanding Class A and Class B Common Stock and any then outstanding Preferred
Stock entitled to vote with the Class A and Class B Common Stock generally on
matters submitted to common stockholders for a vote (collectively "Voting
Stock"), voting as one class, and the Company's Bylaws may be amended only upon
the affirmative vote of at least 75% of the members of the Board of Directors,
or by a vote of holders of 66 2/3% of the total voting power of the outstanding
Voting Stock, voting as a single class. In addition, the Restated Certificate
of Incorporation provides that, subject to the rights of the holders of any
class or series of Preferred Stock, a vote of the holders of 66 2/3% of the
total voting power of the outstanding Voting Stock, voting as a single class,
is required to remove directors (who may be removed only for cause) and to
approve dissolution and certain mergers, consolidations, sales of assets and
similar transactions. As of the date of this Prospectus, the Class A and Class
B Common Stock and the Class C Preferred Stock (as defined below) constitute
the only "Voting Stock" of the Company.
CLASS PREFERRED STOCK
Class A Preferred Stock. The Company is authorized to issue 700,000
shares of Class A Preferred Stock, of which 592,798 were issued and outstanding
as of the date of this Prospectus and all of which were held by a wholly owned
subsidiary of the Company. The dividend, liquidation and redemption features of
the Class A Preferred Stock, each of which is discussed below, are determined
by reference to the liquidation value of the Class A Preferred Stock, which as
of any date of determination will be equal, on a per share basis, to the sum of
(i) $322.84, plus (ii) all dividends accrued on such share through the dividend
payment date on or immediately preceding such date of determination to the
extent not paid on or before such date, plus (iii), for purposes of determining
liquidation and redemption payments, all unpaid dividends accrued on the sum of
clauses (i) and (ii) above, to such date of determination.
The holders of Class A Preferred Stock are entitled to receive
preferential cumulative cash dividends when and as declared by the Board of
Directors out of unrestricted funds legally available therefor. Dividends
accrue cumulatively at an annual rate of 9 3/8% of the liquidation value per
share, whether or not such dividends are declared or funds are legally or
contractually available for payment of dividends. Dividends not paid on any
dividend payment date are added to the liquidation value on such date and
remain a part thereof until such dividends and all dividends accrued thereon
are paid in full.
Upon the dissolution, liquidation or winding up of the Company,
holders of Class A Preferred Stock will be entitled to receive from the assets
of the Company available for distribution to stockholders an amount in cash or
property or a combination thereof, per share, equal to the liquidation value,
and no more, in preference to any liquidating distribution to the holders of
Class A and Class B Common Stock.
The Class A Preferred Stock is subject to optional redemption at any
time by the Company, in whole or in part, and to mandatory redemption by the
Company on the twelfth anniversary of the issue date, in each case at a
redemption price per share equal to the liquidation value of the Class A
Preferred Stock.
Class B Preferred Stock. The Company is authorized to issue 1,675,096
shares of Class B Preferred Stock, all of which were issued and outstanding as
of the date of this Prospectus. The holders of Class B Preferred Stock are
entitled to receive preferential cumulative dividends, when and as declared by
the Board of Directors out of unrestricted funds legally available therefor.
Dividends accrue cumulatively (but without compounding) at an annual rate of 6%
of the stated liquidation value of $100 per share (the "Stated Liquidation
Value"), whether or not such dividends are declared or funds are legally
available for the payment of dividends. Accrued dividends are payable annually
and, in the sole discretion of the Board of Directors, may be declared and paid
in cash, in shares of Class
-5-
<PAGE> 7
A Common Stock or in any combination of the foregoing. Accrued dividends not
paid as provided above on any dividend payment date will accumulate and such
accumulated unpaid dividends may be declared and paid in cash, shares of Class
A Common Stock or any combination thereof at any time without reference to any
regular dividend payment date, to holders of record of Class B Preferred Stock
as of a special record date fixed by the Board of Directors.
Upon the liquidation, dissolution or winding up of the Company, the
holders of Class B Preferred Stock will be entitled to receive from the assets
of the Company available for distribution to stockholders an amount in cash or
property or a combination thereof, per share, equal to the Stated Liquidation
Value thereof, plus all accumulated and accrued but unpaid dividends thereon to
the date of payment, and no more, in preference to any liquidating distribution
to the holders of Class A and Class B Common Stock.
The Class B Preferred Stock is redeemable at any time at the option of
the Company, in whole or in part, for a redemption price per share payable in
cash equal to the Stated Liquidation Value thereof, plus all accumulated and
accrued but unpaid dividends thereon to and including the redemption date.
The Class B Preferred Stock is exchangeable at the option of the
Company in whole but not in part at any time for junior subordinated debt
securities of the Company ("Junior Exchange Notes"). If the Company exercises
its optional exchange right, each holder of outstanding shares of Class B
Preferred Stock will be entitled to receive in exchange therefor newly issued
Junior Exchange Notes of a series authorized and established for the purpose of
such exchange, the aggregate principal amount of which will be equal to the
aggregate Stated Liquidation Value of the shares of Class B Preferred Stock so
exchanged by such holder, plus all accumulated and accrued but unpaid dividends
thereon to and including the exchange date. The Junior Exchange Notes will
mature on the fifteenth anniversary of the date of issuance and will be subject
to earlier redemption at the option of the Company, in whole or in part, for a
redemption price equal to the principal amount thereof plus accrued but unpaid
interest. Interest will accrue, and be payable annually, on the principal
amount of the Junior Exchange Notes at a rate per annum to be determined prior
to issuance by adding a spread of 215 basis points to the "Fifteen Year
Treasury Rate" (as defined in the Indenture pursuant to which the Junior
Exchange Notes will be issued). Interest will accrue on overdue principal at
the same rate, but will not accrue on overdue interest.
SERIES PREFERRED STOCK
The Series Preferred Stock is issuable, from time to time, in one or
more series, with such designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof as shall be stated and expressed in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors. All
shares of any one series of the Series Preferred Stock are required to be alike
in every particular and all series are required to rank equally and be
identical in all respects, except insofar as they may vary with respect to
matters which the Board is expressly authorized by the Company's Restated
Certificate of Incorporation to determine in the resolution or resolutions
providing for the issue of any series of the Series Preferred Stock. No
assurance can be given that the terms of any future series of Series Preferred
Stock will not materially limit or qualify the rights of the holders of Class A
or Class B Common Stock in a manner that is different from or in addition to
the terms of any class or series of Preferred Stock that are outstanding on the
date of this Prospectus.
Convertible Preferred Stock, Series C. The Company is authorized to
issue 80,000 shares of Convertible Preferred Stock, Series C ("Series C
Preferred Stock"), of which 70,559 were issued and outstanding as of the date
of this Prospectus. Each share of Series C Preferred Stock is convertible, at
the option of the holder, into 100 shares of Class A Common Stock, subject to
anti-dilution adjustments. The dividend, liquidation and redemption features of
the Series C Preferred Stock, each of which is discussed below, are determined
by reference to the liquidation value of the Series C Preferred Stock, which as
of any date of determination is equal, on a per share basis, to the sum of (i)
$2,375, plus (ii) all dividends accrued on such share through the dividend
payment date on or
-6-
<PAGE> 8
immediately preceding such date of determination to the extent not paid on or
before such date, plus (iii), for purposes of determining liquidation and
redemption payments, all unpaid dividends accrued on the sums of clauses (i)
and (ii) above, to such date of determination. The holders of Series C
Preferred Stock are entitled to receive preferential cumulative cash dividends
out of funds legally available therefor. Dividends accrue cumulatively at an
annual rate of 5 1/2% of the liquidation value per share, whether or not such
dividends are declared or funds are legally or contractually available for
payment of dividends, except that if the Company fails to redeem shares of
Series C Preferred Stock required to be redeemed on a redemption date,
dividends will thereafter accrue cumulatively at an annual rate of 15% of the
liquidation value per share. Dividends not paid on any dividend payment date
will be added to the liquidation value on such date and remain a part thereof
until such dividends and all dividends accrued thereon are paid in full.
Dividends will accrue on unpaid dividends at the rate of 5 1/2% (15% under the
circumstances described above) per annum, unless such dividends remain unpaid
for two consecutive quarters in which event such rate will increase to 15% per
annum.
Upon the dissolution, liquidation or winding up of the Company,
holders of the Series C Preferred Stock will be entitled to receive from the
assets of the Company available for distribution to stockholders an amount in
cash, per share, equal to the liquidation value of the Series C Preferred
Stock, and no more, in preference to any liquidating distribution to the
holders of Class A and Class B Common Stock.
The Series C Preferred Stock is subject to optional redemption at any
time after the seventh anniversary of its issuance, in whole or in part, by the
Company at a redemption price per share equal to the then liquidation value of
the Series C Preferred Stock. Subject to the prior preferences and other rights
of any other class or series of Preferred Stock ranking senior to or on a
parity with the Series C Preferred Stock, the Series C Preferred Stock is
required to be redeemed by the Company at any time after such seventh
anniversary at the option of the holder, in whole or in part (provided that the
aggregate liquidation value of the shares to be redeemed is in excess of $1
million), in each case at a redemption price per share equal to the liquidation
value.
Redeemable Convertible Preferred Stock, Series E. The Company is
authorized to issue 400,000 shares of Redeemable Convertible Preferred Stock,
Series E ("Series E Preferred Stock") of which 246,402 were issued and
outstanding as of the date of this Prospectus and all of which were held by
wholly owned subsidiaries of the Company. At any time after the Company amends
its Restated Certificate of Incorporation to increase the number of authorized
shares of Class A Common Stock to a number that would permit the conversion of
all of the shares of Series E Preferred Stock then outstanding, the shares of
Series E Preferred Stock shall be convertible, at the option of the holder,
into Class A Common Stock at the rate of 1,000 shares of Class A Common Stock
for each share of Series E Preferred Stock, subject to anti-dilution
adjustments. The dividend, liquidation and redemption features of the Series E
Preferred Stock, each of which is discussed below, are determined by reference
to the liquidation value of the Series E Preferred Stock, which as of any date
of determination is equal, on a per share basis, to the sum of (i) $22,303,
plus (ii) all dividends accrued on such share through the dividend payment date
on or immediately preceding such date of determination to the extent not paid
on or before such date, plus (iii) for purposes of determining liquidation and
redemption payments, all unpaid dividends accrued on the sum of clauses (i) and
(ii) above, to such date of determination.
The holders of Series E Preferred Stock are entitled to receive
preferential cumulative cash dividends out of funds legally available therefor.
Dividends accrue cumulatively at an annual rate of 5% of the stated liquidation
value per share, whether or not such dividends are declared or funds are
legally available for payment of dividends. Dividends not paid on any dividend
payment date are added to the liquidation value on such date and remain a part
thereof until such dividends are paid.
Upon the dissolution, liquidation or winding up of the Company,
holders of the Series E Preferred Stock will be entitled to receive from the
assets of the Company available for distribution to stockholders an amount in
cash or property or a combination thereof, per share, equal to the liquidation
value of the Series E Preferred Stock, and no more, in preference to any
liquidating distribution to the holders of Class A and Class B Common Stock.
-7-
<PAGE> 9
The Series E Preferred Stock is subject to optional redemption by the
Company at any time, in whole or in part, at a redemption price, per share,
equal to the then liquidation value of the Series E Preferred Stock. The
Company may elect to pay the redemption price (or designated portion thereof)
of the shares of Series E Preferred Stock called for redemption by issuing to
the holder thereof, in respect of his shares to be redeemed, a number of shares
of Class A Common Stock equal to the aggregate redemption price (or designated
portion thereof) of such shares divided by the average of the last daily sales
prices of the Class A Common Stock for a specified period, subject to
adjustments described in the certificate of designations establishing the
Series E Preferred Stock.
Convertible Preferred Stock, Series D. The Company has entered into a
definitive merger agreement with TeleCable Corporation ("TeleCable") whereby
TeleCable will be merged with and into a wholly owned subsidiary of the Company
(the "TeleCable Merger"). The terms of the TeleCable Merger contemplate the
issuance to the former stockholders of TeleCable of one million shares of a new
series of Series Preferred Stock to be designated as "Convertible Preferred
Stock, Series D" (the "Series D Preferred Stock"), as partial consideration for
the proposed acquisition by the Company of TeleCable. If such series is
issued, the preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof are expected to be
as set forth below.
Each share of Series D Preferred Stock will be convertible, at the
option of the holder, into 10 shares of Class A Common Stock, subject to
anti-dilution adjustments. The dividend, liquidation and redemption features of
the Series D Preferred Stock, each of which is discussed below, will be
determined by reference to the liquidation value of the Series D Preferred
Stock, which as of any date of determination will equal, on a per share basis,
the sum of (i) $300, plus (ii) all dividends accrued on such share through the
dividend payment date on or immediately preceding such date of determination to
the extent not paid on or before such date, plus (iii) for purposes of
determining liquidation and redemption payments, all unpaid dividends accrued
on the sum of clauses (i) and (ii) above, to such date of determination.
The holders of Series D Preferred Stock will be entitled to receive
preferential cumulative cash dividends out of funds legally available therefor.
Dividends will accrue cumulatively at an annual rate of 5 1/2% of the
liquidation value per share, whether or not such dividends are declared or
funds are legally or contractually available for payment of dividends, except
that if the Company fails to redeem shares of Series D Preferred Stock required
to be redeemed on a redemption date, dividends thereafter will accrue
cumulatively at an annual rate of 10% of the liquidation value per share.
Dividends not paid on any dividend payment date will be added to the
liquidation value on such date and remain a part thereof until such dividends
and all dividends accrued thereon are paid in full. Dividends will accrue on
unpaid dividends at the rate of 5 1/2% per annum, unless such dividends remain
unpaid for two consecutive quarters (or, as described above, if the Company
fails to redeem shares of Series D Preferred Stock on a redemption date) in
which event such rate shall increase to 10% per annum. To the extent any cash
dividends are not paid on any dividend payment date, the amount of such
dividends will be converted, to the extent permissible under the Delaware
General Corporation Law, into shares of Class A Common Stock at a conversion
rate equal to the quotient obtained by dividing the missed dividend amount by
95% of the then current market price per share (as defined in the certificate
of designations establishing the Series D Preferred Stock) of Class A Common
Stock, and upon issuance of Class A Common Stock to holders of Series D
Preferred Stock in respect of such conversion such dividend will be deemed paid
for all purposes.
Upon the dissolution, liquidation or winding up of the Company,
holders of the Series D Preferred Stock will be entitled to receive from the
assets of the Company available for distribution to stockholders an amount in
cash, per share, equal to the liquidation value of the Series D Preferred
Stock, and no more, in preference to any liquidating distribution to the
holders of Class A and Class B Common Stock.
The Series D Preferred Stock will be subject to optional redemption by
the Company at any time after the fifth anniversary of its issuance, in whole
or from time to time in part, at a redemption price per share equal to the
liquidation value of the Series D Preferred Stock. Shares of Series D Preferred
Stock may also be subject to optional
-8-
<PAGE> 10
redemption by the Company after the third anniversary of the issue date if the
market value per share of Class A Common Stock shall have exceeded $37.50 for
the period specified in the certificate of designations establishing the Series
D Preferred Stock. Subject to the prior preferences and other rights of any
other class or series of Preferred Stock ranking senior to or on a parity basis
with, and subject to any prohibition or restriction contained in any instrument
evidencing indebtedness of the Company, any holder of Series D Preferred Stock,
at such holder's option, may require the Company, at any time after the tenth
anniversary of the issuance of such Series D Preferred Stock, to redeem all or
a portion of such holder's shares of Series D Preferred Stock, provided that
the aggregate liquidation value of the shares to be redeemed is in excess of
$50,000 (or, if all of the shares of Series D Preferred Stock held by such
holder has an aggregate liquidation value of less than $50,000, all but not
less than all of such shares of Series D Preferred Stock), in each case at a
redemption price per share equal to the then liquidation value of the Series D
Preferred Stock. If the Company fails to effect any redemption of Series D
Preferred Stock, the holders thereof will have the option to convert their
shares of Series D Preferred Stock into Class A Common Stock at a conversion
rate equal to the quotient obtained by dividing the redemption price by 95% of
the current market value per share of the Class A Common Stock over a period
specified in the certificate of designations establishing the Series D
Preferred Stock, provided that in the case of a failure by the Company to
redeem shares at the option of the holder such option may not be exercised
until the first anniversary of such failure.
RANKING; LIMITATIONS ON RIGHTS OF HOLDERS OF COMMON STOCK
All classes and series of Preferred Stock outstanding on the date of
this Prospectus rank senior to the Class A and Class B Common Stock as to
dividend rights, rights to redemption and rights on liquidation.
For so long as any dividends are in arrears on any outstanding class
or series of Preferred Stock, and until all dividends accrued up to the
immediately preceding dividend payment date on such Preferred Stock and on any
class or series of Preferred Stock ranking on a parity with such Preferred
Stock ("Parity Stock") shall have been paid or declared and set apart so as to
be available for payment in full thereof and for no other purpose, neither the
Company nor any subsidiary thereof may purchase or otherwise acquire any shares
of Class A or Class B Common Stock, or set aside any money or assets for any
such purpose, unless all of the outstanding shares of such Preferred Stock and
Parity Stock are redeemed. For so long as any dividends are in arrears on any
outstanding class or series of Preferred Stock and until all dividends accrued
up to the immediately preceding dividend payment date on such Preferred Stock
shall have been paid or declared and set apart so as to be available for
payment in full thereof and for no other purpose, the Company may not declare
or pay any dividend on or make any distribution with respect to the Class A or
Class B Common Stock or set aside any money or assets for any such purpose. If
the Company fails to redeem shares of Class A, Class B or Series E Preferred
Stock required to be redeemed on a redemption date, the Company may not declare
or pay any dividend on or make any distribution with respect to the Class A or
Class B Common Stock or set aside money or assets for any such purpose, and
neither the Company nor any subsidiary thereof may purchase or otherwise
acquire any shares of Class A or Class B Common Stock or set aside any money or
assets for any such purpose, until all shares of such class or series of
Preferred Stock are redeemed in full. If the Company fails to redeem shares of
Series C or Series D Preferred Stock required to be redeemed on a redemption
date, neither the Company nor any subsidiary thereof may purchase or otherwise
acquire any shares of Class A or Class B Common Stock or set aside any money or
assets for any such purpose, until all shares of such series of Preferred Stock
are redeemed in full. Neither the Company nor any subsidiary thereof may
purchase or otherwise acquire any shares of Class A or Class B Common Stock, or
set aside any money or assets for such purpose, if after giving effect to such
purchase or acquisition the amount that would be available for distribution to
the holders of Class A, Class B and Series E Preferred Stock upon liquidation,
dissolution or winding up of the Company, if such liquidation, dissolution or
winding up were to occur on the date fixed for such purchase or acquisition of
shares of Class A or Class B Common Stock, would be less than the aggregate
liquidation preference of all then outstanding shares of such classes and
series of Preferred Stock. The failure of the Company (i) to redeem on any
date fixed for redemption any outstanding shares of Class A, Class B or Series
E Preferred Stock or (ii) to pay dividends on the Series C or Series D
Preferred Stock, shall not prevent the Company from paying any dividends on
Class A or Class B Common Stock solely in shares of capital stock ranking
junior to such class or series of Preferred Stock or (with respect to (i) above
only) the purchase or other acquisition of Class A or Class
-9-
<PAGE> 11
B Common Stock solely in exchange for (together with a cash adjustment for
fractional shares, if any) shares of such junior capital stock.
Upon the dissolution, liquidation or winding up of the Company, the
holders of each class or series of Preferred Stock then outstanding will be
entitled to receive from the assets of the Company available for distribution
to stockholders an amount in cash or property or a combination thereof equal to
the aggregate liquidation value of such Preferred Stock in preference to any
liquidating distribution to the holders of Class A or Class B Common Stock.
PLAN OF DISTRIBUTION
The Shares may be offered for sale and sold by the Selling Stockholder
in one or more transactions, including block transactions, at a fixed price or
prices, which may be changed, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at prices determined on a
negotiated or competitive bid basis. The Shares may be sold by the Selling
Stockholder directly, through an underwritten offering, through agents
designated from time to time or to or through broker-dealers designated from
time to time.
If any Shares are sold in an underwritten offering, such Shares may be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. Unless otherwise indicated in the applicable Prospectus Supplement, the
obligations of any underwriters to purchase Shares will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all of
the Shares specified in such Prospectus Supplement if any are purchased.
Shares may be sold through a broker-dealer acting as agent or broker
for the Selling Stockholder, or to a broker-dealer acting as principal. In the
latter case, the broker-dealer may then resell such Shares to the public at
varying prices to be determined by such broker- dealer at the time of resale.
The Company has been advised by the Selling Stockholder that it has
not, as of the date of this Prospectus, entered into any arrangement with an
underwriter, agent or broker-dealer for the sale of the Shares.
The Selling Stockholder may also sell all or a portion of the Shares
pursuant to Rule 144 promulgated under the Securities Act, to the extent that
such sales may be made in compliance with such Rule.
The Selling Stockholder and any agents or broker-dealers that
participate with the Selling Stockholder in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any discount or commission received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
To the extent required, the number of Shares to be sold, the purchase
price, the public offering price, if applicable, the name of any underwriter,
agent or broker-dealer, and any applicable commissions, discounts or other
items constituting compensation to such underwriters, agents or broker-dealers
with respect to a particular offering will be set forth in an accompanying
Prospectus Supplement.
LEGAL MATTERS
Certain legal matters with respect to the Shares will be passed upon
for the Company by Baker & Botts, L.L.P. Jerome H. Kern, a partner at Baker &
Botts, L.L.P., is a director of the Company. Mr. Kern holds options to
purchase shares of Class A Common Stock.
-10-
<PAGE> 12
EXPERTS
The consolidated balance sheets of TCI Communications, Inc. (formerly
Tele-Communications, Inc.) and subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 1993, and the related financial statement schedules, which appear in the
Annual Report on Form 10-K, as amended, of TCI Communications, Inc. for the
year ended December 31, 1993, have been incorporated by reference herein in
reliance upon the reports, dated March 21, 1994, of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
reports of KPMG Peat Marwick LLP refer to a change in the method of accounting
for income taxes in 1993.
The consolidated balance sheets of Liberty Media Corporation and
subsidiaries (Successor) as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1993 and 1992 and the period from April 1, 1991 to
December 31, 1991 (Successor Periods) and the consolidated statements of
operations, stockholders' equity, and cash flows of Liberty Media (a
combination of certain programming interests and cable television assets of TCI
Communications, Inc. (formerly Tele-Communications, Inc.)) (Predecessor) for
the period from January 1, 1991 to March 31, 1991 (Predecessor Period),
included in the Form 8-K of TCI Communications, Inc. dated April 6, 1994, have
been incorporated by reference herein in reliance upon the report, dated March
18, 1994, of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP refers
to a change in the method of accounting for income taxes in 1993.
The financial statements of TeleCable Corporation as of December 31,
1993 and 1992 and for each of the two years in the period ended December 31,
1993, incorporated herein by reference to TCI Communications, Inc.'s Current
Report on Form 8-K dated August 26, 1994, have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents filed with the Commission under the Exchange Act: (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1993, as
amended by Form 10-K/A (Amendment 1) (Commission File No. 0-5550), (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994,
as amended by Form 10-Q/A (Amendment 1) (Commission File No. 0-5550), (iii) the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
(Commission File No. 0-5550), (iv) the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994, as amended by Form 10-Q/A (Amendment
1) and Form 10-Q/A (Amendment No. 2) (Commission File No. 0-20421), (v) the
Company's Current Reports on Form 8-K dated February 15, 1994, February 25,
1994, April 6, 1994 and May 27, 1994, as amended by Form 8-K/A (Amendment 1)
(Commission File No. 0-5550), and (vi) the Company's Current Reports on Form
8-K dated August 5, 1994, August 18, 1994, August 26, 1994, October 27, 1994,
December 2, 1994, as amended by Form 8K/A (Amendment No. 1), and January 24,
1995 (Commission File No. 0-20421).
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the termination of the offering of the Shares described in this
Prospectus shall be deemed to be incorporated herein by reference and to be a
part hereof from the respective dates of the filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
-11-
<PAGE> 13
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference herein, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus
incorporates). Such requests should be addressed to Stephen M. Brett, Esq.,
Executive Vice President and General Counsel, Tele-Communications, Inc.,
Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000; telephone
(303) 267-5500.
-12-
<PAGE> 14
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . 2 3,403,405 SHARES
CERTAIN CONSIDERATIONS . . . . . . . . . . . . . . 2
THE COMPANY . . . . . . . . . . . . . . . . . . . . 3
SELLING STOCKHOLDER . . . . . . . . . . . . . . . . 3
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . 4 TELE-COMMUNICATIONS, INC.
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . 10
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . 10
EXPERTS . . . . . . . . . . . . . . . . . . . . . . 11 CLASS A COMMON STOCK
INCORPORATION OF DOCUMENTS BY ($1.00 PAR VALUE)
REFERENCE . . . . . . . . . . . . . . . . . . . 11
PROSPECTUS
JANUARY 27, 1995
</TABLE>
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All of the expenses in connection with the distribution of the Shares
are set forth below and will be borne by the Registrant.
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . $ 24,879
*Blue Sky Fees and Expenses (including counsel fees) . . . . . . . 5,000
*Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 5,000
*Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . 10,000
*Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
----------
*Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,879
</TABLE>
______________
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides,
generally, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any suit or proceeding
(except actions by or in the right of the corporation) by reason of the fact
that such person is or was a director or officer of the corporation against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. A corporation may similarly indemnify such person for expenses
actually and reasonably incurred by him in connection with the defense or
settlement of any action or suit by or in the right of the corporation,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, in the
case of claims, issues and matters as to which such person shall have been
adjudged liable to the corporation, provided that a court shall have
determined, upon application, that, despite the adjudication of liability but
in view of all of the facts and circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision may not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under section 174 of Title 8, or (iv) for any transaction from which the
director derived an improper personal benefit. No such provision may eliminate
or limit the liability of a director for any act or omission occurring prior to
the date when such provision becomes effective.
Article V, Section E of the Registrant's Amended and Restated
Certificate of Incorporation provides as follows:
II-1
<PAGE> 16
1. Limitation on Liability.
To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or may
hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or any of its
stockholders for monetary damages for breach of
fiduciary duty as a director. Any repeal or
modification of this paragraph 1 shall be prospective
only and shall not adversely affect any limitation,
right or protection of a director of the Corporation
existing at the time of such repeal or modification.
2. Indemnification.
(a) RIGHT TO INDEMNIFICATION. The Corporation
shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who
was or is made or is threatened to be made a party or
is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the
fact that he, or a person for whom he is the legal
representative, is or was a director or officer of
the Corporation or is or was serving at the request
of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit
plans, against all liability and loss suffered and
expenses (including attorneys' fees) reasonably
incurred by such person. Such right of
indemnification shall inure whether or not the claim
asserted is based on matters which antedate the
adoption of this Section E. The Corporation shall be
required to indemnify a person in connection with a
proceeding (or part thereof) initiated by such person
only if the proceeding (or part thereof) was
authorized by the Board of Directors of the
Corporation.
(b) PREPAYMENT OF EXPENSES. The Corporation
shall pay the expenses (including attorneys' fees)
incurred in defending any proceeding in advance of
its final disposition, provided, however, that the
payment of expenses incurred by a director or officer
in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by
the director or officer to repay all amounts advanced
if it should be ultimately determined that the
director or officer is not entitled to be indemnified
under this paragraph or otherwise.
(c) CLAIMS. If a claim for indemnification or
payment of expenses under this paragraph is not paid
in full within 60 days after a written claim therefor
has been received by the Corporation, the claimant
may file suit to recover the unpaid amount of such
claim and, if successful in whole or in part, shall
be entitled to be paid the expense of prosecuting
such claim. In any such action the Corporation shall
have the burden of proving that the claimant was not
entitled to the requested indemnification or payment
of expenses under applicable law.
(d) NON-EXCLUSIVITY OF RIGHTS. The rights
conferred on any person by this paragraph shall not
be exclusive of any other rights which such person
may [have] or hereafter acquire under any statute,
provision of this Certificate, the Bylaws, agreement,
vote of stockholders or disinterested directors or
otherwise.
(e) OTHER INDEMNIFICATION. The Corporation's
obligation, if any, to indemnify any person who was
or is serving at its request as a director, officer,
employee or agent of another corporation,
partnership, joint venture, trust, enterprise or
nonprofit entity shall
II-2
<PAGE> 17
be reduced by any amount such person may collect as
indemnification from such other corporation,
partnership, joint venture, trust, enterprise or
nonprofit entity.
Article II, Section 2.9 of the Registrant's Bylaws also contains an
indemnity provision, requiring the Registrant to indemnify members of the Board
of Directors and officers of the Registrant and their respective heirs,
personal representatives and successors in interest for or on account of any
action performed on behalf of the Corporation, to the fullest extent provided
by the laws of the State of Delaware and the Registrant's Certificate of
Incorporation, as then or thereafter in effect.
The Registrant has also entered into indemnification agreements with
each of its directors (each director, an "indemnitee"). The indemnification
agreements provide (i) for the prompt indemnification to the fullest extent
permitted by law against any and all expenses, including attorneys' fees and
all other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness or participating in (including on
appeal), or in preparing for ("Expenses"), any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation ("Claim"), related
to the fact that such indemnitee is or was a director, officer, employee, agent
or fiduciary of the Registrant or is or was serving at the Registrant's request
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, or by reason of anything done or not done by a director or officer
in any such capacity, and against any and all judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection therewith) of any Claim, unless the
Reviewing Party (one or more members of the Board of Directors or other person
appointed by the Board of Directors, who is not a party to the particular
claim, or independent legal counsel) determines that such indemnification is
not permitted under applicable law and (ii) for the prompt advancement of
Expenses, and for reimbursement to the Registrant if the Reviewing Party
determines that such indemnitee is not entitled to such indemnification under
applicable law. In addition, the indemnification agreements provide (i) a
mechanism through which an indemnitee may seek court relief in the event the
Reviewing Party determines that the indemnitee would not be permitted to be
indemnified under applicable law (and therefore is not entitled to
indemnification or expense advancement under the indemnification agreement) and
(ii) indemnification against all expenses (including attorneys' fees), and
advancement thereof if requested, incurred by the indemnitee in seeking to
collect an indemnity claim or advancement of expenses from the Registrant or
incurred in seeking to recover under a directors' and officers' liability
insurance policy, regardless of whether successful or not. Furthermore, the
indemnification agreements provide that after there has been a "change in
control" in the Registrant (as defined in the indemnification agreements),
other than a change in control approved by a majority of directors who were
directors prior to such change, then, with respect to all determinations
regarding a right to indemnity and the right to advancement of Expenses, the
Registrant will seek legal advice only from independent legal counsel selected
by the indemnitee and approved by the Registrant.
The indemnification agreements impose upon the Registrant the burden
of proving that an indemnitee is not entitled to indemnification in any
particular case and negate certain presumptions that may otherwise be drawn
against an indemnitee seeking indemnification in connection with the
termination of actions in certain circumstances. Indemnitees' rights under the
indemnification agreements are not exclusive of any other rights they may have
under Delaware law, the Registrant's Bylaws or otherwise. Although not
requiring the maintenance of directors' and officers' liability insurance, the
indemnification agreements require that indemnitees be provided with the
maximum coverage available for any Registrant director or officer if there is
such a policy.
The Registrant may purchase liability insurance policies covering its
directors and officers.
In addition, the Selling Stockholder has agreed to indemnify the
Registrant, its directors and officers and each person, if any, who controls
the Registrant within the meaning of either the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended.
II-3
<PAGE> 18
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4.1 Specimen Stock Certificate for Class A Common Stock, par value $1.00 per share, of the Registrant. (Incorporated
herein by reference to Exhibit 4.1 to Registration Statement on Form S-4 (Registration No. 33-54263) of the
Registrant filed June 23, 1994).
4.2 Registrant's Restated Certificate of Incorporation. (Incorporated herein by reference to Exhibit 3.1 to
Registration Statement on Amendment No. 1 to Form S-4 (Registration No. 33-56135) of the Registrant filed
December 16, 1994).
4.3 Registrant's Bylaws. (Incorporated by reference herein to Exhibit 3.4 to Registration Statement on Form S-4
(Registration No. 33-54263) of the Registrant filed June 23, 1994).
5 Opinion of Baker & Botts, L.L.P.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Baker & Botts, L.L.P. (included in Exhibit 5).
24 Powers of Attorney (included on page II-7).
99.1 Exchange Agreement, dated as of October 19, 1994, among the Registrant, TCI GameCo Holdings, Inc. and Acclaim
Entertainment, Inc.
99.2 Partnership Agreement, dated as of October 19, 1994, between Acclaim Cable Holdings, Inc. and TCI GameCo.
Ventures, Inc.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement; and
II-4
<PAGE> 19
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-5
<PAGE> 20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF GREENWOOD VILLAGE, STATE OF COLORADO, ON
JANUARY 26, 1995.
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
------------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
II-6
<PAGE> 21
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Stephen M. Brett, Esq., and Elizabeth M.
Markowski, Esq., and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution and re-substitution for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them full power and authority, to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, to all intents and purposes and as fully as they might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents on their substitutes may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
(which persons constitute a majority of the Board of Directors) in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Bob Magness Chairman of the Board January 26, 1995
- ------------------------------------ and Director
(Bob Magness)
President and Director __________, 1995
- ------------------------------------ (Principal Executive
(John C. Malone) Officer)
/s/ Donne F. Fisher Executive Vice President and January 26, 1995
- ------------------------------------ Director (Principal Financial
(Donne F. Fisher) and Accounting Officer)
/s/ John W. Gallivan Director January 26, 1995
- ------------------------------------
(John W. Gallivan)
/s/ Kim Magness Director January 26, 1995
- ------------------------------------
(Kim Magness)
Director __________, 1995
- ------------------------------------
(Robert A. Naify)
/s/ Jerome H. Kern Director January 26, 1995
- ------------------------------------
(Jerome H. Kern)
Director ___________, 1995
- ------------------------------------
(Tony Coelho)
Director __________, 1995
- ------------------------------------
(R. E. Turner)
</TABLE>
II-7
<PAGE> 22
EXHIBIT INDEX
-------------
Exhibits Description
- -------- -----------
4.1 Specimen Stock Certificate for Class A Common Stock, par value $1.00
per share of the Registrant. (Incorporated herein by reference to
Exhibit 4.1 to Registration Statement on Form S-4 (Registration
No. 33-54263) filed June 23, 1994).
4.2 Registrant's Restated Certificate of Incorporation. (Incorporated
herein by reference to Exhibit 3.1 to Registration Statement on
Amendment No. 1 to Form S-4 (Registration No. 33-56135) of the
Registrant filed December 16, 1994).
4.3 Registrant's Bylaws. (Incorporated by reference herein to Exhibit 3.4
to Registration Statement on Form S-4 (Registration No. 33-54263) of
the Registrant filed June 23, 1994).
5 Opinion of Baker & Botts, L.L.P.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Baker & Botts, L.L.P. (included in Exhibit 5).
24 Powers of Attorney (included on page II-7).
99.1 Exchange Agreement, dated as of October 19, 1994, among the
Registrant, TCI GameCo Holdings, Inc. and Acclaim.
99.2 Partnership Agreement, dated as of October 19, 1994, between Acclaim
Cable Holdings, Inc. and TCI GameCo. Ventures, Inc.
<PAGE> 1
EXHIBIT 5
Baker & Botts, L.L.P.
885 Third Avenue
Suite 1900
New York, New York 10022
January 27, 1995
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Gentlemen:
We have acted as counsel to Tele-Communications, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the
Company's registration statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), on the date hereof. The
Registration Statement relates to the offering and sale on a delayed or
continuous basis of 3,403,405 shares (the "Shares") of the Company's Class A
Common Stock, par value $1.00 per share ("Class A Stock"), which Shares are to
be acquired by Acclaim Entertainment, Inc., a Delaware corporation ("Acclaim"),
pursuant to an Exchange Agreement (the "Exchange Agreement"), dated as of
October 19, 1994, among the Company, TCI GameCo Holdings, Inc. ("TCI Gameco")
and Acclaim.
In furnishing our opinion set forth below, we have examined, among
other things, the Restated Certificate of Incorporation and Bylaws of the
Company, each as amended to the date hereof; minutes of proceedings of the
Company's Board of Directors relating to the Company's entrance into the
Exchange Agreement, the preparation and filing of the Registration Statement
and related matters; the Exchange Agreement and all exhibits thereto; the
Registration Statement and all exhibits thereto; and such other documents,
records, certificates of public officials and questions of law as we deemed
necessary or appropriate for the purpose of our opinion. In rendering our
opinion, we have relied, to the extent we deem such reliance appropriate, on
certificates of officers of the Company and of public officials as to factual
matters. In addition, we have assumed (i) the authenticity of all documents
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as certified, conformed or reproductive
copies, (ii) that the signatures, including those of all officers of the
Company, on all documents examined by us are genuine, and (iii) that the
representations and warranties of the Company, TCI Gameco and Acclaim contained
in the Exchange Agreement are true, accurate and complete.
<PAGE> 2
Tele-Communications, Inc.
Page 2
Based upon the foregoing, we are of the opinion that the Shares have
been duly authorized and, when the Shares have been duly executed by the proper
officers of the Company and the transfer agent for the Class A Stock and
issued and delivered to Acclaim against payment therefor in accordance with the
terms of the Exchange Agreement, the Shares will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to us contained therein under the
heading "Legal Matters." In giving the foregoing consent, we do not admit that
we are in the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission promulgated thereunder.
As you are aware, Jerome H. Kern, a partner of Baker & Botts,
L.L.P., is a director of the Company and holds options to purchase shares of
Class A Stock.
Very truly yours,
/s/ BAKER & BOTTS, L.L.P.
BAKER & BOTTS, L.L.P.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Tele-Communications, Inc.
We consent to the incorporation by reference in the registration statement on
Form S-3 of Tele-Communications, Inc. of our reports dated March 21, 1994,
relating to the consolidated balance sheets of TCI Communications, Inc.
(formerly Tele-Communications, Inc.) and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1993, and all related schedules, which reports appear in the
December 31, 1993 Annual Report on Form 10-K, as amended, of TCI
Communications, Inc. and to the reference to our firm under the heading
"Experts" in the registration statement. Our reports refer to a change in the
method of accounting for income taxes in 1993.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
January 23, 1995
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Liberty Media Corporation:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Tele-Communications, Inc. of our report dated March 18, 1994,
relating to the consolidated balance sheets of Liberty Media Corporation and
subsidiaries (Successor) as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1993 and 1992 and the period from April 1, 1991 to
December 31, 1991 (Successor Periods) and the consolidated statements of
operations, stockholders' equity, and cash flows of Liberty Media (a combination
of certain programming interests and cable television assets of TCI
Communications, Inc. (formerly Tele-Communications, Inc.)) (Predecessor) for
the period from January 1, 1991 to March 31, 1991 (Predecessor Period), which
report appears in the Form 8-K of TCI Communications, Inc. dated April 6, 1994,
and to the reference to our firm under the heading "Experts" in the
registration statement. Our reports refer to a change in the method of
accounting for income taxes in 1993.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
January 23, 1995
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 of
Tele-Communications, Inc. of our report dated February 4, 1994, relating to
the consolidated financial statements of TeleCable Corporation which appears
on page 12 of the TCI Communications, Inc. and Tele-Communications, Inc.
Current Report on Form 8-K dated August 26, 1994. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Norfolk, Virginia
January 23, 1995
<PAGE> 1
EXHIBIT 99.1
EXCHANGE AGREEMENT
BETWEEN
TELE-COMMUNICATIONS, INC.,
TCI GAMECO HOLDINGS, INC.
AND
ACCLAIM ENTERTAINMENT, INC.
DATED AS OF OCTOBER 19, 1994
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I.
SALE AND EXCHANGE OF SHARES
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1.01. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Adjustment of TCI Shares; Adjustment of Acclaim Shares; Cash Option . . . . . . . . . . . . . 2
SECTION 1.03. Registration of TCI Shares and Acclaim Shares . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.04. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.05. Deliveries by Acclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.06. Deliveries by TCI and TCI Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.07. Transfer Rights; Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.08. Access to Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF ACCLAIM
<TABLE>
<S> <C> <C>
SECTION 2.01. Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.02. Authorization and Validity of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.03. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.04. [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.05. Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.06. No Approvals or Notices Required; No Conflict with Instruments. . . . . . . . . . . . . . . . 9
SECTION 2.07. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.08. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.09. Compliance With Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.10. Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.11. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.12. Compliance with Charter and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.13. No Violation of Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.14. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF TCI AND TCI SUB
<TABLE>
<S> <C> <C>
SECTION 3.01. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.02. Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.03. Newly Formed Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.04. Issuance of TCI Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.05. Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.06. No Approvals or Notices Required; No Conflict with Instruments . . . . . . . . . . . . . . . . 15
SECTION 3.07. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.08. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.09. Compliance With Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.10. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.11. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.12. Compliance with Charter and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.13. Ownership of Acclaim Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.14. Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.15. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
ARTICLE IV.
TRANSACTIONS PRIOR TO CLOSING
<TABLE>
<S> <C> <C>
SECTION 4.01. Interim Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.02. Access to Information Concerning Properties and Records . . . . . . . . . . . . . . . . . . . 20
SECTION 4.03. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.04. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.05. Acclaim Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.06. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.07. Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.08. Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.09. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.10 Video Game Services Involving 8-Bit and 16-Bit Games . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.11 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
ARTICLE V.
CONDITIONS PRECEDENT
<TABLE>
<S> <C> <C>
SECTION 5.01. Conditions Precedent to the Obligations of TCI and Acclaim . . . . . . . . . . . . . . . . . . 24
SECTION 5.02. Conditions Precedent to the Obligations of TCI . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 5.03. Conditions Precedent to the Obligations of Acclaim . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
ARTICLE VI.
TERMINATION
<TABLE>
<S> <C> <C>
SECTION 6.01. Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 6.03. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ARTICLE VII.
INDEMNIFICATION
<TABLE>
<S> <C> <C>
SECTION 7.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.02. Indemnification Relating to the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.03. Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.04. Limitation of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.05. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ARTICLE VIII.
MISCELLANEOUS
<TABLE>
<S> <C> <C>
SECTION 8.01. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.04. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.05. Assignment; Binding Effect; Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.06. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.07. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.08. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.10. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.11. Definition of "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
iii
<PAGE> 5
EXHIBIT 99.1
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of October 19, 1994, by and between
TELE-COMMUNICATIONS, INC., a Delaware corporation ("TCI"), TCI GAMECO HOLDINGS,
INC., a Colorado corporation and an indirect wholly owned subsidiary of TCI
("TCI Sub") and ACCLAIM ENTERTAINMENT, INC., a Delaware corporation
("Acclaim").
RECITALS
WHEREAS, TCI GameCo Holdings, Inc., an indirect wholly owned
subsidiary of TCI, and Acclaim Cable Holdings, Inc., a direct wholly owned
subsidiary of Acclaim, are creating a joint venture ("Newco") that will engage
in, among other things, the development, acquisition and distribution via
electronic means of games and similar forms of interactive entertainment
software over various telecommunications networks;
WHEREAS, in connection with the establishment of Newco, TCI Sub
desires to acquire, and Acclaim desires to issue and sell to TCI Sub, 4,348,795
shares (the "Initial Acclaim Shares") of Acclaim's common stock, par value $.02
per share ("Acclaim Common Stock"), such number of shares to be subject to
adjustment prior to the Closing (as hereinafter defined) at the sole discretion
of TCI in accordance with Section 1.02(b) hereof (such shares, as so adjusted,
being the "Acclaim Shares"), which shares will represent, immediately following
the issuance thereof, up to 9.98% of the issued and outstanding shares of
Acclaim Common Stock;
WHEREAS, in exchange and as payment for the Acclaim Shares, TCI
desires to issue and sell, and Acclaim desires to accept in exchange for the
Acclaim Shares, subject to Section 1.02(c), 3,403,405 shares of TCI Class A
Common Stock, par value $1.00 per share ("TCI Class A Common Stock"), such
number of shares to be subject to adjustment prior to the Closing (as
hereinafter defined) in accordance with Sections 1.02(a) and 1.02(b) (such
shares, as so adjusted, being the "TCI Shares"); and
WHEREAS, the parties hereto desire to enter into the other agreements and
arrangements described herein.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
<PAGE> 6
ARTICLE I.
SALE AND EXCHANGE OF SHARES
SECTION 1.01. Exchange of Shares. On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 1.04) (i) Acclaim will issue, convey and deliver to TCI Sub, and TCI
Sub will accept, the Acclaim Shares in exchange for the TCI Shares and (ii) TCI
will issue, convey and deliver to Acclaim, and Acclaim will accept, the TCI
Shares in exchange for the Acclaim Shares.
SECTION 1.02. Adjustment of TCI Shares; Adjustment of Acclaim
Shares; Cash Option. (a) Subject to Section 1.02(c), in the event the TCI
Class A Common Market Price shall be less than $21.275, the number of shares of
TCI Class A Common Stock issuable to Acclaim pursuant to Section 1.01 shall be
increased to equal the number of shares determined by dividing the Acclaim
Shares Purchase Price by the TCI Class A Common Market Price. As used herein,
(A) the term "Acclaim Shares Purchase Price" means $78,278,310 and (B) the term
"TCI Class A Common Market Price" means the average of the last reported sale
prices (or, if on any day no sale price is reported, the average of the quoted
high and low bid prices on such day) of a share of TCI Class A Common Stock on
the Nasdaq National Market for each of the twenty full trading days immediately
preceding the second full trading day immediately preceding the Closing Date.
(b) If the number of shares of Acclaim Common Stock outstanding at
the Closing Date (as set forth in the Capitalization Certificate (as defined in
Section 5.03(g) hereof)) shall be different from the number outstanding on the
date hereof (as set forth in Section 2.03(a) hereof), TCI may, in its sole
discretion, elect to acquire at the Closing an additional number of shares of
Acclaim Common Stock (the "Additional Acclaim Shares") such that the aggregate
number of shares of Acclaim Common Stock issued and delivered to TCI Sub equals
9.98% of the number of issued and outstanding shares of Acclaim Common Stock as
of the Closing Date. Acclaim shall advise TCI in writing, not less than five
business days prior to the Closing Date, of the anticipated number of
Additional Acclaim Shares that may be acquired by TCI Sub on the Closing Date.
If TCI elects to acquire the Additional Acclaim Shares (in whole or in part),
it shall notify Acclaim in writing not less than two business days prior to the
Closing Date of the number of Additional Acclaim Shares that TCI has elected to
purchase. TCI Sub shall exchange shares of TCI Class A Common Stock for the
Additional Acclaim Shares elected to be purchased, at the same per share
exchange ratio (as adjusted, if applicable, pursuant to Section 1.02(a)) as
that applicable to the exchange of TCI Class A Common Stock for the Initial
Acclaim Shares at the Closing. No fractional share of TCI Class A Common Stock
shall be issued in the exchange for the Acclaim Shares; in lieu of such
fractional share TCI Sub shall pay to Acclaim cash in an amount determined by
multiplying such fraction by $18.00.
(c) (i) If the TCI Class A Common Market Price is $23.00 or less,
but no less than $17.25, then TCI may elect, in its sole discretion,
to pay for all or part of the Acclaim Shares with cash (payable by
means of a wire transfer of immediately
-2-
<PAGE> 7
available funds to an account designated by Acclaim) in an amount
equal to the Acclaim Shares Purchase Price plus the product of (x)
$18.00 and (y) the number of Additional Acclaim Shares which TCI
elects to purchase pursuant to Section 1.02(b) (the "Total Acclaim
Shares Purchase Price"). If TCI elects to pay a portion (and not all)
of the Total Acclaim Shares Purchase Price in cash, the balance of
such purchase price (the "Balance") shall be paid in a number of
shares of TCI Class A Common Stock equal to the Balance divided by the
TCI Class A Common Market Price; provided that, if the TCI Class A
Common Market Price is $21.275 or higher (up to $23.00), the TCI Class
A Common Market Price to be used in the calculation above shall be
$23.00.
(ii) If the TCI Class A Common Market Price is less than
$17.25, then TCI may elect, in its sole discretion, to pay for all,
but not less than all, of the Acclaim Shares with cash (payable by
means of a wire transfer of immediately available funds to an account
designated by Acclaim) in an amount equal to the Total Acclaim Shares
Purchase Price. If TCI elects to pay cash pursuant to this Section
1.02(c)(ii), then notwithstanding the condition contained in Section
5.03(g), Acclaim's obligation to consummate the transactions
contemplated hereby isnot subject to such condition.
SECTION 1.03. Registration of TCI Shares and Acclaim Shares. (a)
TCI shall register under the Securities Act of 1933, as amended (the
"Securities Act"), the offer and resale by Acclaim of the TCI Shares to be
issued and delivered to Acclaim hereunder, and the registration statement (the
"Registration Statement") covering such offer and sale shall have been declared
effective by the Securities and Exchange Commission (the "Commission") at or
prior to the Closing Date, so as to permit the subsequent offer and resale
thereof by Acclaim pursuant to such Registration Statement, in each case in
accordance with the registration procedures set forth on Exhibit A.
(b) TCI Sub shall have the right, following the Closing Date, to
cause Acclaim to register under the Securities Act the offer and resale of the
Acclaim Shares in accordance with the registration procedures set forth on
Exhibit B.
SECTION 1.04. Closing. Subject to the provisions of Articles V and
VI, the closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of Baker & Botts, L.L.P., 885 Third
Avenue, New York, NY 10022, as promptly as practicable following the meeting of
the stockholders of Acclaim referred to in Section 4.05 and the filing of the
Acclaim Charter Amendment with the Delaware Secretary of State, subject to
adjournment in the event a condition set forth in Article V shall not have been
fulfilled or waived at such time, or at such other place or time as TCI and
Acclaim may mutually agree (the date and time of the Closing being herein
referred to as the "Closing Date").
SECTION 1.05. Deliveries by Acclaim. At the Closing, Acclaim will
deliver or cause to be delivered to TCI Sub the following:
-3-
<PAGE> 8
1. The opinions, certificates, consents and other
documents contemplated by Section 5.02;
2. A stock certificate representing the Acclaim Shares,
with all necessary stock issuance or transfer stamps affixed thereto,
duly completed and registered in the name of TCI Sub on the stock
transfer books of Acclaim;
3. A duly executed voting agreement, in substantially
the form set forth as Exhibit C hereto (the "Voting Agreement"); and
4. A duly executed guarantee of Acclaim, in
substantially the form set forth as Exhibit D hereto.
SECTION 1.06. Deliveries by TCI and TCI Sub. At the Closing, TCI
and TCI Sub will deliver or cause to be delivered to Acclaim the following:
1. The opinions, certificates, consents and other
documents contemplated by Section 5.03;
2. A stock certificate representing the TCI Shares, with
all necessary stock issuance or transfer stamps affixed thereto, duly
completed and registered in the name of Acclaim on the stock transfer
books of TCI;
3. A duly executed Voting Agreement; and
4. A duly executed guarantee of TCI Technology Ventures,
Inc., in substantially the form set forth as Exhibit E hereto.
SECTION 1.07. Transfer Rights; Right of First Refusal. (a) Prior
to the third anniversary of the Closing Date, TCI Sub may not sell, transfer or
otherwise dispose, or agree to dispose, of ownership of any shares of Acclaim
Common Stock acquired by it pursuant to Section 1.01 or any voting or other
rights in respect thereof (each a "Transfer"), except for:
(i) Transfers to any corporation, partnership or other
entity that is wholly owned (directly or indirectly) by TCI (or, if
different as a result of a Permitted Transaction, the Parent (as such
terms are defined in the Partnership Agreement) of TCI Sub immediately
prior to such transfer) or to an entity into which TCI Sub may be
merged or with which it may be consolidated (provided the surviving
entity is wholly owned (directly or indirectly) by TCI or such other
Parent); provided, that (x) the Transfer includes all (but not less
than all) of the Acclaim Shares owned by TCI Sub; (y) such transferee
or successor (a) is a single purpose entity formed for the sole
purpose of holding the Acclaim Shares, with deminimus liabilities, (b)
agrees, in writing, prior to such Transfer to hold the Acclaim Shares
subject to restrictions on subsequent Transfer that are identical to
those set forth in this Section
-4-
<PAGE> 9
1.07 and (c) becomes a signatory to the Voting Agreement and assumes
all of the obligations thereunder of TCI Sub;
(ii) Transfers to such persons or entities as may be
consented to by Acclaim in its sole discretion;
(iii) Transfers pursuant to a tender offer, merger,
recapitalization or other similar extraordinary transaction involving
Acclaim or the Acclaim Common Stock;
(iv) Subject to Section 1.07(b), any Transfer, in one
transaction or series of related transactions, to any person,
corporation, partnership or other entity or "group" (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), pursuant to a privately-negotiated
transaction exempt from registration under the Securities Act;
(v) Transfers made pursuant to an effective registration
statement made in accordance with the registration procedures set
forth on Exhibit B; or
(vi) Transfers made in accordance with Rule 144
promulgated under the Securities Act.
(b) If TCI Sub proposes to make any Transfer pursuant to Section
1.07(a)(iv), in one transaction or in a series of related transactions, of a
number of shares of Acclaim Common Stock equal to 10% or more of the aggregate
number of shares of Acclaim Common Stock acquired by TCI Sub pursuant to
Section 1.01, TCI Sub shall first deliver to Acclaim a notice thereof (the
"Notice of Sale"), which shall set forth in reasonable detail the terms and
conditions of the proposed Transfer, including the number of shares of Acclaim
Common Stock to be sold, the proposed sale date, the price per share, the party
to whom the shares are to be sold and the manner of such proposed sale. The
Notice of Sale shall be delivered to Acclaim not less than fifteen (15)
business days before the proposed Transfer is to be effected. A Notice of Sale
shall be delivered with respect to each proposed Transfer. Acclaim shall have
the right to buy, upon the same terms and conditions as set forth in the Notice
of Sale, all (but not less than all) of the shares specified therein from TCI,
such right to be exercised by delivering written notice to TCI of Acclaim's
decision to buy such shares within ten (10) business days after Acclaim's
receipt of the Notice of Sale. If Acclaim elects not to exercise its right of
first refusal as to a particular Transfer hereunder, or if Acclaim fails to
respond to a Notice of Sale within such ten business-day period, TCI may
proceed promptly therewith on terms and conditions no more favorable to the
proposed transferee than those specified in the Notice of Sale. If such
disposition is not effected within fifteen (15) days of the date of the
proposed Transfer set forth in the Notice of Sale, such proposed Transfer shall
be considered abandoned and any subsequent Transfer pursuant to Section
1.07(a)(iv) must be preceded by the delivery of a new Notice of Sale to Acclaim
hereunder (provided such Transfer is subject to this Section 1.07(a)(iv)
pursuant to the first sentence of this Section 1.07(b)). In the event Acclaim
exercises its right of first refusal as to a particular Transfer hereunder, the
purchase and sale
-5-
<PAGE> 10
of the shares specified in the Notice of Sale shall take place at the offices
of Acclaim on the date specified as the proposed date of sale in the Notice of
Sale. For purposes of this Section 1.07(b), the term TCI Sub includes any
transferee or successor of TCI Sub permitted by Section 1.07(a).
(c) TCI Sub understands and agrees that the certificate
representing the Acclaim Shares will contain a legend stating in substance:
"The shares represented by this certificate are subject (i) to
certain restrictions on transfer, as set forth in a certain
Exchange Agreement, between the Company and the holder of this
certificate and (ii) to the terms of a Voting Agreement among
certain stockholders of the Company. A copy of each of the
Exchange Agreement and the Voting Agreement is available for
inspection at the principal offices of the Company."
Acclaim covenants and agrees to cause the foregoing legend (a) as it relates to
the Exchange Agreement, to be removed from any certificate representing the
Acclaim Shares upon (i) a Transfer of such shares in compliance with Section
1.07 (other than Section 1.07(a)(i) and, in Acclaim's discretion, Section
1.07(a)(ii)) (but only as to the shares subject to such Transfer) or (ii), if
sooner, the third anniversary of the Closing and (b) as it relates to the
Voting Agreement, to be removed from any certificate representing the Acclaim
Shares upon termination of the Voting Agreement.
(d) Any purported Transfer of the Acclaim Shares by TCI Sub (or a
permitted transferee) that is not in compliance with this Section 1.07 shall be
void ab initio and of no force or effect. If, notwithstanding the foregoing,
any such purported Transfer is held by a court of competent jurisdiction upon
entry of a final judgment to be effective, then the provisions of this Section
1.07 and the provisions of the Voting Agreement shall apply to the transferee
as fully as if such transferee were a party to this Agreement and the Voting
Agreement and bound by all of the provisions hereof and thereof which were
applicable to the transferor, and shall be deemed to have been applicable to
such transferee as of the date of such transfer.
(e) Notwithstanding any language to the contrary in this Section
1.07, TCI Sub (and its permitted transferees) may pledge, grant a security
interest in or otherwise encumber the Acclaim Shares in connection with
borrowings by TCI or any of its Subsidiaries from banks or other institutional
lenders.
SECTION 1.08. Access to Financial Information. After the Closing
and for so long as a nominee of TCI Sub is a member of the board of directors
of Acclaim (the "Acclaim Board"), Acclaim shall cause to be delivered to TCI
any and all financial data concerning Acclaim and its Subsidiaries (including
financial statements, budgets and projections)
-6-
<PAGE> 11
provided to the members of the Acclaim Board at the same time as such materials
are provided to the Acclaim Board.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF ACCLAIM
Acclaim hereby represents and warrants to TCI and TCI Sub as follows:
SECTION 2.01. Organization and Qualification. Each of Acclaim and
each of its Subsidiaries (i) is a corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) has all requisite corporate or partnership
power and authority to own, lease and operate its properties and to carry on
its business as it is now being conducted and (iii) is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or license necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed or in good
standing has not had, either individually or in the aggregate, a material
adverse effect on the business, assets, results of operations or financial
condition of Acclaim and its Subsidiaries, taken as a whole. Acclaim has
delivered to TCI true and complete copies of its Certificate of Incorporation
and By-laws, each as amended through and in effect on the date hereof.
SECTION 2.02. Authorization and Validity of Agreement. Acclaim has
all requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the approval of its stockholders referred to in Section
5.01(a), to perform its obligations hereunder and consummate the transactions
contemplated hereby. The execution, delivery and performance by Acclaim of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the Acclaim Board and by all other necessary
corporate action on the part of Acclaim, subject, in the case of the adoption
and filing of the Acclaim Charter Amendment and the sale and exchange of the
Acclaim Shares to TCI Sub, to such approval of Acclaim's stockholders. This
Agreement has been duly executed and delivered by Acclaim and is a valid and
binding obligation of Acclaim, enforceable in accordance with its terms (except
insofar as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
SECTION 2.03. Capitalization. (a) At the date hereof, the
authorized capital stock of Acclaim consists of (i) 50,000,000 shares of
Acclaim Common Stock and (ii) 1,000,000 shares of Preferred Stock, par value
$.01 per share (the "Acclaim Preferred Stock"), of which 200,000 shares have
been designated "Series A Preferred Stock." As of the close of business on
October 18, 1994: (i) 39,226,309 shares of Acclaim Common Stock were issued and
outstanding, 9,117,409 shares were reserved for issuance upon exercise of
outstanding stock options and warrants, 272,727 shares were held by Acclaim in
its treasury and no shares
-7-
<PAGE> 12
were held by any Subsidiary of Acclaim; and (ii) no shares of Acclaim Preferred
Stock were issued or outstanding or held by Acclaim in its treasury or by any
Subsidiary of Acclaim. All issued and outstanding shares of Acclaim Common
Stock have been validly issued and are fully paid and nonassessable, are not
subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any Federal or state securities laws. At
the date hereof, there are no issued or outstanding bonds, debentures, notes or
other indebtedness of Acclaim or any of its Subsidiaries which have the right
to vote (or which are convertible into other securities having the right to
vote) on any matters on which stockholders of Acclaim may vote ("Voting Debt").
Except as set forth in the Acclaim Commission Filings (as hereinafter defined)
or on Schedule 2.03, there are not as of the date hereof any outstanding or
authorized subscriptions, options, warrants, calls, rights, commitments or any
other agreements of any character to or by which Acclaim or any of its
Subsidiaries is a party or is bound which, directly or indirectly, obligate
Acclaim or any of its Subsidiaries to issue, deliver or sell or cause to be
issued, delivered or sold any shares of Acclaim Common Stock or Acclaim
Preferred Stock or any other capital stock, equity interest or Voting Debt of
Acclaim or any securities convertible into, or exercisable or exchangeable for,
or evidencing the right to subscribe for any such shares, interests or Voting
Debt or obligating Acclaim or any of its Subsidiaries to grant, extend or enter
into any such subscription, option, warrant, call or right. Except as set
forth in the Acclaim Commission Filings or on Schedule 2.03, neither Acclaim
nor any of its Subsidiaries has adopted, authorized or assumed any plans,
arrangements or practices for the benefit of its officers, employees or
directors which require or permit the issuance, sale, purchase or grant of any
capital stock, other equity interests or Voting Debt of Acclaim or any other
securities convertible into, or exercisable or exchangeable for, any such
stock, interests or Voting Debt or any phantom shares, phantom equity interests
or stock or equity appreciation rights. All of the shares of capital stock of
each corporate Subsidiary of Acclaim are validly issued, fully paid and
nonassessable. Except as set forth in the Acclaim Commission Filings or on
Schedule 2.03, there are not as of the date hereof any outstanding or
authorized subscriptions, options, warrants, calls, rights, commitments or
other agreements of any character that, directly or indirectly, (x) call for or
relate to the sale, pledge, transfer or other disposition by Acclaim or any
Subsidiary of Acclaim of any shares of capital stock, any partnership or other
equity interests or any Voting Debt of Acclaim or any Subsidiary of Acclaim or
(y) relate to the voting or control of such capital stock, partnership or other
equity interests or Voting Debt.
(b) The Initial Acclaim Shares, as of the date hereof, constitute
9.98% of the issued and outstanding shares of Acclaim Common Stock. The
Acclaim Shares, upon issuance and delivery in accordance with the terms and
conditions of this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable, will be free of any liens, claims, charges, security
interests, pledges, voting or shareholder agreements, encumbrances or equities
of any kind whatsoever (except as expressly contemplated hereby or to the
extent created by TCI Sub) and will not be issued in violation of any
preemptive rights.
SECTION 2.04. [intentionally omitted]
-8-
<PAGE> 13
SECTION 2.05. Reports and Financial Statements. Acclaim has
heretofore made available to TCI true and complete copies of all reports,
registration statements, definitive proxy statements and other documents (in
each case together with all amendments and supplements thereto) filed by
Acclaim with the Commission since September 1, 1991 (such reports, registration
statements, definitive proxy statements and other documents, together with any
amendments and supplements thereto, are sometimes collectively referred to as
the "Acclaim Commission Filings"). The Acclaim Commission Filings constitute
all of the documents (other than preliminary material) that Acclaim was
required to file with the Commission since such date. As of their respective
dates, each of the Acclaim Commission Filings complied in all material respects
with the applicable requirements of the Securities Act, the Exchange Act, and
the rules and regulations under each such Act, and none of the Acclaim
Commission Filings contained as of such date any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. When filed with the Commission, the
financial statements included in the Acclaim Commission Filings complied as to
form in all material respects with the applicable rules and regulations of the
Commission and were prepared in accordance with generally accepted accounting
principles (as in effect from time to time) applied on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto), and
such financial statements fairly present the consolidated financial position of
Acclaim and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments. Since June 1,
1994, except as disclosed in the Acclaim Commission Filings filed with the
Commission prior to the date hereof and except as set forth on Schedule 2.05,
as of the date hereof neither Acclaim nor any Subsidiary of Acclaim has
incurred any liability or obligation of any kind which, in any case or in the
aggregate, is material to the business, assets, results of operations or
financial condition of Acclaim and its Subsidiaries, taken as a whole.
SECTION 2.06. No Approvals or Notices Required; No Conflict with
Instruments. Except as set forth on Schedule 2.06, the execution and delivery
by Acclaim of this Agreement do not, and the performance by Acclaim of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not:
(i) assuming receipt of the approval of Acclaim's
stockholders referred to in Section 5.01, conflict with or violate the
Certificate of Incorporation, as amended, or By-laws, as amended, of
Acclaim or the charter or bylaws of any corporate Subsidiary of
Acclaim or the partnership agreement of any partnership Subsidiary of
Acclaim;
(ii) require any consent, approval, order or authorization
of or other action by any Governmental Entity (as defined in clause
(v) of this Section 2.06) (a "Government Consent") or any
registration, qualification, declaration or filing with or notice to
any Governmental Entity (a "Governmental Filing"), in each case on the
part of or with respect to Acclaim or any Subsidiary of Acclaim, the
absence or
-9-
<PAGE> 14
omission of which would, either individually or in the aggregate, have
a material adverse effect on the transactions contemplated hereby or
on the business, assets, results of operations or financial condition
of Acclaim and its Subsidiaries, taken as a whole, except for (A) the
filing with the Commission of the Proxy Statement (as defined in
Section 4.06) required in connection with this Agreement and the
transactions contemplated hereby and (B) the Governmental Filings
required pursuant to the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations thereunder;
(iii) require, on the part of Acclaim or any Subsidiary of
Acclaim, any consent by or approval of (a "Contract Consent") or
notice to (a "Contract Notice") any other person or entity (other than
a Governmental Entity), the absence or omission of which would, either
individually or in the aggregate, have a material adverse effect on
the transactions contemplated hereby or on the business, assets,
results of operations or financial condition of Acclaim and its
Subsidiaries, taken as a whole, other than Contract Notices and/or
Contract Consents which may need to be obtained by Acclaim in
connection with any assignment of intellectual property rights to
Newco, and which Contract Notices and/or Contract Consents TCI and TCI
Sub acknowledge and agree will not be made or obtained prior to the
Closing;
(iv) assuming that the Contract Consents and Contract
Notices described on Schedule 2.06 or omitted therefrom pursuant to
Section 2.06(iii) are obtained and given, conflict with, result in any
violation or breach of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of any
material benefit under or the creation of any lien, security interest,
pledge, charge, claim, option, right to acquire, restriction on
transfer, voting restriction or agreement, or any other restriction or
encumbrance of any nature whatsoever on any assets pursuant to (any
such conflict, violation, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") any
Contract (which term shall mean and include any note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument, employee benefit plan or practice, or
other agreement, obligation, commitment or concession of any nature)
to which Acclaim or any Subsidiary of Acclaim is a party, by which
Acclaim, any Subsidiary of Acclaim or any of their respective assets
or properties is bound or affected or pursuant to which Acclaim or any
Subsidiary of Acclaim is entitled to any rights or benefits, except
for such Violations which would not, either individually or in the
aggregate, have a material adverse effect on the transactions
contemplated hereby or on the business, assets, results of operations
or financial condition of Acclaim and its Subsidiaries, taken as a
whole; or
(v) assuming receipt of the approval of Acclaim's
stockholders referred to in Section 5.01(a) and assuming that the
Government Consents and Governmental Filings specified in clause (ii)
of this Section 2.06 are obtained, made and given,
-10-
<PAGE> 15
result in a Violation of, under or pursuant to, any law, rule,
regulation, order, judgment or decree applicable to Acclaim or any
Subsidiary of Acclaim or by which any of their respective properties
or assets are bound or affected, except for such Violations which
would not, either individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby or on the
business, assets, results of operations or financial condition of
Acclaim and its Subsidiaries, taken as a whole. As used herein, the
term "Governmental Entity" means and includes any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign.
SECTION 2.07. Absence of Certain Changes or Events. Except as
otherwise disclosed in the Acclaim Commission Filings filed with the Commission
prior to the date hereof or as set forth on Schedule 2.07, during the period
commencing on June 1, 1994 and ending on the date of this Agreement, there has
not been any material adverse change in, and no event has occurred and no
condition exists which, individually or together with other events or
conditions, has had a material adverse effect on, the business, assets, results
of operations or financial condition of Acclaim and its Subsidiaries, taken as
a whole.
SECTION 2.08. Legal Proceedings. Except as set forth in the
Acclaim Commission Filings filed with the Commission prior to the date hereof
or as set forth on Schedule 2.08, there is no suit, action or proceeding
pending or, to the knowledge of Acclaim, any investigation pending or any suit,
action, proceeding or investigation threatened, against, involving or affecting
Acclaim, any Subsidiary of Acclaim or any of its or their respective properties
or rights, nor is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against Acclaim or any Subsidiary of Acclaim, which does
or might (i) result in the modification, termination, suspension, impairment or
reformation of any material contract to which Acclaim or any Subsidiary of
Acclaim is a party, which modification, termination, suspension, impairment or
reformation would have a material adverse effect on the business, assets,
results of operations or financial condition of Acclaim and its Subsidiaries
taken as a whole; (ii) materially adversely affect the manner in which Acclaim
conducts its business (including the manner in which it markets, develops,
acquires or manufactures interactive entertainment software); (iii) materially
adversely affect the ability of Acclaim or TCI to consummate any of the
transactions contemplated hereby; or (iv) have a materially adverse effect on
the business, assets, results of operations or financial condition of Acclaim
and its Subsidiaries, taken as a whole.
SECTION 2.09. Compliance With Regulatory Requirements. Each of
Acclaim and its Subsidiaries is in compliance with, and has conducted its
business so as to comply with, all applicable laws, rules, regulations,
ordinances and codes, domestic or foreign, including laws, rules, regulations,
ordinances and codes relating to the protection of the environment, except
where the failure so to comply has not had, and may reasonably be expected not
to have, either individually or in the aggregate, a material adverse effect on
the business, assets, results of operations or financial condition of Acclaim
and its Subsidiaries, taken as a whole.
-11-
<PAGE> 16
SECTION 2.10. Brokers or Finders. No agent, broker, investment
banker, financial advisor or other person or entity is or will be entitled, by
reason of any agreement, act or statement by Acclaim or any of its
Subsidiaries, directors, officers, employees or affiliates, to any financial
advisory, broker's, finder's or similar fee or commission, to reimbursement of
expenses or to indemnification or contribution in connection with any of the
transactions contemplated by this Agreement, and Acclaim agrees to indemnify
and hold TCI and TCI Sub harmless from and against any and all claims,
liabilities or obligations with respect to any such fees, commissions, expenses
or claims for indemnification or contribution asserted by any person on the
basis of any act or statement made by Acclaim or any of its Subsidiaries,
directors, officers, employees or affiliates.
SECTION 2.11. Intellectual Property. (a) Acclaim and its
Subsidiaries own, or have the defensible right to use, all Intellectual
Property used in Acclaim's business, except where the failure to own or have
the right to use such Intellectual Property would not, individually or in the
aggregate, have a material adverse effect on the business, assets, results of
operations or financial condition of Acclaim and its Subsidiaries, taken as a
whole.
(b) Except as disclosed in the Acclaim Commission Filings filed with
the Commission prior to the date hereof and except as set forth on Schedule
2.11, no claims which, individually or in the aggregate, are reasonably
expected to have a material adverse effect on the business, assets, results of
operations or financial condition of Acclaim and its Subsidiaries, taken as a
whole, have been asserted or, to the knowledge of Acclaim, threatened by any
person or entity (i) challenging the ownership, validity or effectiveness of
any Intellectual Property owned or used by Acclaim or any of its Subsidiaries,
(ii) to the effect that any activity of Acclaim or its Subsidiaries infringes
on any patent or (iii) against the use by Acclaim or its Subsidiaries of any
Intellectual Property necessary for the conduct of their business.
(c) As used in this Section 2.11, "Intellectual Property" means all
industrial and intellectual property rights including Proprietary Technology,
patents, patent applications, trademarks, trademark applications and
registrations, service marks, service mark applications and registrations,
copyrights, know-how, licenses relating to any of the foregoing, trade secrets,
proprietary processes and formulae. "Proprietary Technology" means all
proprietary processes, formulae, inventions, trade secrets, know-how,
development tools and other proprietary rights used by Acclaim and its
Subsidiaries pertaining to any product, software of service manufactured,
marketed, licensed or sold by Acclaim and its Subsidiaries in the conduct of
their business or used, employed or exploited in the development, license,
sale, marketing, distribution or maintenance thereof, and all documentation and
media constituting, describing or relating to the above, including manuals,
memoranda, know-how, notebooks, software, records and disclosures.
SECTION 2.12. Compliance with Charter and Contracts. (a) Neither
Acclaim nor any Subsidiary of Acclaim is in violation of any term of its
charter, by-laws or other organizational documents.
-12-
<PAGE> 17
(b) Acclaim has filed with the Commission copies of all agreements,
leases, license agreements and other contracts that, after consultation with
its legal counsel, Acclaim reasonably believes are required to be filed under
the Securities Act and the Exchange Act, to which Acclaim or any of its
Subsidiaries is a party or may be bound. Each of such agreements, leases,
license agreements and contracts is in full force and effect (other than those
which have expired or terminated pursuant to their terms or by mutual agreement
of Acclaim or the relevant Subsidiary and each other party thereto since the
filing thereof), and (i) none of Acclaim or its Subsidiaries or, to Acclaim's
knowledge, any other party thereto, has breached or is in default thereunder,
(ii) to Acclaim's knowledge, no event has occurred which, with the passage of
time or the giving of notice, would constitute such a breach or default, (iii)
no claim of material default thereunder has, to Acclaim's knowledge, been
asserted or threatened and (iv) none of Acclaim or its Subsidiaries, or to
Acclaim's knowledge, any other party thereto is seeking the renegotiation
thereof or substitute performance thereunder, except where such breach or
default, or attempted renegotiation or substitute performance, individually or
in the aggregate, would not have a material adverse effect on the business,
assets, results of operations or financial condition of Acclaim and its
Subsidiaries, taken as a whole.
SECTION 2.13. No Violation of Act. Following the Closing, Acclaim
will not make any offer or sale of the TCI Shares in connection with, or make
any distribution thereof, in any transaction which would be in violation of the
securities laws of the United States of America or any state thereof. Acclaim
understands that the certificate representing the TCI Shares will contain a
legend stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and such shares
may not be sold or transferred unless such sale or transfer
will be effected in accordance with the registration
requirements of the Securities Act of 1933, as at that time
amended, or in accordance with any exemption from the
registration requirements of such Act, which may then be
available thereto."
Acclaim understands and acknowledges that TCI will deliver unlegended
certificates in exchange for the certificate bearing such legend only in the
event that (i) Acclaim transfers shares represented by such certificate
pursuant to and in the manner provided for in an effective registration
statement covering the transfer or sale of such shares or (ii) Acclaim shall
have delivered to TCI a letter from the staff of the Commission, or an opinion
of counsel in form and substance satisfactory to TCI, to the effect that such
legend is not required for the purposes of the Securities Act.
SECTION 2.14. Disclosure. All facts relating to the assets,
business, operations, financial condition and prospects (as such prospects
relate to Acclaim and its Subsidiaries, not to business conditions in the
interactive entertainment software industry generally) of Acclaim and its
Subsidiaries necessary for a reasonably prudent investor to make an
-13-
<PAGE> 18
investment decision with respect to the acquisition of the Acclaim Shares
contemplated hereby have been disclosed to TCI and TCI Sub. Neither this
Agreement, nor any other agreement, document, certificate or other written
instrument delivered pursuant hereto, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements herein and therein, when taken together, not
misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF TCI AND TCI SUB
TCI and TCI Sub hereby represent and warrant, jointly and severally,
to Acclaim as follows:
SECTION 3.01. Organization and Qualification. Each of TCI and each
of its Subsidiaries (including TCI Sub) (i) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (ii) has all requisite
corporate or partnership power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and (iii)
is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed or in good standing has not had, either individually or
in the aggregate, a material adverse effect on the business, assets, results of
operations or financial condition of TCI and its Subsidiaries, taken as a
whole. TCI and TCI Sub have each delivered to Acclaim true and complete copies
of its Certificate of Incorporation and By-laws, each as amended through and in
effect on the date hereof.
SECTION 3.02. Authorization and Validity of Agreement. Each of
TCI and TCI Sub has all requisite corporate power and, subject to receipt of
the approval contemplated by Section 5.02(j) of this Agreement, authority to
enter into this Agreement and to perform its obligations hereunder and
consummate the transactions contemplated hereby. The execution, delivery and
performance by TCI Sub of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of TCI Sub. This Agreement has been duly executed
and delivered by TCI and TCI Sub and is a valid and binding obligation of TCI
and TCI Sub, enforceable in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
SECTION 3.03. Newly Formed Subsidiary. TCI Sub is a newly-formed
Colorado corporation. All of TCI Sub's outstanding shares of capital stock are
duly authorized, validly issued, fully paid and non-assessable and are directly
owned by TCI Technology, Inc., which in turn
-14-
<PAGE> 19
is a direct wholly owned subsidiary of TCI Technology Ventures, Inc., which in
turn is a direct wholly owned subsidiary of TCI. TCI Sub has not conducted
business prior to the date hereof and has no assets or liabilities other than
those incident to its formation and to the consummation of the transactions
contemplated hereby.
SECTION 3.04. Issuance of TCI Shares. The TCI Shares, upon issuance
and delivery in accordance with the terms and conditions of this Agreement,
will be duly authorized, validly issued, fully paid and non-assessable, will be
free of any liens, claims, charges, security interests, pledges, voting or
shareholder agreements, encumbrances or equities of any kind whatsoever (except
to the extent created by Acclaim) and will not be issued in violation of any
preemptive rights.
SECTION 3.05. Reports and Financial Statements. TCI has heretofore
made available to Acclaim true and complete copies of all reports, registration
statements, definitive proxy statements and other documents (in each case
together with all amendments and supplements thereto) filed by TCI or its
predecessor with the Commission since January 1, 1991 (such reports,
registration statements, definitive proxy statements and other documents,
together with any amendments and supplements thereto, are sometimes
collectively referred to as the "TCI Commission Filings"). The TCI Commission
Filings constitute all of the documents (other than preliminary material) that
TCI (or its predecessor) was required to file with the Commission since such
date. As of their respective dates, each of the TCI Commission Filings
complied in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations under each such
Act, and none of the TCI Commission Filings contained as of such date any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. When
filed with the Commission, the financial statements included in the TCI
Commission Filings complied as to form in all material respects with the
applicable rules and regulations of the Commission and were prepared in
accordance with generally accepted accounting principles (as in effect from
time to time) applied on a consistent basis (except as may be indicated therein
or in the notes or schedules thereto), and such financial statements fairly
present the consolidated financial position of TCI and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments. Since June 30, 1994, except as disclosed
in the TCI Commission Filings filed with the Commission prior to the date
hereof and except as set forth on Schedule 3.05, as of the date hereof neither
TCI nor any Subsidiary of TCI has incurred any liability or obligation of any
kind which, in any case or in the aggregate, is material to the business,
assets, results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole.
SECTION 3.06. No Approvals or Notices Required; No Conflict with
Instruments. Except as set forth on Schedule 3.06 and subject to Section 5.02
(j) of this Agreement, the execution and delivery by TCI and TCI Sub of this
Agreement do not, and the performance
-15-
<PAGE> 20
by each of TCI and TCI Sub of its respective obligations hereunder and the
consummation of the transactions contemplated hereby will not:
(i) conflict with or violate the Certificate of
Incorporation, as amended, or By-laws, as amended, of TCI or the
charter or bylaws of any corporate Subsidiary of TCI or the
partnership agreement of any partnership Subsidiary of TCI;
(ii) require any Government Consent or Governmental
Filing, in each case on the part of or with respect to TCI or any
Subsidiary of TCI, the absence or omission of which would, either
individually or in the aggregate, have a material adverse effect on
the transactions contemplated hereby or on the business, assets,
results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole, except for (A) the filing with the
Commission of such reports under Section 13(d) of the Exchange Act as
may be required in connection with the transactions contemplated by
this Agreement and (B) the Governmental Filings required pursuant to
the pre-merger notification requirements of the HSR Act;
(iii) require, on the part of TCI or any Subsidiary of TCI,
any Contract Consent or Contract Notice, the absence or omission of
which would, either individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby or on the
business, assets, results of operations or financial condition of TCI
and its Subsidiaries, taken as a whole;
(iv) assuming that the Contract Consents and Contract
Notices described on Schedule 3.06 are obtained and given, conflict
with, result in any Violation of any Contract to which TCI or any
Subsidiary of TCI is a party, by which TCI, any Subsidiary of TCI or
any of their respective assets or properties is bound or affected or
pursuant to which TCI or any Subsidiary of TCI is entitled to any
rights or benefits, except for such Violations which would not, either
individually or in the aggregate, have a material adverse effect on
the transactions contemplated hereby or on the business, assets,
results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole; or
(v) assuming that the Government Consents and
Governmental Filings specified in clause (ii) of this Section 3.06 are
obtained, made and given, result in a Violation of, under or pursuant
to, any law, rule, regulation, order, judgment or decree applicable to
TCI or any Subsidiary of TCI or by which any of their respective
properties or assets are bound or affected, except for such Violations
which would not, either individually or in the aggregate, have a
material adverse effect on the transactions contemplated hereby or on
the business, assets, results of operations or financial condition of
TCI and its Subsidiaries, taken as a whole.
SECTION 3.07. Absence of Certain Changes or Events. Except as
otherwise disclosed in the TCI Commission Filings filed with the Commission
prior to the date hereof or as set forth on Schedule 3.07, during the period
commencing on July 1, 1994 and ending
-16-
<PAGE> 21
on the date of this Agreement, there has not been any material adverse change
in, and no event has occurred and no condition exists which, individually or
together with other events or conditions, has had a material adverse effect on,
the business, assets, results of operations or financial condition of TCI and
its Subsidiaries, taken as a whole.
SECTION 3.08. Legal Proceedings. Except as set forth in the TCI
Commission Filings filed with the Commission prior to the date hereof or as set
forth on Schedule 3.08, there is no suit, action or proceeding pending or, to
the knowledge of TCI, any investigation pending or any suit, action, proceeding
or investigation threatened, against, involving or affecting TCI, any
Subsidiary of TCI or any of its or their respective properties or rights, nor
is there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against TCI or any Subsidiary of TCI, which does or might (i)
result in the modification, termination, suspension, impairment or reformation
of any material contract to which TCI or any Subsidiary of TCI is a party,
which modification, termination, suspension, impairment or reformation would
have a material adverse effect on the business, assets, results of operations
or financial condition of TCI and its Subsidiaries, taken as a whole; (ii)
materially adversely affect the manner in which TCI conducts its business;
(iii) materially adversely affect the ability of TCI or Acclaim to consummate
any of the transactions contemplated hereby; or (iv) have a materially adverse
effect on the business, assets, results or operations or financial condition of
TCI and its Subsidiaries, taken as a whole.
SECTION 3.09. Compliance With Regulatory Requirements. Each of TCI
and its Subsidiaries is in compliance with, and has conducted its business so
as to comply with, all applicable laws, rules, regulations, ordinances and
codes, domestic or foreign, including laws, rules, regulations, ordinances and
codes relating to the protection of the environment, except where the failure
so to comply has not had, and may reasonably be expected not to have, either
individually or in the aggregate, a material adverse effect on the business,
assets, results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole.
SECTION 3.10. Brokers or Finders. No agent, broker, investment
banker, financial advisor or other person or entity is or will be entitled, by
reason of any agreement, act or statement by TCI or any of its Subsidiaries,
directors, officers, employees or affiliates, to any financial advisory,
broker's, finder's or similar fee or commission, to reimbursement of expenses
or to indemnification or contribution in connection with any of the
transactions contemplated by this Agreement, and TCI agrees to indemnify and
hold Acclaim harmless from and against any and all claims, liabilities or
obligations with respect to any such fees, commissions, expenses or claims for
indemnification or contribution asserted by any person on the basis of any act
or statement made by TCI or any of its Subsidiaries, directors, officers,
employees or affiliates.
SECTION 3.11. Intellectual Property. (a) TCI and its Subsidiaries
own, or have the defensible right to use, all Intellectual Property used in
TCI's business, except where the failure to own or have the right to use such
Intellectual Property would not, individually or
-17-
<PAGE> 22
in the aggregate, have a material adverse effect on the business, assets,
results of operations or financial condition of TCI and its Subsidiaries, taken
as a whole.
(b) Except as disclosed in the TCI Commission Filings filed with the
Commission prior to the date hereof and except as set forth on Schedule 3.11,
no claims which, individually or in the aggregate, are reasonably expected to
have a material adverse effect on the business, assets, results of operations
or financial condition of TCI and its Subsidiaries, taken as a whole, have been
asserted by any person or entity (i) challenging the ownership, validity or
effectiveness of any Intellectual Property owned or used by TCI or any of its
Subsidiaries, (ii) to the effect that any activity of TCI or its Subsidiaries
infringes on any patent or (iii) against the use by TCI or its Subsidiaries of
any Intellectual Property necessary for the conduct of their business.
(c) As used in this Section 3.11, "Intellectual Property" means all
industrial and intellectual property rights including Proprietary Technology,
patents, patent applications, trademarks, trademark applications and
registrations, service marks, service mark applications and registrations,
copyrights, know-how, licenses relating to any of the foregoing, trade secrets,
proprietary processes and formulae. "Proprietary Technology" means all
proprietary processes, formulae, inventions, trade secrets, know-how,
development tools and other proprietary rights used by TCI its Subsidiaries
pertaining to any product, software of service manufactured, marketed, licensed
or sold by TCI its Subsidiaries in the conduct of their business or used,
employed or exploited in the development, license, sale, marketing,
distribution or maintenance thereof, and all documentation and media
constituting, describing or relating to the above, including manuals,
memoranda, know-how, notebooks, software, records and disclosures.
SECTION 3.12. Compliance with Charter and Contracts. (a) Neither
TCI nor any Subsidiary of TCI is in violation of any term of its charter,
by-laws or other organizational documents.
(b) TCI has filed with the Commission copies of all agreements,
leases, license agreements and other contracts that, after consultation with
its legal counsel, TCI reasonably believes are required to be filed under the
Securities Act and the Exchange Act, to which TCI or any of its Subsidiaries is
a party or may be bound. Each of such agreements, leases, license agreements
and contracts is in full force and effect (other than those which have expired
or terminated pursuant to their terms or by mutual agreement of TCI or the
relevant Subsidiary and each other party thereto since the filing thereof), and
(i) none of TCI or its Subsidiaries or, to TCI's knowledge, any other party
thereto, has breached or is in default thereunder, (ii) to TCI's and TCI Sub's
knowledge, no event has occurred which, with the passage of time or the giving
of notice, would constitute such a breach or default, (iii) no claim of
material default thereunder has, to TCI's knowledge, been asserted or
threatened and (iv) none of TCI or its Subsidiaries, or to TCI's knowledge, any
other party thereto is seeking the renegotiation thereof or substitute
performance thereunder, except where such breach or default, or attempted
renegotiation or substitute performance, individually or in the aggregate,
would not have a material adverse effect on the business,
-18-
<PAGE> 23
assets, results of operations or financial condition of TCI and its
Subsidiaries, taken as a whole.
SECTION 3.13. Ownership of Acclaim Securities. At the date hereof
and immediately prior to the Closing, neither TCI nor any of its Subsidiaries
owns or will own, directly or indirectly (including beneficial ownership as
defined in Rule 13d-3 promulgated under the Exchange Act), or has any option or
right to purchase or has any right (other than pursuant to this Agreement), or
agreement to acquire the right, to exercise voting power or authority in
respect of any shares of Acclaim Common Stock or any securities convertible
into or exchangeable for such shares.
SECTION 3.14. Investment Purpose. TCI is acquiring the Acclaim
Shares solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof in any transaction
which would be in violation of the securities laws of the United States of
America or any state thereof. TCI understands that the certificate
representing the Acclaim Shares will contain a legend stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and such shares
may not be sold or transferred unless such sale or transfer
will be effected in accordance with the registration
requirements of the Securities Act of 1933, as at that time
amended, or in accordance with any exemption from the
registration requirements of such Act, which may then be
available thereto."
TCI understands and acknowledges that Acclaim will deliver unlegended
certificates in exchange for the certificate bearing such legend only in the
event that (i) TCI transfers shares represented by such certificate pursuant to
and in the manner provided for in an effective registration statement covering
the transfer or sale of such shares or (ii) TCI shall have delivered to Acclaim
a letter from the staff of the Commission, or an opinion of counsel in form and
substance satisfactory to Acclaim, to the effect that such legend is not
required for the purposes of the Securities Act.
SECTION 3.15. Disclosure. All facts relating to the assets,
business, operations, financial condition and prospects (as such prospects
relate to TCI and its Subsidiaries, not to business conditions in the cable
television and video distribution media industries generally) of TCI and its
Subsidiaries necessary for a reasonably prudent investor to make an investment
decision with respect to the acquisition of the TCI Shares contemplated hereby
have been disclosed to Acclaim. Neither this Agreement, nor any other
agreement, document, certificate or other written instrument delivered pursuant
hereto, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
herein and therein, when taken together, not misleading.
-19-
<PAGE> 24
ARTICLE IV.
TRANSACTIONS PRIOR TO CLOSING
SECTION 4.01. Interim Conduct of Business. During the period
commencing on the date of this Agreement and ending on the Closing Date, except
as expressly contemplated by this Agreement or any Exhibit hereto or consented
to in writing by TCI (which consent shall not be unreasonably withheld),
Acclaim shall not (i) make any change in or amendments to its Certificate of
Incorporation, as amended (other than the Acclaim Charter Amendment (as defined
in Section 4.06)), or Bylaws, as amended (other than to expand the board of
directors in accordance with Section 5.02(h)), (ii) reclassify the outstanding
shares of its capital stock or make any other changes in its capital structure
or (iii) declare, set aside, pay or make any dividend or other distribution or
payment (whether in cash, property or securities) with respect to its capital
stock or other securities (other than a dividend or distribution consisting
solely of Acclaim Common Stock).
SECTION 4.02. Access to Information Concerning Properties and
Records. From the date hereof until the Closing and subject to contractual and
legal restrictions applicable to TCI or to Acclaim (or their respective
Subsidiaries), upon reasonable notice, each of TCI and Acclaim shall (and shall
cause each of its Subsidiaries to) afford to the officers, employees, counsel,
accountants and other authorized representatives of the other full access
during normal business hours to all its properties, personnel, books and
records and furnish promptly to such persons such information concerning its
business, properties, personnel and affairs as such persons shall from time to
time reasonably request in connection with or to facilitate the consummation of
the transactions contemplated hereby.
SECTION 4.03. Confidentiality. (a) The provisions of numbered
paragraphs 1 through 4, inclusive, and numbered paragraph 7 of that certain
letter agreement, dated October 10, 1994, between Acclaim and TCI (such
paragraphs, the "TCI Confidentiality Agreement") concerning the obligations of
Acclaim in respect of certain confidential information furnished or to be
furnished to Acclaim by or on behalf of TCI shall remain in full force and
effect notwithstanding the execution and delivery of this Agreement.
(b) The provisions of numbered paragraphs 1 through 4, inclusive, and
numbered paragraph 7 of that certain letter agreement, dated October 10, 1994,
between TCI and Acclaim (such paragraphs, the "Acclaim Confidentiality
Agreement") concerning the obligations of TCI in respect of certain
confidential information furnished or to be furnished to TCI by or on behalf
Acclaim shall remain in full force and effect notwithstanding the execution and
delivery of this Agreement.
(c) The obligations of Acclaim under the TCI Confidentiality
Agreement, and the obligations of TCI under the Acclaim Confidentiality
Agreement, shall survive for the period commencing on the date hereof and
ending on the earlier to occur of (i) the second anniversary of the termination
of this Agreement pursuant to Article VI and (ii) the second anniversary of the
Closing Date; provided, that the parties obligations in respect of any
-20-
<PAGE> 25
proprietary Technical Material (as such term is defined in the TCI
Confidentiality Agreement and the Acclaim Confidentiality Agreement,
respectively) shall survive indefinitely.
SECTION 4.04. Public Announcements. Neither TCI nor Acclaim shall,
nor shall either TCI or Acclaim permit any of its Subsidiaries to (and each
such party shall use its reasonable efforts to cause its affiliates, directors,
officers, employees and authorized representatives not to), issue any press
release, make any public announcement or furnish any written statement to its
employees or stockholders generally concerning the transactions contemplated by
this Agreement without the consent of the other party (which consent shall not
be unreasonably withheld), except to the extent required by applicable law or
the applicable requirements of the National Association of Securities Dealers,
Inc. with respect to issuers whose securities are quoted on the Nasdaq National
Market (and in either such case such party shall, to the extent consistent with
timely compliance with such requirement, consult with the other party prior to
making the required release, announcement or statement).
SECTION 4.05. Acclaim Stockholders Meeting. Acclaim will take all
action necessary in accordance with Delaware law, Acclaim's Certificate of
Incorporation, as amended, and By-laws and the requirements of the NASD to
convene a meeting of its stockholders (the "Acclaim Stockholders Meeting") as
promptly as practicable to consider and vote upon an amendment to Acclaim's
Certificate of Incorporation, as amended, increasing the authorized number of
shares of Acclaim Common Stock by an amount not less than that sufficient to
permit the issuance and delivery of the Acclaim Shares to TCI Sub in accordance
with Section 1.01 (the "Acclaim Charter Amendment") and the transactions
contemplated hereby. The Acclaim Board shall, subject to fiduciary
obligations under Delaware law as advised in writing by counsel, recommend that
the stockholders of Acclaim vote in favor of the Acclaim Charter Amendment and
the transactions contemplated hereby. Acclaim shall use its best efforts to
solicit from its stockholders proxies in favor of such approval.
SECTION 4.06. Proxy Statement. (a) Acclaim shall prepare and file
with the Commission, as soon as reasonably practicable, a preliminary proxy
statement and a form of proxy for use at the Acclaim Stockholders Meeting
relating to the vote of Acclaim's stockholders with respect to the Acclaim
Charter Amendment and the transactions contemplated hereby (together with any
amendments or supplements thereto, in each case in the form or forms mailed to
Acclaim's stockholders, the "Proxy Statement"). Acclaim will use all
reasonable efforts to have, or cause, the Proxy Statement to be cleared by the
Commission as promptly as practicable and to cause the Proxy Statement to be
mailed to stockholders of Acclaim at the earliest possible date. TCI and TCI
Sub shall promptly furnish to Acclaim such information regarding each of TCI
and TCI Sub and their respective officers and directors as may be reasonably
requested by Acclaim for inclusion in the Proxy Statement.
-21-
<PAGE> 26
(b) Acclaim covenants that none of the information concerning Acclaim
or any of its affiliates, directors, officers, employees, agents or
representatives which is included or incorporated by reference in the Proxy
Statement will, at the time the Proxy Statement or any amendment or supplement
thereto is filed with the Commission, at the time of mailing of the Proxy
Statement or any amendment or supplement thereto to Acclaim's stockholders or
at the time of the Acclaim Stockholders Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Acclaim covenants that the Proxy Statement
shall comply as to form in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations thereunder.
(c) TCI covenants that none of the information supplied or to be
supplied by TCI or any of its affiliates, directors, officers, employees,
agents or representatives in writing specifically for inclusion in the Proxy
Statement will, at the time the Proxy Statement or any amendment or supplement
thereto is filed with the Commission, at the time of mailing of the Proxy
Statement or any amendment or supplement thereto to Acclaim's stockholders or
at the time of the Acclaim Stockholders Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 4.07. Registration Statement. TCI shall prepare and file
with the Commission, as soon as reasonably practicable, the Registration
Statement, and TCI shall use all reasonable efforts to have, or cause, the
Registration Statement to be declared effective by the Commission on or prior
to the Closing Date. Acclaim shall promptly furnish to TCI such information in
respect of Acclaim as may be reasonably requested by TCI for inclusion in the
Registration Statement.
SECTION 4.08. Reasonable Efforts. Subject to the terms and
conditions of this Agreement and applicable law, each of the parties shall use
its reasonable efforts to take, or cause to be taken, all actions, and do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable, including such actions or things as either
party hereto may reasonably request in order to cause any of the conditions to
such other party's obligation to consummate such transactions specified in
Article V to be fully satisfied. Without limiting the generality of the
foregoing, the parties shall (and shall cause their respective Subsidiaries,
and use their reasonable efforts to cause their respective affiliates,
directors, officers, employees, agents, attorneys, accountants and
representatives, to) consult and fully cooperate with and provide reasonable
assistance to each other in (i) the preparation and filing with the Commission
of the Proxy Statement and any necessary amendments of or supplements thereto;
(ii) seeking to have the Proxy Statement cleared by the Commission as soon as
reasonably practicable after filing with the Commission; (iii) obtaining all
necessary consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications or other permission or action by, and giving all
necessary notices to and making all necessary filings with and applications and
submissions
-22-
<PAGE> 27
to, any Governmental Entity or other person or entity; (iv) filing all
applicable Notification and Report Forms required under the HSR Act as a result
of the transactions contemplated by this Agreement and promptly complying with
any requests for additional information and documentary material that may be
requested pursuant to the HSR Act; (v) lifting any permanent or preliminary
injunction or restraining order or other similar order issued or entered by any
court or Governmental Entity (an "Injunction") of any type referred to in
Section 5.01(c); (vi) providing all such information about such party, its
Subsidiaries and its officers, directors, partners and affiliates and making
all applications and filings as may be necessary or reasonably requested in
connection with any of the foregoing; and (vii) in general, consummating and
making effective the transactions contemplated hereby; provided, however, that
in order to obtain any consent, approval, waiver, license, permit,
authorization, registration, qualification or other permission or action or the
lifting of any injunction referred to in clause (iii) or (v) of this sentence,
no party shall be required to (x) pay any consideration, to divest itself of
any of, or otherwise rearrange the composition of, its assets or to agree to
any conditions or requirements which are materially adverse or burdensome or
(y) amend, or agree to amend, in any material respect any Contract. Prior to
making any application to or filing with any Governmental Entity or other
person or entity in connection with this Agreement, each of TCI and Acclaim
shall provide the other party with drafts thereof and afford the other party a
reasonable opportunity to comment on such drafts. None of Acclaim, TCI or TCI
Sub shall, and each of Acclaim, TCI and TCI Sub shall cause each of its
respective Subsidiaries not to, take any action that would or is reasonably
likely to result in any of the conditions set forth in Article V not being met
as of the Closing Date.
SECTION 4.09. No Solicitation. (a) From the date of this
Agreement to and including the Closing Date, Acclaim shall not, and shall use
its best efforts to cause its Subsidiaries and their respective officers,
employees, agents and other representatives, subject to their respective
fiduciary obligations under Delaware law, not to, solicit, encourage or
initiate (directly or indirectly) any discussion with, or provide any
information to, any third party or "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) with respect to any proposal (a "Proposal") for
(i) a merger, consolidation, reorganization or similar business combination
involving Acclaim which would result in a change of control of Acclaim, (ii)
the acquisition by any person or "group" of a greater number of shares (or the
right to vote a greater number of shares) of Acclaim Common Stock then the
aggregate number of shares held by Gregory E. Fischbach and James Scoroposki or
(iii) commencing or conducting, or acquiring an equity interest in an entity
that conducts or engages in, the "Restricted Business" (as that term is defined
in Section 11.02 of the Partnership Agreement). Acclaim shall immediately give
written notice to TCI of the details of any Proposal received by it after the
date of this Agreement and prior to the Closing.
(b) From the date of this Agreement to and including the Closing
Date, TCI shall not, and shall cause its Subsidiaries and their respective
officers, employees, agents and other representatives ("Agents") not to,
solicit, encourage or initiate (directly or indirectly) any discussion with, or
provide any information to, any third party or "group" (as defined in
-23-
<PAGE> 28
Section 4.09(a)) with respect to any proposal for commencing or conducting, or
acquiring an equity interest in an entity that conducts or engages in, the
Restricted Business. TCI shall immediately give written notice to Acclaim of
the details of any such proposal received by it or, to its knowledge, any
Subsidiary or Agent after the date of this Agreement and prior to the Closing.
(c) For a period commencing on the date hereof and ending two
years following the Closing Date or the date of termination of this Agreement,
as the case may be, TCI shall not solicit, and shall prevent its Subsidiaries
from soliciting, to hire or hiring any person who is currently an employee of
Acclaim or its Subsidiaries.
SECTION 4.10 Video Game Services Involving 8-Bit and 16-Bit Games.
Prior to November 12, 1995, Acclaim shall not, and shall cause its Subsidiaries
not to, engage in, or acquire an equity interest in any corporation,
partnership or other entity that directly or indirectly engages in, the
business of owning or operating a video game service involving 8-bit or 16-bit
platform games that is distributed to residential consumers or to bars and
similar public commercial venues via cable television or satellite.
SECTION 4.11 Performance. Notwithstanding anything to the
contrary contained herein, Acclaim shall be under no obligation to commence its
undertaking and commitments and observe its obligations under Sections 4.05,
4.06 and 4.08 until Acclaim shall have received written notice from TCI that
its board of directors has authorized and ratified the execution and delivery
of this Agreement by TCI and TCI Sub and the performance by TCI and TCI Sub of
their respective obligations hereunder and of the transactions contemplated
hereby.
ARTICLE V.
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Obligations of TCI and
Acclaim. The obligations of each of TCI and Acclaim to consummate the
transactions contemplated by this Agreement are subject to the satisfaction at
or prior to the Closing Date of each of the following conditions:
(a) Approval of Acclaim Stockholders. The Acclaim Charter
Amendment and the transactions contemplated hereby shall have been approved by
the requisite vote of the stockholders of Acclaim under Delaware law, Acclaim's
Certificate of Incorporation, as amended, and its Bylaws.
(b) HSR Act. All applicable waiting periods under the HSR Act
shall have expired or been terminated without receipt of any objections or
commencement of litigation or threat thereof by the appropriate governmental
enforcement agency to restrain the transactions contemplated hereby.
-24-
<PAGE> 29
(c) Absence of Injunctions. No permanent or preliminary
injunction or restraining order or other order by any court or other
Governmental Entity of competent jurisdiction or other legal restraint or
prohibition preventing consummation of the transactions contemplated hereby as
provided herein shall be in effect.
(d) No Proceedings or Adverse Enactments. There shall not have
been any action taken, or any statute, rule, regulation, order, judgment or
decree enacted, promulgated, entered, issued or enforced by any foreign or
United States federal, state or local Governmental Entity, and there shall be
no action, suit or proceeding pending which (i) makes the transactions
contemplated by this Agreement illegal or imposes, or is reasonably likely to
result in the imposition of, material damages or penalties in connection
therewith, (ii) would, as of or after the Closing, impose material limitations
on the ability of TCI effectively to exercise full rights of ownership of the
Acclaim Shares (including the right to vote such shares on all matters properly
presented to the stockholders of Acclaim) or (iii) would, as of or after the
Closing, impose material limitations on the ability of Acclaim effectively to
exercise full rights of ownership of the TCI Shares (including the right to
vote such shares on all matters properly presented to the stockholders of TCI).
(e) Receipt of Governmental Approvals and Consents. All
Government Consents as are required in connection with the consummation of the
transactions contemplated hereby shall have been obtained and shall be in full
force and effect, all Governmental Filings as are required in connection with
the consummation of such transactions shall have been made, and all waiting
periods, if any, applicable to the consummation of such transactions imposed by
any Governmental Entity shall have expired, other than those which, if not
obtained, in force or effect, made or expired (as the case may be) would not,
either individually or in the aggregate, have a material adverse effect on (i)
the transactions contemplated hereby or (ii) the business, assets, results of
operations, financial condition or prospects of TCI and its Subsidiaries, taken
as a whole, or Acclaim and its Subsidiaries, taken as a whole.
SECTION 5.02. Conditions Precedent to the Obligations of TCI and
TCI Sub. The obligations of TCI and TCI Sub to consummate the transactions
contemplated by this Agreement are also subject to the satisfaction at or prior
to the Closing Date of each of the following conditions, unless waived by TCI:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Acclaim contained in this Agreement shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects in each case as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of a specified earlier date) on and as of the Closing Date,
with the same force and effect as though made on and as of the Closing Date,
except for changes permitted or contemplated by this Agreement.
(b) Performance of Agreements. Acclaim shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all
-25-
<PAGE> 30
covenants and conditions, contained in this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Contract Consents and Notices. All Contract Consents and
Contract Notices which are referred to in Section 2.06 or 3.06 or otherwise
required in connection with the consummation of the transactions contemplated
hereby and which, if not obtained or given, would have, individually or in the
aggregate, in the reasonable judgment of TCI, a material adverse effect on (i)
the transactions contemplated hereby or (ii) the business, assets, results of
operations, financial condition or prospects of TCI and its Subsidiaries, taken
as a whole, or Acclaim and its Subsidiaries, taken as a whole, shall have been
obtained and given.
(d) No Material Adverse Change. Since the date hereof nothing
shall have occurred which, individually or in the aggregate, has had or, in the
reasonable judgment of TCI, is reasonably likely to have, a material adverse
effect on the business, assets, results of operations, financial condition or
prospects of Acclaim and its Subsidiaries, taken as a whole.
(e) Officer's Certificates. TCI shall have received certificates
of Acclaim, dated the Closing Date, signed by executive officers of Acclaim to
evidence satisfaction of the conditions set forth in Sections 5.02 (a), (b) and
(d), which certificates shall be given by such officers after due inquiry.
(f) Opinion of Counsel. TCI shall have received favorable
opinions from Acclaim's counsel, Rosenman & Colin and Fischbach, Perlstein &
Yanny (each as to matters within such counsel's expertise), dated the Closing
Date, in form customary for transactions of the type contemplated by this
Agreement.
(g) Acclaim Common Market Price. The Acclaim Common Market Price
shall be not less than $13.50. The term "Acclaim Common Market Price" means,
for purposes of this Section 5.02(g), the average of the last reported sale
prices (or, if on any day no sale price is reported, the average of the quoted
high and low bid prices on such day) of a share of Acclaim Common Stock on the
Nasdaq National Market for each of the twenty full trading days immediately
preceding the Closing Date.
(h) Representation on Acclaim Board. The size of the Acclaim
Board shall have been expanded from 7 to 8 members, and the vacancy created
thereby shall have been filled with the designee of TCI (which designee shall
be reasonably acceptable to Acclaim).
(i) Capitalization Certificate. TCI shall have received a
certificate (the "Capitalization Certificate") of Acclaim, dated the Closing
Date, signed by executive officers of Acclaim setting forth, as of the Closing
Date, any and all changes to the information set forth in Section 2.03.
(j) Board Approval. The board of directors of TCI shall have
approved this Agreement and the transactions contemplated hereby.
-26-
<PAGE> 31
(k) Other Deliveries. All other documents and instruments
required under this Agreement to have been delivered by Acclaim to TCI or TCI
Sub at or prior to the Closing (including those specified in Section 1.05)
shall have been delivered.
SECTION 5.03. Conditions Precedent to the Obligations of Acclaim.
The obligation of Acclaim to consummate the transactions contemplated by this
Agreement is also subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, unless waived by Acclaim:
(a) Accuracy of Representations and Warranties. All
representations and warranties of TCI and TCI Sub contained in this Agreement
shall, if specifically qualified by materiality, be true and correct and, if
not so qualified, be true and correct in all material respects in each case as
of the date of this Agreement and (except to the extent such representations
and warranties speak as of a specified earlier date) on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
(b) Performance of Agreements. TCI and TCI Sub shall have
performed in all material respects all obligations and agreements, and complied
in all material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by them prior to or on the Closing
Date.
(c) Contract Consents and Notices. All Contract Consents and
Contract Notices which are referred to in Section 2.06 or 3.06 or otherwise
required in connection with the consummation of the transactions contemplated
hereby and which, if not obtained or given, would have, individually or in the
aggregate, in the reasonable judgment of Acclaim, a material adverse effect on
(i) the transactions contemplated hereby or (ii) the business, assets, results
of operations, financial condition or prospects of Acclaim and its
Subsidiaries, taken as a whole, or TCI and its Subsidiaries, taken as a whole,
shall have been obtained and given.
(d) No Material Adverse Change. Since the date hereof nothing
shall have occurred which, individually or in the aggregate, has had or, in the
reasonable judgment of Acclaim, is reasonably likely to have, a material
adverse effect on the business, assets, results of operations, financial
condition or prospects of TCI and its Subsidiaries, taken as a whole.
(e) Officer's Certificates. Acclaim shall have received
certificates of TCI and TCI Sub, dated the Closing Date, signed by executive
officers of TCI and TCI Sub to evidence satisfaction of the conditions set
forth in Sections 5.03 (a), (b) and (d) and Section 5.02(j), which certificates
shall be given by such officers after due inquiry.
(f) Opinion of Counsel. Acclaim shall have received a favorable
opinion from TCI's counsel, Baker & Botts, L.L.P., dated the Closing Date, in
form customary for transactions of the type contemplated by this Agreement.
-27-
<PAGE> 32
(g) TCI Common Market Price. Subject to Section 1.02(c)(ii), the
TCI Class A Common Market Price shall be not less than $17.25.
(h) Effectiveness of Registration Statement. The Commission shall
have declared the Registration Statement effective and the Commission shall not
have issued any order preventing or suspending the use of any preliminary or
final prospectus included in the Registration Statement or otherwise filed
pursuant to Rule 424(b) under the Securities Act.
(i) Other Deliveries. All other documents and instruments
required under this Agreement to have been delivered by TCI or TCI Sub to
Acclaim at or prior to the Closing (including those specified in Section 1.06)
shall have been delivered.
ARTICLE VI.
TERMINATION
SECTION 6.01. Termination and Abandonment. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing, whether before or after approval of the matters
presented in connection with this Agreement to the stockholders of Acclaim at
the Acclaim Stockholders Meeting: (i) by mutual written consent of TCI and
Acclaim; or (ii) by either TCI or Acclaim: (A) if the Closing shall not have
occurred before June 30, 1995, provided that the right to terminate this
Agreement pursuant to this clause (ii)(A) shall not be available to any party
whose failure to perform any of its obligations under this Agreement required
to be performed by it at or prior to the Closing has resulted in the failure of
the Closing to occur before such date, (B) if there has been a material breach
by the other party of any of its representations, warranties, covenants or
agreements contained in this Agreement and such breach shall not have been
cured within five business days after written notice thereof shall have been
received by the party alleged to be in breach, (C) if any court of competent
jurisdiction or other competent Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting any of the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final and
nonappealable, or (D) if the stockholders of Acclaim fail to approve the
Acclaim Charter Amendment and the transactions contemplated hereby.
SECTION 6.02. Effect of Termination. In the event of any
termination of this Agreement by TCI or Acclaim pursuant to Section 6.01, this
Agreement forthwith shall become void, and there shall be no liability or
obligation on the part of any party hereto or any of their respective officers
and directors, except that (i) Sections 4.03, 4.09(c), 6.03 and 8.02 and
Article VII shall survive the termination of this Agreement, (ii) nothing
herein will relieve any party from liability for any breach of any of its
representatives, warranties, covenants or agreements set forth in this
Agreement occurring prior to such termination, other than a breach subject to
Section 6.03(a)(i)(x), and (iii) nothing herein shall relieve any party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement subject to Section
6.03(a)(i)(x).
-28-
<PAGE> 33
SECTION 6.03. Certain Payments. (a) Acclaim agrees that if the
Closing does not take place as a result of a "Triggering Event," defined for
this purpose as the occurrence of both subsections (i) and (ii) below:
(i) a termination by TCI Sub pursuant to (x)
Section 6.01(ii)(B) and such termination is the result of a
willful breach of any covenant, agreement, representation or
warranty contained herein by Acclaim, or (y) pursuant to
Section 6.01(ii)(D) because of the Acclaim Charter Amendment
and the transactions contemplated hereby not being approved by
the stockholders of Acclaim; and
(ii) the termination or failure to approve is a
result of or related to a "Business Combination," as
hereinafter defined, that is consummated within six months of
such termination,
then Acclaim shall pay to TCI Sub an amount equal to $10,000,000, which amount
is inclusive of all of TCI Sub's expenses; provided, however, that if Acclaim's
legal existence is to cease as a result of the Business Combination (e.g., if
Acclaim is not the surviving corporation in a merger) and Acclaim's successor
has assumed (by means of a written undertaking reasonably satisfactory to TCI
Sub) the obligation to make the payment contemplated hereby, then such
successor and not Acclaim shall make such payment.
(b) Any payment required to be made pursuant to Section
6.03(a) shall be made no later than five business days after the consummation
of the Business Combination, except that if Acclaim is not the survivor of the
Business Combination and Acclaim's successor has not satisfactorily assumed the
obligation to make such payment, then the payment shall be made by Acclaim
immediately before the Business Combination is to be consummated. In either
event, such payment shall be made by wire transfer of immediately available
funds to an account designated by TCI Sub.
(c) For purposes of this Section 6.03, the term "Business
Combination" shall mean (i) a merger, consolidation or other business
combination or similar transaction involving Acclaim; (ii) a sale, lease,
exchange, transfer or other disposition of 25% or more of the assets of Acclaim
and its Subsidiaries, taken as a whole, in a single transaction or series of
related transactions; or (iii) the acquisition by a person or entity, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of beneficial ownership of 25% or more of
the Acclaim Common Stock whether by tender offer or exchange offer or
otherwise. In no event will any of the foregoing transactions consummated
between Acclaim and an affiliate of TCI be considered a Business Combination
for purposes of this Section 6.03.
ARTICLE VII.
INDEMNIFICATION
-29-
<PAGE> 34
SECTION 7.01. Survival. The representations and warranties of the
parties contained in this Agreement shall survive the Closing for a period of
two years. The covenants and agreements of the parties contained in this
Agreement that contemplate actions to be taken (a) prior to the Closing shall
not survive the Closing and (b) after the Closing shall survive until such
actions shall have been taken or performed in accordance with the terms of the
applicable covenant or agreement.
SECTION 7.02. Indemnification Relating to the Agreement. (a)
Acclaim shall indemnify TCI and TCI Sub and each of their respective directors,
officers, employees, agents, successors and permitted assigns, from and against
any and all losses, liabilities, claims, damages, obligations, liens,
assessments, judgments, awards, fines, interest, penalties, costs and expenses
(including reasonable attorneys' fees and expenses) ("Losses") resulting or
arising from:
1. any breach by Acclaim of any representation or
warranty of Acclaim set forth in this Agreement or in any agreement,
certificate or other document executed by Acclaim and delivered to TCI
or TCI Sub pursuant to the provisions of this Agreement;
2. any failure of Acclaim to comply with or
non-fulfillment of any covenant or agreement of Acclaim set forth in
this Agreement; and
3. any untrue statement or alleged untrue statement, or
omission or alleged omission, of a material fact in the Proxy
Statement (other than statements or omissions made based upon and in
conformity with information supplied to Acclaim by TCI or TCI Sub
expressly for use in the Proxy Statement).
(b) TCI and TCI Sub shall, jointly and severally, indemnify
Acclaim, and each director, employee, agent, officer, employee, agent,
successor and assign of Acclaim, from and against all Losses resulting or
arising from:
1. any breach by TCI or TCI Sub of any representation or
warranty of TCI or TCI Sub set forth in this Agreement or in any
agreement, certificate or other document executed by TCI or TCI Sub
and delivered to Acclaim pursuant to the provisions of this Agreement;
2. any failure of TCI or TCI Sub to comply with or
non-fulfillment of any covenant or agreement of TCI or TCI Sub set
forth in this Agreement; and
3. any untrue statement or alleged untrue statement, or
omission or alleged omission, of a material fact contained in the
Proxy Statement, based upon and in conformity with information
supplied by TCI or TCI Sub to Acclaim expressly for use in the Proxy
Statement.
SECTION 7.03. Indemnification Procedures.
-30-
<PAGE> 35
(a) Procedures for Indemnification of Third Party Claims.
(i) If a party entitled to indemnification under Section
7.02 (an "Indemnitee") shall receive notice or otherwise learn of the
assertion by a person, company or other entity (including, without
limitation, any Governmental Entity) (a "Person") who is not a party
to this Agreement, of any claim or of the commencement or threat by
any such Person of any action, suit, arbitration, inquiry, proceeding
or investigation by or before any court or other Governmental Agency
(a "Third Party Claim") with respect to which the other party may be
obligated to provide indemnification pursuant to Section 7.02 (an
"Indemnifying Party"), such Indemnitee shall give such Indemnifying
Party written notice thereof promptly after becoming aware of such
Third Party Claim and in no event later than the second anniversary of
the Closing Date;provided that the failure of any Indemnitee to give
notice or any delay in giving notice as provided in this Section
7.03(a) shall not relieve the related Indemnifying Party of its
obligations under this Article VII, except to the extent that such
Indemnifying Party is prejudiced by such failure to give or delay in
giving notice. Such notice shall describe the Third Party Claim in
reasonable detail and, if ascertainable, shall indicate the amount
(estimated if necessary) of the Loss that has been or may be sustained
by such Indemnitee.
(ii) An Indemnifying Party may elect to defend or to seek
to settle or compromise, at such Indemnifying Party's own expense and
by such Indemnifying Party's own counsel, any Third Party Claim.
Within 30 days of the receipt of notice from an Indemnitee in
accordance with Section 7.03(a)(i) (or sooner, if the nature of such
Third Party Claim so requires), the Indemnifying Party shall notify
the Indemnitee of its election whether the Indemnifying Party will
assume responsibility for defending such Third Party Claim, which
election shall specify any reservations or exceptions. If the
Indemnifying Party assumes the defense of a Third Party Claim, the
Indemnitee shall be kept reasonably informed with respect to, and
shall have the right to employ separate counsel and to participate in
(but not control) the defense, compromise or settlement thereof, but
the fees and expenses of such separate counsel shall be the expense of
such Indemnitee unless (x) the Indemnifying Party agrees in advance to
pay such fees and expenses or (y) the Indemnitee shall have been
advised by its counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the Indemnifying Party, in which case the fees and
expenses of such separate counsel shall be borne by the Indemnifying
Party. If an Indemnifying Party elects not to assume responsibility
for defending a Third Party Claim, or fails to notify an Indemnitee of
its election as provided in this Section 7.03(a)(ii), such Indemnitee
may defend or seek to compromise or settle such Third Party Claim at
the expense of the Indemnifying Party. Neither an Indemnifying Party
nor an Indemnitee shall consent to entry of any judgment or enter into
any settlement of any Third Party Claim which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnitee, in the case of a consent or settlement by an
Indemnifying Party, or the Indemnifying Party, in the case of a
consent or settlement
-31-
<PAGE> 36
by the idemnitee, of a written release from all liability in respect of
such Third Party Claim.
(iii) If an Indemnifying Party chooses to defend or to seek
to compromise or settle any Third Party Claim, the related Indemnitee
shall make available to such Indemnifying Party (in a manner that will
not unreasonably interfere with the conduct of the Indemnitee's
business) any personnel or any books, records or other documents
within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense,
settlement or compromise, and shall otherwise cooperate (in a manner
that will not unreasonably interfere with the conduct of the
Indemnitee's business) in the defense, settlement or compromise of
such Third Party Claim.
(iv) Notwithstanding anything in this Section 7.03(a) to
the contrary, (A) neither an Indemnifying Party nor an Indemnitee
shall, without the written consent of the other party, settle or
compromise or consent to the entry of any judgment with respect to any
Action or Third Party Claim if the effect thereof is to admit any
criminal liability by, or to permit any injunctive relief or other
order providing non-monetary relief to be entered against, the other
party and (B) neither an Indemnifying Party nor an Indemnitee may
settle or compromise any claim without the consent of the other (which
consent shall not be unreasonably withheld). Subject to clause (A) of
this paragraph (iv), if an Indemnifying Party notifies the related
Indemnitee in writing of such Indemnifying Party's desire to settle or
compromise a Third Party Claim on the basis set forth in such notice
(provided that such settlement or compromise includes as an
unconditional term thereof the giving by the claimant or plaintiff of
a written release of the Indemnitee from all liability in respect
thereof) and the Indemnitee shall notify the Indemnifying Party in
writing that such Indemnitee declines to accept any such settlement or
compromise, such Indemnitee may continue to contest such Third Party
Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such
Indemnifying Party to such Indemnitee with respect to such Third Party
Claim shall be equal to (1) the costs and expenses of such Indemnitee
prior to the date such Indemnifying Party notifies such Indemnitee of
the offer to settle or compromise (to the extent such costs and
expenses are otherwise indemnifiable hereunder) plus (2) the lesser of
(x) the amount of any offer of settlement or compromise which such
Indemnitee declined to accept and (y) the actual out-of-pocket amount
such Indemnitee is obligated to pay subsequent to such date as a
result of such Indemnitee's continuing to contest such Third Party
Claim.
(v) In the event of payment by an Indemnifying Party to
any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place
of such Indemnitee as to any events or circumstances in respect of
which such Indemnitee may have any right or claim relating to such
Third Party Claim against any claimant or plaintiff asserting such
Third Party Claim or against any other Person. Such Indemnitee shall
cooperate
-32-
<PAGE> 37
with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated
right or claim.
(b) Other Procedures for Indemnification.
(i) Any claim on account of a Loss which does not result from
a Third Party Claim shall be asserted by written notice given by the
Indemnitee to the related Indemnifying Party, in no event later than
the second anniversary of the Closing Date. Such Indemnifying Party
shall have a period of 30 days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does not respond
within such 30 day period, such Indemnifying Party shall be deemed to
have refused to accept responsibility to make payment. If such
Indemnifying Party does not respond within such 30 day period or
rejects such claim in whole or in part, such Indemnitee shall be free
to pursue such remedies as may be available to such party under
applicable law.
(ii) If the amount of any Liability shall, at any time
subsequent to the payment required by this Agreement, be reduced by
recovery, settlement or otherwise, the amount of such reduction, less
any expenses incurred in connection therewith, shall promptly be
repaid by the Indemnitee to the Indemnifying Party.
SECTION 7.04. Limitation of Indemnity. No party shall be entitled
to recover under Section 7.02 until the total amount of Losses exceeds
$1,000,000 and, upon exceeding such amount, the Indemnified Party shall be
entitled to be indemnified for all Losses (including all Losses below such
$1,000,000 threshold) on a dollar for dollar basis; provided, however, that
notwithstanding the foregoing, (i) TCI shall be entitled to be indemnified on a
dollar for dollar basis from and against all Losses arising under Section 2.10
of this Agreement and (ii) Acclaim shall be entitled to be indemnified on a
dollar for dollar basis from and against all Losses arising under Section 3.10
of this Agreement.
SECTION 7.05. Remedies Cumulative. Subject to the limitations set
forth in Section 7.04 hereof, the remedies provided in this Article VII shall
be cumulative, and the remedies provided in this Article VII shall not preclude
assertion by an Indemnitee of any other rights or the seeking of any and all
other remedies against any Indemnifying Party.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Further Assurances. From and after the Closing Date,
each of TCI and Acclaim shall, at any time and from time to time, make, execute
and deliver, or causes to be made, executed and delivered, such instruments,
agreements, consents and assurances and take or cause to be taken all such
actions as may reasonably be requested by the other party hereto for the
effectual consummation, confirmation and particularization of this Agreement
and the transactions contemplated hereby.
-33-
<PAGE> 38
SECTION 8.02. Expenses. Except as otherwise provided herein, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall occur.
SECTION 8.03. Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given on (i) the day
on which delivered personally or by telecopy (with prompt confirmation by mail)
during a business day to the appropriate location listed as the address below,
(ii) three business days after the posting thereof by United States registered
or certified first class mail, return receipt requested, with postage and fees
prepaid or (iii) one business day after deposit thereof for overnight delivery.
Such notices, requests, demands, waivers or other communications shall be
addressed as follows:
(a) if to TCI, to:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attn: General Counsel
Telecopy No.: (303) 488-3245
with a copy to:
Jerome H. Kern, Esq.
Baker & Botts, L.L.P.
885 Third Avenue
19th Floor
New York, New York 10022
Telecopy No.: (212) 705-5125
(b) if to Acclaim, to:
Acclaim Entertainment, Inc.
71 Audrey Avenue
Oyster Bay, New York 11771
Attn: Gregory E. Fischbach
Telecopy No.: (516) 624-2886
with a copy to:
Eric M. Lerner, Esq.
Rosenman & Colin
575 Madison Avenue
-34-
<PAGE> 39
New York, New York 10022
Telecopy No.: (212) 940-8776
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof, except that any notice of
a change of address shall be effective only upon actual receipt thereof.
SECTION 8.04. Entire Agreement. This Agreement (including the
Exhibits, Annexes, Schedules and other documents referred to herein)
constitutes the entire agreement between the parties and, except as expressly
provided herein, supersedes all prior agreements and understandings, oral and
written, between the parties with respect to the subject matter hereof.
SECTION 8.05. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, benefits or obligations hereunder may be
assigned by any party without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, other than rights conferred upon Indemnified
Parties under Article VII.
SECTION 8.06. Amendment. This Agreement may be amended by the
parties at any time before or after approval of any matters presented in
connection with this Agreement to the stockholders of Acclaim at the Acclaim
Stockholders Meeting, except that after receipt of any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
SECTION 8.07. Extension; Waiver. TCI or Acclaim may, to the extent
legally allowed, (i) extend the time specified herein for the performance of
any of the obligations of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, (iii) waive compliance by the other party
with any of the agreements or covenants of such other party contained herein or
(iv) waive any condition to such waiving party's obligation to consummate the
transactions contemplated hereby or to any of such waiving party's other
obligations hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. Any such extension or waiver by any party
shall be binding on such party but not on the other party entitled to the
benefits of the provision of this Agreement affected unless such other party
also has agreed to such extension or waiver. No such waiver shall constitute a
waiver of, or estoppel with respect to, any subsequent or other breach or
failure to comply strictly with the provisions of this Agreement. The failure
of any party to insist
-35-
<PAGE> 40
on strict compliance with this Agreement or to assert any of its rights or
remedies hereunder or with respect hereto shall not constitute a waiver of such
rights or remedies. Whenever this Agreement requires or permits consent or
approval by any party, such consent or approval shall be effective if given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 8.06.
SECTION 8.08. Interpretation. When a reference is made in this
Agreement to Sections, Articles, Exhibits, Annexes or Schedules, such reference
shall be to a Section, Article, Exhibit, Annex or Schedule (as the case may be)
of this Agreement unless otherwise indicated. When a reference is made in this
Agreement to a "party" or "parties", such reference shall be to a party or
parties to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The use of any gender herein shall be deemed to be or include the
other genders and the use of the singular herein shall be deemed to be or
include the plural (and vice versa), wherever appropriate. The use of the
words "hereof", "herein", "hereunder" and words of similar import shall refer
to this entire Agreement, and not to any particular article, section,
subsection, clause, paragraph or other subdivision of this Agreement, unless
the context clearly indicates otherwise.
SECTION 8.09. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
SECTION 8.10. Applicable Law. This Agreement and the legal
relations between the parties shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflict of laws
rules thereof.
SECTION 8.11. Definition of "Subsidiary". As used in this
Agreement, a "Subsidiary" of any party means any corporation or other
organization, whether incorporated or unincorporated, of which (a), in the case
of a corporation, securities or other interests having by their terms ordinary
voting power to elect at least one-half of the board of directors or others
performing similar functions with respect to such corporation are directly or
indirectly owned or controlled by such party, by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries or (b) in
the case of any organization or entity other than a corporation, such party,
one or more of its Subsidiaries, or such party and one or more of its
Subsidiaries (x) owns at least one-half of the equity interests thereof or (y)
has the power to elect or direct the election of at least one-half of the
members of the governing body thereof or otherwise has "control" (within the
meaning of Rule 12b-2 under the Exchange) over such organization or entity.
For purposes of this Agreement, Newco shall not be deemed a Subsidiary of
either party.
-36-
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TELE-COMMUNICATIONS, INC.
By: /s/ John C. Malone
------------------------------------
Its: President
TCI GAMECO HOLDINGS, INC.
By: /s/ Bruce W. Ravenel
------------------------------------
Its: Vice President
ACCLAIM ENTERTAINMENT, INC.
By: /s/ Robert Holmes
------------------------------------
Its: President
-37-
<PAGE> 42
Schedule 3.05
None.
-38-
<PAGE> 43
Schedule 3.06
None.
-39-
<PAGE> 44
Schedule 3.07
None.
-40-
<PAGE> 45
Schedule 3.08
None.
-41-
<PAGE> 46
Schedule 3.11
None.
-42-
<PAGE> 1
EXHIBIT 99.2
AGREEMENT OF LIMITED PARTNERSHIP
of
ACTC, L.P.
Dated as of October 19, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
----
ARTICLE I
DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Additional Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.03. Terms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
FORMATION, NAME AND TERM OF PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.01. Formation of the Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.02. Name of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.03. Term of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.04. Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.05. Residences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.06. Delaware Office; Agent for Service of Process. . . . . . . . . . . . . . . . . . . . . . 12
Section 2.07. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.08. Property Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III
PARTNERSHIP CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.01. Percentage Interests; Preservation of Percentages of Partnership Interests Held
as General Partners and as Limited Partners; Admission of Limited Partners. . . . . . . . 13
Section 3.02. Capital Contributions Generally; Initial Capital Contributions. . . . . . . . . . . . . . 14
Section 3.03. Additional Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.04. Failure to Make Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.05. Effect of Failure to Contribute on Voting . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.06. Partnership Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.07. Partner Loans; Defaulted Advance Loans; Other Borrowings. . . . . . . . . . . . . . . . . 21
ARTICLE IV
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V
CAPITAL ACCOUNTS; TAX ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Page
----
Section 5.01. Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.02. Capital Account Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.03. Allocations for Federal Income Tax Purposes. . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.04. Prorated Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.05. Distribution in Kind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.06. Tax Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.07. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.08. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
MANAGEMENT OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.01. Partnership Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.02. Meetings of the Partnership Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.03. Officers of the Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.04. Business Plan and Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.05. Actions To Be Submitted to the Partnership Committee. . . . . . . . . . . . . . . . . . . . . 33
Section 6.06. Actions Requiring Unanimous Approval of the Partnership Committee. . . . . . . . . . . . . . 34
Section 6.07. Limitation of Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.08. Liability of Partners and Representatives. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.09. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.10. Partners' Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII
BOOKS, RECORDS, REPORTS AND ACCOUNTINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.01. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.02. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.03. Tax Returns and Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII
TRANSFERS, ADMISSIONS, WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.01. Prohibition on Transfers of Partnership Interests; Withdrawals; Admissions. . . . . . . . . . 43
Section 8.02. Transfers of Partnership Interests to a Permitted Transferee. . . . . . . . . . . . . . . . . 44
Section 8.03. Registration Sale Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.04. Subsequent Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.05. Purchase Option upon Bankruptcy of a Partner. . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.06. Purchase Option upon Change in Control of a Partner. . . . . . . . . . . . . . . . . . . . . 51
Section 8.07. Purchase Option for Defaulting Partner's Partnership Interest. . . . . . . . . . . . . . . . 52
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Page
----
Section 8.08. Purchase of Interest by Other Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.09. Additional Provisions Relating to Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.10. Distributions After Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.11. Extension of Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.12 Buy-Sell Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE IX
EVENTS OF DEFAULT; CONSEQUENCES AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.02. Remedies of Non-Defaulting Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE X
TERMINATION AND LIQUIDATION OF THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.01. Events of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.02. Winding-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.01. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.02. Business Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.03. TCI Sub Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.04. Acclaim Sub Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.05. Partnership License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.01. Freedom of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.03. Table of Contents; Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.04. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.05. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.06. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.07. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.08. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.09. Parties in Interest; Limitation on Rights of Others. . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Page
----
Section 12.10. Waivers; Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.11. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.12. Arbitration; Jurisdiction; Consent to Service of Process. . . . . . . . . . . . . . . . . . . 79
Section 12.13. Waiver of Rights of Partition and Dissolution. . . . . . . . . . . . . . . . . . . . . . . . 80
Section 12.14. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 12.15. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 12.16. Cross-Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 12.17. Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 12.18. No Right of Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 12.19. Property Rights; Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 12.20. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 12.21. Effect of Permitted Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 12.22. Termination of Exchange Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
iv
<PAGE> 6
EXHIBIT 99.2
AGREEMENT OF LIMITED PARTNERSHIP
of
ACTC, L.P.
AGREEMENT OF LIMITED PARTNERSHIP made as of October 19, 1994 by and
between Acclaim Cable Holdings, Inc., a Delaware corporation ("Acclaim Sub"),
and TCI GameCo Ventures, Inc., a Colorado corporation ("TCI Sub").
In consideration of the mutual covenants and agreements contained
herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.01. Certain Definitions. As used in this Agreement, the
following terms shall have the meanings specified below:
"Accountants" means the firm of nationally recognized independent
certified public accountants that, as of any time, have been appointed by the
Partnership Committee as the accountants for the Partnership.
"Act" means the Delaware Revised Uniform Limited Partnership Act.
"Acclaim" means Acclaim Entertainment, Inc., a Delaware corporation,
and any successor (by merger, consolidation, transfer or otherwise) to all or
substantially all of its businesses and assets.
"Acclaim Permitted Transaction" means a transaction pursuant to which
shares of the capital stock of a wholly owned Subsidiary of Acclaim other than
Acclaim Sub (or a Permitted Transferee of Acclaim Sub) (a "Spin-Off Person")
are (A) offered or distributed on a pro rata basis to all of the common
stockholders (and possibly other securityholders) of Acclaim pursuant to a
stock dividend or other distribution, an offering of rights, warrants or
securities entitling the holders to acquire or subscribe for such shares, a
spin-off, a split-up, a split-off, an exchange offer or a similar transaction
and/or (B) are offered pursuant to an initial public offering made on a
widely-distributed basis (in each case, an "Acclaim Spin-Off Transaction"),
where immediately following such transaction either (i) Acclaim Sub is a wholly
owned Subsidiary of the Acclaim Spin-Off Person or (ii) all of the outstanding
<PAGE> 7
shares of capital stock of Acclaim Sub are solely owned by Acclaim and the
Acclaim Spin-Off Person (directly or through one or more wholly owned
Subsidiaries); provided, that Acclaim shall remain the Parent of Acclaim Sub
for purposes of this Agreement notwithstanding such Acclaim Spin-Off
Transaction if, immediately following such transaction, Acclaim is the owner,
directly or through one or more wholly owned Subsidiaries, of not less than 50%
of the outstanding shares of capital stock of Acclaim Sub. If immediately
following the consummation of an Acclaim Spin-Off Transaction Acclaim is not
the owner, directly or through one or more wholly owned Subsidiaries, of at
least 50% of the outstanding shares of capital stock of Acclaim Sub, then the
new Parent of Acclaim Sub shall be (x) the Acclaim Spin-Off Person, if the
Acclaim Spin-Off Person owns, directly or through one or more wholly owned
Subsidiaries, at least a majority of the outstanding shares of capital stock of
Acclaim Sub or (y), if the Acclaim Spin-Off Person is not the new Parent, the
Person that is the ultimate corporate or partnership parent entity (within the
meaning of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
rules and regulations promulgated thereunder (the "HSR Act")) of Acclaim Sub
(the "Acclaim Spin-Off Ultimate Parent Entity"); provided, further, that an
Acclaim Spin-Off Transaction that results in Acclaim ceasing to be the Parent
of Acclaim Sub shall not be deemed a Permitted Transaction unless (i) the
successor Parent of Acclaim Sub has a stockholders' equity of at least
$100,000,000, (ii) no Person or "group" (within the meaning of Rule 13d-3 under
the Exchange Act) owns, directly or indirectly, more shares of the capital
stock or other equity interests of the successor Parent than Acclaim or the
Acclaim Spin-Off Person, whichever holds more shares, and (iii) the successor
Parent accepts and adopts the terms of the Parents Agreement by instrument in
form and substance reasonably satisfactory to the Parent of TCI Sub (or its
Permitted Transferee). For purposes of this definition, (x) the ownership of
shares of capital stock of Acclaim Sub shall include the right to vote and
dispose of such shares and (y) the term "Acclaim Sub" includes any Permitted
Transferee of Acclaim Sub.
"Affiliate", when used with respect to a specified Person, means any
other Person that directly, indirectly or through one or more intermediaries
Controls, is Controlled by or is under Common Control with, such Person.
Notwithstanding the foregoing, (i) neither the Partnership nor any Person
Controlled by the Partnership shall be deemed to be an "Affiliate" of any
Partner or of any Affiliate of any Partner and (ii) no Partner or any Affiliate
thereof shall be deemed to be an "Affiliate" of any other Partner or any
Affiliate thereof solely by virtue of its Partnership Interest.
"Agreement" means this Agreement of Limited Partnership, including all
Schedules and Exhibits hereto, as the same may be amended or modified from time
to time.
The "Bankruptcy" of any Partner shall be deemed to have occurred upon
the happening of any of the following: (i) the filing of an application by
such Person for, or a consent to, the appointment of a trustee of its assets;
(ii) the filing by such Person of a voluntary petition in bankruptcy or the
seeking of relief under Title 11 of the United States
2
<PAGE> 8
Code, or the filing of a pleading in any court of record admitting in writing
its inability to pay its debts as they come due; (iii) the making by such
Person of a general assignment for the benefit of creditors; (iv) the filing by
such Person of an answer admitting the material allegations of, or consenting
to, or defaulting in answering, a bankruptcy petition filed against it in any
bankruptcy proceeding or a petition seeking relief under Title 11 of the United
States Code; or (v) the entry of an order, judgment or decree by any court of
competent jurisdiction adjudicating such Person a bankrupt or for relief in
respect of such Person or appointing a trustee of its assets, and such order,
judgment or decree continues unstayed and in effect for any period of 60
consecutive days.
"Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which banks are open for
business in the City of New York.
"Capital Contributions" means the contributions made by each Partner
to the capital of the Partnership pursuant to Article III.
A "Change in Control" of a Partner shall be deemed to have occurred if
such Partner ceases to be a wholly owned Subsidiary of its Parent; provided,
however, that a Change of Control shall not be deemed to have occurred (i) with
respect to TCI Sub, if TCI Sub ceases to be a wholly owned Subsidiary of TCI as
a result of a TCI Permitted Transaction and, immediately following such TCI
Permitted Transaction, TCI Sub becomes a wholly owned Subsidiary of the Person
who becomes its Parent as a result of the TCI Permitted Transaction and (ii)
with respect to Acclaim Sub, if Acclaim Sub ceases to be a wholly owned
Subsidiary of Acclaim as a result of an Acclaim Permitted Transaction and,
immediately following such Acclaim Permitted Transaction, Acclaim Sub becomes a
wholly owned Subsidiary of the Person who becomes its Parent as a result of the
Acclaim Permitted Transaction.
"Code" means the Internal Revenue Code of 1986.
"Consumer Price Index" means the Consumer Price Index "All Urban
Consumers: U.S. city average, all items" (1982-1984 = 100) published by the
Bureau of Labor Statistics of the United States Department of Labor, or any
equivalent successor or substitute index published by the Bureau of Labor
Statistics or a successor or substitute governmental agency.
"Control" (including its correlative meanings, "Controlled by" and
"under Common Control with") as to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person (whether through ownership of securities, partnership
interests or other ownership interests, by contract, by membership or
involvement in the board of directors, management committee or other management
structure of such Person, or otherwise).
3
<PAGE> 9
"Controlled Affiliate", when used with respect to a specified Person,
means the Parent of such Person and each Subsidiary of such Parent.
"Dispose" (including its correlative meanings, "Disposed of",
"Disposition" and "Disposed"), with respect to any Partnership Interest, means
to Transfer, pledge, hypothecate or otherwise dispose of such Partnership
Interest or any interest therein, except by operation of law in connection with
a merger, consolidation or other business combination of the Partnership and
except that such term shall not include any pledge or hypothecation of, or
granting of a security interest in, a Partnership Interest that is approved by
the Partnership Committee in connection with any financing obtained on behalf
of the Partnership.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Agreement" means the Exchange Agreement, dated as of October
19, 1994, among TCI, TCI GameCo Ventures, Inc., and Acclaim, as such agreement
may be amended or modified in accordance with its terms.
"Fair Market Value", when used with reference to a Partnership
Interest or a Capital Contribution made other than in cash, including any
Section 704(c) Property, means the price at which a willing seller would sell,
and a willing buyer (having full knowledge of the facts) would buy, such
Partnership Interest or the non-cash property comprising such Capital
Contribution at the time such property is contributed to the Partnership, in an
arm's-length transaction without time constraints, and without being under any
compulsion to buy or sell.
"Floating Rate" means, subject to the last two sentences of Section
3.06, the rate per annum (computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as applicable), compounded monthly, equal
to the greater of (i) 3% plus the Prime Rate (adjusted as and when changes in
the Prime Rate occur), (ii) 2% plus the rate per annum applicable to borrowings
by the Partnership under its principal credit facility, if any, or, if a choice
of rates is then available to the Partnership, the highest such rate (in either
case adjusted as and when changes in such applicable rate occur) and (iii) 2%
plus the rate per annum applicable to borrowings by the Timely Partner or the
Complying Partner, as the case may be, under its principal credit facility or,
if a choice of rates is then available to such Partner, the highest such rate
(in either case adjusted as and when changes in such applicable rate occur).
If the Timely Partner or the Complying Partner, as applicable, has no credit
facility, then the principal credit facility of its Parent shall be used for
purposes of the calculations under clause (iii) of the preceding sentence.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
4
<PAGE> 10
"General Partner" means Acclaim Sub, TCI Sub and any Person or
Persons who have been admitted as a successor or additional General Partner in
accordance with the provisions of this Agreement.
"Investment Bank" means a nationally recognized underwriting firm
which is not an affiliate or associate (each as defined in Rule 12b-2 under the
Exchange Act) of either Partner.
"Limited Partner" means Acclaim Sub, TCI Sub and any Person or Persons
who have been admitted as a substituted or additional Limited Partner in
accordance with the provisions of this Agreement.
"Net Income" and "Net Loss" of the Partnership for any Fiscal Year
shall mean the taxable income and tax loss of the Partnership for Federal
income tax purposes for such year, increased by the amount of any tax-exempt
income of the Partnership during such year and decreased by the amount of any
Section 705(a)(2)(B) expenditures (within the meaning of Regulations Section
1.704-1(b)(2)(iv)(i)) of the Partnership during such Fiscal Year; provided,
however, that (A) the depreciation (or amortization) for such Fiscal Year with
respect to any Section 704(c) Property shall be an amount equal to (x) the
depreciation (or amortization) with respect to such Section 704(c) Property for
such Fiscal Year as determined for Federal income tax purposes multiplied by
(y) a fraction (i) the numerator of which is the Fair Market Value of such
Section 704(c) Property on the date of its contribution (or revaluation
pursuant to Section 5.01(b)) and (ii) the denominator of which is the adjusted
basis of such Section 704(c) Property on the date of its contribution (or such
revaluation) for Federal income tax purposes, unless such basis is zero, in
which case the depreciation shall be determined by the Partnership Committee
using a reasonable method, (B) for purposes of calculating the Net Income or
Net Loss arising from any sale or other disposition of any Section 704(c)
Property, the book value of such Section 704(c) Property shall be deemed to be
its Fair Market Value on the date of its contribution (or revaluation) less the
accumulated depreciation or amortization (calculated in accordance with clause
(A) above) arising after that date with respect to such Section 704(c)
Property, and (C) Net Income and Net Loss does not include any item specially
allocated pursuant to Sections 5.02(b) through 5.02(g).
"Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.704-2(b)(1). Generally, the amount of Nonrecourse
Deductions for a Fiscal Year equals the net increase, if any, in the amount of
Partnership Minimum Gain during that Fiscal Year reduced (but not below zero)
by the aggregate amount of any distributions during that Fiscal Year of
proceeds of a Nonrecourse Liability that are allocable to an increase in
Partnership Minimum Gain (except that increases in Partnership Minimum Gain
resulting from certain conversions, refinancing or other changes to a debt
instrument do not generate Nonrecourse Deductions). The amount of Nonrecourse
Deductions shall be determined in accordance with Regulations Section
1.704-2(c).
5
<PAGE> 11
"Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.704-2(b)(3) (and Regulations Section 1.752-1(a)(2)).
"Parent" means (i) with respect to Acclaim Sub (and its Permitted
Transferees), Acclaim or (in lieu of Acclaim) such other Person who may become
the Parent of Acclaim Sub (or its Permitted Transferees) as a result of an
Acclaim Permitted Transaction, and (ii) with respect to TCI Sub (and its
Permitted Transferees), TCI or (in lieu of TCI) such other Person who may
become the Parent of TCI Sub (or its Permitted Transferees) as a result of a
TCI Permitted Transaction. With respect to any other Person hereafter admitted
to the Partnership as a General Partner, the Parent with respect to such
Partner shall be the Person identified as such in a Schedule to be attached to
this Agreement in connection with the admission of such Partner.
"Partner" means a General Partner or Limited Partner.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set
forth in Regulations Section 1.704-2(i)(2). Generally, Partner Nonrecourse
Debt Minimum Gain means an amount, with respect to each Partner Nonrecourse
Debt, equal to the minimum gain attributable to the Partner Nonrecourse Debt.
The amount of Partner Nonrecourse Debt Minimum Gain shall be determined in
accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.704-2(i)(1). Generally, the amount of Partner
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a Fiscal
Year equals the net increase, if any, in the amount of Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt reduced (but not
below zero) by the aggregate amount of any distributions during that Fiscal
Year to the Partner that bears the economic risk of loss for such Partner
Nonrecourse Debt that are both attributable to such Partner Nonrecourse Debt
and allocable to an increase in Partner Nonrecourse Debt Minimum Gain. The
amount of Partner Nonrecourse Deductions shall be determined in accordance with
Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership created pursuant to this
Agreement.
"Partnership Costs" means all costs necessary or appropriate for the
Partnership to incur, including all costs of administering the Partnership and
all other costs and expenses reflected in the Approved Business Plan or
otherwise associated with any agreement, obligation or other matter either
approved by the Partnership Committee or which does not require the approval of
the Partnership Committee.
6
<PAGE> 12
"Partnership Interest" means, as to each Partner, all of the interest
of such Partner in the Partnership, including such Partner's (i) right to a
distributive share of the income, gain, losses and deductions of the
Partnership in accordance herewith, (ii) right to a distributive share of
Partnership assets, (iii) obligations as a Partner, and (iv) rights with
respect to the management of the business and affairs of the Partnership, as
provided herein or by law.
"Partnership Minimum Gain" with respect to the Partnership shall have
the meaning set forth in Regulations Section 1.704-2(b)(2). Generally, the
amount of Partnership Minimum Gain is determined by first computing for each
Partnership Nonrecourse Liability any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains, with certain limitations applicable to minimum gain arising
from certain conversions, refinancing, or other changes to a debt instrument.
The amount of Partnership Minimum Gain shall be determined in accordance with
Regulations Section 1.704-2(d).
"Permitted Transferee" of any Partner means the Parent and any
wholly-owned Subsidiary of the Parent of such Partner.
"Person" means any individual, firm, corporation, general or limited
partnership, joint venture, trust, association, unincorporated entity of any
kind or governmental authority.
"Prime Rate" means the rate of interest publicly announced from time
to time by The Bank of New York, as its prime rate in effect at its principal
office in the City of New York.
"Public Company" means any corporation, partnership or other entity
which is publicly traded on any principal trading exchange or inter-dealer
quotation system.
"Public Equity Value" means, with respect to any interest, the price
at which such interest could be sold to the public in an underwritten public
offering under the Securities Act.
"Regulation(s)" means United States Treasury Regulations issued under
the Code.
"Representative" means the representative of a Partner on the
Partnership Committee.
"Section 704(c) Property" means any property contributed to the
Partnership by a Partner that has a tax basis for Federal income tax purposes
on the date of its contribution that differs from its Fair Market Value on such
date and any Partnership property that is revalued pursuant to Section 5.01(b).
7
<PAGE> 13
"Securities Act" means the Securities Act of 1933.
"Subsidiary" of any Person means a corporation, company or other
entity (i) more than fifty percent (50%) of whose outstanding shares or
securities are, now or hereafter, owned or controlled, directly or indirectly
through one or more Subsidiaries, by such Person, and the shares or securities
so owned entitle such Person and/or Subsidiaries to elect at least a majority
of the members of the board of directors or other managing authority of such
corporation, company or other entity or (ii) which does not have outstanding
shares or securities, as may be the case in a partnership, joint venture or
unincorporated association, but more than fifty percent (50%) of whose
ownership interest is, now or hereafter, owned or controlled, directly or
indirectly through one or more Subsidiaries, by such Person, and the ownership
interest so owned entitles such Person and/or Subsidiaries to make the
decisions for such corporation, company or other entity; provided, in each
case, that such corporation, company or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
"TCI" means Tele-Communications, Inc., a Delaware corporation, and any
successor (by merger, consolidation, transfer or otherwise) to all or
substantially all of its businesses and assets.
"TCI Permitted Transaction" means a transaction pursuant to which
shares of the capital stock of a wholly owned Subsidiary of TCI other than TCI
Sub (or a Permitted Transferee of TCI Sub)(a "Spin-Off Person") are (A) offered
or distributed on a pro rata basis to all of the common stockholders (and
possibly other securityholders) of TCI pursuant to a stock dividend or other
distribution, an offering of rights, warrants or securities entitling the
holders to acquire or subscribe for such shares, a spin-off, a split-up, a
split-off, an exchange offer or a similar transaction and/or (B) are offered
pursuant to an initial public offering made on a widely-distributed basis (in
each case, a "TCI Spin-Off Transaction"), where immediately following such
transaction either (i) TCI Sub is a wholly owned Subsidiary of the TCI Spin-Off
Person or (ii) all of the outstanding shares of capital stock of TCI Sub are
solely owned by TCI and the TCI Spin-Off Person (directly or through one or
more wholly owned Subsidiaries); provided, that TCI shall remain the Parent of
TCI Sub for purposes of this Agreement notwithstanding such TCI Spin-Off
Transaction if, immediately following such transaction, TCI is the owner,
directly or through one or more wholly owned Subsidiaries, of not less than 50%
of the outstanding shares of capital stock of TCI Sub. If immediately
following the consummation of a TCI Spin-Off Transaction TCI is not the owner,
directly or through one or more wholly owned Subsidiaries, of at least 50% of
the outstanding shares of capital stock of TCI Sub, then the new Parent of TCI
Sub shall be (x) the TCI Spin-Off Person, if the TCI Spin-Off Person owns,
directly or through one or more wholly owned Subsidiaries, at least a majority
of the outstanding shares of capital stock of TCI Sub or (y), if the TCI
Spin-Off Person is not the new Parent, the Person that is the ultimate
corporate or partnership parent entity (within the meaning of the HSR Act) of
TCI Sub (the "TCI Spin-Off Ultimate Parent Entity"); provided further, that a
TCI-Spin
8
<PAGE> 14
Off Transaction that results in TCI ceasing to be the Parent of TCI Sub
shall not be deemed a Permitted Transaction unless (i) the successor Parent of
TCI Sub has a stockholders' equity of at least $300,000,0000, (ii) no Person or
"group" (within the meaning of Rule 13d-3 under the Exchange Act) owns,
directly or indirectly, more shares of the capital stock or other equity
interests of the successor Parent than TCI or the TCI Spin-Off Person,
whichever holds more shares, and (iii) the successor Parent accepts and adopts
the terms of the Parents Agreement by instrument in form and substance
reasonably satisfactory to the Parent of Acclaim Sub (or its Permitted
Transferee). For purposes of this definition, (x) the ownership of shares of
capital stock of TCI Sub shall include the right to vote and dispose of such
shares and (y) the terms "TCI Sub" includes any Permitted Transferee of TCI
Sub.
"Transfer" means to sell, exchange, assign or transfer.
"wholly owned Subsidiary" of any Person means a corporation, company
or other entity (i) all of whose outstanding securities and the voting and
disposition rights in respect thereof are solely beneficially owned (as defined
in Rule 13d-3 under the Exchange Act) directly, or indirectly through one or
more wholly owned subsidiaries, by such Person or (ii) which does not have
outstanding shares or securities, as may be the case in a partnership, joint
venture or other unincorporated association, but 100% of whose ownership
interest and the voting and disposition rights in respect thereof are solely
beneficially owned directly, or indirectly through one or more wholly-owned
subsidiaries, by such Person; provided, in each case, that such corporation,
company or other entity shall be deemed to be a wholly-owned subsidiary only so
long as such 100% sole beneficial ownership exists.
Section 1.02. Additional Definitions. The following additional
terms have the meaning ascribed thereto in the Section or Schedule indicated
below next to such term:
<TABLE>
<CAPTION>
Defined Term Section or Schedule Defined In
- ------------ ------------------------------
<S> <C> <C>
Additional Agreement 11.01
Approved Business Plan 6.04(b)
Bankrupt Partner 8.05
Book Value 8.08
Budget 6.04(a)
Business 11.05
Business Plan 6.04(a)
Buyer 8.12(c)
Buy-Sell Closing Date 8.12(d)
Buy-Sell Procedure 8.12(a)
Capital Account 5.01(a)
Capital Call 3.03
Certificate 2.01
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
Defined Term Section or Schedule Defined In
- ------------ ------------------------------
<S> <C> <C>
Changed Partner 8.06
Complying Partner 3.04(b)
Damages 9.02(a)
Defaulted Advance Loan 3.04(e)
Defaulting Partner 9.01
Delinquent Partner 3.04(a)
Electronic Means 11.02(b)
Event of Default 9.01
Event of Termination 10.01
Extraordinary Decision 6.05
Fiscal Year 5.07
initial Approved Business Plan 6.04(a)
Initiating Partner 8.03(a)
Make-up Amount 3.04(e)
Non-Defaulting Partner 9.02
Nonrecourse Regulatory Allocations 5.02(f)
Offer Notice 8.03(b)
Officers 6.03
Partner Loan 3.06
Partner Nonrecourse Regulatory Allocations 5.02(g)
Partnership Committee 6.01(a)
Payment Date 3.03
Payment Default 3.04(b)
Penalty Amount 3.04(a)
Percentage Interest 3.01
Proposed Budget 6.04(b)
Proprietary Information 12.18
Purchasing Partner 8.08
Refusing Partner 3.04(b)
Registration Sale Procedure 8.03(a)
Required Contribution 3.03
Responding Partner 8.03(a)
Response Notice 8.03(c)
Sale Notice 8.03(a)
S-B Initiating Partner 8.12(a)
S-B Responding Partner 8.12(a)
Seller 8.12(c)
Selling Partner 8.08
Senior Credit Agreements 3.06
Senior Officer 6.03
Special Contribution 3.04
</TABLE>
10
<PAGE> 16
<TABLE>
<CAPTION>
Defined Term Section or Schedule Defined In
- ------------ ------------------------------
<S> <C>
STT Partnership 11.02(d)
Stated Value 8.12(a)
Tax Matters Partner 7.03(a)
TCI Sub Cable Systems 11.02
Term 2.03
Timely Partner 3.04(a)
Trigger Date
Unpaid Amount 3.04(a)
</TABLE>
Section 1.03. Terms Generally. The definitions in Sections 1.01
and 1.02 shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The words "herein", "hereof" and "hereunder" and words
of similar import refer to this Agreement (including the Exhibits and
Schedules) in its entirety and not to any part hereof unless the context shall
otherwise require. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise require.
Unless the context shall otherwise require, any references to any agreement or
other instrument or statute or regulation are to it as amended and supplemented
from time to time (and, in the case of a statute or regulation, to any
successor provisions). Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
ARTICLE II
FORMATION, NAME AND TERM OF PARTNERSHIP
Section 2.01. Formation of the Partnership. The Partners hereby
form the Partnership as a limited partnership pursuant to the Act, for the
purposes and upon the terms and conditions set forth in this Agreement.
Promptly after the execution of this Agreement, the Partnership shall file and
record a Certificate of Limited Partnership of the Partnership (the
"Certificate") in the office of the Secretary of State of the State of Delaware
and provide a copy as filed to the Partners. The Partnership shall also file
and record all such other certificates and documents, including amendments to
the Certificate, as may be required or appropriate to comply with all
requirements for the formation and operation of the Partnership as a limited
partnership, the ownership of property and the
11
<PAGE> 17
conduct of business under the laws of the State of Delaware and of any other
jurisdictions in which the Partnership may own property or conduct business.
The Partnership shall provide the Partners with copies of each such document as
filed and recorded.
Section 2.02. Name of Partnership. The name of the Partnership
shall be "_________________". The business of the Partnership may be conducted
under such other name and/or names and variations thereof as the Partnership
Committee may from time to time select. The name and any trade or service
names, marks, emblems or logos related to the name of the Partnership shall be
the exclusive property of the Partnership, and no Partner nor any Affiliate
thereof shall have the right to use, and each Partner agrees, and shall cause
its Controlled Affiliates and use its reasonable efforts to cause its other
Affiliates, not to use any of said names, marks, emblems or logos other than on
behalf of the Partnership and except as permitted pursuant to agreements
between the Partnership and any such Partner or Affiliate or as otherwise
agreed by the Partners.
Section 2.03. Term of Partnership. The term of the Partnership
shall commence upon the filing of the Certificate in the office of the
Secretary of State of the State of Delaware and shall expire on August 31,
2044, unless sooner terminated in accordance with Article X. Such period of
time as the Partnership shall remain in existence is referred to herein as the
"Term".
Section 2.04. Principal Office. The principal executive office of
the Partnership shall be located at such place as the Partnership Committee
shall establish, and the Partnership Committee may change the location of the
principal executive office from time to time, provided that such principal
executive office shall be located in the United States. The Partnership
Committee may establish and maintain such other or additional offices and
places of business of the Partnership, either within or without the State of
Delaware, as it deems appropriate.
Section 2.05. Residences. The place of residence of each Partner
is its address set forth in Section 12.02.
Section 2.06. Delaware Office; Agent for Service of Process. The
address of the Partnership's registered office in the State of Delaware is in
care of The Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, County of New Castle, Delaware 19801, and the name of the
registered agent for service of process of the Partnership is The Corporation
Trust Company. The Partnership Committee may from time to time appoint a new
registered agent for the Partnership.
Section 2.07. Purpose. Subject to, and upon the terms and
conditions of this Agreement, the purposes and business of the Partnership
shall be (i) to produce, develop, acquire (including by purchase or license),
merchandise, own, and invest in games and other interactive entertainment
software, (ii) to sell, license, distribute or otherwise transmit
12
<PAGE> 18
interactive entertainment principally to or through Electronic Means, (iii) to
develop, provide and merchandise programming for the video game and computer
industry and (iv) to promote standard hardware, software and other technologies
to implement the Partnership's services and the delivery thereof. The
Partnership shall have all the powers now or hereafter conferred by the laws of
the State of Delaware on limited partnerships formed under the Act and, subject
to the limitations of this Agreement, may do any and all lawful acts or things
that are necessary, appropriate, incidental or convenient for the furtherance
and accomplishment of the purposes and businesses of the Partnership.
Section 2.08. Property Ownership. Except as otherwise expressly
provided herein, all assets and property, whether real, personal or mixed,
tangible or intangible, including contractual rights, owned by the Partnership
or which the Partnership has the right to use shall be held or used in the name
of the Partnership; all such assets, property and rights shall be deemed to be
owned or used by the Partnership as an entity, and none of the Partners
individually shall have any separate ownership in such assets, property or
rights other than (i) as expressly provided in any agreement between the
Partnership and any Partner or Affiliate thereof or (ii) as otherwise agreed by
the Partners. Each Partner's interest in the Partnership is personal property
for all purposes.
ARTICLE III
PARTNERSHIP CAPITAL
Section 3.01. Percentage Interests; Preservation of Percentages of
Partnership Interests Held as General Partners and as Limited Partners. The
initial "Percentage Interest" of Acclaim Sub as of the date of this Agreement
is 65% and the initial "Percentage Interest" of TCI Sub as of the date of this
Agreement is 35%, each of which percentage represents the sum of the "General
Partner Percentage Interest" and "Limited Partner Percentage Interest" of such
Partner as of the date of this Agreement as set forth in Exhibit A. Except as
expressly provided in this Agreement or as may result from a transfer of
Partnership Interests required or permitted by this Agreement, the Percentage
Interest of a Partner shall not be subject to increase or decrease without such
Partner's prior consent. For purposes of this Agreement, each Partner is
treated as though it holds a single Partnership Interest, even though it holds
ninety nine percent (99.00%) of its Partnership Interest as a General Partner
and one percent (1.00%) of its Partnership Interest as a Limited Partner.
Notwithstanding anything in this Agreement to the contrary, the Partners intend
for each Partner to continue to hold ninety nine percent (99.00%) of its
Partnership Interest as a General Partner and one percent (1.00%) of its
Partnership Interest as a Limited Partner. Accordingly, the amount of any
Capital Contributions made by a Partner pursuant to Article III and any
allocations and distributions to a Partner pursuant to Article IV or Article V
shall, except as otherwise provided therein, be allocated ninety nine percent
(99.00%) to the Partnership Interest held by the Partner as a General Partner
and one
13
<PAGE> 19
percent (1.00%) to the Partnership Interest held by the Partner as a Limited
Partner. In the event that a Partner Transfers all or any portion of its
Partnership Interest pursuant to this Agreement, ninety nine percent (99.00%)
of the aggregate Partnership Interest so acquired by any Person shall be
treated as attributable to the Partnership Interest held by the transferring
Partner as a General Partner and one percent (1.00%) shall be treated as
attributable to the Partnership Interest held by the transferring Partner as a
Limited Partner. In the event that the Partnership Interest of a Partner is
otherwise increased or decreased pursuant to this Agreement, the amount of the
increase or decrease, as the case may be, shall be allocated ninety-nine
percent (99.00%) to the Partnership Interest held by such Partner as a General
Partner and one percent (1.00%) to the Partnership Interest held by such
Partner as a Limited Partner.
Section 3.02. Capital Contributions Generally; Initial Capital
Contributions. As their initial Capital Contributions to the Partnership,
Acclaim Sub and TCI Sub shall contribute an aggregate of $5,000,000 in cash.
The amount of the initial Capital Contribution of each of Acclaim Sub and TCI
Sub is set forth opposite its name on Exhibit A under the heading "Initial Cash
Capital Contribution", which amount shall be payable on the date of the closing
under the Exchange Agreement (or such other date as the Partners may agree).
Unless otherwise agreed by the Partnership Committee pursuant to Section 6.06,
all Capital Contributions shall be in cash. If the Partnership Committee
determines to allow any future Capital Contributions to be made in property
other than cash, such contributed property shall be credited to the
contributing Partner's Capital Account at the Fair Market Value thereof (which
shall be determined net of liabilities secured by such property that the
Partnership is considered to assume or take subject to under Section 752 of the
Code). Any such properties to be contributed by a Partner, the Fair Market
Value thereof, and the liabilities to be assumed by the Partnership in
connection therewith will be set forth in a contribution agreement, the terms
of which must be satisfactory to and approved by the Partnership Committee
pursuant to Section 6.06, but which shall include, in any event,
representations and warranties by the contributing Partner that the properties
being contributed are free and clear of any liens or encumbrances, are not
subject to any indebtedness for borrowed money, and that the Partnership shall
receive good and marketable title to such properties, and an agreement by the
contributing Partner to indemnify the Partnership in the event of a breach of
such representations and warranties.
Section 3.03. Additional Capital Contributions. Subject to the
limitations of this Agreement, if the Partnership requires additional capital
from time to time to fund Partnership Costs to be incurred in conformity with
the Approved Business Plan and/or decisions of the Partnership Committee, the
Partners agree to make additional Capital Contributions, pro rata in accordance
with their respective Percentage Interests, to fund such Partnership Costs
pursuant to the following procedures. If additional Capital Contributions are
scheduled to be made by the Partners under the Approved Business Plan, or upon
a determination by the Partnership Committee pursuant to Section 6.06 that
Capital Contributions in addition to those provided for in the Approved
Business Plan are required
14
<PAGE> 20
to fund Partnership Costs to be incurred within the next six months in
conformity with the Approved Business Plan, the Partnership Committee shall
cause notice thereof (a "Capital Call") to be given to each Partner, setting
forth in such notice in reasonable detail the purposes for which such
additional capital is required, the amount of the additional Capital
Contribution requested to be made by each Partner (the "Required
Contribution"), the date (the "Payment Date") on which such additional Capital
Contributions are to be made (which shall not be less than 15 days nor more
than 45 days after the date such notice is given) and the account of the
Partnership to which payment is to be made; provided, that in the case of
additional Capital Contributions provided for in the initial Approved Business
Plan and Budget adopted pursuant to Section 6.04 (a), such notice need only
refer to the Required Contribution and the Payment Date therefor. Each Partner
shall make the additional Capital Contribution required by such notice on or
before the Payment Date. After adoption of the initial Approved Business Plan
pursuant to Section 6.04(a) and during the period covered thereby or by any
subsequent Approved Business Plan, if the Partnership Committee fails to make a
Capital Call with respect to additional Capital Contributions scheduled to be
made by the Partners under the initial Approved Business Plan or any
subsequently Approved Business Plan or otherwise required to fund Partnership
Costs incurred or to be incurred within the next six months in conformity with
the Approved Business Plan as then in effect, or fails to make a Capital Call
contemplated by Section 6.06(c) or Section 11.02(c), either Partner may issue
such Capital Call to the other Partner (and the Partners shall make the
additional Capital Contributions required thereby pro rata in accordance with
their respective Percentage Interests); provided, however, that, except as
otherwise provided in Section 6.06(c) and Section 11.02(c), no Partner shall be
entitled to issue a Capital Call for additional Capital Contributions in any
Fiscal Year if and to the extent that the amount of such additional Capital
Contributions, when added to the amount of all other Capital Contributions for
which Capital Calls have theretofore been made in such Fiscal Year, would
exceed the amount specified for such Fiscal Year in the Approved Business Plan
then in effect (and, if such amount varies based on varying sets of
assumptions, under the then applicable set of assumptions) or if the amount or
making of such additional Capital Contributions is subject to the achievement
of any milestones provided for in the Approved Business Plan that have not been
achieved.
Section 3.04. Failure to Make Capital Contributions.
(a) In the event that any Partner (the "Delinquent
Partner") fails to make all or any portion of its Required Contribution on or
before the related Payment Date, then, unless the Capital Call is rescinded as
provided in Section 3.04(b)(i), an additional amount shall accrue as a penalty
with respect to such unpaid amount (the "Unpaid Amount") at the Floating Rate
from and including the Payment Date until the Unpaid Amount and the full amount
of the penalty accrued thereon (as of any date of determination, the "Penalty
Amount") are paid as provided in this Section 3.04. If the Delinquent Partner
pays the Unpaid Amount to the Partnership on or before the tenth day following
the related Payment Date, the Delinquent Partner shall, at the time of such
payment, pay to the other Partner,
15
<PAGE> 21
if the other Partner made its Required Contribution in full on or before the
related Payment Date and has no uncured Payment Defaults (the "Timely
Partner"), a portion of the Penalty Amount equal to the interest that such
Timely Partner would have earned on the amount of its Required Contribution,
from and including the Payment Date to the date the Delinquent Partner pays the
Unpaid Amount to the Partnership, if the Timely Partner had made a loan in such
amount to the Partnership with interest at the Floating Rate. The Delinquent
Partner shall pay the balance of the Penalty Amount, if any, to the Partnership
and the amount so paid shall be deemed to be a special contribution ("Special
Contribution") by the Delinquent Partner to the capital of the Partnership. The
portion of the Penalty Amount paid to the Timely Partner shall not, for any
purpose, be deemed to be a Capital Contribution.
(b) If the Delinquent Partner fails to pay the Unpaid
Amount together with the Penalty Amount to the Partnership and/or the Timely
Partner as provided in Section 3.04(a) on or before the tenth day following the
related Payment Date (such failure being referred to herein as a "Payment
Default", and such Partner being referred to herein as a "Refusing Partner"),
the other Partner, if it is not a Refusing Partner and has no uncured Payment
Defaults (the "Complying Partner"), may, in its sole discretion, by notice
given to the Partnership Committee and the Refusing Partner within 10 days
after the occurrence of the Payment Default:
(i) Elect to cause the Capital Call in respect of which
the Payment Default occurred to be rescinded;
(ii) Elect to have the Required Contribution made by it in
response to such Capital Call be deemed to be a loan to the
Partnership, rather than a Capital Contribution, and make an
additional loan to the Partnership in an amount equal to the Unpaid
Amount;
(iii) Elect to make a loan to the Partnership in an amount
equal to the Unpaid Amount;
(iv) Elect to make an additional Capital Contribution (an
"Excess Contribution") to the Partnership in an amount equal to the
Unpaid Amount;
(v) Elect to cause the Partnership to borrow from banks,
lending institutions or other unrelated third parties an amount equal
to the Unpaid Amount (in which event such borrowing shall not be
subject to approval by the Partnership Committee pursuant to Section
6.05or 6.06); or
(vi) If the Payment Default occurs prior to the end of the
last full Fiscal Year included in the initial Approved Business Plan,
elect to cause the Payment Default to be referred to arbitration in
accordance with Section 12.12 and, if the
16
<PAGE> 22
arbiter determines that the Capital Call in respect of which such
Payment Default is alleged was valid and such Payment Default was the
result of a violation of Section 3.03, (x) require the Defaulting
Partner to make the additional Capital Contribution required by such
Capital Call and (y) deposit in escrow, in accordance with Section
3.04(h), an amount (the "Escrow Amount") equal to the Defaulting
Partner's pro rata share of all additional Capital Contributions
scheduled to be made by the Partners under the Approved Business Plan
for the remainder of the Fiscal Year in which such Payment Default
occurred. Any determination made by an arbiter with respect to a
referral pursuant to this clause (vi) shall be binding on each Partner
and the Partnership.
The Complying Partner shall not be obligated to make any election under this
Section 3.04(b) and, except as provided in Section 9.01 or 9.02(a), neither the
existence nor the exercise of any right of election available to a Complying
Partner under this Section 3.04(b) shall affect the Complying Partner's right
to treat the Refusing Partner's Payment Default as an Event of Default and to
make any election and pursue at any time any remedy then available to a
Non-Defaulting Partner pursuant to Section 9.02(a).
(c) If a Partner at any time becomes a Refusing Partner,
it shall thereafter cease to be entitled to make any additional Capital
Contributions to the Partnership unless and until it cures all of its Payment
Defaults in the manner specified in Sections 3.04(g) or 3.04(h) or as otherwise
agreed by the Complying Partner. Unless and until a Refusing Partner cures all
of its Payment Defaults, such Partner shall be deemed (unless otherwise agreed
by the Complying Partner) a Refusing Partner with respect to each subsequent
Capital Call, and the other Partner, if it is a Complying Partner, shall be
entitled to make an election under Section 3.04(b) with respect to each
subsequent Capital Call.
(d) If the Complying Partner makes an election pursuant
to clause (i) of Section 3.04(b), the Partnership shall promptly return to each
Partner the amount contributed by it in response to such Capital Call and the
Complying Partner shall be entitled to reimbursement directly from the Refusing
Partner (and not from the Partnership) of an amount equal to the interest that
such Complying Partner would have earned on the amount of its Required
Contribution, from and including the later of (i) the Payment Date and (ii) the
date such Complying Partner made its Required Contribution, to the date the
same is returned to it by the Partnership, if the Complying Partner had made a
loan in such amount to the Partnership with interest at the Floating Rate.
Reimbursement payments pursuant to the immediately preceding sentence shall
not, for any purpose, be deemed to be Capital Contributions.
(e) If the Complying Partner makes an election under
clause (ii) or (iii) of Section 3.04(b), the indebtedness of the Partnership to
the Complying Partner for the amount loaned and deemed loaned pursuant to such
election (a "Defaulted Advance Loan") shall be evidenced by a promissory note
of the Partnership in the form of Exhibit B hereto
17
<PAGE> 23
(with any changes therein requested by any lender under any Senior Credit
Agreement and consented to by the Complying Partner, which consent shall not be
withheld unreasonably) and shall bear interest from the date made until paid in
full at the Floating Rate.
(f) Whenever a Payment Default occurs, the Percentage
Interests of the Partners shall (unless the Complying Partner has made an
election pursuant to clause (i) or (ii) of Section 3.04(b)) be adjusted as
follows: (i) the Percentage Interest of the Refusing Partner shall be reduced,
with effect from the related Payment Date, so that such Percentage Interest
equals the quotient (expressed as a percentage) of (x) the sum of all Capital
Contributions (other than Special Contributions) actually made by such Refusing
Partner from inception of the Partnership through and including the related
Payment Date divided by (y) the sum of all Capital Contributions (other than
Special Contributions) actually made by all Partners from inception of the
Partnership through and including the related Payment Date plus the amount of
any Excess Contribution made by a Complying Partner in respect of such Capital
Call; and (ii) the Percentage Interest of the other Partner shall be increased,
with effect from the related Payment Date, by the amount by which the
Percentage Interest of the Refusing Partner has been reduced.
(g) Notwithstanding the foregoing provisions of this
Section 3.04, if a Payment Default occurs and the Complying Partner does not
elect to cause the Capital Call to be rescinded pursuant to clause (i) of
Section 3.04(b), a Refusing Partner may, with the written consent of the
Complying Partner (which may be withheld in the Complying Partner's sole
discretion), cure its Payment Default by paying to the Partnership and/or the
Complying Partner, as provided below, an amount (the "Make-up Amount") equal to
the Unpaid Amount plus the Penalty Amount. If the Complying Partner made no
election pursuant to Section 3.04(b), the Refusing Partner shall pay (i) to the
Complying Partner a portion of the Make-up Amount (the "Equalizing Payment")
equal to the interest that the Complying Partner would have earned on the
amount of its Required Contribution, from and including the later of (x) the
Payment Date and (y) the date such Complying Partner made its Required
Contribution, to the date the Equalizing Payment is paid to the Complying
Partner, if the Complying Partner had made a loan in such amount to the
Partnership and (ii) to the Partnership the balance of the Make-up Amount. The
Equalizing Payment shall not, for any purpose, be deemed to be a Capital
Contribution. The portion of the Make-up Amount paid to the Partnership that is
in excess of the Unpaid Amount (if any) shall be deemed to be a Special
Contribution by the Refusing Partner. If the Complying Partner had made an
election pursuant to clause (ii) or clause (iii) of Section 3.04(b) to make a
Defaulted Advance Loan to the Partnership, the full Make-up Amount shall be
paid to the Partnership and the proceeds thereof shall promptly be applied by
the Partnership to the repayment of such Defaulted Advance Loan in accordance
with the terms of the note or notes evidencing the same. The portion of the
Make-up Amount paid by the Refusing Partner pursuant to the immediately
preceding sentence that is in excess of the Unpaid Amount shall be deemed to be
a Special Contribution by the Refusing Partner. The Complying Partner shall
contribute the balance of such Defaulted Advance Loan to the
18
<PAGE> 24
Partnership and surrender the note or notes evidencing the same to the
Partnership for cancellation. The portion of such Defaulted Advance Loan so
contributed by the Complying Partner pursuant to the immediately preceding
sentence that is in excess of such Complying Partner's Required Contribution
shall be deemed to be a Special Contribution by the Complying Partner. If the
Complying Partner had made an election pursuant to clause (iv) of Section
3.04(b) to make an Excess Contribution to the Partnership in respect of the
Unpaid Amount, then the Refusing Partner shall pay to the Complying Partner a
portion of the Make-up Amount equal to the interest that such Complying Partner
would have earned on the amount of the Required Contribution made by it in
response to the Capital Call in respect of which the Payment Default occurred,
if it had made a loan in such amount to the Partnership with interest at the
Floating Rate from and including the date of such contribution to the date the
Make-up Amount is paid. The portion of the Make-up Amount so paid to the
Complying Partner shall not, for any purpose, be deemed to be a Capital
Contribution. The balance of the Make-up Amount shall be paid by the Refusing
Partner to the Partnership and the Partnership shall apply the proceeds of such
payment to make a special distribution to the Complying Partner in an amount
equal to the Excess Contribution made by such Complying Partner. If the
Complying Partner had made an election pursuant to clause (v) of Section
3.04(b) to cause the Partnership to borrow funds from banks, lending
institutions or other unrelated third parties, the full Make-up Amount (plus an
additional amount, if necessary, to pay accrued but unpaid interest on such
borrowings if such rate of interest exceeded the Floating Rate) shall be paid
to the Partnership and the proceeds thereof shall promptly be applied by the
Partnership to the repayment of such borrowings in accordance with the terms of
the credit agreement and the related note or notes evidencing the same. The
portion of the Make-up Amount (and any additional amount paid in respect of
accrued but unpaid interest in excess of the Floating Rate) paid by the
Refusing Partner pursuant to the immediately preceding sentence that is in
excess of the Unpaid Amount shall be deemed to be a Special Contribution by the
Refusing Partner. If the Percentage Interests of the Partners were adjusted
pursuant to Section 3.04(f) as a result of the Payment Default, then upon
payment by the Refusing Partner of the Make-up Amount (plus any additional
amount required in accordance with the provisions of this Section 3.04(g)) in
full in accordance with the foregoing provisions of this Section 3.04(g), the
Percentage Interests of the Partners shall be readjusted so as to restore to
the Refusing Partner and the Complying Partner the respective Percentage
Interests they would have had but for and solely based on the Payment Default
of the Refusing Partner.
(h) If the Complying Partner makes an election pursuant
to clause (vi) of Section 3.04(b) and the arbiter determines that the Capital
Call in respect of which the Payment Default is alleged was valid and such
Payment Default was the result of a violation of Section 3.03, the Refusing
Partner shall pay (i) to the Complying Partner an amount (the "Interest
Amount") equal to the interest that the Complying Partner would have earned on
the amount of its Required Contribution, from and including the later of (x)
the Payment Date and (y) the date such Complying Partner made its Required
Contribution, to the date
19
<PAGE> 25
the Interest Amount is paid to the Complying Partner, if the Complying Partner
had made a loan in such amount to the Partnership and (ii) to the Partnership
an amount equal to the Unpaid Amount, plus an amount equal to the interest that
the Partnership could have earned on the Unpaid Amount, from and including the
Payment Date to the date the Unpaid Amount is paid to the Partnership. For
purposes of this Section 3.04(h), it shall be assumed that the rate of interest
that the Partnership could have earned on the Unpaid Amount is equal to 2%
plus the rate per annum applicable to borrowings by the Partnership under its
principal credit facility, if any, or, if a choice of rates is then available
to the Partnership, the highest such rate (in either case adjusted as and when
changes in such applicable rate occur). The Interest Amount paid to the
Complying Partner shall not, for any purpose, be deemed to be a Capital
Contribution and the amount paid to the Partnership in excess of the Unpaid
Amount shall be deemed to be a Special Contribution by the Refusing Partner.
The Refusing Partner shall deposit the Escrow Amount in escrow with a financial
institution acceptable to the Complying Partner as escrow agent, and amounts
deposited in escrow shall be subject to automatic withdrawal by the Partnership
to satisfy Capital Calls made in conformity with the Approved Business Plan for
the remainder of the Fiscal Year in which the applicable Payment Default
occurred. Any interest earned on the amount deposited in escrow by the Refusing
Partner shall be paid to the Partnership, and shall be deemed a Special
Contribution by the Refusing Partner. Upon compliance with this Section
3.04(h), a Refusing Partner shall be deemed to have cured its Payment Default
and shall thereafter be entitled to all the rights and benefits of a Complying
Partner. If the Percentage Interests of the Partners were adjusted pursuant to
Section 3.04(f) as a result of the Payment Default, then upon compliance by the
Refusing Partner with this Section 3.04(h), the Percentage Interests of the
Partners shall be readjusted so as to restore to the Refusing Partner and the
Complying Partner the respective Percentage Interests they would have had but
for and solely based on the Payment Default of the Refusing Partner.
(i) This Section 3.04 shall not be applicable to Acclaim
Sub (or its Permitted Transferee), and Acclaim Sub (or its Permitted
Transferee) shall not be deemed a Refusing Partner, if Acclaim was unable to
make all or part of a Required Contribution (other than its initial Capital
Contribution payable pursuant to Section 3.02) because of financial inability
resulting directly from (i) the failure of TCI to maintain an effective
registration statement covering the sale of the "TCI Shares" (as defined in the
Exchange Agreement) during the period it was required to maintain such
effectiveness under the Exchange Agreement or if such registration statement
shall be the subject of a stop order by the Securities and Exchange Commission
suspending the effectiveness thereof, (ii) the suspension or threatened
suspension of the qualification of the TCI Shares for sale under the securities
or blue sky laws of any jurisdiction, (iii) TCI advising Acclaim pursuant to
Schedule 1.02 to the Exchange Agreement to cease selling TCI Shares or (iv) any
cessation or delay in trading or the delisting of TCI's securities on or from
any national securities exchange or the Nasdaq Stock Market; provided, that
this Section 3.04 shall be applicable to Acclaim Sub (or its Permitted
Transferee), and Acclaim Sub (or such Permitted Transferee) shall be deemed a
Refusing Partner, if the inability of TCI to maintain such
20
<PAGE> 26
effective registration statement, or such stop order, suspension or threatened
suspension, is due to or arising from, in whole or in substantial part, (x) any
actual or alleged untrue statement of a material fact or any actual or alleged
omission of a material fact required to be stated in the related prospectus
made (or omitted) in reliance on and in conformity with written information
furnished by or on behalf of Acclaim Sub or Acclaim or (ii) any violation of
any federal or state securities laws, rules or regulations by Acclaim or any of
its Affiliates.
Section 3.05. Effect of Failure to Contribute on Voting. A
Refusing Partner, at such time as its Percentage Interest is less than 25% of
all Percentage Interests of the General Partners, shall cease to have any
rights to representation on the Partnership Committee, whereupon such Refusing
Partner's then Representatives on the Partnership Committee shall be deemed to
have immediately resigned such positions, with the number of members comprising
the Partnership Committee, and the required quorum necessary for the taking of
action by the Partnership Committee, reduced accordingly. Thereafter, subject
to Section 6.06(b), all matters required to be submitted to the Partnership
Committee pursuant to Sections 6.05 or 6.06(a) or any other provision of this
Agreement shall be deemed approved if consented to by the Representatives of
the other Partner (provided such other Partner has no uncured Payment
Defaults), and the Refusing Partner shall have no voting rights other than
those required under Delaware law and those enumerated in Section 6.06(b);
provided, however, that if the Refusing Partner cures all of its Payment
Defaults in accordance with Section 3.04(g) or 3.04(h), then the number of
members of the Partnership Committee (and the quorum necessary for the taking
of action) shall be restored to the number that would have been in effect but
for the removal of the Refusing Partner's Representatives pursuant to this
Section 3.05 and such Refusing Partner shall be entitled to designate
Representatives to fill such positions on the Partnership Committee.
Section 3.06. Partnership Funds. The funds of the Partnership
shall be deposited in such bank accounts or invested in such investments as
shall be designated by the Partnership Committee. Partnership funds shall not
be commingled with those of any other Person without the consent of all
Partners. The Partnership shall not lend or advance funds to, or guarantee any
obligation of, a Partner or any Affiliate thereof without the prior written
consent of the other Partner.
Section 3.07. Partner Loans; Defaulted Advance Loans; Other
Borrowings. Subject to any applicable approval required by Article VI, in
order to satisfy the Partnership's financial needs, the Partnership may, if so
determined by the Partnership Committee or provided for in the Approved
Business Plan, (i) borrow from banks, lending institutions or other unrelated
third parties, and may pledge Partnership properties or the production of
income therefrom to secure and provide for the repayment of such loans and (ii)
borrow funds from any Partner or an Affiliate of a Partner. Loans made by a
Partner or an Affiliate of a Partner (a "Partner Loan") shall be evidenced by a
promissory note of the Partnership in the form approved by the lending Partner
and the Partnership Committee
21
<PAGE> 27
and, unless otherwise agreed by the Partners and subject to the last two
sentences of this Section 3.07, shall bear interest payable quarterly from the
date made until paid in full at a rate per annum (calculated for actual days
elapsed in a year of 365 or 366 days, as applicable) equal to 2% plus the Prime
Rate (adjusted as and when changes in such Prime Rate occur). Unless a Partner
declines to make such loan, Partner Loans shall be made pro rata in accordance
with the respective Percentage Interests of the Partners (or in such other
proportion as the Partners may agree). Unless otherwise expressly determined
by the Partnership Committee, all Partner Loans and Defaulted Advance Loans
shall be unsecured and the promissory notes evidencing the same shall, except
as otherwise provided in Section 8.09(a)(iii), be nonnegotiable and
nontransferable except to a Permitted Transferee in connection with a Transfer
under Section 8.02. Repayment of the principal amount of and accrued interest
on all Partner Loans and Defaulted Advance Loans shall be subordinated to the
repayment of the principal of and accrued interest on any indebtedness of the
Partnership to third party lenders, to the extent required by the applicable
provisions of the instruments creating such indebtedness to third party lenders
("Senior Credit Agreements"). All amounts required to be paid in accordance
with the terms of such notes and all amounts permitted to be prepaid shall be
applied to the notes held by the Partners in accordance with the order of
payment contemplated by Section 10.02(c)(iii). Subject to the terms of
applicable Senior Credit Agreements, Partner Loans and Defaulted Advance Loans
shall be repaid to the Partners at such times as the Partnership has sufficient
funds to permit such repayment without jeopardizing the Partnership's ability
to meet its other obligations on a timely basis. Nothing contained in this
Agreement or in any promissory note issued by the Partnership hereunder shall
require the Partnership or any Partner to pay interest or any amount as a
penalty at a rate exceeding the maximum amount of interest permitted to be
collected from time to time under applicable usury laws. If the amount of
interest or of such penalty payable by the Partnership or any Partner on any
date would exceed the maximum permissible amount, it shall be automatically
reduced to such amount, and interest or the amount of the penalty for any
subsequent period, to the extent less than that permitted by applicable usury
laws, shall, to that extent, be increased by the amount of such reduction.
ARTICLE IV
DISTRIBUTIONS
No Partner shall have the right to withdraw any amount from its
Capital Account, or to receive any distribution, without the approval of the
Partnership Committee. No Partner shall have the right to demand or, except as
otherwise provided in Section 10.02, receive a distribution of property other
than cash from the Partnership. The Partnership may, from time to time,
distribute cash to the Partners pro rata in accordance with their respective
Percentage Interests in amounts that the Partnership Committee determines are
in excess of the amounts reasonably necessary for the continued efficient
operation of the
22
<PAGE> 28
business of the Partnership. The Partnership shall pay in full all Partner
Loans and Defaulted Advance Loans (in accordance with the order of payment
contemplated by Section 10.02(c)(iii)) prior to making any cash distributions
to the Partners, other than a special distribution pursuant to Section 3.04(g).
Except as otherwise provided in Section 10.02, distributions to the Partners
shall be made in accordance with their respective Percentage Interests at the
time of distribution. Notwithstanding the above, no distribution shall be made
to a Partner to the extent such distribution would cause or increase a deficit
balance in such Partner's Capital Account.
ARTICLE V
CAPITAL ACCOUNTS; TAX ALLOCATIONS
Section 5.01. Capital Accounts.
(a) There shall be established for each Partner on the
books of the Partnership a capital account (a "Capital Account"). The Capital
Account of each Partner shall be credited with (i) the amount of any cash
contributed by such Partner to the Partnership (including deemed contributions
pursuant to Section 12.16), (ii) the fair market value of any Capital
Contributions made in property other than cash (net of any liabilities secured
by such property that the Partnership is considered to assume or take subject
to under Section 752 of the Code) and (iii) the amount of any Net Income or
items thereof or any other income item, allocated to such Partner pursuant to
Section 5.02. The contribution by a Complying Partner of a Defaulted Advance
Loan to the Partnership pursuant to Section 3.04(e) shall be deemed to be a
contribution of cash in an amount equal to the unpaid principal amount of such
Defaulted Advance Loan plus all accrued but unpaid interest thereon. The
Capital Account of each Partner shall be decreased by (i) the amount of any Net
Losses, or items thereof or any other item of deduction, allocated to such
Partner pursuant to Section 5.02 and (ii) the amount of cash and the fair
market value of any property (net of any liabilities secured by such property
that such Partner is considered to assume or take subject to under Section 752
of the Code) distributed to such Partner (including deemed distributions
pursuant to Section 12.16). The Capital Account of a Partner also shall be
adjusted appropriately to reflect any other adjustments required pursuant to
Regulations Sections 1.704-1(b) and 1.704-2.
(b) Upon the occurrence of any event specified in
Regulations Section 1.704-1(b)(2)(iv)(f), the Partnership Committee may cause
the Capital Accounts of the Partners to be adjusted as if the property of the
Partnership had been sold at Fair Market Value immediately prior to such event.
23
<PAGE> 29
(c) In the event that any Partnership Interest is
Transferred in accordance with the provisions of Article VIII, the transferee
of such Partnership Interest shall succeed to the portion of the transferor's
Capital Account attributable to such interest.
Section 5.02. Capital Account Allocations.
(a) Allocations of Net Income and Net Loss. The Net
Income or Net Loss, as applicable, of the Partnership for each Fiscal Year (or
portion thereof) shall be allocated to the Partners pro rata in accordance with
their respective Percentage Interests.
(b) Income Offset. Notwithstanding any other provision
of this Agreement, no Loss or item of deduction or loss shall be allocated to a
Partner which causes or increases a deficit balance in such Partner's Capital
Account. In determining the extent to which the previous sentence is
satisfied, each Partner's Capital Account also shall be reduced by (i)
allocations of loss and deduction that, as of the end of such year reasonably
are expected to be made to such Partner pursuant to Section 704(e)(2) of the
Code, Section 706(e) of the Code and paragraph (b)(2)(ii) of Regulations
Section 1.751-1, and (ii) distributions that, as of the end of such year,
reasonably are expected to be made to such Partner to the extent they exceed
offsetting increases to such Partner's Capital Account that reasonably are
expected to occur during (or prior to) the Partnership taxable years in which
such distributions reasonably are expected to be made. For the purposes of
determining the amount of expected distributions and expected Capital Account
increases described in (ii) above, the adjusted basis of Partnership property
(as reflected in the Capital Accounts of the Partners) will be presumed to be
the fair market value of such property and adjustments to the basis will be
presumed to be matched by corresponding changes in such property's fair market
value. In addition, the Capital Account of a Partner will be deemed to be
increased by such Partner's share of Partner Nonrecourse Debt Minimum Gain and
such Partner's share of Partnership Minimum Gain. Any deduction denied to a
Partner because of the rule of this Section 5.02(b) shall be allocated to the
other Partners in proportion to their respective Percentage Interests. If any
Partner unexpectedly receives an allocation or distribution described in clause
(i) or (ii) above, which causes a deficit balance in such Partner's Capital
Account (as modified pursuant to this Section 5.02(b)), such Partner will be
allocated items of income and gain (consisting of a pro rata portion of each
item of Partnership income and gain for such year) in an amount and manner
sufficient to eliminate such deficit, as quickly as possible.
(c) Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement if for any Fiscal Year there is a net decrease in
Partnership Minimum Gain, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, for succeeding
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g), except as otherwise provided in Regulations Section 1.704-2(f)(2),
1.704-2(f)(3), 1.704- (2)(f)(4), and 1.704-2(f)(5). Allocations pursuant to
the previous
24
<PAGE> 30
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 5.02(c) is intended to comply with the minimum gain chargeback
requirement of Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(d) Partner Minimum Gain Chargeback. Notwithstanding any
other provision of this Agreement, if during a Fiscal Year there is a net
decrease in Partner Nonrecourse Debt Minimum Gain, each Partner who has a share
of that Partner Nonrecourse Debt Minimum Gain (determined in accordance with
Regulations Section 1.704-2(i)(5)) as of the beginning of such year shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, for succeeding years) in an amount equal to such Partner's share of
the net decrease in Partner Nonrecourse Debt Minimum Gain, determined in
accordance with Regulations Section 1.704-2(i)(4) (and taking into account the
exceptions provided therein). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704- 2(i)(4). This Section
5.02(d) is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(e) Nonrecourse Deductions. Nonrecourse Deductions for
any Fiscal Year or other period shall be allocated as Net Loss pursuant to
Section 5.02(a).
(f) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year or other period shall be specially
allocated to the Partner who bears the economic risk of loss with respect to
the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i).
(g) Nonrecourse Regulatory Allocations. The "Nonrecourse
Regulatory Allocations" consist of all allocations pursuant to Sections 5.02(c)
and 5.02(e). Notwithstanding any other provision of this Agreement, the
Nonrecourse Regulatory Allocations shall be taken into account in allocating
items of income, gain, loss, and deduction among the Partners so that, to the
extent possible, the net amount of such allocations of other items and the
Nonrecourse Regulatory Allocations to each Partner shall be equal to the net
amount that would have been allocated to each such Partner if the Nonrecourse
Regulatory Allocations had not occurred. For purposes of applying the
foregoing sentence (i) no allocations pursuant to this Section 5.02(g) shall be
made with respect to allocations pursuant to Section 5.02(c) prior to the
Fiscal Year during which there is a net decrease in Partnership Minimum Gain,
and then only to the extent necessary to avoid any potential economic
distortions caused by such net decrease in Partnership Minimum Gain and (ii)
allocations pursuant to this Section 5.02(g) shall be deferred with
25
<PAGE> 31
respect to allocations pursuant to Section 5.02(e) to the extent the
Partnership Committee determines that such allocations are likely to be offset
by subsequent allocations pursuant to Section 5.02(c).
(h) Partner Nonrecourse Regulatory Allocations. The
"Partner Nonrecourse Regulatory Allocations" consist of all allocations
pursuant to Sections 5.02(d) and 5.02(f). Notwithstanding any other provision
of this Agreement, the Partner Nonrecourse Regulatory Allocations shall be
taken into account in allocating items of income, gain, loss, and deduction
among the Partners so that, to the extent possible, the net amount of such
allocations of other items and the Partner Nonrecourse Regulatory Allocations
to each Partner shall be equal to the net amount that would have been allocated
to each such Partner if the Partner Nonrecourse Regulatory Allocations had not
occurred. For purposes of applying the foregoing sentence (i) no allocations
pursuant to this Section 5.02(h) shall be made with respect to allocations
pursuant to Section 5.02(d) relating to a particular Partner Nonrecourse Debt
prior to the Fiscal Year during which there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
and then only to the extent necessary to avoid any potential economic
distortions caused by such net decrease in Partner Nonrecourse Debt Minimum
Gain and (ii) allocations pursuant to this Section 5.02(h) shall be deferred
with respect to allocations pursuant to Section 5.02(f) to the extent the
Partnership Committee determines that such allocations are likely to be offset
by subsequent allocations pursuant to Section 5.02(d).
(i) Application. The Partnership Committee shall have
reasonable discretion, with respect to each Fiscal Year, to (i) apply the
provisions of Sections 5.02(g) and 5.02(h) in whatever order is likely to
minimize the economic distortions that might otherwise result from the
Regulatory Allocations and (ii) divide all allocations pursuant to Sections
5.02(g) and 5.02(h) among the Partners in a manner that is likely to minimize
such economic distortions.
Section 5.03. Allocations for Federal Income Tax Purposes. The
Partnership's ordinary income and losses, capital gains and losses and other
tax items as determined for Federal income tax purposes shall be allocated to
the Partners in the same manner as the corresponding "book" items are allocated
pursuant to Section 5.02. Notwithstanding the foregoing sentence, Federal
income tax items relating to Section 704(c) Property shall be allocated among
the Partners in accordance with Section 704(c) of the Code or Regulations
Section 1.704-1(b)(4)(i), as applicable, to take into account the difference
between the fair market value and the tax basis of such Section 704(c) Property
as of the date of its contribution to the Partnership or revaluation pursuant
to Section 5.01(b). Credits shall be allocated in accordance with the
allocation of the deduction for the Partnership expenditure which gave rise to
the credit. Items described in this Section 5.03 shall neither be credited nor
charged to the Capital Accounts of the Partners.
26
<PAGE> 32
Section 5.04. Prorated Allocations. In the event of a Transfer of
any Partnership Interest, regardless of whether the transferee is already a
Partner or becomes an additional, substitute or successor Partner, all items of
income, gain, loss and deduction attributable to such Partnership Interest for
the Fiscal Year in which the Transfer occurs shall be allocated between the
transferor and the transferee on the basis of the ownership of such Partnership
Interest during such Fiscal Year. Subject to Section 706 of the Code, such
allocation shall be made either by prorating items of income, gain, loss and
deduction for such year based upon the number of days that such Partnership
Interest was owned by the transferor and the transferee, respectively, or in
accordance with a closing of the books on an interim basis on the date on which
the Transfer occurred, as determined by the Tax Matters Partner.
Section 5.05. Distribution in Kind. If any asset of the
Partnership is distributed in kind pursuant to Section 10.02(c)(iv) of this
Agreement, the amount of income or loss that would have been realized had such
asset been sold at its Fair Market Value shall be Net Income or Net Loss, as
the case may be, and shall be allocated to the Capital Accounts of the Partners
pursuant to Section 5.02. If any asset of the Partnership is distributed in
kind pursuant to any other section of this Agreement, the amount of income or
loss that would have been realized had such asset been sold at its fair market
value shall be deemed to be Net Income or Net Loss and shall be allocated to
the Capital Accounts of the Partners pursuant to Section 5.02.
Section 5.06. Tax Elections.
(a) The Partnership may elect to capitalize (rather than
deduct) all expenses that it incurs to the extent permitted by applicable law
and GAAP.
(b) In the event of a Transfer of all or part of a
Partner's interest in the Partnership, the Tax Matters Partner shall at the
request of the transferee cause the Partnership to elect, pursuant to Section
754 of the Code, to adjust the basis of the Partnership's property; provided,
however, that the tax items attributable to any such basis adjustment shall be
allocated solely to such transferee and such transferee shall reimburse the
Partnership promptly for all costs associated with such basis adjustment,
including bookkeeping, appraisal and other similar costs..
(c) Except as otherwise expressly provided herein, all
other elections required or permitted to be made by the Partnership under the
Code (or applicable state or local tax law) shall be made in such manner as may
be determined by the Partnership Committee to be in the best interests of the
Partners as a group.
Section 5.07. Fiscal Year. The fiscal year of the Partnership
("Fiscal Year") for tax and accounting purposes shall end on the last day of
August of each year.
27
<PAGE> 33
Section 5.08. Interest. No Partner shall be entitled to interest
on its Capital Contributions or on the positive balance in its Capital Account
and no such interest shall be accrued or paid.
ARTICLE VI
MANAGEMENT OF THE PARTNERSHIP
Section 6.01. Partnership Committee.
(a) There is hereby established a Partnership Committee
for the Partnership (the "Partnership Committee"), which, unless otherwise
stated herein, shall have and exercise full discretion and final authority with
respect to the management of the business and affairs of the Partnership. The
initial Partnership Committee shall consist of five members (each, a
"Representative"), with three members designated by Acclaim Sub and two members
designated by TCI Sub. One Representative designated by each Partner shall be a
co-chair of the Partnership Committee. Each Partner shall give written notice
to the other Partner on or prior to the date hereof of the Persons selected to
be its initial Representatives, effective as of the date hereof. The
Representatives of each Partner shall collectively have one vote and, in the
absence of prior written notice to the Partnership Committee to the contrary,
each Representative of a Partner shall be conclusively presumed to have the
authority to cast such vote in the name and on behalf of such Partner. The
number of members of the Partnership Committee will be subject to reduction in
accordance with Section 3.05 and Section 9.02(d).
(b) Any Partner may, at any time, by written notice to
the other Partner, remove any or all of its Representatives, with or without
cause, and appoint substitute Representatives to serve in their stead. Each
Partner shall be entitled to name an alternate Representative to serve in the
place of any Representative appointed by such Partner should any such
Representative not be able to attend a meeting or meetings. Each Partner shall
bear the costs incurred by each Representative or alternate designated by it to
serve on the Partnership Committee, and no Representative or alternate shall be
entitled to compensation from the Partnership for serving in such capacity.
(c) In the event any Representative dies or is unwilling
or unable to serve as such or is removed from office by the Partner that
designated him or her, such Partner shall promptly designate a successor to
such Representative. Such successor shall be appointed as soon as possible,
but in no event later than five Business Days after the day such vacancy first
occurs.
(d) The written notice of a Partner's appointment of a
Representative or alternate shall in each case set forth such Representative's
or alternate's business and
28
<PAGE> 34
residence addresses and business telephone number. Each Partner shall promptly
give written notice to the other Partner of any change in the business or
residence address or business telephone number of any of its Representatives.
Each Person designated by a Partner to be its Representative on the Partnership
Committee, and each Person designated by such Partner to serve in such
Representative's stead or as his or her alternative or successor, shall be
subject to the approval of the other Partner (which approval shall not be
unreasonably withheld) prior to such Person's appointment to the Partnership
Committee. TCI Sub shall not designate a Person to serve as its Representative
on the Partnership Committee if such Person serves in a similar capacity on the
partnership committee of the STT Partnership.
(e) Each Partner shall cause its Representatives on the
Partnership Committee to comply with the terms of this Agreement. In the
absence of prior written notice to the contrary, any action taken by a
Representative of a Partner shall, so far as the other Partner is concerned, be
deemed to have been duly authorized by the Partner that appointed such
Representative.
Section 6.02. Meetings of the Partnership Committee.
(a) The initial meeting of the Partnership Committee
shall take place on such date and at such time and place as the Partners agree.
The Partnership Committee shall hold regular meetings no less frequently than
quarterly and shall establish meeting times, dates and places and requisite
notice requirements and adopt rules or procedures consistent with the terms of
this Agreement. The Partnership Committee may meet by means of telephone,
conference telephone or similar communications equipment. Each Partner shall
have the right to call a special meeting of the Partnership Committee at any
time or from time to time by giving prior written notice of the agenda, time,
date and location (which shall be at the principal office of the Partnership
unless otherwise agreed) or means of conducting such meeting to the other
Partner. Unless a longer notice period is established by the Partnership
Committee, at least five Business Days' prior notice of a special meeting shall
be given. Written notice of a special meeting shall be preceded by a telephone
call from the Partner calling the Special Meeting to each Representative, at
which time such Representative (or his office) shall be advised of the date,
time and place of, and proposed agenda (in summary) for, the special meeting.
Any Representative of a Partner may waive notice to such Partner of any meeting
in writing before, at or after such meeting. The attendance of a
Representative at a meeting shall constitute a waiver of notice of such
meeting, except when a Representative attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting was not
properly called. Except as otherwise determined by the Partnership Committee,
all regular meetings of the Partnership Committee shall be held at the
principal office of the Partnership.
(b) Subject to Section 3.05 and 9.02(d), at any meeting
of the Partnership Committee, the presence or participation of one
Representative designated by each Partner
29
<PAGE> 35
shall constitute a quorum for the taking of any action, provided that all
Partners have received prior written notice of such meeting or have waived such
notice as provided in Section 6.02(a). Subject to Sections 3.05(g) and 9.02,
all actions required or permitted to be taken by the Partnership Committee must
be by the affirmative vote of the Representatives of the requisite Partner or
Partners as provided in Sections 6.05 or 6.06, as applicable, attending or
participating in a meeting at which a quorum (except as provided in this
Section 6.02) is present, or in lieu of a meeting, by the unanimous written
consent (which may be executed in counterparts) of the Representatives of the
Partners. Each Representative entitled to vote at a meeting of the Partnership
Committee may authorize another Person to act for him by proxy, provided that
such proxy must be signed by the Representative and shall be revocable by such
Representative at any time prior to such meeting. Minutes of each meeting of
the Partnership Committee shall be prepared and circulated to the
Representatives. Written consents to any action taken by the Partnership
Committee shall be filed with the minutes. The quorum and vote required for
action to be taken at a meeting of the Partnership Committee shall be subject
to change in accordance with Sections 3.05, 6.05 and 9.02(d).
Section 6.03. Officers of the Partnership. The Partnership shall
have such officers (the "Officers") as the Partnership Committee may determine
to appoint from time to time. The Partners contemplate that in accordance with
Sections 6.05 or 6.06 (a), as applicable, the Partnership Committee will
appoint a chief executive officer (a "CEO"), a chief financial officer ("CFO")
and one or more chief operating officers for the Partnership (each, a "Senior
Officer"), who shall be responsible for the day-to-day management of the
operations of such business. Such Officers, who shall be deemed agents and
employees of the Partnership, shall serve at the pleasure of the Partnership
Committee; shall act in full accordance with the Approved Business Plan and the
decisions of the Partnership Committee; and shall have no authority to take any
action with respect to any of the matters enumerated in Section 6.05 or 6.06
(unless such action is specifically authorized in the Approved Business Plan or
Budget) without first obtaining the requisite approval of the Partnership
Committee, as provided therein with respect to the matter in question. Except
as provided above or as otherwise determined by the Partnership Committee, such
Officers shall (x) have such powers as are usually exercised by comparably
designated officers of a Delaware corporation and (y) have the power to bind
the Partnership through the exercise of such powers to the extent consistent
with the terms of this Agreement. The CEO (or his or her designee) shall
attend the meetings of the Partnership Committee unless otherwise requested by
the Partnership Committee and shall provide such reports with respect to the
business of the Partnership as may be requested by the Partnership Committee.
The Partners shall undertake promptly to identify and hire a CEO for the
Partnership (it being understood that Acclaim Sub shall have the primary
responsibility for locating, interviewing and recommending qualified persons
for the position of CEO to the Partnership Committee for its approval). A
Limited Partner or an employee, agent or officer of a Limited Partner may also
be an employee, agent or officer of the Partnership or a General Partner. The
existence of these relationships and acting in such capacities will not result
in a Limited
30
<PAGE> 36
Partner being deemed to be participating in the conduct or control of the
business of the Partnership.
Section 6.04. Business Plan and Budget.
(a) Promptly following the appointment of a CEO, the CEO
(and the CFO, if any) shall work with the Partners and their authorized
representatives to prepare a business plan ("Business Plan") for the
Partnership covering the remainder of the Fiscal Year in which the initial
Approved Business Plan is approved and the next succeeding three Fiscal Years
of the Partnership (or such other period as the Partnership Committee may
approve). The Partners shall use all diligent efforts and cooperate in good
faith with each other and the CEO to develop and submit to the Partnership
Committee a proposed initial Business Plan by no later than six months after
the appointment of the CEO (such initial Business Plan, if approved, being
herein referred to as the "initial Approved Business Plan"). The initial
Approved Business Plan shall include, in reasonable detail, research and
development, capital expenditure and operating budgets for each Fiscal Year (or
part thereof) covered thereby (such budgets for any Fiscal Year being
collectively referred to as the "Budget"). The initial Approved Business Plan
shall also set forth a timetable for, together with the amount of, all
additional Capital Contributions to be requested of the Partners during each
Fiscal Year (or part thereof) included therein based on the assumptions (or
varying sets of assumptions) upon which the initial Approved Business Plan was
prepared (which shall be stated therein) and depending, if applicable, on the
achievement of any milestones specified therein.
(b) The CEO and, if any, the CFO shall submit annually to
the Partnership Committee at least 60 days prior to the start of each Fiscal
Year after the first full Fiscal Year (i) a proposed Budget (the "Proposed
Budget") for the forthcoming Fiscal Year including an income statement prepared
on an accrual basis which shall show in reasonable detail the revenues and
expenses projected for the Partnership's business for the forthcoming Fiscal
Year and a cash flow statement which shall show in reasonable detail the
receipts and disbursements projected for the Partnership's business for the
forthcoming Fiscal Year and the amount of any corresponding cash deficiency or
surplus, the required additional Capital Contributions, if any (including the
timing of the call of any such additional Capital Contributions) and any
contemplated borrowings of the Partnership and (ii) a proposed revised Business
Plan for the Fiscal Year covered by the Proposed Budget and the succeeding two
Fiscal Years (or such other period as the Partnership Committee may approve
pursuant to Section 6.06(a)) in substantially the same or greater detail as the
initial Approved Business Plan and containing such additional categories of
information as may be appropriate to reflect the progress of the Partnership's
development, marketing and distribution activities. Such Proposed Budget and
Business Plan shall be prepared on a basis consistent with the Partnership's
audited financial statements and GAAP. If such Proposed Budget or such
Business Plan, as the case may be, is approved by the Partnership Committee,
then such Proposed Budget or such Business Plan, as the case may be, shall be
31
<PAGE> 37
considered approved and shall constitute the Budget or the Approved Business
Plan, as the case may be, for all purposes of this Agreement and shall
supersede any previously approved Budget or Approved Business Plan, as the case
may be. If a Proposed Budget or Business Plan, as the case may be, is not
approved by the Partnership Committee, then the Partners shall cause their
Representatives on the Partnership Committee to cooperate in good faith and
confer with the CEO and, if any, the CFO for the purpose of attempting to
arrive at a Proposed Budget or Business Plan, as the case may be, that can
secure the approval of the Partnership Committee.
(c) If, notwithstanding the foregoing procedures, on the
first day of the second full Fiscal Year contained in the initial Approved
Business Plan or on September 1 of any Fiscal Year thereafter, no Proposed
Budget has been approved by the Partnership Committee for such Fiscal Year,
then the previously approved Budget for such Fiscal Year, adjusted (without
duplication) to reflect increases or decreases resulting from the following
events, shall govern until such time as the Partnership Committee approves a
new Proposed Budget:
(i) the operation of escalation or de-escalation
provisions in contracts in effect at the time of approval of
the prior Fiscal Year's Budget solely as a result of the
passage of time or the occurrence of events beyond the control
of the Partnership to the extent such contracts are still in
effect and have not been terminated;
(ii) elections made in any prior Fiscal Year under
contracts contemplated by the Budget for the prior Fiscal Year
regardless of which party to such contracts makes such
election;
(iii) increases or decreases in expenses
attributable to the annualized effect of employee additions or
reductions during the prior Fiscal Year contemplated by the
Budget for the prior Fiscal Year;
(iv) interest expense attributable to any loans
made to the Partnership (including Partner Loans and Defaulted
Advance Loans);
(v) increases in overhead expenses in an amount
equal to the total of overhead expenses reflected in the
Budget for the prior Fiscal Year multiplied by the increase in
the Consumer Price Index for the prior year, but in no event
more than 5%;
(vi) the anticipated incurrence of costs during
such Fiscal Year for any legal, accounting and other
professional fees or disbursements in connection with events
or changes not contemplated at the time of preparation of the
Budget for the prior Fiscal Year;
32
<PAGE> 38
(vii) the continuation of the effects of a decision
made by the Partnership Committee or the Partners in the prior
Fiscal Year with respect to any of the matters referred to in
Section 6.05 or 6.06 that are not reflected in the Budget for
the prior Fiscal Year; and
(viii) decreases in expense attributable to
non-recurring items reflected in the prior Fiscal Year's
Budget.
Except as otherwise provided herein, any Budget established pursuant
to this Section 6.04(c) shall be deemed to have been approved by the Partnership
Committee.
(d) If a Business Plan is submitted for approval pursuant
to this Section 6.04 and is not approved by the Partnership Committee, the
Business Plan most recently approved by the Partnership Committee pursuant to
Section 6.04(a) or Section 6.04(b) shall remain in effect as the Approved
Business Plan; provided, that, if a Proposed Budget is approved pursuant to
Section 6.04(b) (as opposed to a Budget that is deemed approved pursuant to
Section 6.04(c)), the Approved Business Plan then in effect (including the
aggregate amount of additional Capital Contributions contemplated for the
applicable Fiscal Year) shall be deemed to be amended so that the matters to be
addressed and funded in the Fiscal Year therein corresponding to the Fiscal
Year for which such Budget has been approved shall be consistent with such
Budget approved under Section 6.04(b). Subject to the foregoing and to Section
6.06(c) and Section 11.02(c), the aggregate amount of additional Capital
Contributions that may be requested of the Partners during a Fiscal Year for
which the Budget is approved or deemed approved but a proposed Business Plan is
not approved shall not exceed the amount projected for such Fiscal Year in the
Approved Business Plan then in effect (and, if such amount varies based on
varying sets of assumptions, under the then applicable set of assumptions) and
shall remain subject to the achievement of any milestones provided for therein.
Section 6.05. Actions To Be Submitted to the Partnership Committee.
Subject to Sections 3.05, 6.06 and 9.02(d), except to the extent expressly
provided for in the then-applicable Budget or Approved Business Plan (in which
event such action may be taken without further submission to or approval by the
Partnership Committee), no action may be taken by the Partnership in connection
with any of the following matters unless such matters are first submitted for
discussion to the Partnership Committee:
(i) the making of cash distributions in
accordance with Article IV;
(ii) all matters relating to the appointment,
compensation or payment of benefits to, or the termination or
removal of, any Senior Officer, other than the CEO, of the
Partnership;
33
<PAGE> 39
(iii) the appointment of and any change in the
Accountants for the Partnership;
(iv) the adoption or change of a significant tax
or accounting practice or principle of the Partnership or the
making of any significant tax or accounting election by the
Partnership (other than an election under Section 754 of the
Code in connection with the transfer of a Partnership Interest
which shall be made by the Tax Matters Partner in accordance
with Section 5.06(b) if (and only if) requested by the
transferee thereof) or the adoption of any position for
purposes of any tax return that will have a material effect on
the Partnership or any Partner (unless the taking of such
position is expressly contemplated by this Agreement);
(v) the appointment or change in appointment of
legal counsel for the Partnership;
(vi) the investment of Partnership Funds pursuant
to Section 3.06;
(vii) the taking of any action requiring the
approval of the Partnership Committee pursuant to this
Agreement for which the unanimous vote of the Representatives
on the Partnership Committee pursuant to Section 6.06(a) is
not expressly specified; and
(viii) the approval of all other material
transactions not in the ordinary course of business.
Any matter submitted to the Partnership Committee in
accordance with this Section 6.05 shall, after discussion, be deemed approved
if consented to by the Representatives of the Partner holding, at the time of
such meeting, the higher Percentage Interest; provided, that if, (A) pursuant
to Section 3.05 or 9.02(d), a Partner is not entitled to representation on the
Partnership Committee or (B) after notice is properly given of a meeting of the
Partnership Committee in accordance with Section 6.02(a) the Representatives of
one Partner do not attend such meeting, then the foregoing matters may be
unilaterally approved by the Representatives of the other Partner.
Section 6.06. Actions Requiring Unanimous Approval of the
Partnership Committee.
(a) Subject to Sections 3.05, 9.02(d), and 11.02(c) and
except to the extent expressly provided for in the then-applicable Budget or
Approved Business Plan (in which event such action may be taken without further
submission to or approval by the Partnership Committee), no action may be taken
by the Partnership in connection with any
34
<PAGE> 40
of the following matters (each, an "Extraordinary Decision") without the
approval of the Representatives of both Partners on the Partnership Committee:
(i) the sale, transfer, disposition, pledge or
encumbrance (a "disposition") of any assets of the
Partnership, except for (x) dispositions in the ordinary
course of business of the Partnership and (y) dispositions not
in the ordinary course of business that have a value which
singly, or in the aggregate for any Fiscal Year, exceed
$1,500,000 (or such greater or lesser amount as may from time
to time be approved by the Partnership Committee pursuant to
this Section 6.06);
(ii) the making of Capital Calls, except as
provided for in the Approved Business Plan and/or Budget or
otherwise expressly provided in Sections 3.03 and 11.02(b);
(iii) subject to Sections 6.04(c) and (d), the
approval and adoption of a Budget and Business Plan pursuant
to Section 6.04 and the approval of any modifications thereto;
(iv) the making of any loan or other advance of
money to any Person or the guaranteeing of the obligations of
any Person, other than a loan, advance or guarantee made in
the ordinary course of business of the Partnership to or of
the obligations of a Person that is not a Partner or Affiliate
of a Partner;
(v) except with respect to (x) transactions
entered into in the ordinary course of business on terms no
less favorable to the Partnership than those that have been or
would be agreed upon with third parties in similar
transactions after arm's length negotiations or (y)
transactions involving amounts in the aggregate of $100,000 or
less in any single Fiscal Year, the approval of any
transaction or agreement between the Partnership and a Partner
or any Affiliate of a Partner (or any officer or director of a
Partner or an Affiliate of a Partner) or any amendment,
termination or abandonment thereof, the determination of
whether there has been a breach of any such agreement and the
exercise, waiver or release by the Partnership of any rights
it may have in respect thereof; provided that the
Representatives of the Partner that is or whose Affiliate (or
such Partner's or Affiliate's officer or director, as
applicable) is or is proposed to be a party to such
transaction or agreement (other than, with regard to such
officers and directors, matters relating only to employment or
retention of such persons by the Partnership) shall abstain
from the vote with respect to such matter and the
Representatives of the other Partner shall have the exclusive
authority to make the determinations and to act on behalf of
the Partnership in exercising
35
<PAGE> 41
the powers set forth in this clause (v); and provided,
further, that any determination made pursuant to the
immediately preceding proviso shall not be binding upon any
court arbitrator or other tribunal or proceeding before which
there may be brought an action to determine whether a breach
of any such agreement has occurred or whether any other action
by the Partnership thereunder or with respect thereto as
contemplated by such proviso was appropriate or a breach of
the terms of such agreement;
(vi) the making of any commitment on behalf of the
Partnership to specific projects or categories of projects or
transactions (e.g., for the acquisition of proprietary rights)
(each a "Line Item") requiring funds ("excess funds") not
contemplated by the Approved Business Plan or Budget, which
excess funds, either singly or in the aggregate for any Fiscal
Year, exceed the greater of (i) $1,000,000 and (ii) 5% of the
Line Item (or such greater or lesser amount as may from time
to time be approved by the Partnership Committee pursuant to
this Section 6.06);
(vii) the making of any expenditures not provided
for in the Approved Business Plan or Budget which are in
excess of the greater of (i) $500,000 for any one item or
$2,000,000 in the aggregate and (ii) 1% of the aggregate
Budget for the Fiscal Year (or such greater or lesser amount
as may from time to time be fixed by the Partnership Committee
pursuant to this Section 6.06) and any other material
deviation from the Budget;
(viii) all matters relating to (A) the appointment,
employment, compensation, termination or removal of the CEO,
(B) the payment of, or agreement by the Partnership to pay,
cash compensation or other benefits to any officer or employee
of the Partnership whose aggregate annual compensation will
exceed, or will exceed by reason of a contemplated increase,
$400,000 (or such greater or lesser amount as may from time to
time be fixed by the Partnership Committee pursuant to this
Section 6.06) or (C) the adoption or material amendment of any
equity or phantom equity compensation plan;
(ix) any amendment of this Agreement;
(x) the issuance of any additional interests in
the Partnership or, except as provided in Article VIII, the
admission of any Person as an additional, substitute or
successor Partner in the Partnership;
(xi) the merger or consolidation of the
Partnership with any other Person or engaging in any other
business combination;
36
<PAGE> 42
(xii) subject to Sections 3.04(b)(v), the
incurrence of any indebtedness for borrowed money, other than
in the ordinary course of business or as contemplated by the
Approved Business Plan, in an amount greater than an aggregate
of $1,000,000 outstanding at any time (or such greater or
lesser amount as may from time to time be approved by the
Partners pursuant to this Section 6.06);
(xiii) the institution, settlement or abandonment of
any legal action or arbitration in the name of the Partnership
involving a claim or claims for equitable relief or monetary
damages aggregating more than $1,000,000 (or such greater or
lesser amount as may from time to time be fixed by the
Partnership Committee pursuant to this Section 6.06) or
involving a claim or claims by or against any governmental
entity; provided that the Representatives of the Partner that
is or whose Affiliate is the other party to any existing or
proposed legal action or arbitration with the Partnership
shall abstain from the vote with respect to such matter and
the Representatives of the other Partner shall have the
exclusive authority to make any determinations and to act on
behalf of the Partnership in respect of any such legal action
or arbitration.
(xiv) the dissolution and winding up of the
Partnership except as otherwise provided in Article X or
pursuant to a sale of the Partnership as a going concern
pursuant to Section 10.2(e);
(xv) the making of any distribution to a Partner
other than (x) in accordance with Article IV (including the
Sections referenced therein) or (y) the making of a special
distribution pursuant to Section 3.04(g);
(xvi) the taking of any action that would make it
impossible for the Partnership to carry on its ordinary
business anywhere in the world or that is in contravention of
this Agreement or the Certificate or that would be in
violation of a Senior Credit Agreement;
(xvii) the making of any change in the composition
or organization of the Partnership Committee (other than
pursuant to Sections 3.05, 6.01(b), 6.01(c) or 9.02(d);
(xviii) the conversion of the Partnership to a
corporate or other form of business organization, other than
in accordance with Section 8.03 or 8.04;
(xix) the making of any public offering of
securities of, or interests in, the Partnership, other than in
accordance with Section 8.03 or 8.04;
37
<PAGE> 43
(xx) the taking of any action requiring the
approval of the Partnership Committee under this Agreement
which expressly provides that the vote of the Representatives
on the Partnership Committee is to be pursuant to this Section
6.06(a);
(xxi) the filing for bankruptcy of the Partnership
or the making of any assignment for the benefit of creditors
of the Partnership; and
(xxii) the entry by the Partnership into any
agreement that may be voided by the other party or parties if
Acclaim Sub or TCI Sub is no longer a Partner, or if Acclaim
Sub owns less than a majority in Partnership Interest of the
Partnership.
Notwithstanding the foregoing and subject to Section 6.06(b),
in the event a Partner is not entitled to representation on the Partnership
Committee pursuant to Section 3.05 or 9.02(d) at the time any of the foregoing
matters are presented to the Partnership Committee for a vote, the
Representatives of the other Partner may unilaterally approve or disapprove
such matters.
(b) The prior written consent of any Partner that is not
at the time entitled to representation on the Partnership Committee as a result
of the operation of Section 3.05 or 9.02(d) shall, in addition to the approval
of the Partnership Committee contemplated by Section 6.06(a), be required to
authorize any action by the Partnership with respect to the following matters:
(i) the taking of any action that is in
contravention of Section 3.04 or the Certificate or that would
be in violation of a Senior Credit Agreement;
(ii) the winding up of the Partnership's affairs
other than in accordance with Section 10.02; and
(iii) any of the matters referred to in clauses
(ii), (v), (ix), (x) and (xv) of Section 6.06(a).
(c) If an Extraordinary Decision made by the Partnership
Committee pursuant to Section 6.06(a) requires the expenditure of funds by the
Partnership in excess of the amounts contemplated by the Approved Business Plan
then in effect, then (A) such Approved Business Plan shall be deemed amended to
give effect to such Extraordinary Decision and (B) the Representatives of each
Partner shall approve or shall be deemed to have approved pursuant to clause
(ii) of Section 6.06(a) the making of such Capital Calls as may be required to
fund such excess expenditures (subject to such limitations or
38
<PAGE> 44
conditions as the Partnership Committee may determine at the time the
Extraordinary Decision is made or thereafter).
Section 6.07. Limitation of Agency. No Partner shall have any
authority to act for or to assume any obligation or responsibility on behalf of
another Partner or the Partnership except (i) as approved by the Partnership
Committee pursuant to Section 6.06(a), (ii) as approved by written agreement
between the Partners, and (iii) as provided herein. In addition to the other
remedies specified herein, each Partner agrees to indemnify and hold the
Partnership and the other Partner harmless from and against any claim, demand,
loss, damage, liability or expense (including reasonable attorneys' fees and
disbursements and amounts paid in settlement, but excluding any indirect,
special or consequential damages) incurred by or against such other Partner or
the Partnership and arising out of or resulting from any action taken by the
indemnifying Partner in violation of this Section 6.07.
Section 6.08. Liability of Partners and Representatives. No
Partner, former Partner or Representative or former Representative, no
Affiliate of any thereof, nor any partner, shareholder, director, officer,
employee or agent of any of the foregoing, shall be liable, in damages or
otherwise, to the Partnership or any Partner for any act or failure to act in
such Person's capacity as a Partner or Representative or otherwise on behalf of
the Partnership unless such act or omission constituted fraudulent or willful
misconduct, was performed or omitted in bad faith or constituted gross
negligence or a violation of this Agreement. Each Partner, former Partner and
Representative or former Representative, each Affiliate of any thereof, and
each partner, shareholder, director, officer, employee and agent of any of the
foregoing, shall be indemnified and held harmless by the Partnership from and
against any liability for damages and expenses, including reasonable attorneys'
fees and disbursements and amounts paid in settlement, resulting from any
threatened, pending or completed action, suit or proceeding relating to or
arising out of such Person's acts or omissions in such Person's capacity as a
Partner or Representative or (except as provided in Section 6.07) otherwise
involving such Person's activities on behalf of the Partnership, except to the
extent that such damages or expenses result from the bad faith, gross
negligence, fraud or willful misconduct of the indemnified Person or a
violation by such Person of this Agreement or an agreement between such Person
and the Partnership. Any indemnity by the Partnership under this Section 6.08
shall be provided out of and to the extent of Partnership assets only.
Section 6.09. Indemnification. Any Person asserting a right to
indemnification under Section 6.07 or 6.08 shall so notify the Partnership or
the other Partners, as the case may be, in writing. If the facts giving rise
to such indemnification shall involve any actual or threatened claim or demand
by or against a third party, the indemnifying Person shall be entitled to
control the defense or prosecution of such claim or demand in the name of the
indemnified Person, with counsel satisfactory to the indemnified Person, if it
notifies the indemnified Person in writing of its intention to do so within 20
days of its receipt of such
39
<PAGE> 45
notice, without prejudice, however, to the right of the indemnified Person to
participate therein through counsel of its own choosing, which participation
shall be at the indemnified Person's expense unless (i) the indemnified Person
shall have been advised by its counsel that use of the same counsel to
represent both the indemnifying Person and the indemnified Person would present
a conflict of interest (which shall be deemed to include any case where there
may be a legal defense or claim available to the indemnified Person which is
different from or additional to those available to the indemnifying Person), in
which case the indemnifying Person shall not have the right to direct the
defense of such action on behalf of the indemnified Person, or (ii) the
indemnifying Person shall fail vigorously to defend or prosecute such claim or
demand within a reasonable time. Whether or not the indemnifying Person
chooses to defend or prosecute such claim, the Partners shall cooperate in the
prosecution or defense of such claim and shall furnish such records,
information and testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may reasonably be requested in connection
therewith. The indemnifying Person shall not settle or permit the settlement
of any such third party claim or action in which any relief other than the
payment of money damages is sought against the indemnified Person without the
prior written consent of the indemnified Person which consent shall not be
unreasonably withheld. The indemnified Person shall not settle or permit the
settlement of any claim or action for which it is entitled to indemnification
without the prior written consent of the indemnifying Person, unless the
indemnifying Person shall have failed to assume the defense thereof after the
notice and in the manner provided above.
Section 6.10. Partners' Expenses. The Partnership shall reimburse
each Partner for all direct, out-of-pocket costs and expenses incurred after
the formation of the Partnership by such Partner on behalf of and for the
benefit of the Partnership; provided, however, that (i) such expenditure shall
have been contemplated by an approved Budget, or otherwise approved by the
Partnership Committee pursuant to Section 6.06(a) prior to incurrence, or
ratified by the Partnership Committee thereafter, and (ii) no Partner shall be
reimbursed for any of its overhead or general administrative expenses
attributable to the operation of the Partnership, nor shall salaries, fees,
commissions or other compensation be paid by the Partnership to any Partner or
to any Affiliate of any Partner for services rendered to the Partnership
(except pursuant to agreements between a Partner or its Affiliate and the
Partnership entered into with the approval of the Partnership Committee
pursuant to Section 6.06(a)). Reimbursement under this Section 6.10 shall be
made within 30 days after the Partnership's receipt of documentation from a
Partner substantiating in reasonable detail its incurrence of the reimbursable
cost or expense.
40
<PAGE> 46
ARTICLE VII
BOOKS, RECORDS, REPORTS AND ACCOUNTINGS
Section 7.01. Books and Records. The Partnership shall keep or
cause to be kept current and complete books of account and records which shall
fully and accurately reflect all transactions of the Partnership and other
matters and include all documents and other materials with respect to the
Partnership's business as are usually entered and maintained by Persons engaged
in similar businesses. The books of the Partnership shall be kept on an
accrual basis of accounting and in accordance with GAAP consistently applied,
and shall be audited annually by the Accountants at the Partnership's cost.
The books of the Partnership shall at all times be maintained at the principal
executive office of the Partnership. Each Partner and its duly authorized
representatives shall have the right, during normal business hours and at such
Partner's sole cost and expense, to examine and audit the Partnership's books,
records and documents, to copy any of such books, records and documents and to
inspect the properties and operations of the Partnership, for any lawful
purpose related to the affairs of the Partnership or the investment in the
Partnership by such Partner. The Partnership's books of account, records and
documents shall be filed and preserved for such period as may be required by
law or reasonably requested by either Partner.
Section 7.02. Financial Statements. The Partnership Committee
shall cause to be delivered to each Partner the financial statements listed in
clauses (i) through (iii) below, prepared, in each case, in accordance with
GAAP consistently applied (and, if required by any Partner for purposes of
reporting under the Exchange Act and Regulation S-X thereunder), and such other
reports as any Partner may reasonably request from time to time. Such
financial statements shall be accompanied by an analysis, in reasonable detail,
of the variance between the financial condition and results of operations
reported therein and the corresponding amounts for the applicable period or
periods in the Approved Business Plan. The monthly and quarterly financial
statements referred to in clauses (ii) and (iii) below may be subject to normal
year-end audit adjustments.
(i) As soon as practicable following the end of
each Fiscal Year (and in any event not later than 75 days
after the end of such Fiscal Year), an audited balance sheet
of the Partnership as of the end of such Fiscal Year and the
related statements of operations, Partners' capital
(deficiency) and cash flows for such Fiscal Year, together
with appropriate notes to such financial statements and
supporting schedules, all of which shall be certified by the
Accountants, and in each case setting forth in comparative
form the corresponding figures for the immediately preceding
Fiscal Year (in the case of the balance sheet) and the two
immediately preceding Fiscal Years (in the case of the
statements).
41
<PAGE> 47
(ii) As soon as practicable following the end of
each fiscal quarter (and in any event not later than 40 days
after the end of such fiscal quarter), a condensed balance
sheet of the Partnership as of the end of such fiscal quarter
and the related statements of operations, Partners' capital
(deficiency) and cash flows for the Fiscal Year to date, in
each case setting forth in comparative form the corresponding
figures for the prior year's fiscal quarter and interim period
corresponding to the fiscal quarter and interim period just
completed.
(iii) As soon as practicable following the end of
each calendar month (and in any event not later than 30 days
after the end of such calendar month) commencing after the
approval of the initial Approved Business Plan pursuant to
Section 6.04(a), a balance sheet as of the end of such month
and statements of operations for the interim period through
such month and the monthly period then ended, setting forth in
comparative form the corresponding figures from the Approved
Business Plan for such month and the interim period through
such month.
Section 7.03. Tax Returns and Information.
(a) Acclaim Sub, acting in its capacity as a General
Partner, shall act as the "tax matters partner" of the Partnership within the
meaning of Section 6231(a)(7) of the Code (and in any similar capacity under
applicable state or local law) (the "Tax Matters Partner"). If Acclaim Sub
shall cease to be a Partner or shall cease to be entitled to representation on
the Partnership Committee, then TCI Sub, acting in its capacity as a General
Partner and assuming it is at such time and continues to be entitled to
representation on the Partnership Committee, shall act as the Tax Matters
Partner. The Tax Matters Partner shall take reasonable action to cause each
other Partner to be treated as a "notice partner" within the meaning of Section
6231(a)(8) of the Code. All expenses incurred by a Partner while acting in its
capacity as Tax Matters Partner shall be paid or reimbursed by the Partnership.
Each Partner shall have the right to participate in (i) any administrative
proceeding relating to the determination of Partnership items at the
Partnership level and (ii) any discussions with the Internal Revenue Service
relating to the allocations pursuant to Section 5.03 or Section 5.04. Without
the prior consent of each affected Partner, the Tax Matters Partner shall not
(W) initiate any action or proceeding, (X) extend any statute of limitations,
(Y) compromise or settle any issue, or (Z) take any action contemplated by
Sections 6222 through 6232 of the Code or any other action which may be legally
binding on any other Partner or the Partnership. The Tax Matters Partner shall
from time to time upon request of any other Partner confer, and cause the
Partnership's tax attorneys and Accountants to confer, with such other Partner
and its attorneys and accountants on any matters relating to a Partnership tax
return or any tax election.
42
<PAGE> 48
(b) The Tax Matters Partner shall cause all Federal,
state, local and other tax returns and reports (including amended returns)
required to be filed by the Partnership to be prepared and sent to each Partner
for review at least 15 Business Days prior to filing, and to be timely filed
with the appropriate authorities. Unless otherwise agreed by the Partnership
Committee, all returns of the Partnership shall be prepared by the Accountants.
The cost of preparation of such returns by the Accountants or other outside
preparers, if any, shall be borne by the Partnership.
(c) The Tax Matters Partner shall cause to be provided to
each Partner as soon as possible after the close of each Fiscal Year (and, in
any event, no later than May 15 of each year), a schedule setting forth such
Partner's distributive share of the Partnership's income, gain, loss, deduction
and credit as determined for Federal income tax purposes and any other
information relating to the Partnership that is reasonably required by such
Partner to prepare its own Federal, state, local and other tax returns. At any
time after such schedule and information have been provided, upon at least two
(2) Business Days' notice from a Partner, the Tax Matters Partner shall also
provide each Partner with a reasonable opportunity during ordinary business
hours to review and make copies of all work papers related to such schedule and
information or to any return provided under Section 7.03(b). The Tax Matters
Partner shall also cause to be provided to each Partner, at the time that the
quarterly financial statements are required to be delivered pursuant to Section
7.02(ii), an estimate of each Partner's share of all items of income, gain,
loss, deduction and credit of the Partnership for the fiscal quarter just
completed and for the Fiscal Year to date for Federal income tax purposes.
ARTICLE VIII
TRANSFERS, ADMISSIONS, WITHDRAWALS
Section 8.01. Prohibition on Transfers of Partnership Interests;
Withdrawals; Admissions.
(a) Except for Transfers made pursuant to and in compliance
with the terms and conditions of this Article VIII or with the prior written
consent of the other Partner, no Partner shall Dispose of all or any part of
its Partnership Interest. A purported Transfer of all or any part of a
Partnership Interest in violation of any provision of this Agreement shall be
void ab initio and of no force or effect. After any Transfer of a Partnership
Interest permitted by this Agreement, the transferred Partnership Interest
shall continue to be subject to all the provisions of this Agreement, including
the provisions of this Article VIII with respect to the Disposition of
Partnership Interests. Except as otherwise permitted pursuant to Article VIII,
no Partner shall withdraw from the Partnership, except with the prior written
consent of the other Partner; provided that, notwithstanding such consent, such
withdrawal shall not relieve the withdrawn Partner of its obligations under
Sections 6.07 or
43
<PAGE> 49
12.16 and shall not relieve such Partner or any of its Affiliates of its
obligations under, or result in a termination of or otherwise affect, any
contract between the Partnership and such Partner or Affiliate then in effect,
except to the extent provided therein. Upon completion of any Transfer made
pursuant to this Article VIII, the transferee of the Partnership Interest (if
not already a Partner) shall be admitted as a Partner without any further
action upon compliance with the provisions of Section 8.09.
(b) The General Partners may admit into the Partnership at
any time key officers of the Partnership (whose appointment as officers was
previously approved by the Partnership Committee pursuant to Section 6.05 or
6.06(a)), as Limited Partners, with an aggregate Percentage Interest among all
such Limited Partners not to exceed 15% of the combined Percentage Interests of
all the Partners. Each such Limited Partner's capital contribution to, interest
in and rights and duties with respect to the Partnership shall be as determined
by the Partnership Committee pursuant to Section 6.06(a)(x) and reflected by
appropriate amendments to this Agreement. The Partnership Interests issued in
connection with the admission of any Limited Partner shall be non-voting
(except to the extent required under the Act).
Section 8.02. Transfers of Partnership Interests to a Permitted
Transferee. A Partner may Transfer all, but not less than all, of its
Partnership Interest to a Permitted Transferee of such Partner without the
consent of the other Partner; provided, that (i), in the case of Transfer to a
Permitted Transferee, the obligations hereunder of the Permitted Transferee
shall be guaranteed by the Parent of the transferring Partner (or, if such
Parent is TCI, shall be guaranteed by TCI Technology Ventures, Inc.) and (ii)
the Transfer (whether considered alone or taken together with prior transfers)
would not cause the Partnership to lose its status as a Partnership for Federal
income tax purposes and would not result in the violation of any applicable
law. No Partner may, under any circumstance, transfer any aspect, partnership
attribute, component, right or obligation comprising its Partnership Interest
separately from the transfer of its entire Partnership Interest.
Section 8.03. Registration Sale Procedure.
(a) Subject to Section 8.03(h), at any time following the
fourth anniversary of the adoption of the initial Approved Business Plan, and
prior to an initial public offering of any securities of the Partnership, the
procedure set forth in this Section 8.03 (the "Registration Sale Procedure")
may be initiated by either Partner (the "Initiating Partner") at its option by
giving written notice (the "Sale Notice") to the other Partner (the "Responding
Partner") of the Initiating Partner's election to initiate the Registration
Sale Procedure; provided, that a Partner may not initiate the Registration Sale
Procedure if such Partner has sent a Sale Notice during the immediately
preceding twelve-month period.
(b) Within 10 days after receipt by the Responding
Partner of the Sale Notice, the Initiating Partner and the Responding Partner
shall each select an Investment
44
<PAGE> 50
Bank to act as pricing agent or lead underwriter with respect to a public
offering of the Partnership Interest of the Initiating Partner (or, if such two
Investment Banks agree, of capital stock or other securities into which such
Partnership Interest would be converted following the reorganization of the
Partnership into corporate or another form (with an appropriate
capitalization)). Within 45 days of their selection, each Investment Bank
shall present to the Partners in writing a range of proposed Public Equity
Values for the Partnership that would be used in connection with the public
offering under the Securities Act of the Initial Partner's Partnership Interest
(without reflecting any discount for the right of first refusal described in
Section 8.03(e)). If the midpoint of the range of Public Equity Values
presented by each Investment Bank varies by less than 10% of the average of
such two midpoints, the Investment Bank of the Initiating Partner shall be
retained for purposes of this Section 8.03 and such Investment Bank's range
shall be the one provided in the Offer Notice as described below. If the
midpoint of each range of Public Equity Values presented by each Investment
Bank varies by more than 10% of the average of such two midpoints, the two
investment banks shall promptly designate a third Investment Bank. The third
Investment Bank shall select one of the two ranges as the range of Public
Equity Values for the Initiating Partner's Partnership Interests within 30 days
of such third Investment Bank's selection. The Partnership shall use its
reasonable best efforts to cooperate with and assist the Investment Banks in
performing their duties pursuant to this Section 8.03(b). In the event that
the Initiating Partner is willing to sell its (or any portion of its)
Partnership Interest at a price within the range of Public Equity Values for
the Partnership determined as provided above, the Initiating Partner shall
notify the Responding Partner of its intent to proceed with the initial public
offering. Such notice (the "Offer Notice") shall indicate the amount of the
Partnership Interest the Initiating Partner desires to sell and shall include a
copy of the written pricing report of the Investment Bank as provided above.
The Offer Notice shall be given within 90 days of the Sale Notice.
(c) Within five Business Days of receipt of the Offer
Notice, the Responding Partner shall give written notice (the "Response
Notice") to the Initiating Partner as to whether it elects to purchase all of
the Initiating Partner's Partnership Interest designated for sale in the Offer
Notice at the midpoint of the range of Public Equity Values set forth in such
notice. If the Responding Partner fails to exercise its right to purchase the
Initiating Partner's Partnership Interest pursuant to this Section 8.03(c), the
Partnership shall use its reasonable best efforts to effect, at the earliest
practicable date, the registration under the Securities Act of the Initiating
Partner's Partnership Interest (or portion thereof, as specified in the Offer
Notice), subject to any decrease in accordance with Section 8.03(d). Such
reasonable best efforts shall include the Partnership's cooperation with and
assisting the Initiating Partner and the Investment Bank(s) in the consummation
of the public offering of such Partnership Interest (or portion thereof) as
soon as reasonably practicable, but in any event, within 180 days after receipt
by the Responding Partner of the Offer Notice. In connection therewith, the
Partnership shall enter into an underwriting agreement in customary form for
similar offerings with the Investment Bank selected by the Initiating Partner
pursuant to Section 8.03(b) (or such other Investment Bank as may be selected
by
45
<PAGE> 51
the Initiating Partner) to be the managing underwriter; provided, that any
underwriting shall be arranged so that, to the best knowledge of the
underwriters, immediately after giving effect to the sale of the Initiating
Partner's Partnership Interest as contemplated by the underwriting agreement,
no beneficial owner or group of beneficial owners (the term "beneficial owner"
and "group" being used herein as defined in Rule 13d-3 under the Exchange Act)
other than the Partners shall own more than 15% of the outstanding equity
securities of the Partnership immediately after the consummation of the
offering. If advised by the managing underwriter that it is necessary for the
success of the offering, the Partnership shall be converted to corporate or
other form consistent with the intent of this Agreement and in compliance with
Section 8.03(k). The Responding Partner, whether or not it exercises its right
under Section 8.03(d), shall have the right to participate in the process of
any public offering (including, without limitation, attending diligence
meetings and having access to all relevant materials) and to be informed on a
regular basis or upon any inquiry concerning the progress of the offering,
including investor reaction on any road show, the expected pricing of the
offering, (including any changes from the range of Public Equity Values
initially contemplated) and to attend (either by a representative or
telephonically) the final pricing meeting for the offering. The Initiating
Partner (and the Responding Partner, if it registers any portion of its
Partnership Interest in the offering) shall enter into an agreement
indemnifying the Partnership, its officers and the other Partner, its
directors, officers and controlling persons from and against any liability
arising in connection with the initial public offering on terms customary for
secondary offerings and shall provide customary covenants regarding its
compliance with Rules 10b-2, 10b-6 and 10b-7 under the Exchange Act.
(d) In the event that the Initiating Partner proceeds
with a public offering of its Partnership Interest (or portion thereof), the
Responding Partner shall have the right, exercisable prior to the filing of the
initial registration statement relating to such offering with the Securities
and Exchange Commission, to include in the registration statement a designated
amount of its Partnership Interest up to the Partnership Interest designated
for sale by the Initiating Partner. If, in the good faith judgment of the
managing underwriter, the inclusion of the requested amount of the Responding
Partner's Partnership Interest would adversely affect the pricing range for
initial public offering, then the Partnership Interests to be included in the
registration by each Partner shall be reduced on a pro rata basis, based on the
Partnership Interests each such Partner designated to include in the public
offering, to the extent necessary to preserve the pricing range. Each Partner
shall have the right to withdraw any portion or all of the Partnership Interest
designated for sale by it from the public offering at any time prior to the
execution of the underwriting agreement. If either Partner withdraws some or
all of its Partnership Interest to be offered in the public offering, the other
Partner shall have the right to include in the offering an additional amount of
its Partnership Interest up to the amount of Partnership Interest withdrawn
(subject to such inclusion not having, in the good faith judgment of the
managing underwriter, the adverse effect referred to above).
46
<PAGE> 52
(e) In the event that the final public offering price
contained in the underwriting or pricing agreement is more than 5% lower than
the low point of the pricing range set forth in the Offer Notice and the
Initiating Partner decides to proceed with the public offering, the Responding
Partner shall have the right, exercisable by written notice until midnight, New
York City time, on the day of pricing of the public offering, to purchase all
of the Initiating Partner's Partnership Interest to be included in the public
offering, at the public offering price net of the underwriter's discount that
would have been applicable in the event that the Partnership had proceeded with
a public offering, plus all the fees and expenses of the underwriter.
(f) In the event that the Responding Partner does not
elect to purchase the Initiating Partner's Partnership Interest pursuant to
Section 8.03(c) or (e), all the expenses relating to incorporating the
Partnership (including legal and accounting and other expenses of the
non-electing Responding Partner), all registration expenses (including, but not
limited to, filing fees, printing expenses, all fees and costs of Investment
Banks incurred pursuant to Section 8.03(b), all fees and costs of counsel,
including blue sky counsel, and accountants of the Partnership) and
underwriter's fees and costs incurred in connection with the public offering
shall be borne by the Initiating Partner; provided, that, if the Responding
Partner sells any portion of its Partnership Interest in the public offering,
such incorporation expenses and registration fees and expenses shall be borne
by the Initiating Partner and the Responding Partner on a pro rata basis based
on the amount of Partnership Interests included by each of them in the public
offering and each Partner shall be responsible for (i) the fees and expenses of
its own accountants and counsel and (ii) the costs of the Investment Bank
appointed by it pursuant to Section 8.03(b) and, if a third Investment Bank has
been appointed, one-half of the costs of such third Investment Bank.
(g) The business affairs of the Partnership shall
continue to be conducted in the ordinary course as provided in this Agreement
during the pendency of the Registration Sale Procedure; provided that no
Capital Call (other than Capital Calls which do not require Partnership
Committee approval pursuant to Section 6.06) may be made after notice of the
initiation of the Registration Sale Procedure is given and prior to the closing
of the public offering of the Partnership Interests or the Registration Sale
Closing Date, as the case may be. If, but for the proviso clause of the
immediately preceding sentence, additional Capital Contributions would be
requested pursuant to Section 3.03 prior to the applicable closing date, the
Responding Partner may, at its election, make one of the elections permitted
under Section 3.04 with respect to an aggregate amount not exceeding the amount
of the additional Capital Contributions that would have been so requested. In
the event that the Responding Partner elected to purchase the Partnership
Interest of the Initiating Partner, the purchase price to be paid to the
Initiating Partner for such Partnership Interest shall not be reduced by the
amount loaned or contributed to the Partnership in connection with any such
election under Section 3.04.
47
<PAGE> 53
(h) Unless the Initiating Partner and the Responding
Partner otherwise agree, in the event that the Responding Partner elects to
purchase the Partnership Interest of the Initiating Partner pursuant to Section
8.03(c) or 8.03(e), the closing of the purchase and sale of the Partnership
Interest of the Initiating Partner pursuant to this Section 8.03 shall take
place at the Partnership's offices on the date selected by the Responding
Partner (the "Registration Sale Closing Date"), such date to be a date within
(i) sixty days (subject to the provisions of Section 8.11) after receipt by the
Initiating Partner of the Response Notice or (ii) five Business Days (subject
to the provisions of Section 8.11) after the date of final pricing of the
initial public offering, as the case may be. At such closing, the Initiating
Partner shall deliver to the Responding Partner such deeds, bills of sale,
assignments and other agreements and instruments, and shall take all such other
reasonable actions, in connection with the purchase and sale of the applicable
Partnership Interest as the Responding Partner shall reasonably request,
including removing any lien or encumbrance attached to its Partnership Interest
so that good title to such Partnership Interest shall be Transferred to the
Responding Partner free and clear of any mortgage, pledge, lien or encumbrance
(other than any of the foregoing securing financing obtained by the
Partnership). Unless otherwise agreed by the Responding Partner and the
Initiating Partner, the purchase price shall be payable in cash, by wire
transfer or certified or cashier's check drawn to the order of the Initiating
Partner as specified by the Initiating Partner; provided, however, that the
parties may agree that all or any portion of the purchase price shall be
payable in the first month after the close of the taxable year in which the
Transfer occurs. If the Responding Partner fails to tender payment at the
closing in the manner agreed by the parties or if the closing fails to occur
within the applicable time period specified above (without allowing for the
extension provided for in Section 8.11) for any reason (including reasons
contemplated by Section 8.11) other than a breach by the Initiating Partner or
the Initiating Partner's inability to deliver its Partnership Interest free and
clear of encumbrances as contemplated above, then the Responding Partner shall
place the amount necessary to purchase the Initiating Partner's Partnership
Interests pursuant to Section 8.03(c) or 8.03(e) on the last day of the
applicable time period specified above in escrow with a financial institution
acceptable to the Initiating Partner as escrow agent, and (x) in the event that
the Responding Partner eventually closes within the period specified in Section
8.11, the Initiating Partner shall receive the money placed in escrow including
the interest thereon, or (y) in the event that the Responding Partner is unable
to close within the time period specified in Section 8.11 other than due to a
breach by the Initiating Partner or due to the Initiating Partner's inability
to deliver its Partnership Interest free and clear of encumbrances as
contemplated above, the Responding Partner shall pay to the Initiating Partner
at the time of the closing of the subsequent public offering referred to below,
out of the money placed in escrow, the difference between what the Initiating
Partner would have received on the applicable closing date if the Responding
Partner had purchased all of the Initiating Partner's Partnership Interests
designated for sale pursuant to Section 8.03(c) or 8.03(e) above and what the
Initiating Partner actually receives for such Partnership Interests in a
subsequent public offering, plus all the interest which has accrued on the
amounts placed in escrow at the time of the closing of the public offering. In
the
48
<PAGE> 54
event that the Responding Partner becomes aware that it will not be able to
close the purchase of the Initiating Partner's Partnership Interests for any
reason, the Responding Partner shall promptly notify the Initiating Partner.
If upon making an election to purchase pursuant to Section 8.03(c) or 8.03(e),
the Responding Partner fails to tender payment on the Registration Sale Closing
Date or if the closing fails to occur within the applicable time period
specified above (subject to provisions of Section 8.11) for any reason other
than a breach by the Initiating Partner or the Initiating Partner's inability
to deliver its Partnership Interest free and clear of encumbrances as
contemplated above, then the Initiating Partner, in its sole discretion, may
elect to consider the failure to close by the Responding Partner as an Event of
Default in lieu of the remedy specified above.
(i) No notice initiating the Registration Sale Procedure
or request to participate in a public offering pursuant to Section 8.03(d) may
be given by (i) any Partner while any notice, purchase or Transfer is pending
under the provisions of this Article VIII, or during the period that notice may
be given by a Partner under Section 8.05 or 8.06 or after an Event of
Termination has occurred; (ii) by a Defaulting Partner during the continuance
of an Event of Default with respect to it or during the period that the
Non-Defaulting Partner is pursuing the remedy specified in Section 9.02(a)(ii)
with respect to such Event of Default or (iii) by a Changed Partner during the
further period that the other Partner may elect pursuant to Sections 10.01(vi)
to dissolve the Partnership.
(j) In the event that there is an initial public offering
of Partnership Interests pursuant to Section 8.03, the Partners shall enter
into a stockholders agreement containing the relevant terms contained herein
and consistent with the intent of this Agreement.
(k) The Partners recognize that it may be advisable or
appropriate to incorporate the Partnership and its business and assets pursuant
to Section 8.03(c) or otherwise in the future and hereby agree to consider the
tax consequences thereof to the Partners and to use their respective reasonable
efforts to effectuate the incorporation of the Partnership in a manner that
will minimize the amount of taxes payable by the Partners in connection with
any such incorporation. Each Partner shall receive shares of common stock of
the incorporated entity in proportion to its Percentage Interest at the time of
such incorporation.
Section 8.04. Subsequent Registration Rights.
(a) Following an initial public offering of any
securities of the Partnership, each Partner shall be entitled to submit a
written request to the Partnership that the Partnership effect a registration
under the Securities Act of a designated amount of its Partnership Interest.
Upon receipt of such request, the Partnership shall notify the other Partner of
such request and the Partnership shall use reasonable best efforts, to effect,
49
<PAGE> 55
at the earliest practicable date, such registration as may be so requested and
as would permit the sale and distribution of the Partnership Interests
specified in such request; provided, that the Partnership shall not be
obligated to take any action to effect such registration if the Partnership has
effected one previous registration of Partnership Interests during the
preceding twelve-month period.
(b) If at any time the Partnership proposes to register
an offering of Partnership Interests under the Securities Act, either for its
own account or for the account of a Partner pursuant to Section 8.04(a) (other
than a registration of Partnership Interests in a Securities Act Rule 145
transaction or a registration relating to an employee benefit plan), the
Partnership will (i) give written notice to the non-requesting Partner within
10 days of its receipt of a demand pursuant to Section 8.04(a) of its decision
to effect such registration for its own account and (ii) use its reasonable
best efforts to include in such registration and any underwriting involved
therein the Partnership Interests specified in a written request to the
Partnership by the non-requesting Partner made within 30 days after receipt of
such written notice from the Partnership. If the registration is being made
pursuant to a demand registration, the non-requesting Partner may only include
in the registration an amount of Partnership Interests not to exceed the amount
to be included by the requesting Partner. If the managing underwriter
determines in good faith that marketing factors require a limitation on the
amount of Partnership Interests to be underwritten, the managing underwriter
may limit the amount of Partnership Interests to be included in the
registration such that the amount of Partnership Interests that each Partner
can sell shall be reduced on a pro rata basis, based on the amount of
Partnership Interests each such Partner designated to include in the public
offering, to the extent such managing underwriter deems necessary. Each
Partner that registers any portion of its Partnership Interest in the offering
shall enter into an agreement indemnifying the Partnership and its officers and
the other Partner, its directors, officers and controlling persons, from and
against any liability arising in connection with the public offering on terms
customary for secondary offerings and shall provide customary covenants
regarding its compliance with Rules 10b-2, 10b-6 and 10b-7 under the Exchange
Act.
(c) All the registration expenses (including, but not
limited to, filing fees, printing expenses, and fees and costs of counsel
(including blue sky counsel) and accountants of the Partnership) and
underwriter's fees and costs incurred in connection with the public offering of
Partnership Interests in connection with a demand registration pursuant to
Section 8.04(a) shall be borne by the requesting Partner; provided, that, if
the other Partner registers any Partnership Interests in the public offering,
such registration fees and expenses shall be borne by the requesting Partner
and the other Partner on a pro rata basis based on the amount of Partnership
Interests included by each of them in the public offering; and provided
further, that if the registration was initiated by the Partnership for its own
account, all such registration fees and expenses shall be borne by the
Partnership, except that the underwriting fees and expenses shall be shared by
the Partnership and the participating Partners on a pro rata basis based on the
amount of Partnership Interests included by each
50
<PAGE> 56
of them in the public offering and each Partner shall be responsible for the
fees and expenses of its own accountants and counsel.
(d) After an initial public offering of any Partnership
Interest, either Partner may sell its Partnership Interests in accordance with
Rule 144 under the Securities Act; provided, that such Partner shall notify the
other Partner of any proposed sale of Partnership Interests under Rule 144 as
soon as practicable and the other Partner shall have an option (the exercise of
such option to be notified to the selling Partner within three Business Days
after the receipt of the notice of proposed sale) to purchase all or a portion
of such Partnership Interest at the purchase price (payable in immediately
available funds at a closing to be held within five Business Days from the
exercise of such option) equal to the average closing prices for Partnership
Interests for the five consecutive trading days on the principal trading
exchange or inter-dealer quotation system for such Partnership Interests
immediately prior to the receipt of such notice or proposed sale.
(e) No request pursuant to Sections 8.04(a) or 8.04(b)
may be given by (i) any Partner while any notice, purchase or Transfer is
pending under the provisions of this Article VIII, or during the period that
notice may be given by a Partner under Section 8.05 or 8.06 or after an Event
of Termination has occurred; (ii) by a Defaulting Partner during the
continuance of an Event of Default with respect to it or during the period that
the Non-Defaulting Partner is pursuing the remedy specified in Section
9.02(a)(ii) with respect to such Event of Default or (iii) by a Changed Partner
during the further period that the other Partner may elect pursuant to Sections
10.01(iv) to dissolve the Partnership.
Section 8.05. Purchase Option upon Bankruptcy of a Partner. Upon
the Bankruptcy of a Partner, the other Partner shall have the right, but not
the obligation, exercisable by notice given within 45 days after it obtains
actual knowledge of the occurrence of such Bankruptcy, to purchase (or cause a
designee to purchase) the Partnership Interest of such Partner (the "Bankrupt
Partner") and continue the business of the Partnership as a successor business
entity without liquidation of its affairs. The purchase price payable for such
Partnership Interest will be equal to the Fair Market Value thereof, determined
in accordance with Section 8.08 as of the last day of the fiscal quarter
immediately preceding the fiscal quarter in which such notice was given to the
Bankrupt Partner. If notice of the exercise by the other Partner of such
purchase right is timely given, the closing of the purchase and sale of the
Bankrupt Partner's Partnership Interest shall occur in accordance with Section
8.08.
Section 8.06. Purchase Option upon Change in Control of a Partner.
If a Change in Control of a Partner (the "Changed Partner") occurs without the
consent of the other Partner, the other Partner (provided such other Partner is
a Non-Defaulting Partner) shall have the right, but not the obligation,
exercisable by notice given within 120 days after it obtains actual knowledge
of the occurrence of such Change in Control, to purchase (or cause a designee
to purchase) the Partnership Interest of the Changed Partner and continue
51
<PAGE> 57
the business of the Partnership as a successor business entity without
liquidation of its affairs. The purchase price payable for such Partnership
Interest will be equal to the Fair Market Value thereof, determined in
accordance with Section 8.08 as of the last day of the fiscal quarter
immediately preceding the fiscal quarter in which such notice was given to the
Changed Partner, less a discount equal to twenty percent (20%) of such Fair
Market Value. If notice of the exercise by the other Partner of such purchase
right is timely given, the closing of the purchase and sale of the Changed
Partner's Partnership Interest shall occur in accordance with Section 8.08.
Section 8.07. Purchase Option for Defaulting Partner's Partnership
Interest. If a Partner is a Defaulting Partner, then the Non- Defaulting
Partner shall have the right, but not the obligation, exercisable in accordance
with Section 9.02, to purchase (or cause a designee to purchase) the Defaulting
Partner's Partnership Interest and continue the business of the Partnership as
a successor business entity without liquidation of its affairs. Subject to the
last two sentences of this Section 8.07, (i) if the Non-Defaulting Partner
elects to purchase the Defaulting Partner's Partnership Interest prior to the
third anniversary of the approval of the initial Approved Business Plan (the
"Trigger Date"), and the Defaulting Partner became such due to a Payment
Default in respect of a Capital Call made in conformity with the initial
Approved Business Plan or any subsequent Approved Business Plan, the purchase
price payable for the Defaulting Partner's Partnership Interest shall be equal
to the lesser of the Book Value or the Fair Market Value thereof, less a
discount of 20% of such value; and (ii) if the Non-Defaulting Partner elects
to purchase the Defaulting Partner's Partnership Interest on or after the
Trigger Date, or if such election is made prior to Trigger Date and the
Defaulting Partner became such for any reason other than due to a Payment
Default in respect of a Capital Call made prior to the Trigger Date in
conformity with the initial Approved Business Plan or any subsequent Approved
Business Plan, the purchase price payable for the Defaulting Partner's
Partnership Interest shall be equal to the Fair Market Value thereof, less a
discount of 5% of such Fair Market Value. Fair Market Value and Book Value
shall be determined in accordance with Section 8.08 as of the last day of the
fiscal quarter immediately preceding the fiscal quarter in which notice of the
exercise of the purchase right of the Non-Defaulting Partner is given to the
Defaulting Partner. If notice of the exercise by the Non-Defaulting Partner of
such purchase right is given, the closing of the purchase and sale of the
Defaulting Partner's Partnership Interest shall occur in accordance with
Section 8.08. In determining the Fair Market Value of the Defaulting Partner's
Partnership Interest for purposes of this Section 8.07, an amount equal to the
aggregate Make-up Amount, if any, that would be payable (as of the date as of
which the Fair Market Value of the Defaulting Partner's Partnership Interest is
to be determined) by the Defaulting Partner in order to cure in full all of its
then outstanding Payment Defaults shall be deemed to have been paid to the
Partnership or the Complying Partner, as applicable in accordance with Section
3.04(e) and with the effect provided therein; provided, however, that if the
purchase price for the Defaulting Partner's Partnership Interest (determined
after giving effect to the foregoing deemed payment, but before giving effect
to the following sentence) is less than the Make-up Amount then the
52
<PAGE> 58
amount deemed to have been paid in accordance with this sentence shall be
reduced to that amount which would result in the purchase price being equal to
the aggregate Make-up Amount. The purchase price for the Partnership Interest
of the Defaulting Partner, determined after giving effect to the foregoing
provisions of this Section 8.07 shall be reduced (but not below One Dollar
($1.00)) by the aggregate Make-up Amount, and the amount of such reduction
shall be retained by the Non-Defaulting Partner or paid to the Partnership as
would be the case if such amount had been paid by the Defaulting Partner
pursuant to Section 3.04(e). Notwithstanding the foregoing provisions of this
Section 8.07, the deemed payments contemplated above as having been made by the
Defaulting Partner shall not have the effect of increasing the Defaulting
Partner's Percentage Interest as contemplated by Section 3.04(f).
Section 8.08. Purchase of Interest by Other Partner.
(a) In any case in which a Partner (a "Purchasing
Partner") has the right to purchase (or cause a designee to purchase) the
Partnership Interest of the other Partner (the "Selling Partner") pursuant to
Section 8.05, 8.06 or 8.07, the provisions of this Section 8.08 shall apply in
addition to any other applicable provisions of this Agreement.
(b) If the applicable Section of this Article VIII
provides for a purchase price for the Selling Partner's Partnership Interest
equal to the Book Value thereof (less a discount) as of any date, the term
"Book Value" shall mean the greater of (i) One Dollar ($1.00) and (ii) the
positive Capital Account balance of the Selling Partner as of such date (as
adjusted pursuant to Section 5.02 for the current year to and including such
date), as determined by the Partnership's Accountants.
(c) If the applicable Section of this Article VIII
provides for a purchase price for the Selling Partner's Partnership Interest
equal to the Fair Market Value thereof (less a discount, if applicable) as of
any date, the procedure for determining such Fair Market Value shall be as
follows. The Purchasing Partner and the Selling Partner shall attempt to
mutually agree on the Fair Market Value of the Selling Partner's Partnership
Interest. If they are unable to reach such an agreement within 30 days after
the date of the Purchasing Partner's notice to the Selling Partner requiring it
to sell its Partnership Interest, then either the Selling Partner or the
Purchasing Partner may elect by notice (an "Appraisal Notice") given to the
other within five Business Days thereafter to require an independent appraisal
of the Selling Partner's Partnership Interest. The Purchasing Partner and the
Selling Partner shall attempt in good faith to mutually agree on a single
appraiser. If they have failed to reach such an agreement within five Business
Days after the Appraisal Notice is given, each shall choose one appraiser
within five Business Days thereafter (and, if either of them fails to select
its appraiser within said period, the appraisal shall be made by the appraiser
selected by the other if such selection was timely made). The appraiser, or
each appraiser in the event of multiple appraisers, shall submit its
determination of the Fair Market Value of the Selling Partner's Partnership
Interest to the Partner and the Selling
53
<PAGE> 59
Partner within 45 days of the date of its selection. If there are two
appraisers and their respective determinations of the Fair Market Value of the
Selling Partner's Partnership Interest vary by less than 10% of the higher
determination, the Fair Market Value shall be the average of the two
determinations. If such determinations vary by 10% or more of the higher
determination, the two appraisers shall promptly designate a third appraiser.
No Partner shall provide, and the two appraisers initially selected shall be
instructed not to provide, any information to the third appraiser as to the
determinations of the two appraisers initially selected or otherwise influence
such third appraiser's determination in any way. The third appraiser shall
submit its determination of the Fair Market Value of the Selling Partner's
Partnership Interest to the Purchasing Partner and the Selling Partner within
45 days of the date of its selection. The Fair Market Value of the Selling
Partner's Partnership Interest shall be equal to the average of the two closest
of the three determinations; provided, however, that if the difference between
the highest and middle determination is no more than 105% and no less than 95%
of the difference between the middle and lowest determination, then the Fair
Market Value of such Partnership Interest shall be equal to the middle
determination. The determination of the Fair Market Value of the Selling
Partner's Partnership Interest in accordance with the foregoing procedure shall
be final and binding on the Purchasing Partner and the Selling Partner. If any
appraiser is only able to provide a range in which Fair Market Value would
exist, the average of the highest and lowest value in such range shall be
deemed to be such appraiser's determination of the Fair Market Value of the
Selling Partner's Partnership Interest. Each appraiser selected pursuant to
the provisions of this Section shall be an investment banker or other qualified
Person with prior experience in appraising businesses comparable to the
business of the Partnership and that is not affiliated with any Partner. If
there is only one appraiser appointed pursuant to this Section, the cost of
such appraiser shall be borne equally by the Purchasing Partner and the Selling
Partner. If there is more than one appraiser, the Purchasing Partner shall
bear the cost of any appraiser appointed by the Purchasing Partner, the Selling
Partner shall bear the cost of any appraiser appointed by it, and the
Purchasing Partner and the Selling Partner shall equally bear the cost of any
appraiser appointed by the other appraisers. The Purchasing Partner is hereby
authorized to deduct from the purchase price for the Selling Partner's
Partnership Interest an aggregate amount equal to the appraisers' fees owed by
the Selling Partner and to pay the same directly to the applicable appraisers
on behalf of the Selling Partner.
(d) Unless the Purchasing Partner and the Selling Partner
otherwise agree, the closing of the purchase and sale of the Selling Partner's
Partnership Interest pursuant to the applicable of Section 8.05, 8.06 or 8.07
shall take place at the offices of the Purchasing Partner at 11:00 a.m. (local
time) on the date selected by the Purchasing Partner, such date to be a date
within 90 days after the date the Purchasing Partner's notice of the exercise
of its purchase right was given to the Selling Partner (or, if applicable, 30
days after the completion of the appraisal procedure set forth in Section
8.08(c)) (subject, in each case, to the provisions of Section 8.11). At such
closing, the Purchasing Partner shall pay (or cause to be paid) to the Selling
Partner the purchase price for the Selling Partner's
54
<PAGE> 60
Partnership Interest in cash, by wire transfer or certified or cashier's check
drawn to the order of the Selling Partner as specified by the Selling Partner
(unless the provisions of the last sentence of Section 8.08(c) or the
provisions of Section 8.09(a)(i) are applicable, in which event a portion of
such purchase price determined in accordance with said Sections shall be paid
on behalf of the Selling Partner in the manner provided therein), and the
Selling Partner shall deliver such deeds, bills of sale, assignments and other
documents, and shall take all such other reasonable actions, in connection with
such purchase and sale of its Partnership Interest as the Purchasing Partner
shall request, so that good title to its Partnership Interest may be
Transferred to the Purchasing Partner or its designee, as applicable, free and
clear of any mortgage, pledge, lien or encumbrance (other than any of the
foregoing securing financing obtained by the Partnership).
Section 8.09. Additional Provisions Relating to Transfer. In the
case of any Transfer (whether such Transfer is to a Partner (or its designee),
a Permitted Transferee or a third party purchaser) of a Partnership Interest
under this Article VIII (except, unless otherwise noted below, with respect to
any Transfer pursuant to Section 8.03 in which the Transfer is to the public
and not to the Responding Partner and Section 8.04):
(i) any and all filing and recording fees, fees
of counsel and accountants and other costs and expenses
reasonably incurred by the Partnership as a result of such
Transfer shall be paid as follows: (w) such fees, costs and
expenses shall be shared equally by the Partners in case of a
Transfer pursuant to Section 8.12(a)(ii); (x) all of such
fees, costs and expenses shall be paid by the transferee of a
Partnership Interest pursuant to Section 8.02, 8.03 or
8.12(a)(i); (y) one-half of such fees, costs and expenses
shall be paid by the Bankrupt Partner in the case of a
Transfer pursuant to Section 8.05; and (z) all of such fees,
costs and expenses shall be paid by the Changed Partner or the
Defaulting Partner in the case of a Transfer pursuant to
Section 8.06 or 8.07, respectively, and in each of the cases
referred to in clause (y) and (z) above, the Purchasing
Partner (or its designee) shall be entitled to deduct such
amount owed by the Selling Partner from the purchase price for
the Selling Partner's Partnership Interest and to pay the same
to the Partnership on behalf of the Selling Partner;
(ii) the transferee of a Partnership Interest
(other than, with respect to clauses (A) and (B) below, a
transferee Partner) shall, by written instrument in form and
substance reasonably satisfactory to the nontransferring
Partner (and, in the case of clause (C) below, reasonably
satisfactory to the transferor Partner), (A) make
representations and warranties to the nontransferring Partner
equivalent to those set forth in Section 11.01, (B) accept and
adopt the terms and provisions of this Agreement and (C)
assume the obligations of the transferor Partner under this
Agreement with respect to the transferred Partnership Interest
and the
55
<PAGE> 61
transferor Partner shall be released from all such obligations
except as otherwise provided in clause (iv) below and Section
12.19 or as otherwise expressly provided herein with respect
to obligations that are to survive any such Transfer and,
unless expressly assumed by the transferee with the consent of
the nontransferring Partner, except for (x) those obligations
or liabilities of the transferor Partner arising out of a
breach of this Agreement or pursuant to Sections 6.07 or 12.16
and (y) those obligations or liabilities of the transferor
Partner based on events occurring, arising or maturing prior
to the date of Transfer (other than, in the case of a Transfer
of a Partnership Interest by one Partner to another Partner or
its designee, any such obligation or liability referred to in
this clause (y) that is taken into account in the
determination of the purchase price for the transferor
Partner's Partnership Interest);
(iii) in the case of a Transfer pursuant to Section
8.02 or 8.12, and otherwise if required by the nontransferring
Partner, the transferor will be obligated to sell to the
transferee, and the transferee will be obligated to buy from
the transferor, all evidences of indebtedness (including
Partner Loans and Defaulted Advance Loans) of the Partnership
held directly or indirectly by the transferor or an Affiliate
thereof; the purchase price for such evidences of indebtedness
shall be the outstanding principal amount thereof at the time
of transfer plus accrued and unpaid interest thereon which,
unless otherwise agreed by the transferor and the transferee,
shall be paid in cash;
(iv) no Transfer (including a transfer pursuant to
Section 8.03 or 8.04) shall result in termination of, relieve
the Partnership, the transferor Partner or any of its
Affiliates of or otherwise affect any of the obligations or
liabilities of the Partnership, the transferor Partner or any
of its Affiliates under, any contract between the transferor
Partner or such Affiliate and the Partnership, except to the
extent otherwise provided therein or otherwise agreed by the
nontransferring Partner;
(v) if required by the nontransferring Partner,
the transferee shall deliver to the Partnership an opinion,
satisfactory in form and substance to the nontransferring
Partner, of counsel reasonably satisfactory to the
nontransferring Partner to the effect that the Transfer of the
Partnership Interest is in compliance with applicable state
and Federal securities laws;
(vi) if required by the nontransferring Partner,
the transferee shall deliver to the nontransferring Partner
evidence of the authority of such Person to become a Partner
and to be bound by all of the terms and conditions of this
Agreement and the transferee and transferor shall each execute
and deliver such other instruments as the nontransferring
Partner reasonably
56
<PAGE> 62
deems necessary or appropriate to effect, and as a condition
to, such Transfer, including amendments to the Certificate or
any other instrument filed with the State of Delaware or any
other state or governmental agency; and
(vii) the transferee of a Partnership Interest (if
such transferee is not already a Partner) shall cause its
Parent to accept and adopt the terms and provisions of the
Parents Agreement by written instrument in form and substance
reasonably satisfactory to the nontransferring Partner.
Section 8.10. Distributions After Transfer. Distributions made on
or after the effective date of the Transfer of a Partnership Interest shall be
made to the transferee, regardless of when such distributions accrued on the
books of the Partnership.
Section 8.11. Extension of Time. If any Transfer of a Partner's
Partnership Interest in accordance with this Article VIII requires the consent,
approval, waiver, or authorization of any government department, board, bureau,
commission, agency or instrumentality as a condition to the valid Transfer of
such Partner's Partnership Interest to the proposed transferee thereof, then
each of the time periods provided in this Article VIII shall be suspended for
the period of time during which any such consent, approval, waiver, or
authorization is being diligently pursued; provided, however, that in no event
shall the suspension of any time period pursuant to this Section 8.11 exist for
more than 180 days. Each of the Partners agrees to use its diligent efforts to
obtain, or to assist the affected Partner or the Partnership Committee in
obtaining, any such consent, approval, waiver, or authorization and shall
cooperate and use its diligent efforts to respond as promptly as practicable to
all inquiries received by it, by the affected Partner or by the Partnership
Committee from any government department, board, bureau, commission, agency or
instrumentality for initial or additional information or documentation in
connection therewith.
Section 8.12 Buy-Sell Procedure.
(a) Subject to Section 8.12(e), the procedure set forth
in this Section 8.12 (the "Buy-Sell Procedure") may be initiated by any Partner
(the "S-B Initiating Partner"), at its option, by giving notice to the other
Partner (the "S-B Responding Partner") of its election to initiate the Buy-Sell
Procedure during any of the following periods: (i) commencing on the Trigger
Date and for one month thereafter and annually thereafter during the
corresponding period in each such year, and (ii), if no new Budget (beginning
with the Budget for the second full Fiscal Year after approval of the initial
Approved Business Plan) is agreed upon in accordance with the provisions of
Section 6.04(b) for any two consecutive Fiscal Years, at any time after the
date 90 days following the date on which the proposed Budget in respect of the
second such Fiscal Year was submitted and prior to the earlier of (x) 120 days
following the date of such submission and (y) the approval of a new Budget in
accordance with the provisions of Section 6.04(b). Such notice shall include
57
<PAGE> 63
a statement of the S-B Initiating Partner's estimate of the value of the
Partnership for the purposes of the Buy-Sell Procedure (the "Stated Value").
(b) Within 30 days after receipt of the notice, the S-B
Responding Partner shall give written notice to the S-B Initiating Partner of
its election either to (i) purchase (or designate another Person to purchase)
the S-B Initiating Partner's Partnership Interest, or (ii) sell the Partnership
Interest of such S-B Responding Partner. If the S-B Responding Partner elects
to purchase (or cause a designee to purchase) the S-B Initiating Partner's
Partnership Interest, the S-B Initiating Partner shall be obligated to sell the
same to the S-B Responding Partner (or its designee), and the S-B Responding
Partner shall be obligated to purchase (or cause its designee to purchase) the
S-B Initiating Partner's Partnership Interest. If the S-B Responding Partner
elects to sell its Partnership Interest, then the S-B Responding Partner shall
be obligated to sell, and the S-B Initiating Partner (or its designee) shall be
obligated to buy, the same. The purchase price for the Partnership Interest to
be sold shall be the amount determined by multiplying the Stated Value by the
Percentage Interest of the Partner whose Partnership Interest is to be sold.
The failure of the S-B Responding Partner timely to notify the S-B Initiating
Partner of its election to buy or sell shall be deemed to be an election by the
S-B Responding Partner to sell its Partnership Interest and the S-B Responding
Partner shall then be bound to sell. If a designee of a Partner is to effect
the purchase, then the Partner designating such Person shall guarantee the
performance of its designee.
(c) Upon an election by the S-B Responding Partner under
the Buy-Sell Procedure which establishes that a Partner or its designee (the
"Buyer") shall purchase the Partnership Interest of the other Partner (the
"Seller"), the business affairs of the Partnership shall continue to be
conducted in the ordinary course as provided in this Agreement during the
pendency of the Buy-Sell Procedure;provided that no Capital Call may be made
after notice of the initiation of the Buy-Sell Procedure is given and prior to
the Buy-Sell Closing Date. If, but for the proviso clause of the immediately
preceding sentence, additional Capital Contributions would be requested
pursuant to Section 3.03 prior to the Buy-Sell Closing Date, the Buyer may, at
its election, make Partner Loans to the Partnership in an aggregate amount not
exceeding the amount of the additional Capital Contributions that would have
been so requested. The purchase price to be paid by the Buyer for the
Partnership Interest of the Seller shall not be reduced by the amount of such
Partner Loans.
(d) Unless the Partners otherwise agree, the closing of
the purchase and sale of the Partnership Interest of the Seller pursuant to
this Section 8.12 shall be held at the principal office of the Buyer at 11:00
a.m. (local time) on the date (the "Buy-Sell Closing Date") that is 60 days
after the date of an election (or deemed election) by the S-B Responding
Partner under Section 8.12(b) (subject to the provisions of Section 8.11). At
such closing, the Buyer shall pay the purchase price for the Seller's
Partnership Interest to the Seller, and the Seller shall deliver to the Buyer
such deeds, bills of sale, assignments and
58
<PAGE> 64
other agreements and instruments, and shall take all such other reasonable
actions, in connection with the purchase and sale of its Partnership Interest
as the Buyer shall request, including removing any lien or encumbrance attached
to its Partnership Interest so that good title to such Partnership Interest
shall be Transferred to the Buyer free and clear of any mortgage, pledge, lien
or encumbrance (other than any of the foregoing securing financing obtained by
the Partnership). Unless otherwise agreed by the Partners, the purchase price
shall be payable in cash, by wire transfer or certified or cashier's check
drawn to the order of the Seller as specified by the Seller; provided, however,
that the parties may agree that all or any portion of the purchase price shall
be payable in the first month after the close of the taxable year in which the
Transfer occurs. If the Buyer fails to tender payment on the Buy-Sell Closing
Date in the manner agreed by the parties or if the closing fails to occur
within the time period specified above (subject to the provisions of Section
8.11) for any reason other than a breach by the Seller, then such failure shall
be deemed to constitute an election by the Buyer to sell its Partnership
Interest for the Stated Value, less a discount of 5% of such Stated Value and
the Buyer shall then be bound to sell if the Seller, by notice given to the
Buyer, within 15 days thereafter, requires it to do so. If the Seller timely
gives such notice, then the date by which the closing of the purchase and sale
of the other Partner's Partnership Interest shall occur shall be calculated, in
accordance with the foregoing provisions of this Section 8.12(d), from the date
such notice is given. If the Seller does not timely give such notice or fails
to consummate the purchase as provided above, then the Buy-Sell Procedure shall
be deemed not to have been initiated.
(e) No notice initiating the Buy-Sell Procedure may be
given (i) by any Partner while any notice, purchase or Transfer is pending
under this Article VIII, or during the period that notice may be given by a
Partner under Section 8.05 or 8.06, or after an Event of Termination has
occurred; (ii) by a Defaulting Partner during the continuance of an Event of
Default with respect to it or during the period that the Non-Defaulting Partner
is pursuing the remedy specified in Section 9.02(a)(ii) with respect to such
Event of Default or (iii) by a Changed Partner during the further period that
the other Partner may elect pursuant to Section 10.01(vi) to dissolve the
Partnership.
ARTICLE IX
EVENTS OF DEFAULT; CONSEQUENCES AND REMEDIES
Section 9.01. Events of Default. An "Event of Default" shall be
considered to have occurred with respect to a Partner (the "Defaulting
Partner") if:
(i) Such Partner Disposes of all or any part of
its Partnership Interest, or suffers such Disposition to
occur, except as permitted by this Agreement; provided,
however, that no Event of Default shall be considered to have
occurred for 30 days following the involuntary encumbrance of
all or
59
<PAGE> 65
any part of such Partnership Interest if during such 30-day
period such Partner acts diligently to, and does, remove any
such encumbrance, including effecting the posting of a bond to
prevent foreclosure where necessary;
(ii) A Payment Default occurs with respect to such
Partner and the Capital Call with respect to which such
Partner defaulted is not rescinded pursuant to Section
3.04(b)(i) or cured pursuant to Section 3.04(g) or 3.04(h);
(iii) Such Partner or any Controlled Affiliate of
such Partner willfully fails to perform or violates any other
material term or condition of this Agreement or a material
term or condition of any contract with the Partnership to
which such Partner or Controlled Affiliate is a party or by
which it is bound and such failure or violation continues for
15 days after written notice thereof has been given by the
other Partner (or such other period as is provided in such
contract); provided, however, that if the failure or violation
is not a failure to pay money and is of such a nature that it
cannot reasonably be cured within such 15-day (or other)
period, but if it is curable and such Partner in good faith
begins efforts to cure it within such 15-day (or other) period
and continues diligently to do so, it shall have a reasonable
additional period thereafter to effect the cure;
(iv) Such Partner fails to purchase the Initiating
Partner's Partnership Interest pursuant to Section 8.03(h) and
the Initiating Partner elects to consider such failure an
Event of Default;
(v) A Change of Control occurs with respect to
such Partner; or
(vi) Such Partner otherwise causes the dissolution
of the Partnership in contravention of the terms of this
Agreement (other than solely by virtue of the Bankruptcy of
such Partner).
Section 9.02. Remedies of Non-Defaulting Partner.
(a) Upon the occurrence and during the continuance of an
Event of Default with respect to a Defaulting Partner, the other Partner
(assuming no Events of Default are continuing with respect to it) (the
"Non-Defaulting Partner") may elect:
(i) to purchase or cause its designee to purchase
the Partnership Interest of the Defaulting Partner in
accordance with Section 8.06 or 8.07, as applicable, and
continue the business of the Partnership as a successor
business entity without liquidation of its affairs;
60
<PAGE> 66
(ii) to seek to enjoin such default or to obtain
specific performance of a Defaulting Partner's (or the
applicable Affiliate's) obligations or Damages (as defined and
subject to the limitations specified below) in respect of such
Event of Default; or
(iii) to dissolve the Partnership in which event
the affairs of the Partnership shall be wound up as provided
in Section 10.02 and in accordance with the provisions of
Section 9.02(c), except that all references in Sections 10.02
and 9.02(c) to the Partnership Committee shall be deemed to
refer to the Non-Defaulting Partner.
The election of a remedy specified in clause (i), (ii) or (iii) above may be
exercised by notice given to the Defaulting Partner (x) at any time, in the
case of an Event of Default specified in clause (ii) of Section 9.01, or (y)
within 120 days after the Non-Defaulting Partner obtains actual knowledge of
the occurrence of such Event of Default, including, if applicable, that any
cure period has expired; provided that, if an election pursuant to clause (ii)
above is made to seek an injunction, specific performance or other equitable
relief and a final judgment in such action is rendered denying such equitable
remedy, then, by notice given within 10 days thereafter, the Non-Defaulting
Partner may elect to pursue the remedies specified in clause (i) or (iii) above
unless, prior to the giving of such notice, the Defaulting Partner has cured
(or caused to be cured) the Event of Default in question in full and no other
Event of Default with respect to such Partner has occurred and is continuing or
the final judgment denying equitable relief specifically held that there was no
Event of Default.
The foregoing remedies shall not be deemed mutually exclusive, and
selection or resort to any thereof shall not preclude selection or resort to
the others; provided that, if the Non-Defaulting Partner makes an election
pursuant to clause (i) above in respect of an Event of Default, then, except as
otherwise expressly provided in Section 9.02(b), it may not pursue the remedy
specified in clause (iii) above in respect of that Event of Default. Except as
provided in the immediately preceding sentence, the resort to any remedy
pursuant to this Section 9.02(a) shall not for any purpose be deemed to be a
waiver of any other remedy available hereunder or under applicable law;
provided that the failure to elect a remedy within the time period provided in
the preceding paragraph shall be conclusively presumed to be a waiver of such
Event of Default.
Unless an Event of Default or resort to such remedy has been waived as
set forth in the immediately preceding paragraph, the Partnership or the
Non-Defaulting Partner shall be entitled to recover from the Defaulting Partner
(or the applicable Controlled Affiliate in the case of an Event of Default
specified in clause (iii) of Section 9.01) in an appropriate proceeding any and
all damages, losses and expenses (including reasonable attorneys' fees and
disbursements) (collectively, "Damages") suffered or incurred by the
Partnership or the Non-Defaulting Partner as a result of such Event of
Default; provided that neither the
61
<PAGE> 67
Partnership nor the Non-Defaulting Partner shall have or assert any claim
against the Defaulting Partner or any of its Affiliates for punitive Damages or
for indirect, special or consequential Damages suffered or incurred by the
Partnership or the Non-Defaulting Partner as a result of an Event of Default;
and provided, further, that if an election is made pursuant to clause (i) or
(iii) above, the amount that the Partnership or the Non-Defaulting Partner may
recover in any action for Damages (x) shall be without duplication of the
amount by which the purchase price for the Defaulting Partner's Partnership
Interest is reduced pursuant to the last sentence of Section 8.07 and (y) shall
be reduced by the amount of the discount determined pursuant to the second
sentence of Section 8.07 (in the case of an election pursuant to clause (i)
above) or by the amount withheld pursuant to Section 9.02(c) from the amount
otherwise payable to the Defaulting Partner (in the case of an election
pursuant to clause (iii) above), as applicable.
(b) If an election is made pursuant to clause (i) of
Section 9.02(a), the closing of the purchase and sale of the Defaulting
Partner's Partnership Interest shall occur as provided in Sections 8.06, 8.07
and 8.08; provided that if, as contemplated by Section 8.11 the time period
within which such closing is to occur has been suspended pending the pursuit of
any required consent, approval, waiver or authorization, but all such required
consents, approvals, waivers or authorizations have not been obtained within
the 180-day suspension period provided by said Section 8.11, then by notice
given within 10 days thereafter, the Non-Defaulting Partner may elect to
dissolve the Partnership in which event the affairs of the Partnership shall be
wound up as provided in Section 10.02 and in accordance with the provisions of
Section 9.02(c).
(c) If an election is made pursuant to clause (iii) of
Section 9.02(a), the Partnership Committee shall deduct from any amounts to be
paid to the Defaulting Partner that amount which it reasonably estimates to be
sufficient to compensate the Non-Defaulting Partner for Damages incurred by it
as a result of the Event of Default (subject to the limitations of Section
9.02(a)) and shall pay the same to the Non-Defaulting Partner.
(d) In addition to the foregoing provisions of this
Section 9.02 (and without limitation of the provisions of Section 3.05 as they
relate to a Refusing Partner), the non-Defaulting Partner shall be entitled to
require the Defaulting Partner to remove, and the Defaulting Partner hereby
agrees upon written notice thereof from the non-Defaulting Partner to remove,
its Representatives from the Partnership Committee pending the giving of an
Election Notice under Section 9.02(a) and, if an Election Notice is timely
given with respect to a remedy specified in clause (i) or (iii) of Section
9.02(a), thereafter until the consummation of the purchase and sale of the
Defaulting Partner's Partnership
62
<PAGE> 68
Interest or the dissolution of the Partnership, as the case may be. The number
of Representatives on the Partnership Committee (and the quorum necessary for
the taking of action by the Partnership Committee) will be reduced accordingly
during any period that the Defaulting Partner has been so required to remove
its Representatives and will be permanently reduced upon the consummation of
the purchase and sale of the Defaulting Partner's Partnership Interest, if
applicable. After the removal of the Defaulting Partner's Representatives from
the Partnership Committee and until such Representatives are reappointed to the
Partnership Committee (if ever), and subject to Section 6.06(b), all matters
required to be submitted to the Partnership Committee pursuant to Section 6.05,
6.06(a) or pursuant to another provision of this Agreement shall be deemed
approved if consented to by the Representatives of the other Partner (provided
such other Partner has no uncured Events of Default). Except as otherwise
provided herein, the rights and obligations of a Defaulting Partner under this
Agreement shall not be affected by the occurrence of an Event of Default,
including its rights and obligations to share in accordance with its Percentage
Interest in the Net Income and Net Loss of, and distributions from, the
Partnership subsequent to the occurrence of such Event of Default, and its
rights and obligations pursuant to Sections 6.07, 6.08, 6.09 and 12.16.
ARTICLE X
TERMINATION AND LIQUIDATION OF THE PARTNERSHIP
Section 10.01. Events of Termination. The Partnership shall be
dissolved and its affairs wound up pursuant to Section 10.02 upon the first to
occur of any of the following (each, an "Event of Termination"):
(i) August 31, 2044 (provided, however, that the
Partners may at any time prior to such date amend this
Agreement to extend the Term of the Partnership to a later
date);
(ii) the unanimous written consent of the Partners
to dissolution;
(iii) the sale or other disposition of
substantially all of the assets of the Partnership;
(iv) the making by the Non-Defaulting Partner of
an election pursuant to Section 9.02(a)(iii);
(v) the Bankruptcy of a Partner, unless such
Partner's Partnership Interest has been purchased pursuant to
Section 8.05 or the other Partner has consented to the
continuation of the Partnership with the successor of such
Partner admitted as a new Partner;
(vi) the Change in Control of a Partner if the
Changed Partner's Partnership Interest has not been purchased
pursuant to Section 8.06 and the other Partner has elected, by
notice given to the Changed Partner within 120
63
<PAGE> 69
days after obtaining actual knowledge of the occurrence of
such Change in Control, not to continue the Partnership with
the Changed Partner;
(vii) the failure of the Partners to adopt an
initial Approved Business Plan within nine (9) months after
the date the Partnership Committee appoints a CEO (or such
other date as the Partners may agree); or
(viii) the termination of the Exchange Agreement,
prior to the closing contemplated therein, in accordance with
Section 6.01 of such agreement.
Section 10.02. Winding-Up. Upon the occurrence of an Event of
Termination, the Partnership affairs shall be wound up as follows:
(a) The Partnership Committee shall cause to be prepared
a statement of the assets and liabilities of the Partnership as of the date of
dissolution.
(b) The assets and properties of the Partnership shall be
liquidated as promptly as possible, and receivables collected, all in an
orderly and business-like manner so as not to involve undue sacrifice.
Notwithstanding the foregoing, the Partnership Committee may determine not to
sell, or authorize the sale of, all or any portion of the assets and properties
of the Partnership, in which event such assets and properties shall be
distributed in kind pursuant to Section 10.02(c).
(c) The proceeds of liquidation under Section 10.02(b)
and all other assets and properties of the Partnership shall be applied and
distributed as follows in the following order of priority:
(i) to the payment of the debts and liabilities
of the Partnership (except for Partner Loans and any other
amounts which may be owed to any Partner) and the expenses of
liquidation;
(ii) to establish any reserves as the Partnership
Committee, in accordance with sound business judgment, deems
reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership, which reserves
may be paid over by the Partnership Committee to an escrow
agent selected by it to be held by such agent for the purpose
of (x) distributing such reserves in payment of the
aforementioned contingencies and (y) upon the expiration of
such period as the Partnership Committee may deem advisable,
distributing the balance thereof in the manner provided in
this Section 10.02(c);
64
<PAGE> 70
(iii) to the payment of all other amounts owed to
any Partner other than in respect of the Capital Accounts and
other than Partner Loans and Defaulted Advance Loans and then
(A) to pay first the accrued and unpaid interest on and then
the unpaid principal amount of the Defaulted Advance Loans in
the proportion that the aggregate outstanding amount of the
Defaulted Advance Loans made by each Partner, including
accrued and unpaid interest, bears to the total outstanding
amount of all Defaulted Advance Loans made by the Partners,
including accrued and unpaid interest, and then (B) to pay
first the accrued and unpaid interest on and then the unpaid
principal amount of the Partner Loans on a pro rata basis to
each Partner and its Affiliates (considered as a group) in
proportion to the respective amounts owed to each Partner and
its Affiliates (considered as a group);
(iv) to the Partners in amounts proportional to
the total amount in each Partner's Capital Account (as
adjusted in accordance with Section 5.01); provided that, if
any assets are to be distributed in kind, they will be valued
at their fair market values before the distribution, and will
be deemed to have been sold at such fair market value. This
deemed sale will be reflected in an adjustment to the
Partners' Capital Accounts pursuant to Section 5.05 as if such
property had actually been sold immediately prior to any
liquidating distribution. Any distribution pursuant to this
Section 10.02(c)(iv) shall be made prior to the later of (A)
the end of the Partnership taxable year in which the
liquidation of the Partnership occurs or (B) 90 days after the
date of such liquidation. Distributions pursuant to this
Section 10.02(c)(iv) may be distributed to a trust established
for the benefit of the Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the
Partnership and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of any
Partner arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to the
Partners from time to time, in the reasonable discretion of
the Partnership Committee, in the same proportions as the
amount distributed to such trust by the Partnership would
otherwise have been distributed to the Partners pursuant to
this Agreement.
(d) Nothing contained in this Section 10.02 shall be
construed to limit the Partnership Committee's discretion to attempt to sell
the Partnership's business and assets as a going concern following the
occurrence of an Event of Termination, provided that the proceeds of such sale
shall be applied and distributed as provided in Section 10.02(c), and provided,
further, that if such a sale cannot be effected within six months after the
occurrence of an Event of Termination (or such longer or shorter period as the
Partners may agree) then the Partnership Committee shall promptly proceed to
wind-up the affairs of the Partnership as provided above in this Section 10.02.
65
<PAGE> 71
ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTNERS
Section 11.01. Representations and Warranties. Each Partner hereby
makes the following representations, warranties and covenants with respect to
itself and its Parent to the other Partner:
(i) It is, and at all times material to this
Agreement shall be, duly incorporated or organized, validly
existing and in good standing under the laws of its state of
incorporation or organization and duly qualified or registered
to do business in each state or jurisdiction in which failure
to so qualify or register would have a material adverse effect
upon such Partner or the Partnership.
(ii) It has, and at all times material to this
Agreement shall continue to have, the full power and authority
to take all actions contemplated by this Agreement and any
other contract with the Partnership to which it is or may
hereafter become a party or be bound (each an "Additional
Agreement").
(iii) The execution, delivery and performance of
this Agreement and each Additional Agreement to which it is a
party, have been, or at the appropriate time shall be, duly
authorized by all necessary action on its part.
(iv) This Agreement and each Additional Agreement
to which it is a party constitutes, or at the appropriate time
will constitute, a valid and binding obligation of it
enforceable in accordance with the terms hereof and thereof,
subject as to enforceability to limits imposed by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and the availability of equitable remedies.
(v) The execution, delivery and performance of
this Agreement and of each Additional Agreement to which it is
a party do not, or at the time of its execution and delivery
will not, violate any provision of law applicable to it or of
its organizational documents.
(vi) The execution, delivery and performance of
this Agreement and of each Additional Agreement to which it is
a party are not inconsistent with, and do not violate or cause
a breach or default under, or at the time of its execution and
delivery will not be inconsistent with, and will not violate
or
66
<PAGE> 72
cause a breach or default under, any agreement or obligation
to which it is a party or is otherwise subject.
(vii) It shall, at all times, comply in all
material respects, with all applicable laws, ordinances, rules
and regulations and shall not knowingly take, or direct the
Partnership to take, any action which is illegal.
(viii) It is and has been formed solely for the
purposes of holding its Partnership Interest and acting in the
capacity of a Partner hereunder and, at all times material to
this Agreement, shall engage in no business other than that
described in this clause (viii) and shall have no interest in
any Person other than the Partnership.
Section 11.02. Business Opportunities.
(a) Subject to Section 11.02 (d), during the Restricted
Period no Partner shall Engage In, or permit its Applicable Affiliates to
Engage In, the Restricted Business other than (i) in the case of a Partner
through the Partnership or (ii) in the case of a Partner's Applicable
Affiliates, after complying with the requirements of this Section 11.02. For
purposes of this Section 11.02, the following terms have the following
meanings:
(1) "Applicable Affiliate", when used with respect to a
specific Partner, means the Parent of such Partner and each Affiliate
of such Parent as to which such Parent or any of its Subsidiaries has
the power or contractual right (but only for so long as such power or
contractual right exists) (i) unilaterally to preclude or veto the
ability of such Affiliate to Engage In the Restricted Business or (ii)
unilaterally to cause such Affiliate to offer the Partnership the
opportunity to pursue a Business or Investment Opportunity (as defined
in Section 11.02(b)) in lieu of such Affiliate. When used with respect
to (i) TCI Sub (or any Permitted Transferee), the term Applicable
Affiliate includes TCI, whether or not it is then the Parent of TCI
Sub (or any Permitted Transferee), and (ii) Acclaim Sub (or any
Permitted Transferee), the term Applicable Affiliate includes Acclaim,
whether or not it is then the Parent of Acclaim Sub (or any Permitted
Transferee).
(2) "Electronic Means" means distribution via coaxial or
fiber optic cable, satellite, telephone, cellular or other wireless or
wired delivery systems and any other electronic means of distribution,
whether now existing or hereafter created.
(3) "Engage In" means to commence or conduct, or acquire,
directly or indirectly, an equity or voting interest in, or any option
or right to acquire any such equity or voting interest, or any phantom
stock, stock appreciation right, profit participation or similar
economic benefit related to the financial performance of, a Person
that conducts or engages in, the Restricted Business.
67
<PAGE> 73
(4) "Interactive Software" means computer software or any
other audio visual work embodying a game intended primarily for
interactive play by one or more users (either playing on the same
telecommunications network or over multiple networks by Electronic
Means). Notwithstanding the foregoing, the term "Interactive Software"
does not include computer software which functions primarily (i) to
deliver messages or communications to another person or machine, (ii)
to record or score results of a game or (iii) to administer game-like
services (e.g., authorization systems, information billing, network
management) where the computer software itself does not embody the
interactive game-play element.
(5) "Restricted Business" means the development,
acquisition, acquisition of rights to, acquisition of rights and/or
properties for use in, marketing and/or advertisement of, sale of,
licensing of or publishing of Interactive Software, all of the
foregoing of which are for distribution via Electronic Means on any
telecommunications network (e.g., cable system, satellite- delivered,
telephone, cellular, or other local or wide area network) in the
continental United States and Canada. Notwithstanding the foregoing,
the term "Restricted Business" does not include any aspect of the
following businesses or activities: (i) the provision, distribution or
carriage of services which entail "play along" with television
programming; (ii) the provision, distribution or carriage of services
which entail gambling or promotions, sweepstakes and similar contests
or advertising; (iii) the provision, distribution or carriage of
educational services or educational programming services delivered to
public or private educational institutions or to individuals; (iv) the
hosting of on-line applications (e.g, a business comparable to that of
America On Line, Inc.) solely for personal computers and computer-like
electronic devices (but excluding any set-top box to be used in
connection with the distribution of the Partnership's Interactive
Software and dedicated interactive game platforms); (v) the sale,
licensing or other exploitation of Acclaim's proprietary "Motion
Capture Technology" (animation and motion capture processes, now
existing or hereafter created, developed, licensed or acquired by
Acclaim, Acclaim's Affiliates or Acclaim's Advanced Technology Group);
(vi) the distribution of Interactive Software via Electronic Means to
retail stores for conversion to cartridge or other physical form
(whether now existing or hereafter created) for subsequent sale to
retail customers and/or the distribution of Interactive Software via
Electronic Means directly or through any tele-communications network
for downloading for permanent storage by the end user for retail sale
to such end user; (vii) subject to Section 11.04, the licensing of
Interactive Software for distribution via Electronic Means over
telecommunications networks; (viii) the distribution of Interactive
Software via Electronic Means to video game arcades and/or similar
location-based entertainment centers; (ix) the provision, distribution
or carriage of a graphic novel, comic strip or comic book service via
Electronic Means over telecommunications networks (in which game play
elements, if any, are incidental to the service); and (x) carriage of
Interactive Software offered by a Person that is not an Affiliate of
TCI or TCI Sub
68
<PAGE> 74
(or its Permitted Transferees) or Acclaim or Acclaim Sub (or its
Permitted Transferees), as the case may be, via Electronic Means over
cable systems or other telecommunications networks owned or operated
by TCI or its Affiliates or by Acclaim or its Affiliates.
(6) "Restricted Period" means the period commencing on
the date hereof and ending on the earliest to occur of the following:
(i) the third anniversary of the adoption of the initial Approved
Business Plan; (ii) the termination of this Agreement in accordance
with its terms; and (iii) the initial public offering of securities by
the Partnership pursuant to an effective registration statement filed
under the Securities Act.
(b) Except as expressly permitted in this Section 11.02,
during the Restricted Period no Partner shall Engage In, or permit its
Applicable Affiliates to Engage In, any Restricted Business (whether or not
involving a third party that is not an Affiliate of such Partner or its Parent)
unless such Partner (a "Notifying Partner") shall have first offered to the
Partnership in writing (a "Notice") the opportunity to Engage In such business,
in lieu of such Partner or its Applicable Affiliate. The Notice shall specify,
in reasonable detail, the nature and scope of the Restricted Business proposed
to be commenced or conducted (the "Business Opportunity"), or, if participation
in such Restricted Business is by means of acquiring an equity or voting
interest in, or any option or right to acquire any such equity or voting
interest, or any phantom stock, stock appreciation right, profit participation
or similar economic benefit related to the performance of a Person (an
"Investment Opportunity"), the terms and conditions of such Investment
Opportunity (including any arrangements proposed to be entered into by such
Notifying Partner to facilitate or provide services in respect of the
Restricted Business encompassed by such Investment Opportunity). (If the
Notice with respect to a Business or Investment Opportunity is delivered to the
Partnership during the Restricted Period, the expiration of such period shall
not relieve the Notifying Partner of any of its obligations under this Section
11.02 with respect to such Business or Investment Opportunity nor permit the
Notifying Partner or its Applicable Affiliates to thereafter Engage In such
Business or Investment Opportunity free of the restrictions of this Section
11.02.) Within 20 Business Days after receipt of the Notice by the
Partnership, the Partners shall cause the Partnership Committee to meet and
consider the advisability of the Partnership pursuing the Business or
Investment Opportunity described therein, and to either accept or reject such
Business or Investment Opportunity. Only the Representatives of the Partner
that is not the Notifying Partner shall have the right to vote on whether the
Partnership shall pursue such Business or Investment Opportunity (whether or
not such Partner is then entitled to representation on the Partnership
Committee). If the Partnership Committee rejects the Business or Investment
Opportunity or, through no fault of the Notifying Partner, the Partnership
Committee does not meet or fails to make its determination within the foregoing
20 Business Day period, then the Notifying Partner or its Applicable Affiliate,
as the case may be, shall be free to Engage In the Business or Investment
Opportunity described in the related Notice (on substantially
69
<PAGE> 75
similar terms as those presented to the Partnership in the Notice) free of the
restrictions of this Agreement (including this Section 11.02); provided, (i) in
the case of a Business Opportunity that does not include an Investment
Opportunity, that such Notifying Partner or Applicable Affiliate takes
reasonable steps, within 12 months from the date the Partnership Committee
rejects (or is deemed to have rejected through inaction) such Business
Opportunity, to commence the business contemplated by such Business Opportunity
and (ii) in the case of an Investment Opportunity, that such Notifying Partner
or Applicable Affiliate make such investment within 90 days after the date
specified in the Notice as the anticipated closing date therefor on terms and
conditions substantially similar to (but not materially more favorable to the
Notifying Partner or such Applicable Affiliate than) those described in the
Notice. If the Notifying Partner or such Applicable Affiliate fails to take
such reasonable steps or make such investment within the foregoing time
periods, then such Notifying Partner and its Applicable Affiliates shall not
thereafter Engage In such Business or Investment Opportunity without first
reoffering it to the Partnership in accordance with the provisions of this
Section 11.02(b).
(c) If the Partnership Committee timely determines to pursue
the Business or Investment Opportunity, then (i) in the case of a Business
Opportunity, the Partnership shall take reasonable steps, within 12 months from
the date the Partnership Committee determines to pursue such Business
Opportunity, to commence the business contemplated by such Business
Opportunity, and (ii) in the case of an Investment Opportunity, the Partnership
shall make such investment within 90 days after the date specified in the
Notice as the anticipated closing date therefor (subject to extension for up to
120 days to obtain all material governmental, regulatory and third party
consents that may be required in connection with the Partnership's investment).
If the Partnership fails to take such reasonable steps or make such investment
within the foregoing time periods, other than as a result of a violation by the
Notifying Partner of this Agreement or, in the case of an Investment
Opportunity, the failure or refusal of the other party to such transaction to
(or a breach by the other party of its obligations under any definitive
agreements which results in a failure to) close on substantially the same terms
and conditions as those set forth in the Notice, then the Notifying Partner or
its Applicable Affiliate, as the case may be, may thereafter pursue such
Business or Investment Opportunity (on substantially similar terms as those
presented to the Partnership in the Notice) free of the restrictions of this
Agreement (including this Section 11.02). If the Partnership determines to
pursue a Business or Investment Opportunity, then the Notifying Partner shall
be deemed to have committed to contribute to the Partnership an amount in cash
equal to its pro-rata share (based on its Partnership Interest) of any
additional capital that may be required to pursue such Business or Investment
Opportunity, and the Approved Business Plan and Budget shall be deemed amended
accordingly. The Notifying Partner shall use its commercially reasonable
efforts to facilitate the consummation of such Business or Investment
Opportunity by the Partnership.
70
<PAGE> 76
(d) Nothing in this Section 11.02: (A) shall prohibit
a Partner (an "Acquiring Partner") or any of its Applicable Affiliates
from (i) acquiring (by stock or asset purchase, share exchange, merger or
similar transaction) a Person, or an equity interest in a Person, that is
Engaged In a Restricted Business if (x) such Restricted Business does not
constitute a principal business of such Person (i.e. does not represent in
excess of 10% of the assets, sales and earnings of such Person, as determined
from such Person's last regularly prepared balance sheet and income statement)
and (y) within 60 days following such acquisition, the Acquiring Partner
offers, or causes to be offered, to the Partnership in writing the opportunity
to acquire the Restricted Business, pursuant to the provisions of Section
11.02(b), for a purchase price to be agreed upon following good faith
negotiations, or, if such purchase price cannot be so agreed upon within 14
days after the Partnership's receipt of the Acquiring Partner's written notice,
for a purchase price equal to the fair market value of such Restricted
Business, as determined by a nationally recognized investment banking firm
selected by the Partner that is not the Acquiring Partner; provided, that (I)
such investment banking firm may not be an Affiliate of such selecting Partner,
(II) any such selection shall be subject to the approval of the Acquiring
Partner, which approval shall not be unreasonably withheld, and (III) the fees
and expenses of the investment banking firm incurred for such appraisal shall
be borne by the Partners in equal shares or (ii) acquiring beneficial ownership
(as such term is defined in Rule 13d-3 under the Exchange Act) of less than 5%
of any class of equity securities of a Public Company (provided such
acquisition is through open market transactions and not by means of a privately
negotiated transaction with the issuer); (B) shall prohibit or encumber the
investment by TCI or any of its Affiliates in STT Video Partners, L.P., a
Delaware limited partnership (the "STT Partnership"), prohibit or restrict the
carriage of the service offerings of the STT Partnership over cable systems or
other telecommunications networks owned or operated by TCI or its Affiliates of
Affiliates of TCI Sub, or require TCI Sub or any of its Applicable Affiliates
to offer to the Partnership (x) such investment in the STT Partnership or (y)
the opportunity to Engage In any Restricted Business proposed to be Engaged In
by the STT Partnership and which is within the scope of the business of the STT
Partnership as set forth in the Agreement of Limited Partnership of SST Video
Partners, L.P., dated as of November 12, 1993; (C) shall prohibit or encumber
the investment by TCI or any of its Affiliates in Zing Systems, L.P., a
Delaware limited partnership ("Zing") or Interactive Network, Inc., a
California corporation, or require TCI Sub or its Controlled Affiliates to
offer either such investment to the Partnership; or (D) require TCI Sub or any
of its Applicable Affiliates to breach a fiduciary duty owed to the STT
Partnership or Zing. Notwithstanding the foregoing, neither TCI Sub nor any of
its Applicable Affiliates shall (subject to clause (A)(ii) of the immediately
preceding sentence) acquire, make an equity investment in, or participate in a
joint venture or partnership with, any of the Persons listed on Schedule
11.02(d) of this Agreement, if (i) such Person at the time of such acquisition
or investment is Engaged In, or has announced or adopted a plan to Engage In, a
Restricted Business (the entry of such Person into the Restricted Business
within six months of such acquisition or investment to be conclusive evidence
of the adoption, prior to such acquisition or investment, of such a plan) or if
the acquisition or investment is to fund such Person's entry into the
Restricted
71
<PAGE> 77
Business or (ii) if the business purpose of such joint venture or partnership
includes the Restricted Business.
Section 11.03. TCI Sub Additional Agreements.
(a) TCI Sub covenants and agrees that it and each of its
Controlled Affiliates will, for the period commencing on the date hereof and
ending on the fifth anniversary of the adoption of the initial Approved
Business Plan, use reasonable efforts to: (i) offer the Partnership's service
for Interactive Software distributed via Electronic Means on all cable
television systems and other comparable telecommunications networks owned or
managed by TCI or the Controlled Affiliates of TCI Sub that are suitably
equipped for delivery of such services ("TCI Sub Systems"). With respect to
the pricing, terms and conditions of carriage of the Partnership's services
over TCI Sub Systems, TCI Sub covenants and agrees that such pricing, terms and
conditions shall be no less favorable to the Partnership than the pricing,
terms and conditions offered to any third party that is not an Affiliate of TCI
or TCI Sub for comparably equivalent carriage for similar services and product
offerings at comparable pricing, revenue and subscriber levels.
Notwithstanding the foregoing, if the Partnership shall enter into an agreement
with another owner or manager (which is not an Affiliate of TCI or Acclaim) of
a cable television system or other comparable telecommunications network (a
"Non-Affiliated System") for carriage of the Partnership's services and product
offerings on terms and conditions that are more favorable to the Non-Affiliated
System than the terms and conditions on which a TCI Cable System provides
carriage over a similar network of comparable services and product offerings of
the Partnership, then the Partnership shall offer such TCI Cable System the
right to provide such carriage on the same terms and conditions (in all
material respects) as those agreed to with such Non-Affiliated System.
(b) TCI Sub covenants and agrees that it and each of its
Controlled Affiliates will, for the period commencing on the date hereof and
ending on the fifth anniversary of the adoption of the initial Approved
Business Plan, use reasonable efforts (i) to place the Partnership's game
services in a preferred position with respect to other similar services which
offer game services on any menu or "navigator" of services supplied by TCI Sub
Systems to their subscribers and (ii) to make available to the Partnership and
Acclaim advertising time and space that it or its Controlled Affiliates
(including TCI) own or Control on terms and conditions and at rates no less
favorable (giving consideration to economic and noneconomic terms) to Acclaim
and the Partnership, as the case may be, than those offered by such Controlled
Affiliates to advertisers that are not Affiliates of TCI or TCI Sub.
(c) TCI Sub covenants and agrees that it and each of its
Controlled Affiliates will, during the period commencing on the date hereof and
ending on the fifth anniversary of the adoption of the initial Approved
Business Plan (the "TCI License Period"), grant to the Partnership a
non-exclusive license for any interactive entertainment software (a "TCI
Product") developed or owned by, or licensed (provided such license permits
such
72
<PAGE> 78
sublicense) to, TCI Sub or its Controlled Affiliates to enable the Partnership
to distribute by Electronic Means such software (with appropriate
modifications, the expense of which shall not be borne by TCI Sub or its
Controlled Affiliates) with the Partnership's other service offerings. Such
non-exclusive license shall contain terms and conditions (including pricing)
that are no less favorable to the Partnership than the terms offered by TCI Sub
or its Controlled Affiliates to any unaffiliated third party for distribution
by Electronic Means of such TCI Product over similar types of Electronic Means
as those to be used by the Partnership. Notwithstanding the foregoing, TCI Sub
or any of its Controlled Affiliates may enter into an exclusive license for a
TCI Product with a non-Affiliate of TCI or TCI Sub (including an exclusive
license for a limited period of time (a so-called "window")) provided TCI Sub
first offers, or causes such Controlled Affiliate to first offer, to the
Partnership in writing (a "TCI Exclusivity Notice") the opportunity to enter
into such exclusive license on the same terms and conditions as those agreed to
with such non-Affiliate of TCI or TCI Sub (which terms shall be described, in
all material respects, in the TCI Exclusivity Notice). If the Partnership
desires to enter into such exclusive license, it shall so notify TCI Sub within
10 Business Days after its receipt of the TCI Exclusivity Notice in which case
TCI Sub or its Controlled Affiliate shall enter into such exclusive license
with the Partnership on the terms set forth in the TCI Exclusivity Notice. If
the Partnership fails to notify TCI Sub of its intention to enter into such
exclusive license of such TCI Product within the foregoing 10 Business Day
period, or notifies TCI Sub that it does not desire such license, then TCI Sub
or its Controlled Affiliate shall be free to enter into an exclusive license
with such non-Affiliate of TCI Sub or TCI on the terms set forth in the TCI
Exclusivity Notice. TCI Sub shall cause its Controlled Affiliates, when
entering into license agreements for items to be included in any TCI Product,
to use commercially reasonable efforts to permit the sublicense of such items
to the Partnership, and to take such further commercially reasonable actions as
may be required to permit the Partnership to obtain a valid license for all TCI
Products. The provisions of this Section 11.03(c) shall cease and be of no
further force or effect upon the expiration of the TCI License Period.
(d) TCI Sub covenants and agrees that, as promptly as
practicable after the execution and delivery of this Agreement, it will cause
(i) TCI Technology Ventures, Inc., a wholly owned Subsidiary of TCI, to execute
and deliver a guarantee to Acclaim Sub in the form attached hereto as Exhibit
C, contemporaneously with the execution and delivery of this Agreement; and
(ii) TCI to execute and deliver a Parents Agreement to Acclaim in the form
attached hereto as Exhibit D.
Section 11.04. Acclaim Sub Additional Agreements.
(a) Acclaim Sub covenants and agrees that it and each of its
Controlled Affiliates (including Acclaim) will, during the period commencing on
the date hereof and ending on the fifth anniversary of the adoption of the
initial Approved Business Plan (the "Acclaim License Period"), grant to the
Partnership a non-exclusive license for any interactive entertainment software
(an "Acclaim Product") developed or owned by, or
73
<PAGE> 79
licensed (provided such license permits such sublicense) to, Acclaim Sub or its
Controlled Affiliates or Acclaim to enable the Partnership to distribute by
Electronic Means such software (with appropriate modifications, the expense of
which shall not be borne by Acclaim Sub or its Controlled Affiliates) with the
Partnership's other service offerings. Such non-exclusive license shall
contain terms and conditions (including pricing) that are no less favorable to
the Partnership than the terms offered by Acclaim Sub or its Controlled
Affiliates or Acclaim to any unaffiliated third party for distribution by
Electronic Means of such Acclaim Product over similar types of Electronic Means
as those to be used by the Partnership. Notwithstanding the foregoing, Acclaim
Sub or any of its Controlled Affiliates may enter into an exclusive license for
an Acclaim Product with a non-Affiliate of Acclaim or Acclaim Sub (including an
exclusive license for a limited period of time (a so-called "window")) provided
Acclaim Sub first offers, or causes such Controlled Affiliate or Acclaim to
first offer, to the Partnership in writing (an "Acclaim Exclusivity Notice")
the opportunity to enter into such exclusive license on the same terms and
conditions as those agreed to with such non-Affiliate of Acclaim or Acclaim Sub
(which terms shall be described, in all material respects, in the Acclaim
Exclusivity Notice). If the Partnership desires to enter into such exclusive
license, it shall so notify Acclaim Sub within 10 Business Days after its
receipt of the Acclaim Exclusivity Notice in which case Acclaim Sub or its
Controlled Affiliate shall enter into such exclusive license with the
Partnership on the terms set forth in the Acclaim Exclusivity Notice. If the
Partnership fails to notify Acclaim Sub of its intention to enter into such
exclusive license of such Acclaim Product within the foregoing 10 Business Day
period, or notifies Acclaim Sub that it does not desire such license, then
Acclaim Sub or its Controlled Affiliate shall be free to enter into an
exclusive license with such non-Affiliate of Acclaim Sub or Acclaim on the
terms set forth in the Acclaim Exclusivity Notice. Notwithstanding the
foregoing, none of Acclaim Sub, Acclaim or any of their Controlled Affiliates
shall be required to offer such a license to the Partnership for a particular
Acclaim Product if Acclaim or the applicable Controlled Affiliate is
contractually prohibited from doing so by the terms of any license agreement
covering Acclaim's or such Controlled Affiliate's rights with respect to such
Acclaim Product; provided, that Acclaim Sub shall cause Acclaim and its
Controlled Affiliates, when entering into license agreements for items to be
included in any Acclaim Product, to use commercially reasonable efforts to
permit the sublicense of such items to the Partnership, and to take such
further commercially reasonable actions as may be required to permit the
Partnership to obtain a valid license for all Acclaim Products. The provisions
of this Section 11.04(b) shall cease and be of no further force or effect upon
the expiration of the Acclaim License Period.
(b) Acclaim Sub covenants and agrees that, as promptly as
practicable after the execution and delivery of this Agreement, it will cause
Acclaim to execute and deliver a guarantee to TCI Sub in the form attached
hereto as Exhibit C and a Parents Agreement in the form attached hereto as
Exhibit D.
Section 11.05. Partnership License. For so long as Acclaim Sub (or
its Permitted Transferee) is a Partner (and not a Defaulting Partner), the
Partnership shall offer to
74
<PAGE> 80
Acclaim (or, at Acclaim's request, a designated Controlled Affiliate of
Acclaim) an exclusive license to enable Acclaim to distribute by means other
than Electronic Means any interactive entertainment software (a "Partnership
Product") developed or owned by, or licensed (provided such license permits
such sublicense) to, the Partnership. The Partnership shall be entitled to
grant a license (which may be exclusive or non-exclusive, in the sole
discretion of the Partnership) for such Partnership Product to a non-affiliated
third party if (i) Acclaim has not entered into an exclusive license therefor
with the Partnership within 30 days after the Partnership notifies Acclaim in
writing of the availability of such Partnership Product (provided the
Partnership has used good faith efforts to negotiate such license on
commercially reasonable terms) or (ii) Acclaim does not take substantive
efforts to distribute such Partnership Product within 24 months after the
execution of an exclusive license therefor with the Partnership. The terms of
any exclusive license entered into between Acclaim or any Controlled Affiliate
of Acclaim Sub and the Partnership for any Partnership Product shall (x)
provide for payment to the Partnership of a royalty rate that is at least as
favorable to the Partnership as the royalty rate offered by Acclaim or any of
such Controlled Affiliates to any other Person for an exclusive license for
interactive entertainment software that is comparable to such Partnership
Product, (y) not require the payment by Acclaim or any such Controlled
Affiliate of any guaranteed amounts or advances and (z) provide for the same
territory and be for the same term (including any renewals thereof) as the
license obtained by the Partnership for such Partnership Product from the
licensor thereof. Notwithstanding the foregoing, the Partnership shall not be
required to offer such an exclusive license to Acclaim or its Controlled
Affiliates for a particular Partnership Product if the Partnership is
contractually prohibited from doing so by the terms of any license agreement
covering the Partnership's rights with respect to such Partnership Product;
provided, that the Partnership, when entering into license agreements for items
to be included in any Partnership Product, shall use its commercially
reasonable efforts to permit the sublicense of such items to Acclaim, and shall
take such further commercially reasonable actions as may be required to permit
Acclaim to obtain a valid license for all Partnership Products.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Freedom of Action. Except as expressly provided
herein pursuant to Section 11.02, no Partner shall have any obligation to the
Partnership or its Partners not to (i) engage in the same or similar activities
or lines of business as the Partnership or develop or market any products or
services that compete, directly or indirectly, with those of the Partnership or
(ii) invest or own any interest publicly or privately in, or develop a business
relationship with, any corporation, partnership or other entity engaged in the
same or similar activities or lines of business as, or otherwise in competition
with, the Partnership or (iii) do business with any client or customer of the
Partnership (provided that such
75
<PAGE> 81
Partner has not solicited, encouraged or induced such client or customer to
cease doing business with the Partnership) or (iv) employ or otherwise engage
any former officer or employee of the Partnership. Except as expressly
provided herein pursuant to Section 11.02, no Partner shall be obligated to
present or offer to the Partnership any particular investment or business
opportunity, regardless of whether the Partnership could take advantage of such
opportunity if it were presented to the Partnership, but may, subject to the
terms of any agreement between the Partners other than this Agreement, avail
itself of any such opportunity for its own benefit or direct such opportunity
to another Person. Except as expressly provided herein pursuant to Section
11.02, no Partner shall have any obligation, or be liable, to the Partnership
or its Partners for or arising out of the conduct described in the two
immediately preceding sentences, for exercising its rights under any Additional
Agreement to which it is or will be a party, for exercising or failing to
exercise its rights as a Partner of the Partnership or for breach of any
fiduciary or other duty to the Partnership or its Partners by reason of such
conduct. For purposes of this Section 12.01, any reference to a Partner shall
include its Affiliates, including its Parent, and the Affiliates of such
Parent.
Section 12.02. Notices. Except as expressly provided herein,
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed (certified or
registered mail, postage prepaid, return receipt requested) or sent by telex,
graphic scanning or other telegraphic communications equipment of the sending
Partner, as follows:
(a) if to TCI Sub,
TCI GameCo Ventures, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Telephone: (303) 267-5500
Telecopy: (303) 488-3225
Attention of Bruce W. Ravenel, Vice President
(with a copy similarly addressed to the attention of the Legal Department)
with a copy to:
Baker & Botts, L.L.P.
885 Third Avenue
New York, New York 10022-4834
76
<PAGE> 82
Telephone: (212) 705-5000
Telecopy: (212) 705-5125
Attention of Jerome H. Kern, Esq.
(b) if to Acclaim Sub,
Acclaim Cable Holdings, Inc.
71 Audrey Avenue
Oyster Bay, New York 11771
Telephone: (516) 624-8888
Telecopy: (516) 624-2886
Attention of Gregory E. Fischbach, Chairman and
Chief Executive Officer
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York New York 10022
Telephone: (212) 940-8800
Telecopy: (212) 940-8776
Attention of Eric M. Lerner, Esq.
or to such other address or attention of such other Person as any Partner shall
advise the other Partner in writing. All notices and other communications
given to a Partner in accordance with the provisions of this Agreement shall be
deemed to have been given (i) three Business Days after the same are sent by
certified or registered mail, postage prepaid, return receipt requested, (ii)
when delivered by hand or transmitted by telecopy (answer back received) or
(iii) one Business Day after the same are sent by a reliable overnight courier
service, with acknowledgement of receipt.
Section 12.03. Table of Contents; Headings. The table of contents
and headings of the Articles, Sections and other subdivisions of this Agreement
are for convenience of reference only and shall not modify, define or limit any
of the terms or provisions of this Agreement.
Section 12.04. Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of Delaware
without regard to principles of conflict of laws.
77
<PAGE> 83
Section 12.05. Severability. If any provision of this Agreement
shall be held to be illegal, invalid or unenforceable, that provision will be
enforced to the maximum extent permissible so as to effect the intent of the
Partners and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If necessary
to effect the intent of the Partners, the Partners will negotiate in good faith
to amend this Agreement to replace the unenforceable language with enforceable
language which as closely as possible reflects such intent.
Section 12.06. Amendments. This Agreement may be modified or
amended only by a written amendment signed by Persons authorized to so bind
each Partner.
Section 12.07. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts shall have
been signed by each Partner and delivered to the other Partner.
Section 12.08. Entire Agreement. The provisions of this Agreement
set forth the entire agreement and understanding between the Partners as to the
subject matter hereof and supersede all prior agreements, oral or written, and
other communications between the Partners relating to the subject matter
hereof.
Section 12.09. Parties in Interest; Limitation on Rights of Others.
Except as otherwise provided herein, the terms of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Nothing in this Agreement, whether express
or implied, shall be construed to give any Person (other than the parties
hereto and their permitted successors and assigns as expressly provided in
Article VIII and other than the Persons referred to in Section 6.08 as
expressly provided in said Section and Section 6.09) any legal or equitable
right, remedy or claim under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
Section 12.10. Waivers; Remedies. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party or parties entitled to
enforce such term, but any such waiver shall be effective only if in a writing
signed by the party or parties against which such waiver is to be asserted.
Except as otherwise provided herein, no failure or delay of any Partner in
exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.
Section 12.11. Further Assurances. Upon reasonable request from
time to time, each Partner shall execute and deliver all documents and
instruments and do all other acts
78
<PAGE> 84
that may be reasonably necessary or desirable to carry out the intent and
purposes of this Agreement and give effect to the exercise by a party of its
rights hereunder.
Section 12.12. Arbitration; Jurisdiction; Consent to Service of
Process.
(a) Any and all controversies, claims and matters of
difference between the Partners relating to or arising directly or indirectly
out of (i) the Partnership, including its business, operations, assets or
dissolution, and/or (ii) this Agreement, which cannot be resolved through
negotiations between the Partners, shall be resolved at the request of either
Partner through a two-step dispute resolution process administered by Judicial
Arbitration & Mediation Services, Inc. ("JAMS") involving first mediation
before a retired judge or justice from the JAMS panel followed, if necessary,
by final and binding arbitration conducted at a location determined by the
arbitrator in New York, New York administered by and in accordance with the
then existing Rules of Practice and Procedure of Judicial Arbitration &
Mediation Service, Inc., and judgment upon any award rendered by the
arbitrator(s) may be entered in any state or federal court having jurisdiction
thereof. This subsection shall in no way affect the right of a Partner to seek
specific performance or other injunctive relief, and only such relief, in any
court of competent jurisdiction. Arbitration may proceed in the absence of any
Partner if notice of the proceedings has been given to such Partner. No
Partner shall be considered in default hereunder during the pendency of
arbitration proceedings relating to such default. The arbitrator shall not
have authority to award punitive or other non-compensatory damages to either
party. Subject to the foregoing, the Partners agree to abide by all awards
rendered in such proceedings. The arbitrator's decision and award shall be
final and binding and may be entered in any court with jurisdiction. Each
party shall bear its own costs and expenses, including attorney's fees,
incurred in connection with any arbitration proceeding. If one party files a
court action alleging claims subject to arbitration and the other party
successfully stays the court action and/or compels arbitration of the claims,
the party filing the court action will pay the other party's costs and
expenses, including reasonable attorney's fees, incurred in connection
therewith.
(b) Subject to Section 12.12(a), each Partner hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court sitting in the County of
New York or any Federal court of the United States of America sitting in the
Southern District of New York, and any appellate court from any such court, in
any suit, action or proceeding arising out of or relating to the Partnership or
this Agreement, or for recognition or enforcement of any judgment, and each
Partner hereby irrevocably and unconditionally agrees that all claims in
respect of any such suit, action or proceeding may be heard and determined in
such New York State court or, to the extent permitted by law, in such Federal
court.
(c) Each Partner hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or
79
<PAGE> 85
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to the Partnership or this Agreement in any New York State
court sitting in the County of New York or any Federal court sitting in the
Southern District of New York. Each Partner hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court and further
waives the right to object, with respect to such suit, action or proceeding,
that such court does not have jurisdiction over such Partner.
(d) Each Partner irrevocable consents to service of
process in the manner provided for the giving of notices pursuant to this
Agreement. Nothing in this Agreement shall affect the right of either party to
serve process in any other manner permitted by law.
Section 12.13. Waiver of Rights of Partition and Dissolution. Each
Partner waives all rights it may have at any time to maintain any action for
partition or sale of any Partnership assets as now or hereafter permitted under
applicable law; provided that the foregoing shall not be construed to apply to
any action by a Partner for the enforcement of its rights under this Agreement.
Each Partner waives its right to seek a court decree of dissolution (other than
a dissolution in accordance with Article X) or to seek the appointment of a
court receiver for the Partnership as now or hereafter permitted under
applicable law.
Section 12.14. Waiver of Jury Trial. Each Partner waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any action, suit or proceeding arising out of or relating to
the Partnership or this Agreement.
Section 12.15. Construction. This Agreement has been negotiated by
the parties and their respective counsel and will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against any party.
Section 12.16. Cross-Indemnification. Except as otherwise agreed by
such Partner in writing, as between the Partners, no Partner shall be liable or
bear responsibility for more than a percentage of each and all of the
liabilities and obligations of the Partnership equal to such Partner's
Percentage Interest. In the event that (whether before or following any
dissolution of the Partnership) any Partner (the "Paying Partner") shall be
required, otherwise than by reason of such Partner's violation of this
Agreement, gross negligence, fraud or willful misconduct, to pay, discharge or
otherwise bear responsibility for any amount of any liability or obligation of
the Partnership in excess of such Partner's proportionate share thereof, the
other Partner (the "Contributing Partner") hereby agrees to indemnify, hold
harmless and reimburse (directly or through the Partnership at the Paying
Partner's discretion) such Paying Partner against and for such excess. It is
the intention of the Partners that, following the operation of this clause,
each Partner will have borne exactly its proportionate share (determined as
provided in the first sentence of this Section) of the liability or obligation
of the Partnership at issue. For purposes of computing the Capital
80
<PAGE> 86
Accounts of the Partners, the amount of the liability or obligation of the
Partnership that the Paying Partner paid, discharged or otherwise bore
responsibility for shall be deemed to be a contribution of cash from the Paying
Partner to the Partnership, and the amount paid by the Contributing Partner to
the Paying Partner in respect of such liability or obligation pursuant to this
Section 12.16 shall be deemed to be (i) a contribution of cash from the
Contributing Partner to the Partnership and (ii) a distribution of cash from
the Partnership to the Paying Partner.
Section 12.17. Change in Control. Each Partner agrees that promptly
following the occurrence of an event which constitutes or, with the passage of
time is likely to constitute, a Change in Control it will notify the other
Partner of the Change in Control.
Section 12.18. No Right of Set-Off. No Partner shall be entitled to
offset against any of its financial obligations to the Partnership under this
Agreement, any obligation owed to it or any of its Affiliates by any other
Partner or any of such other Partner's Affiliates.
Section 12.19. Property Rights; Confidentiality. All Proprietary
Information of any Partner or its Affiliates shall remain the property of such
Partner or its Affiliates. Any Proprietary Information developed by or for the
Partnership shall at all times be the exclusive property of the Partnership;
provided, that if such Proprietary Information was developed on behalf and at
the expense of the Partnership by an employee of Acclaim Sub, TCI Sub or any of
their respective Controlled Affiliates ("Jointly-Developed Proprietary
Information"), such Proprietary Information shall be licensed to Acclaim Sub,
TCI Sub or such Controlled Affiliate, as the case may be, on a non-exclusive,
royalty-free basis (with the right to sublicense such Jointly-Developed
Proprietary Information to others). Notwithstanding the foregoing, if any
Jointly-Developed Proprietary Information includes proprietary ideas or rights
that are unique to the business of the Partnership (as compared to the
respective businesses of TCI Sub, Acclaim Sub and their respective Controlled
Affiliates), then the Partnership shall grant a non-exclusive royalty free
license to such Jointly-Developed Proprietary Information to each Partner (if
it so requests) whose employee(s) developed such Jointly-Developed Proprietary
Information, but only if such Partner pays the Partnership a fair share of the
costs and expenses incurred by the Partnership in connection with the
development of such Jointly-Developed Proprietary Information and such Partner
agrees not to sublicense such Jointly-Developed Proprietary Information to
others without the Partnership's prior written consent. No Partner shall,
during the period such Partner is a Partner and for a period of three years
after such Partner has ceased to be a Partner, disclose any confidential or
Proprietary Information with respect to the Partnership to any Person, except
(i) with the prior written consent of the other Partner; (ii) to the extent
necessary to comply with law or the valid order of a court of competent
jurisdiction, in which event the party making such disclosure shall so notify
the other Partner as promptly as practicable (and, if possible, prior to making
such disclosure) and shall seek confidential treatment of such information;
(iii) as part of its normal reporting or review procedure to its Parent, its
auditors and its attorneys; provided that such
81
<PAGE> 87
Partner shall be liable for any breach by such Parent, auditors or attorneys of
any provision of this Section; (iv) in connection with the enforcement pursuant
to legal proceedings, arbitration or similar means of such Partner's rights
hereunder; (v) disclosures to an Affiliate of, or professional advisor to, such
Partner in connection with the performance by such Partner of its obligations
hereunder or under an agreement with the Partnership; provided that such
Partner shall be liable for any breach by such Affiliate or professional
advisor of any provision of this Section; and (vi) in compliance with any other
confidentiality agreement between such Partner or any of its Affiliates and the
Partnership.
"Proprietary Information," as used in this Section, shall mean any
proprietary ideas, plans and information, including, without limitation,
information of a technological or business nature (including, without
limitation, all trade secrets, trade names, slogans, copyrights, computer
software, technology, intellectual property, data, summaries, reports, or
mailing lists, whether written or oral and if written, however produced or
reproduced) (i) belonging to any Partner or any of its Affiliates that is
marked proprietary or confidential, or bears a marking of like import, or that
such Partner or Affiliate states is to be considered proprietary or
confidential, or that would logically be considered proprietary or confidential
under the circumstances of its disclosure or (ii) developed by or for the
Partnership, as the case may be, in each case other than any of such ideas,
plans or information that are already known to the receiving party or its
Affiliates at the time of receipt, as evidenced by written records made prior
to such receipt, or are independently developed or formulated by the receiving
party or its Affiliates, or that otherwise become publicly available through no
fault of the receiving party or its Affiliates.
Section 12.20. Public Announcements. Neither the Partnership nor
any Partner shall make or shall permit any of its Affiliates to make any public
announcement about the Partnership and its activities without the prior written
consent of each Partner (or the other Partner, as the case may be), which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, after the approval of the initial Approved Business Plan, the
Partnership and either Partner or its Parent may make public announcements
concerning non-material matters related to the Partnership (including
disclosure regarding the entering into of agreements for the acquisition of
properties to be included in Interactive Software in the ordinary course of
business) without the prior written consent of either Partner (or the other
Partner, as the case may be); provided, that none of the following matters are
considered to be non-material: (i) disclosure regarding any matter which needs
to be brought to the Partnership Committee pursuant to Section 6.06; (ii)
disclosure of forecasts, projections or earnings; and (iii) disclosure
regarding any legal or regulatory matters or matters involving any governmental
authority or public policy issues; provided, further, that the Person making
such public announcement provides each Partner (or the other Partner, as the
case may be) with a copy of such public announcement immediately prior to its
release. Notwithstanding any other provision contained herein, the Partnership
and each Partner and their respective Parents may at any time make
announcements which are required by applicable law or the applicable rules of
any national stock exchange or stock
82
<PAGE> 88
association so long as the Partnership, the Partner or the Parent so required
to make the announcement, promptly upon learning of such requirement, notifies
each Partner (or the other Partner, as the case may be) of such requirement and
discusses with them (or it) in good faith the exact wording of any such
announcement.
Section 12.21. Effect of Permitted Transactions. Notwithstanding
any provision to the contrary in this Agreement, in no event shall an Acclaim
Permitted Transaction or a TCI Permitted Transaction have an adverse effect on
the rights of the Partnership or any Partner under any contract between the
Partnership and such Partner, its Parent immediately prior to such Acclaim or
TCI Permitted Transaction, as the case may be, or any Affiliate of such Partner
or Parent, except to the extent specifically set forth in such contract.
Section 12.22. Termination of Exchange Agreement. The obligations
of the Partners under Article XI and Section 12.19 shall cease and be of no
further force and effect upon the occurrence of an Event of Termination in
accordance with Section 10.01(viii).
83
<PAGE> 89
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
General Partners:
TCI GAMECO VENTURES, INC.
By: /s/ Bruce W. Ravenel
----------------------------
Name: Bruce Ravenel
Title: Vice President
ACCLAIM CABLE HOLDINGS, INC.
By: /s/ Robert Holmes
----------------------------
Name: Robert Holmes
Title: President
Limited Partners:
TCI GAMECO VENTURES, INC.
By: /s/ Bruce W. Ravenel
----------------------------
Name: Bruce W. Ravenel
Title: Vice President
ACCLAIM CABLE HOLDINGS, INC.
By: /s/ Robert Holmes
----------------------------
Name: Robert Holmes
Title: President
84
<PAGE> 90
EXHIBIT A
GENERAL PARTNERS
<TABLE>
<CAPTION>
Initial General Partner
Name of Cash Capital Percentage
Partner Contribution Interest
------- ------------ --------
<S> <C> <C>
TCI Sub $1,700,000 34%
Acclaim Sub $3,200,000 64%
----------
Total $4,900,000 98%
========== ===
LIMITED PARTNERS
Initial Limited Partner
Name of Cash Capital Percentage
Partner Contribution Interest
------- ------------ --------
TCI Sub $ 50,000 1%
Acclaim Sub $ 50,000 1%
Total $100,000 2%
======== ==
</TABLE>
1
<PAGE> 91
EXHIBIT B
[NONNEGOTIABLE AND NONTRANSFERABLE]
SUBORDINATED NOTE
$____________________ ____________, ____________,
____________, ___ 199_____
FOR VALUE RECEIVED, the undersigned, __________________, a
Delaware limited partnership ("Maker") promises to pay to
__________________________ ("Holder") at _____________________, or at such
other place as the holder hereof may direct in writing, the principal sum of
_________________________ ($______________) with interest on the balance of
principal outstanding from time to time from the date hereof until paid in full
(whether at maturity, by prepayment, by acceleration or otherwise, and whether
before or after judgment) at a rate per annum, compounded monthly, equal to the
Floating Rate (as defined in and computed in accordance with the Agreement of
Limited Partnership of ___________________, dated as of __________, 1994 (the
"Agreement")); provided, however, that the interest rate payable hereunder
shall in no event exceed the maximum amount of interest permitted to be
collected from time to time under applicable usury laws. Interest shall be
computed on the basis of a 365- or 366-day year, as the case may be, for actual
days elapsed.
Interest hereunder shall be payable, prior to demand for
payment, monthly in arrears, on the last day of each calendar month beginning
with the calendar month ending _____________, 199__. Principal hereunder shall
be payable on ____________________, 19__, or, if required by the terms of any
Senior Credit Agreement (as defined in the Agreement), on such later date that
is the maturity date of the loan made to Maker under such Senior Credit
Agreement (as defined in the Agreement). To the extent permitted under the
Senior Credit Agreement, the principal of this Note may be prepaid in whole or
in part at any time without premium or penalty by paying, in addition to the
principal amount of such prepayment, all interest accrued on the amount of such
prepayment to the date thereof.
All payments of principal and interest shall be made in lawful
money of the United States of America in immediately available funds. If any
payment falls due on a day on which Holder is not open for business, the due
date thereof shall be extended to the next succeeding day on which Holder is
open for business, and interest will be payable at the rate stated herein in
respect of such extension. All payments, as received, shall be applied first
<PAGE> 92
to the payment of interest accrued to the date of receipt of payment, and the
balance, if any, to principal.
If, and only if, and then only to the extent, required by the
terms of any Senior Credit Agreement, this Note is subordinate to all
obligations which the Maker may now or hereafter have under such Senior Credit
Agreement, and under any promissory notes (the "Senior Notes") issued under
such Senior Credit Agreement.
The entire unpaid balance of principal and interest of this
Note shall become due and payable immediately, without notice or demand, at the
election of the Holder hereof upon the first to occur of the following:
(a) the acceleration of the maturity of the Senior Notes;
(b) the Bankruptcy of Maker (as defined in the
Agreement); or
(c) the dissolution of Maker.
Maker shall immediately provide Holder with written notice of any acceleration
of the maturity of the Senior Notes.
Maker waives demand and presentment for payment, protest,
notice of protest and notice of nonpayment or dishonor of this Note, and
consents to all extensions of the time of payment hereof. Maker promises to
pay all reasonable costs (including, without limitation, attorneys' fees) which
may be incurred in the collection of this Note or any portion hereof.
Except as otherwise provided in Section 8.09(a)(iii) of the
Agreement, this Note is nonnegotiable and nontransferable.
This Note shall be governed by and construed in accordance
with the internal laws of the State of [Delaware] without regard to principles
of conflict of laws.
[_______________]
By: ________________________,
General Partner
By: ________________________
Title:
2
<PAGE> 93
Schedule 11.02(d)
Nintendo
Sony
Electronic Arts
Time-Warner (and affiliates)
Viacom (and affiliates)
MCA (and affiliates)
WMS Industries
Disney
Philips
Fox
Atari
BMG
Interplay
3
