<PAGE>
As filed with the Securities and Exchange Commission on February 9, 1996
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)
Delaware 5619 DTC Parkway 84-1260157
(State or other Englewood, Colorado 80111-3000 (I.R.S. Employer
jurisdiction of (303) 267-5500 Identification No.)
incorporation or (Address, including zip code,
organization) 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)
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after the effective date of the 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]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PRICE PER UNIT (2) AGGREGATE OFFERING PRICE (2) REGISTRATION FEE (2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tele-Communications, Inc. Series ++
A TCI Group Common Stock, par 13,528,620 +
value $1.00 per share............ +
- ---------------------------------------------------- ++ $(2) $379,646,898.70 $130,913
Tele-Communications, Inc. +
Series A Liberty Media Group 3,382,155 +
Common Stock, par value +
$1.00 per share.................. ++
====================================================================================================================================
</TABLE>
(1) Based upon the registrant's estimate of the maximum number of shares that
may be issued pursuant to the Merger Agreement described herein. Pursuant to
Rule 416(a), this Registration Statement covers such additional number of
shares of Tele-Communications, Inc. Series A TCI Group Common Stock and
Tele-Communications, Inc. Series A Liberty Media Group Common Stock as may
be issued upon the closing of the Merger described herein in connection with
certain antidilution provisions of the Merger Agreement.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(c). Based upon (a) the product of (i) the average
of the high and low sales prices of Tele-Communications, Inc. Series A TCI
Group Common Stock on February 6, 1996 ($21.0625) and (ii) 13,528,620, the
amount of shares of Tele-Communications, Inc. Series A TCI Group Common
Stock registered hereby plus (b) the product of (i) the average of the high
and low sales prices of Tele-Communications, Inc. Series A Liberty Media
Group Common Stock on February 6, 1996 ($28) and (ii) 3,382,155, the amount
of shares of Tele-Communications, Inc. Series A Liberty Media Group Common
Stock registered hereby.
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>
Subject to Completion, dated February 9, 1996
PROSPECTUS
Tele-Communications, Inc.
Tele-Communications, Inc. Series A TCI Group Common Stock ($1.00 par value)
Tele-Communications, Inc. Series A Liberty Media Group Common Stock
($1.00 par value)
This Prospectus relates to (i) 13,528,607 shares (the "TCI Group Shares") of
the Tele-Communications, Inc. Series A TCI Group Common Stock, par value $1.00
per share (the "TCI Group Series A Common Stock"), of Tele-Communications, Inc.,
a Delaware corporation (the "Company" or "TCI"), and (ii) 3,382,132 shares (the
"Liberty Group Shares," and collectively with the TCI Group Shares, the
"Shares") of the Tele-Communications, Inc. Series A Liberty Media Group Common
Stock, par value $1.00 per share (the "LMG Series A Common Stock"), of the
Company, to be offered and sold from time to time by the holders thereof (each a
"Selling Stockholder" and collectively, the "Selling Stockholders"). For
information with respect to the Selling Stockholders see "Selling Stockholders."
The Company's common stock, par value $1.00 per share (the "TCI Common
Stock"), is comprised of four series: TCI Group Series A Common Stock, Tele-
Communications, Inc. Series B TCI Group Common Stock (the "TCI Group Series B
Common Stock" and, together with the TCI Group Series A Common Stock, the "TCI
Group Common Stock"), LMG Series A Common Stock and Tele-Communications, Inc.
Series B Liberty Media Group Common Stock (the "LMG Series B Common Stock" and,
together with the LMG Series A Common Stock, the "Liberty Media Group Common
Stock").
Both series of TCI Group Common Stock are identical in all respects, except
(i) each share of TCI Group Series B Common Stock has ten votes and each share
of TCI Group Series A Common Stock has one vote and (ii) each share of TCI Group
Series B Common Stock is convertible, at the option of the holder, into one
share of TCI Group Series A Common Stock. Similarly, both series of Liberty
Media Group Common Stock are identical in all respects, except (i) each share of
LMG Series B Common Stock has ten votes and each share of LMG Series A Common
Stock has one vote and (ii) each share of LMG Series B Common Stock is
convertible, at the option of the holder, into one share of LMG Series A Common
Stock. The shares of TCI Group Series A Common Stock and LMG Series A Common
Stock are not convertible into shares of TCI Group Series B Common Stock and LMG
Series B Common Stock, respectively.
Shares of the TCI Group Series A Common Stock, the TCI Group Series B Common
Stock, the LMG Series A Common Stock and the LMG Series B Common Stock are
traded on the Nasdaq National Market under the symbols "TCOMA," "TCOMB," "LBTYA"
and "LBTYB," respectively.
(continued)
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 date of this Prospectus is February , 1996.
<PAGE>
The Shares may be offered for sale and sold by the Selling Stockholders from
time to time in varying amounts (subject to certain restrictions described under
the caption "Selling Stockholders"), 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
Stockholders directly or through agents designated from time to time or to or
through broker-dealers designated from time to time. To the extent required, the
number and type of Shares to be sold, the purchase price, the name of any agent
or broker-dealer, and any applicable commissions, discounts or other items
constituting compensation to such 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 Stockholders 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 Stockholders to 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 Stockholders. See "Selling
Stockholders." The Selling Stockholders 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 agent or broker-dealer and the Selling
Stockholders.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders 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 discounts or
commissions under the Securities Act.
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") 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 or in any document
incorporated herein by reference concerning the provisions of any contract or
other document are not necessarily complete and, in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document. 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.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents filed with the Commission (File No. 0-20421): (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 (as
amended by Form 10-K/A (Amendment No. 1)), (ii) the Company's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and September
30, 1995 (as amended by Form 10-Q/A (Amendment No. 1)), (iii) the Company's
Current Reports on Form 8-K, dated January 23, 1995, February 3, 1995 (as
amended by Form 8-K/A (Amendment No. 1)), February 13, 1995, February 15, 1995,
April 6, 1995, April 20, 1995 (as amended by Form 8-K/A (Amendment No. 1)), May
4, 1995 (as amended by Form 8-K/A (Amendment No. 1)), July 26, 1995, August 10,
1995 and December 18, 1995, and (iv) the financial statements and notes thereto
of TeleCable Corporation as of December 31, 1993 and 1992 and for each of the
two years in the period ended December 31, 1993, included in the Company's
Current Report on Form 8-K, dated August 26, 1994.
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 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, including any
beneficial owner, to whom a Prospectus is delivered, upon the written or oral
request of such person, a copy of any and all of the documents incorporated by
reference herein, other than certain 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.
3
<PAGE>
THE COMPANY
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 (i) has investments
in cable and telecommunications operations and television programming in certain
international markets and (ii) is involved, as an investor and developer, in new
television and telecommunications ventures and technologies. The Company is a
Delaware corporation and its principal executive offices are located at Terrace
Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000; telephone (303) 267-
5500.
SELLING STOCKHOLDERS
The Shares being offered hereby were acquired by the Selling Stockholders in
accordance with the terms of an Agreement and Plan of Merger and Reorganization,
dated as of June 28, 1995 (the "Merger Agreement"), by and between The Chronicle
Publishing Company, a Nevada corporation ("Chronicle"), and the Company. A copy
of the Merger Agreement has been filed as an exhibit to the Registration
Statement. Pursuant to the Merger Agreement, Chronicle merged with and into the
Company (the "Merger"), and the shares of the Common Stock, par value $.01 per
share, of Chronicle ("Chronicle Common Stock") outstanding at the time of the
Merger were converted into the Shares. Pursuant to a Contribution and Assumption
Agreement (the "Contribution Agreement") between Chronicle and a newly formed
Nevada corporation ("Spinco"), prior to the closing of the Merger Chronicle
contributed certain of its assets to Spinco in return for the capital stock of
Spinco. The assets retained by Chronicle are specified in the Contribution
Agreement and include those assets relating to its cable television operations
and an undivided 49% interest in certain assets relating to a local cable
television network distributed in the San Francisco Bay Area. A copy of the
Contribution Agreement has been filed as an exhibit to the Registration
Statement. The capital stock of Spinco and certain unsecured notes of Chronicle
assumed by Spinco were then distributed to the holders of Chronicle Common Stock
prior to the closing of the Merger.
As required by the Merger Agreement, the Company has filed the Registration
Statement (of which this Prospectus forms a part) under the Securities Act to
register the Shares for resale by the Selling Stockholders. The Company is
obligated to keep the Registration Statement effective for a period of up to
three years (or until all of the Shares are disposed of by the Selling
Stockholders, if earlier).
Each Selling Stockholder has entered into a Shareholder Registration Rights
Agreement (the "Registration Rights Agreement") with the Company pursuant to
which such Selling Stockholder has agreed, among other things, not to sell or
otherwise distribute more than (i) 25% in the aggregate of the number of shares
of each of the TCI Group Series A Common Stock and the LMG Series A Common Stock
issued to such Selling Stockholder in the Merger within one year after the
closing of the Merger or (ii) 50% in the aggregate of the number of shares of
each of the TCI Group Series A Common Stock and the LMG Series A Common Stock
issued to such Selling Stockholder in the Merger within two years after the
closing of the Merger; provided, however, that the foregoing restriction shall
-------- -------
not apply to the following (and shall not be taken into account for purposes of
determining whether any other transfer complies with the foregoing restriction):
(i) any transfer by will or the laws of intestacy, (ii) any transfer by a trust
which is a Selling Stockholder to the beneficiaries of such trust, (iii) any
transfer by a Selling Stockholder to another Selling Stockholder, (iv) any
transfer by a Selling Stockholder to such Selling Stockholder's spouse, parents,
grandparents, or lineal descendants of such Selling Stockholder's grandparents,
or (v) any transfer by a Selling Stockholder to a trust all of the beneficial
interests in which are owned by one or more of the members of the group
consisting of the Selling Stockholder and the individuals described in the
preceding clause (iv). Pursuant to the Merger Agreement, the Company agreed
that, for a period of two years after the closing of the Merger, the Company
will not register in its stock transfer records any transfer of the Shares by
the Selling Stockholders, unless the Company receives the written consent of
Spinco to such transfer.
4
<PAGE>
Pursuant to the Registration Rights Agreements, the Company and the Selling
Stockholders have agreed that if the Company determines, in its reasonable
judgment, that the use of the Registration Statement would adversely affect any
financing, acquisition, corporate reorganization, or other material transaction
involving the Company or any of its affiliates or require the Company to
disclose matters that otherwise would not be required to be disclosed at such
time, then the Company may require the suspension by each Selling Stockholder of
the distribution of any Shares registered pursuant to the Registration Statement
for a reasonable period of time not to exceed 15 consecutive business days (a
"Blackout Period"). There may not be more than four Blackout Periods in any
period of twelve consecutive calendar months, and the number of days the Selling
Stockholders may be required to suspend distributions of Shares may not exceed
45 business days in any period of twelve consecutive calendar months.
Pursuant to the Registration Rights Agreements, the Company has agreed 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 with 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 and
(ii) fees and disbursements of counsel or of any advisors retained by the
Selling Stockholders in connection with the registration of the offer and sale
of the Shares.
The Company has agreed to indemnify the Selling Stockholders 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 the Selling Stockholders may be required to make in respect thereof.
Except as discussed above, neither the Company nor any of its affiliates has
had within the past three years any material relationship with any of the
Selling Stockholders. Chronicle has entered into programming affiliation
agreements and had other dealings in the ordinary course of business with the
Company and its subsidiaries. Any material relationship between the Company or
any of its affiliates, on the one hand, and a Selling Stockholder, on the other,
within three years prior to the date of a sale by such Selling Stockholder
hereunder will be described in the Prospectus Supplement relating to such sale
if not then described in the Prospectus.
The table set forth below provides the following information: the names of
the Selling Stockholders who currently hold Shares and the number of TCI Group
Shares and Liberty Group Shares owned as of the date of this Prospectus by each
such holder (which in each case represents less than one percent of the
outstanding shares of TCI Group Series A Common Stock and LMG Series A Common
Stock). Unless otherwise indicated in a footnote to this table, the Selling
Stockholders do not own any shares of TCI Group Common Stock or Liberty Media
Group Common Stock, other than those shares set forth in the table, as of the
date of this Prospectus.
<TABLE>
<CAPTION>
NO. OF WHOLE
SHARES OF TCI NO. OF WHOLE SHARES
GROUP SERIES A OF LMG SERIES A
SELLING STOCKHOLDER COMMON STOCK COMMON STOCK
------------------- -------------- -------------------
<S> <C> <C>
Bark, Dennis, Trustee U/A Dated December 31, 1986 9,770 2,442
f/b/o Elizabeth F. Thieriot
Bark, Dennis, Trustee U/A Dated December 31, 1986 9,770 2,442
f/b/o Ferdinand M. Thieriot, III
Bark, Dennis, Trustee U/A Dated December 31, 1986 9,770 2,442
f/b/o Joshua P. Thieriot
Bianchi, George R., Trustee of Michael Tobin Children's
Trust f/b/o Patricia Tobin Kubal 107,370 26,842
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NO. OF WHOLE
SHARES OF TCI NO. OF WHOLE SHARES
GROUP SERIES A OF LMG SERIES A
SELLING STOCKHOLDER COMMON STOCK COMMON STOCK
------------------- -------------- -------------------
<S> <C> <C>
Bianchi, George R., Trustee of Michael Tobin Children's 107,370 26,842
Trust f/b/o Joseph O. Tobin, II
Bianchi, George R., Trustee of Michael Tobin Children's 107,370 26,842
Trust f/b/o Katherine O. Tobin
Bianchi, George R., Trustee of Michael Tobin Children's 107,370 26,842
Trust f/b/o Michael H. Tobin, II
Bianchi, George R., Trustee of Michael Tobin Spousal Trust 715,800 178,950
Bianchi, George R., Trustee of Tobin 1994 Trust 44,737 11,184
f/b/o Patricia Tobin Kubal
Bianchi, George R., Trustee of Tobin 1994 Trust 44,737 11,184
f/b/o Joseph O. Tobin, II
Bianchi, George R., Trustee of Tobin 1994 Trust 44,737 11,184
f/b/o Katherine O. Tobin
Bianchi, George R., Trustee of Tobin 1994 Trust 44,737 11,184
f/b/o Michael H. Tobin, II
Folger, Peter M., Trustee of Consuelo Tobin Martin 82,674 20,668
Children's Trust f/b/o Constance M. Goodyear
Folger, Peter M., Trustee of Consuelo Tobin Martin 82,674 20,668
Children's Trust f/b/o Candyce Martin
Folger, Peter M., Trustee of Consuelo Tobin Martin 82,674 20,668
Children's Trust f/b/o Francis A. Martin, III
Folger, Peter M., Trustee of Consuelo Tobin Martin 82,674 20,668
Children's Trust f/b/o Helen M. Spalding
Folger, Peter M., Trustee of Consuelo Tobin Martin 82,674 20,668
Children's Trust f/b/o Priscilla M. Tamkin
Folger, Peter M., Trustee Martin 1994 Trust 207,582 51,895
f/b/o Constance M. Goodyear
Folger, Peter M., Trustee Martin 1994 Trust 207,582 51,895
f/b/o Candyce Martin
Folger, Peter M., Trustee Martin 1994 Trust 207,582 51,895
f/b/o Francis A. Martin, III
Folger, Peter M., Trustee Martin 1994 Trust 207,582 51,895
f/b/o Helen M. Spalding
Folger, Peter M., Trustee Martin 1994 Trust 207,582 51,895
f/b/o Priscilla M. Tamkin
Goodyear, Constance M./(1)(5)/ 67,643 16,910
Kubal, Patricia Tobin, Trustee of the Patricia Tobin Kubal 187,897 46,974
Separate Property Trust
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NO. OF WHOLE
SHARES OF TCI NO. OF WHOLE SHARES
GROUP SERIES A OF LMG SERIES A
SELLING STOCKHOLDER COMMON STOCK COMMON STOCK
------------------- -------------- -------------------
<S> <C> <C>
Martin, Candyce/(2)(5)/ 67,643 16,910
Martin, Consuelo Tobin aka Nini Tobin Martin Family Trust/(3)/ 465,270 116,317
Martin, Francis A., III, Trustee of Francis A. Martin, III
Trust/(4)(5)/ 67,643 16,910
McEvoy, Nan T./(6)/ 3,562,536 890,634
McEvoy, Nion T. 270,572 67,643
Mosley, Daniel M., Trustee u/a dated January 1, 1988 676,431 169,107
f/b/o Nion T. McEvoy
Spalding, Helen M./(5)/ 67,643 16,910
Stent, Ferdinand T. 751,590 187,897
Stent, Peter D. 751,590 187,897
Tamkin, Priscilla M./(5)/ 67,643 16,910
Thieriot, Charles C., Trustee of the Charles C. Thieriot
Revocable Trust Under Declaration
Dated February 27, 1991 751,590 187,897
Thieriot, George C. 366,400 91,600
Thieriot, John D., Trustee of the John Dade Thieriot Living
Trust Dated October 8, 1987 375,795 93,948
Thieriot, Nion R. 375,795 93,948
Thieriot, Peter E. 355,877 88,969
Thieriot, Richard T. 751,590 187,897
Tobin, Joseph O., II 187,897 46,974
Tobin, Katherine O. 187,897 46,974
Tobin, Michael H., Trustee of Michael Tobin Family Trust 178,950 44,737
Tobin, Michael H., II 187,897 46,974
---------- ---------
TOTAL 13,528,607 3,382,132
========== =========
</TABLE>
- --------------------
/(1)/ In addition, Constance M. Goodyear shares beneficial ownership of 500
shares of TCI Group Series B Common Stock and 125 shares of LMG Series B Common
Stock with her spouse. Such shares and the shares of TCI Group Series A Common
Stock and LMG Series A Common Stock into which such shares are convertible are
not being offered pursuant to this Prospectus.
/(2)/ In addition, Candyce Martin may be deemed to share beneficial ownership of
6,035 shares of TCI Group Series A Common Stock and 1,508 shares of LMG Series A
Common Stock with Consuelo T. Martin and Francis A. Martin, III by virtue of her
position as co-trustee of the George T. Cameron Trust and the Helen de Young
Cameron Trust. Such shares are not being offered pursuant to this Prospectus.
7
<PAGE>
/(3)/ In addition, Consuelo T. Martin may be deemed to share beneficial
ownership of 6,035 shares of TCI Group Series A Common Stock and 1,508 shares of
LMG Series A Common Stock with Candyce Martin and Francis A. Martin, III by
virtue of her position as co-trustee and income beneficiary of the George T.
Cameron Trust and the Helen de Young Cameron Trust. Such shares are not being
offered pursuant to this Prospectus.
/(4)/ In addition, Francis A. Martin, III may be deemed to share beneficial
ownership of 6,035 shares of TCI Group Series A Common Stock and 1,508 shares of
LMG Series A Common Stock with Candyce Martin and Consuelo T. Martin by virtue
of his position as co-trustee of the George T. Cameron Trust and the Helen de
Young Cameron Trust. Such shares are not being offered pursuant to this
Prospectus.
/(5)/ Constance M. Goodyear, Candyce Martin, Francis A. Martin, III, Helen M.
Spalding and Priscilla M. Tamkin have contingent interests in the George T.
Cameron Trust and the Helen de Young Cameron Trust.
/(6)/ In addition, Nan T. McEvoy beneficially owns 4,800 shares of TCI Group
Series A Common Stock and 1,200 shares of LMG Series A Common Stock. Such shares
are not being offered pursuant to this Prospectus.
The name of the Selling Stockholder in connection with any particular sale
of Shares, the number of Shares to be sold and the number and (if one percent or
more) the percentage of the outstanding shares of TCI Group Series A Common
Stock or LMG Series A Common Stock to be owned by such Selling Stockholder after
completion of any offering hereunder will be specified in the Prospectus
Supplement relating to such sale. It is anticipated that, from time to time
after the date hereof, record ownership of certain of the Shares that are
currently held in trust for the benefit of certain Selling Stockholders will be
transferred to the beneficiaries of the applicable trust and/or that record
ownership of certain of the Shares may be transferred to living trusts of which
the current record owner or (in the case of Shares currently held in trust)
beneficial owner would be a trustee with sole control and complete discretion to
revoke or amend such trust during such person's lifetime.
PLAN OF DISTRIBUTION
Subject to the restrictions described under the caption "Selling
Stockholders," the Shares may be offered for sale and sold by the Selling
Stockholders from time to time in one or more public or private 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. Subject to the
restrictions described under the caption "Selling Stockholders," the Shares may
be sold by the Selling Stockholders directly or through agents designated from
time to time or to or through broker-dealers designated from time to time. The
Shares may be sold through a broker-dealer acting as agent or broker for the
Selling Stockholders, 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 Shares
may be sold in connection with equity swap, put or call, margin and similar
transactions entered into by a Selling Stockholder, including sales by or at the
direction of the counterparty to any such transactions.
The Company has been advised by the Selling Stockholders that they have not,
as of the date of this Prospectus, entered into any arrangement with an agent or
broker-dealer for the sale of the Shares.
The Selling Stockholders 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 Stockholders and any agents or broker-dealers that participate
with the Selling Stockholders 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
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resale of the Shares purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
In connection with a sale of Shares, the following information will, to the
extent then required, be provided in the Prospectus Supplement relating to such
sale: the number and type of Shares to be sold, the purchase price, the name of
any agent or broker-dealer, and any applicable commissions, discounts or other
items constituting compensation to such agents or broker-dealers with respect to
the particular sale.
DESCRIPTION OF TCI COMMON STOCK
The following description of certain terms of the TCI Common Stock does not
purport to be complete and is qualified in its entirety by reference to the
Restated Certificate of Incorporation, as amended, of TCI (the "TCI Charter").
GENERAL
The TCI Charter provides, among other things, that TCI is authorized to
issue 2,725,000,000 shares of common stock, par value $1.00 per share, of which
1,750,000,000 shares are designated Tele-Communications, Inc. Series A TCI Group
Common Stock, 150,000,000 shares are designated Tele-Communications, Inc. Series
B TCI Group Common Stock, 750,000,000 shares are designated Tele-Communications,
Inc. Series A Liberty Media Group Common Stock, and 75,000,000 shares are
designated Tele-Communications, Inc. Series B Liberty Media Group Common Stock.
As of November 1, 1995, 571,576,645 shares of TCI Group Series A Common
Stock, 84,801,554 shares of TCI Group Series B Common Stock, 142,892,796 shares
of LMG Series A Common Stock and 21,200,336 shares of LMG Series B Common Stock
(in each case net of shares held by subsidiaries of TCI) had been issued and
were outstanding and 100,524,364 shares of TCI Group Series A Common Stock were
held by subsidiaries of TCI. As of that date, 68,295,414 shares of TCI Group
Series A Common Stock and 17,080,230 shares of LMG Series A Common Stock were
reserved for issuance upon conversion, exchange or exercise of outstanding
convertible or exchangeable securities and options. In addition, TCI has
reserved a number of shares of TCI Group Series A Common Stock equal to the
number of shares of TCI Group Series B Common Stock outstanding, and a number of
shares of LMG Series A Common Stock equal to the number of shares of LMG Series
B Common Stock outstanding, for issuance upon conversion, at the option of the
holder, of the TCI Group Series B Common Stock and LMG Series B Common Stock,
respectively. Subsequent to November 1, 1995 and on or prior to January 25,
1996, additional convertible or exchangeable securities were issued that are
initially convertible or exchangeable for an aggregate of 16,228,949 shares of
TCI Group Series A Common Stock and 1,905,588 shares of LMG Series A Common
Stock.
The TCI Charter also authorizes 52,375,096 shares of preferred stock (the
"TCI Preferred Stock"), of which 700,000 shares are designated Class A Preferred
Stock, par value $0.01 per share (the "Class A Preferred Stock"), 1,675,096
shares are designated Class B 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), and
50,000,000 shares are designated Series Preferred Stock, par value $.01 per
share (the "Series Preferred Stock"), issuable in series. All of the shares of
Class A Preferred Stock have previously been redeemed and retired and may not be
reissued, thereby reducing the number of authorized shares of TCI Preferred
Stock. Of the Series Preferred Stock, as of January 25, 1996, 80,000 shares are
designated Convertible Preferred Stock, Series C (the "Series C Preferred
Stock"), 1,000,000 shares are designated Convertible Preferred Stock, Series D
(the "Series D Preferred Stock"), 400,000 shares are designated Redeemable
Convertible Preferred Stock, Series E (the "Series E Preferred Stock"), 500,000
shares are designated Convertible Redeemable Participating Preferred Stock,
Series F (the "Series F Preferred Stock"), 7,259,380 shares are designated
Redeemable Convertible TCI Group Preferred Stock, Series G (the "Series G
Preferred Stock") and 7,259,380 shares are designated Redeemable Convertible
Liberty Media Group Preferred Stock, Series H (the "Series H Preferred Stock").
As of January 25, 1996, 1,675,096
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shares of Class B Preferred Stock (of which 55,070 shares are held by
subsidiaries of TCI), 70,575 shares of Series C Preferred Stock, 999,569 shares
of Series D Preferred Stock, 277,064 shares of Series F Preferred Stock,
7,259,380 shares of Series G Preferred Stock and 7,259,380 shares of Series H
Preferred Stock had been issued and were outstanding. All of the shares of
Series E Preferred Stock have previously been redeemed and retired with the
effect that such shares have been restored to the status of authorized and
unissued shares of Series Preferred Stock and may be reissued as shares of
another series of Series Preferred Stock, but not as Series E Preferred Stock.
All of the outstanding shares of Series F Preferred Stock are held by
subsidiaries of TCI. Approximately 33,901,240 shares of Series Preferred Stock
remain available for designation pursuant to the TCI Charter as of January 25,
1996. The rights evidenced by the TCI Common Stock are subject to the prior
preferences and rights of the TCI Preferred Stock.
CERTAIN DEFINITIONS
As used herein, the following terms have the meanings specified below:
"Committed Acquisition Shares" means (a) the shares of LMG Series A Common
Stock that TCI had, prior to the record date for the Distribution, agreed to
issue, but as of such record date had not issued, and (b) the shares of LMG
Series A Common Stock that are issuable upon conversion, exercise or exchange of
Convertible Securities that TCI had, prior to the record date for the
Distribution, agreed to issue, but as of such record date had not issued, in
each case including obligations of TCI to issue shares of TCI's Class A Common
Stock, par value $1.00 per share (which has been redesignated TCI Group Series A
Common Stock), which as a result of the Distribution, constitute obligations to
issue, among other securities, LMG Series A Common Stock or Convertible
Securities which are convertible into or exercisable or exchangeable for LMG
Series A Common Stock; provided, however that Committed Acquisition Shares will
not include any shares of Liberty Media Group Common Stock issuable upon
conversion, exercise or exchange of Pre-Distribution Convertible Securities. The
type and amount of Committed Acquisition Shares issuable will be appropriately
adjusted to reflect subdivisions and combinations of the LMG Series A Common
Stock and dividends or distributions of shares of LMG Series A Common Stock or
LMG Series B Common Stock to holders of LMG Series A Common Stock and other
reclassifications of the LMG Series A Common Stock, in each case occurring (or
the record date for which occurs) after the Distribution.
"Convertible Securities" means any securities of TCI (other than any series
of TCI Common Stock) that are convertible into, exchangeable for or evidence the
right to purchase any shares of any series of TCI Common Stock, whether upon
conversion, exercise, exchange, pursuant to antidilution provisions of such
securities or otherwise.
"DGCL" means the General Corporation Law of the State of Delaware.
The "Distribution" means the distribution paid by TCI on August 10, 1995 of
one-fourth of one share of LMG Series A Common Stock on each outstanding share
of TCI Group Series A Common Stock and one-fourth of one share of LMG Series B
Common Stock on each outstanding share of TCI Group Series B Common Stock to
holders of record on August 4, 1995.
The "Inter-Group Interest" means any equity value of TCI attributable to the
Liberty Media Group that is not represented by outstanding shares of Liberty
Media Group Common Stock. The Inter-Group Interest is represented by the Number
of Shares Issuable with Respect to the Inter-Group Interest.
The "Inter-Group Interest Fraction" means a fraction the numerator of which
is the Number of Shares Issuable with Respect to the Inter-Group Interest and
the denominator of which is the sum of such Number of Shares Issuable with
Respect to the Inter-Group Interest and the aggregate number of shares of
Liberty Media Group Common Stock outstanding.
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The "Liberty Media Group" means:
(a) the interest of TCI or any of its subsidiaries in Liberty Media
Corporation or any of its subsidiaries (including any successor thereto by
merger, consolidation or sale of all or substantially all of its assets, whether
or not in connection with a Related Business Transaction (as defined below under
"--Conversion and Redemption--Mandatory Dividend, Redemption or Conversion of
Liberty Media Group Common Stock")) and their respective properties and assets,
(b) all assets and liabilities of TCI or any of its subsidiaries to the
extent attributed to any of the properties or assets referred to in clause (a)
of this sentence, whether or not such assets or liabilities are assets and
liabilities of Liberty Media Corporation or any of its subsidiaries (or a
successor as described in clause (a) of this sentence),
(c) all assets and properties contributed or otherwise transferred to the
Liberty Media Group from the TCI Group, and
(d) the interest of TCI or any of its subsidiaries in the businesses, assets
and liabilities acquired by TCI or any of its subsidiaries for the Liberty Media
Group, as determined by the Board of Directors of TCI (the "TCI Board of
Directors");
provided that (i) from and after any dividend or other distribution with respect
to any shares of Liberty Media Group Common Stock (other than a dividend or
other distribution payable in shares of Liberty Media Group Common Stock, with
respect to which adjustment will be made as described in clause (a) of the
definition of "Number of Shares Issuable with Respect to the Inter-Group
Interest," or in other securities of TCI attributed to the Liberty Media Group
for which provision will be made as described in the penultimate sentence of
this definition), the Liberty Media Group will no longer include an amount of
assets or properties equal to the aggregate amount of such kind of assets or
properties so paid in respect of shares of Liberty Media Group Common Stock
multiplied by a fraction the numerator of which is equal to the Inter-Group
Interest Fraction in effect immediately prior to the record date for such
dividend or other distribution and the denominator of which is equal to the
Outstanding Interest Fraction in effect immediately prior to the record date for
such dividend or other distribution and (ii) from and after any transfer of
assets or properties from the Liberty Media Group to the TCI Group, the Liberty
Media Group will no longer include the assets or properties so transferred. If
TCI pays a dividend or makes any other distribution with respect to shares of
Liberty Media Group Common Stock payable in securities of TCI attributed to the
Liberty Media Group other than Liberty Media Group Common Stock, the TCI Group
will be deemed to hold an amount of such other securities equal to the amount so
distributed multiplied by the fraction specified in clause (i) of this
definition (determined as of a time immediately prior to the record date for
such dividend or other distribution), and to the extent interest or dividends
are paid or other distributions are made on such other securities so distributed
to the holders of Liberty Media Group Common Stock, the Liberty Media Group will
no longer include a corresponding ratable amount of the kind of assets paid as
such interest or dividends or other distributions in respect of such securities
so deemed to be held by the TCI Group. TCI may also, to the extent any such
other securities constitute Convertible Securities which are at the time
convertible, exercisable or exchangeable, cause such Convertible Securities
deemed to be held by the TCI Group to be deemed to be converted, exercised or
exchanged (and to the extent the terms of such Convertible Securities require
payment or delivery of consideration in order to effect such conversion,
exercise or exchange, the Liberty Media Group will in such case include an
amount of the kind of properties or assets required to be paid or delivered as
such consideration for the amount of the Convertible Securities deemed
converted, exercised or exchanged as if such Convertible Securities were
outstanding), in which case such Convertible Securities will no longer be deemed
to be held by the TCI Group or attributed to the Liberty Media Group.
"Market Value" of any class or series of capital stock of TCI on any day
means the average of the high and low reported sale prices regular way of a
share of such class or series on such day (if such day is a trading day, and if
such day is not a trading day, on the trading day immediately preceding such
day) or in case no such reported sale takes place on such trading day the
average of the reported closing
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bid and asked prices regular way of a share of such class or series on such
trading day, in either case on the Nasdaq National Market, or if the shares of
such class or series are not quoted on such Nasdaq National Market on such
trading day, the average of the closing bid and asked prices of a share of such
class or series in the over-the-counter market on such trading day as furnished
by any New York Stock Exchange member firm selected from time to time by TCI, or
if such closing bid and asked prices are not made available by any such New York
Stock Exchange member firm on such trading day, the market value of a share of
such class or series as determined by the TCI Board of Directors; provided that
for purposes of determining the ratios described under "--Conversion and
Redemption--Conversion of Liberty Media Group Common Stock at the Option of TCI"
and "--Conversion and Redemption--Mandatory Dividend, Redemption or Conversion
of Liberty Media Group Common Stock" and "--Liquidation Rights," (a) the "Market
Value" of any share of any series of TCI Common Stock on any day prior to the
"ex" date or any similar date for any dividend or distribution paid or to be
paid with respect to such series of TCI Common Stock will be reduced by the fair
market value of the per share amount of such dividend or distribution as
determined by the TCI Board of Directors and (b) the "Market Value" of any share
of any series of TCI Common Stock on any day prior to (i) the effective date of
any subdivision (by stock split or otherwise) or combination (by reverse stock
split or otherwise) of outstanding shares of such series of TCI Common Stock or
(ii) the "ex" date or any similar date for any dividend or distribution with
respect to any such series of TCI Common Stock in shares of such series of TCI
Common Stock will be appropriately adjusted to reflect such subdivision,
combination, dividend or distribution.
The "Number of Shares Issuable with Respect to the Inter-Group Interest" is
currently zero and will from time to time be
(a) adjusted as appropriate to reflect subdivisions (by stock split or
otherwise) and combinations (by reverse stock split or otherwise) of the LMG
Series A Common Stock and dividends or distributions of shares of LMG Series A
Common Stock or LMG Series B Common Stock to holders of LMG Series A Common
Stock and other reclassifications of LMG Series A Common Stock,
(b) decreased (but not to less than zero) by (i) the aggregate number of
shares of LMG Series A Common Stock issued or sold by TCI after the
Distribution other than Committed Acquisition Shares, the proceeds of which
are attributed to the TCI Group, (ii) the aggregate number of shares of LMG
Series A Common Stock issued or delivered upon conversion, exercise or
exchange of Convertible Securities (other than Pre-Distribution Convertible
Securities and Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares), the proceeds of
which are attributed to the TCI Group, (iii) the aggregate number of shares of
LMG Series A Common Stock issued or delivered by TCI as a dividend or
distribution to holders of TCI Group Series A Common Stock and TCI Group
Series B Common Stock, (iv) the aggregate number of shares of LMG Series A
Common Stock issued or delivered upon the conversion, exercise or exchange of
any Convertible Securities (other than Pre-Distribution Convertible Securities
and Convertible Securities which are convertible into or exercisable or
exchangeable for Committed Acquisition Shares) issued or delivered by TCI
after the Distribution as a dividend or distribution or by reclassification or
exchange to holders of TCI Group Series A Common Stock and TCI Group Series B
Common Stock and (v) the aggregate number of shares of LMG Series A Common
Stock (rounded, if necessary, to the nearest whole number), equal to the
aggregate fair value (as determined by the TCI Board of Directors) of assets
or properties attributed to the Liberty Media Group that are transferred from
the Liberty Media Group to the TCI Group in consideration of a reduction in
the Number of Shares Issuable with Respect to the Inter-Group Interest,
divided by the Market Value of one share of LMG Series A Common Stock as of
the date of such transfer, and
(c) increased by (i) the aggregate number of any shares of LMG Series A
Common Stock and LMG Series B Common Stock which are retired or otherwise
cease to be outstanding following their purchase with funds attributed to the
TCI Group, (ii) a number (rounded, if necessary, to the nearest whole number),
equal to the fair value (as determined by the TCI Board of Directors) of
assets or properties, theretofore attributed to the TCI Group that are
contributed to the Liberty Media
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Group in consideration of an increase in the Number of Shares Issuable with
Respect to the Inter-Group Interest, divided by the Market Value of one share
of LMG Series A Common Stock as of the date of such contribution and (iii) the
aggregate number of shares of LMG Series A Common Stock and LMG Series B
Common Stock into or for which Convertible Securities are deemed to be
converted, exercised or exchanged pursuant to the last sentence of the
definition of "TCI Group."
TCI will not issue or sell shares of LMG Series B Common Stock in respect of a
reduction in the Number of Shares Issuable with Respect to the Inter-Group
Interest. Whenever a change in the Number of Shares Issuable with Respect to the
Inter-Group Interest occurs, TCI will prepare and file a statement of such
change with the Secretary of TCI.
The "Outstanding Interest Fraction" means a fraction the numerator of which
is the aggregate number of shares of Liberty Media Group Common Stock
outstanding and the denominator of which is the sum of such aggregate number of
shares of Liberty Media Group Common Stock outstanding and the Number of Shares
Issuable with Respect to the Inter-Group Interest.
"Pre-Distribution Convertible Securities" means Convertible Securities that
were outstanding on the record date for the Distribution and were, prior to such
date, convertible into or exercisable or exchangeable for shares of TCI's Class
A Common Stock, par value $1.00 per share (which has been redesignated TCI Group
Series A Common Stock).
The "TCI Group" means as of any date of determination thereof:
(a) the interest of TCI or any of its subsidiaries in all of the businesses
in which TCI or any of its subsidiaries (or any of their predecessors or
successors) is or has been engaged, directly or indirectly, and the respective
assets and liabilities of TCI or any of its subsidiaries, other than any
businesses, assets or liabilities of the Liberty Media Group;
(b) a proportionate interest in the businesses, assets and liabilities of
the Liberty Media Group equal to the Inter-Group Interest Fraction as of such
date;
(c) from and after any dividend or other distribution with respect to shares
of Liberty Media Group Common Stock (other than a dividend or other
distribution payable in shares of Liberty Media Group Common Stock, with
respect to which adjustment will be made as described in clause (a) of the
definition of "Number of Shares Issuable with Respect to the Inter-Group
Interest," or in other securities of TCI attributed to the Liberty Media
Group, for which provision will be made as described in the penultimate
sentence of this definition), an amount of assets or properties theretofore
included in the Liberty Media Group equal to the aggregate amount of such kind
of assets or properties so paid in respect of such dividend or other
distribution with respect to shares of Liberty Media Group Common Stock
multiplied by a fraction the numerator of which is equal to the Inter-Group
Interest Fraction in effect immediately prior to the record date for such
dividend or other distribution and the denominator of which is equal to the
Outstanding Interest Fraction in effect immediately prior to the record date
for such dividend or other distribution; and
(d) any assets or properties transferred from the Liberty Media Group to the
TCI Group;
provided that, from and after any contribution or transfer of any assets or
properties from the TCI Group to the Liberty Media Group, the TCI Group will no
longer include such assets or properties so contributed or transferred (other
than pursuant to its interest in the businesses, assets and liabilities of the
Liberty Media Group described in clause (b) above). If TCI pays a dividend or
makes any other distribution with respect to shares of Liberty Media Group
Common Stock payable in other securities of TCI attributed to the Liberty Media
Group, the TCI Group will be deemed to hold an amount of such other securities
equal to the amount so distributed multiplied by the fraction specified in
clause (c) of this definition (determined as of a time immediately prior to the
record date for such dividend or other distribution), and to the extent interest
or dividends are paid or other distributions are made on such other securities
so distributed to holders of Liberty Media Group Common Stock, the TCI Group
will include
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a corresponding ratable amount of the kind of assets paid as such interest or
dividends or other distributions in respect of such securities so deemed to be
held by the TCI Group. TCI may also, to the extent any such other securities
constitute Convertible Securities which are at the time convertible, exercisable
or exchangeable, cause such Convertible Securities deemed to be held by the TCI
Group to be deemed to be converted, exercised or exchanged (and to the extent
the terms of such Convertible Securities require payment or delivery of
consideration in order to effect such conversion, exercise or exchange, the TCI
Group will in such case no longer include an amount of the kind of properties or
assets required to be paid or delivered as such consideration for the amount of
the Convertible Securities deemed converted, exercised or exchanged as if such
Convertible Securities were outstanding), in which case such Convertible
Securities will no longer be deemed to be held by the TCI Group or attributed to
the Liberty Media Group.
VOTING RIGHTS
Holders of TCI Group Series A Common Stock are entitled to one vote for each
share of such stock held, holders of TCI Group Series B Common Stock are
entitled to ten votes for each share of such stock held, holders of LMG Series A
Common Stock are entitled to one vote for each share of such stock held and
holders of LMG Series B Common Stock are entitled to ten votes for each share of
such stock held, on all matters presented to such stockholders. Except as may
otherwise be required by the laws of the State of Delaware or, with respect to
any class or series of TCI Preferred Stock, in the TCI Charter (including any
resolution or resolutions providing for the establishment of such class or
series pursuant to authority vested in the TCI Board of Directors by the TCI
Charter), the holders of TCI Group Common Stock and the holders of Liberty Media
Group Common Stock and the holders of each class or series of TCI Preferred
Stock entitled to vote on a particular matter will vote as one class for all
purposes. See "--Other Matters."
Neither the holders of TCI Group Series A Common Stock or TCI Group Series B
Common Stock, nor the holders of LMG Series A Common Stock or LMG Series B
Common Stock, have any rights to vote as a separate class or series on any
matter coming before the stockholders of TCI, except with respect to certain
limited class and series voting rights provided under the DGCL. Under the DGCL,
the approval of the holders of a majority of the outstanding shares of any class
of capital stock of a corporation, voting separately as a class, is required to
approve any amendment to the charter that would alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely, provided that, if any amendment would alter or change the powers,
preferences or special rights of one or more series of the class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment would be entitled to vote thereon
separately as a class.
DIVIDENDS
Subject to the prior payment of dividends on, and other rights of, any of
the outstanding shares of TCI Preferred Stock, dividends may be paid as
determined by the TCI Board of Directors (i) on the TCI Group Common Stock out
of the lesser of (x) the TCI Group Available Dividend Amount and (y) funds of
TCI legally available therefor under the DGCL and (ii) on the Liberty Media
Group Common Stock out of the lesser of (x) the Liberty Media Group Available
Dividend Amount and (y) funds of TCI legally available therefor under the DGCL.
Under the DGCL the amount of the funds of TCI legally available for the payment
of dividends on any series of TCI Common Stock is determined on the basis of the
entire corporation and not just the Liberty Media Group or the TCI Group.
Consequently, the amount of legally available funds will be reduced by the
amount of any net losses of the Liberty Media Group or the TCI Group and any
dividends or distributions on, or repurchases of, the TCI Group Common Stock or
the Liberty Media Group Common Stock and dividends on, or certain repurchases
of, TCI Preferred Stock. Certain loan agreements to which certain subsidiaries
of TCI are parties or are subject contain restricted payment provisions that
limit the amount of dividends, other than stock dividends, that those companies
may pay. Future loan agreements may also contain similar restrictions and
limits.
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The "TCI Group Available Dividend Amount," as of any date, means either (a)
the excess of (i) an amount equal to the total assets of the TCI Group less the
total liabilities (not including preferred stock) of the TCI Group as of such
date over (ii) the aggregate par value of, or any greater amount determined to
be capital in respect of, all outstanding shares of TCI Group Common Stock and
each class or series of TCI Preferred Stock attributed to the TCI Group or (b)
in case there is no such excess, an amount equal to TCI Earnings (Loss)
Attributable to the TCI Group (if positive) for the fiscal year in which such
date occurs and/or the preceding fiscal year. "TCI Earnings (Loss) Attributable
to the TCI Group," for any period, means the net earnings or loss of the TCI
Group for such period determined on a basis consistent with the determination of
the net earnings or loss of the TCI Group for such period as presented in the
combined financial statements of the TCI Group for such period, including income
and expenses of TCI attributed to the operations of the TCI Group on a
substantially consistent basis, including without limitation, corporate
administrative costs, net interest and income taxes. The TCI Group Available
Dividend Amount is intended to be similar to the amount that would be legally
available for the payment of dividends on the TCI Group Common Stock under the
DGCL if the TCI Group were a separate Delaware corporation. There can be no
assurance that there will be a TCI Group Available Dividend Amount.
The "Liberty Media Group Available Dividend Amount," as of any date, means
the product of the Outstanding Interest Fraction and either (a) the excess of
(i) an amount equal to the total assets of the Liberty Media Group less the
total liabilities (not including preferred stock) of the Liberty Media Group as
of such date over (ii) the aggregate par value of, or any greater amount
determined to be capital in respect of, all outstanding shares of Liberty Media
Group Common Stock and each class or series of TCI Preferred Stock attributed to
the Liberty Media Group or (b) in case there is no such excess, an amount equal
to TCI Earnings (Loss) Attributable to the Liberty Media Group (if positive) for
the fiscal year in which such date occurs and/or the preceding fiscal year. "TCI
Earnings (Loss) Attributable to the Liberty Media Group," for any period, means
the net earnings or loss of the Liberty Media Group for such period determined
on a basis consistent with the determination of the net earnings or loss of the
Liberty Media Group for such period as presented in the combined financial
statements of the Liberty Media Group for such period, including income and
expenses of TCI attributed to the operations of the Liberty Media Group on a
substantially consistent basis, including, without limitation, corporate
administrative costs, net interest and income taxes. The Liberty Media Group
Available Dividend Amount is intended to be similar to the amount that would be
legally available for the payment of dividends on the Liberty Media Group Common
Stock under the DGCL if the Liberty Media Group were a separate Delaware
corporation. There can be no assurance that there will be a Liberty Media Group
Available Dividend Amount.
Except for dividends declared or paid as described below under "--Share
Distributions" and "--Conversion and Redemption--Mandatory Dividend, Redemption
or Conversion of Liberty Media Group Common Stock," any dividends paid on the
TCI Group Series A Common Stock or the TCI Group Series B Common Stock will be
paid only on both series, in equal amounts per share, and any dividends paid on
the LMG Series A Common Stock or the LMG Series B Common Stock will be paid only
on both series, in equal amounts per share.
The TCI Board of Directors, subject to the provisions described herein under
"--Dividends" and below under "--Share Distributions," has the authority and
discretion to declare and pay dividends on the TCI Group Common Stock or the
Liberty Media Group Common Stock in equal or unequal amounts, notwithstanding
the relationship between the TCI Group Available Dividend Amount and the Liberty
Media Group Available Dividend Amount, the respective amounts of prior dividends
declared on, or liquidation rights of, the TCI Group Common Stock or the Liberty
Media Group Common Stock or any other factor.
At the time of any dividend or other distribution on the outstanding shares
of Liberty Media Group Common Stock (including any dividend of Net Proceeds from
the Disposition of all or substantially all of the properties and assets of the
Liberty Media Group as described below under "--Conversion and Redemption--
Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock"), the TCI Group will (if at such time there is an Inter-Group Interest)
be credited, and
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the Liberty Media Group will be charged (in addition to the charge for the
dividend or other distribution paid or distributed in respect of outstanding
shares of Liberty Media Group Common Stock), with an amount equal to the product
of (i) the aggregate amount of such dividend or distribution paid or distributed
in respect of outstanding shares of Liberty Media Group Common Stock times (ii)
a fraction the numerator of which is the Inter-Group Interest Fraction and the
denominator of which is the Outstanding Interest Fraction.
SHARE DISTRIBUTIONS
DISTRIBUTIONS ON TCI GROUP COMMON STOCK. If at any time after the
Distribution a distribution paid in TCI Group Common Stock, Liberty Media Group
Common Stock, or any other securities of TCI or any other person (a "share
distribution") is to be made with respect to the TCI Group Common Stock, such
share distribution will be declared and paid only as follows:
(i) a share distribution consisting of shares of TCI Group Series A
Common Stock (or Convertible Securities convertible into or
exercisable or exchangeable for shares of TCI Group Series A Common
Stock) to holders of TCI Group Series A Common Stock and TCI Group
Series B Common Stock, on an equal per share basis; or consisting of
shares of TCI Group Series B Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI
Group Series B Common Stock) to holders of TCI Group Series A Common
Stock and TCI Group Series B Common Stock, on an equal per share
basis; or consisting of shares of TCI Group Series A Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of TCI Group Series A Common Stock) to holders of TCI Group
Series A Common Stock and, on an equal per share basis, shares of TCI
Group Series B Common Stock (or like Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI
Group Series B Common Stock) to holders of TCI Group Series B Common
Stock;
(ii) a share distribution consisting of shares of LMG Series A Common
Stock (or Convertible Securities convertible into or exercisable or
exchangeable for shares of LMG Series A Common Stock) to holders of
TCI Group Series A Common Stock and TCI Group Series B Common Stock,
on an equal per share basis; provided that the sum of (a) the
aggregate number of shares of LMG Series A Common Stock to be so
issued (or the number of such shares which would be issuable upon
conversion, exercise or exchange of any Convertible Securities to be
so issued) and (b) the number of shares of such series that are
subject to issuance upon conversion, exercise or exchange of any
Convertible Securities then outstanding that are attributed to the TCI
Group (other than Pre-Distribution Convertible Securities and other
than Convertible Securities convertible into or exercisable or
exchangeable for Committed Acquisition Shares) is less than or equal
to the Number of Shares Issuable with Respect to the Inter-Group
Interest; and
(iii) a share distribution consisting of any class or series of securities
of TCI or any other person other than TCI Group Common Stock or
Liberty Media Group Common Stock (or Convertible Securities
convertible into or exercisable or exchangeable for shares of TCI
Group Common Stock or Liberty Media Group Common Stock), either on the
basis of a distribution of identical securities, on an equal per share
basis, to holders of TCI Group Series A Common Stock and TCI Group
Series B Common Stock or on the basis of a distribution of one class
or series of securities to holders of TCI Group Series A Common Stock
and another class or series of securities to holders of TCI Group
Series B Common Stock, provided that the securities so distributed
(and, if the distribution consists of Convertible Securities, the
securities into which such Convertible Securities are convertible or
for which they are exercisable or exchangeable) do not differ in any
respect other than their relative voting rights and related
differences in designation, conversion, redemption and share
distribution provisions, with holders of shares of TCI Group Series B
Common Stock receiving the class or series having the higher relative
voting rights (without regard to whether such rights differ to a
greater or lesser extent
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than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the
TCI Group Series A Common Stock and the TCI Group Series B Common
Stock), provided that if the securities so distributed constitute
capital stock of a subsidiary of TCI, such rights will not differ to a
greater extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions
between the TCI Group Series A Common Stock and the TCI Group Series B
Common Stock, and provided in each case that such distribution is
otherwise made on an equal per share basis.
TCI will not reclassify, subdivide or combine the TCI Group Series A Common
Stock without reclassifying, subdividing or combining the TCI Group Series B
Common Stock, on an equal per share basis, and TCI will not reclassify,
subdivide or combine the TCI Group Series B Common Stock without reclassifying,
subdividing or combining the TCI Group Series A Common Stock, on an equal per
share basis.
DISTRIBUTIONS ON LIBERTY MEDIA GROUP COMMON STOCK. If at any time a share
distribution is to be made with respect to the Liberty Media Group Common Stock,
such share distribution will be declared and paid only as follows (or as
described under "--Conversion and Redemption" with respect to the redemptions
and other distributions referred to therein):
(i) a share distribution consisting of shares of LMG Series A Common
Stock (or Convertible Securities convertible into or exercisable or
exchangeable for shares of LMG Series A Common Stock) to holders of
LMG Series A Common Stock and LMG Series B Common Stock, on an equal
per share basis; or consisting of shares of LMG Series B Common Stock
(or Convertible Securities convertible into or exercisable or
exchangeable for shares of LMG Series B Common Stock) to holders of
LMG Series A Common Stock and LMG Series B Common Stock, on an equal
per share basis; or consisting of shares of LMG Series A Common Stock
(or Convertible Securities convertible into or exercisable or
exchangeable for shares of LMG Series A Common Stock) to holders of
LMG Series A Common Stock and, on an equal per share basis, shares of
LMG Series B Common Stock (or like Convertible Securities convertible
into or exercisable or exchangeable for shares of LMG Series B Common
Stock) to holders of LMG Series B Common Stock; and
(ii) a share distribution consisting of any class or series of securities
of TCI or any other person other than as described in the immediately
preceding clause (i) and other than TCI Group Common Stock (or
Convertible Securities convertible into or exercisable or exchangeable
for shares of TCI Group Series A Common Stock or TCI Group Series B
Common Stock), either on the basis of a distribution of identical
securities, on an equal per share basis, to holders of LMG Series A
Common Stock and LMG Series B Common Stock or on the basis of a
distribution of one class or series of securities to holders of LMG
Series A Common Stock and another class or series of securities to
holders of LMG Series B Common Stock, provided that the securities so
distributed (and, if the distribution consists of Convertible
Securities, the securities into which such Convertible Securities are
convertible or for which they are exercisable or exchangeable) do not
differ in any respect other than their relative voting rights and
related differences in designation, conversion, redemption and share
distribution provisions, with holders of shares of LMG Series B Common
Stock receiving the class or series having the higher relative voting
rights (without regard to whether such rights differ to a greater or
lesser extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions
between the LMG Series A Common Stock and the LMG Series B Common
Stock), provided that if the securities so distributed constitute
capital stock of a subsidiary of TCI, such rights will not differ to a
greater extent than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions
between the LMG Series A Common Stock
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and the LMG Series B Common Stock, and provided in each case that such
distribution is otherwise made on an equal per share basis.
TCI will not reclassify, subdivide or combine the LMG Series A Common Stock
without reclassifying, subdividing or combining the LMG Series B Common Stock,
on an equal per share basis, and TCI will not reclassify, subdivide or combine
the LMG Series B Common Stock without reclassifying, subdividing or combining
the LMG Series A Common Stock, on an equal per share basis.
CONVERSION AND REDEMPTION
CONVERSION OF TCI GROUP SERIES B COMMON STOCK AND LMG SERIES B COMMON STOCK
AT THE OPTION OF THE HOLDER. Each share of TCI Group Series B Common Stock is
convertible, at the option of the holder thereof, into one share of TCI Group
Series A Common Stock. Each share of LMG Series B Common Stock is convertible,
at the option of the holder thereof, into one share of LMG Series A Common
Stock. Shares of TCI Group Series A Common Stock are not convertible into shares
of TCI Group Series B Common Stock, and shares of LMG Series A Common Stock are
not convertible into shares of LMG Series B Common Stock.
CONVERSION OF LIBERTY MEDIA GROUP COMMON STOCK AT THE OPTION OF TCI. The TCI
Board of Directors may at any time declare that (i) all of the outstanding
shares of LMG Series A Common Stock will be converted into a number (or
fraction) of fully paid and nonassessable shares of TCI Group Series A Common
Stock equal to the Optional Conversion Ratio, and (ii) all of the outstanding
shares of LMG Series B Common Stock will be converted into a number (or
fraction) of fully paid and nonassessable shares of TCI Group Series B Common
Stock equal to the Optional Conversion Ratio.
For these purposes, the "Optional Conversion Ratio" means the quotient
(calculated to the nearest five decimal places) obtained by dividing (x) the
Liberty Media Group Common Stock Per Share Value by (y) the average Market Value
of one share of TCI Group Series A Common Stock over the 20-trading day period
ending on the trading day preceding the Appraisal Date.
The "Liberty Media Group Private Market Value" means an amount equal to the
private market value of the Liberty Media Group as of the last day of the
calendar month preceding the month in which the last of the two appraisers
referred to in the immediately following sentence are selected (the last day of
such calendar month is hereinafter referred to as the "Appraisal Date"). In the
event that TCI determines to establish the Liberty Media Group Private Market
Value, two investment banking firms of recognized national standing will be
designated to determine the private market value of the Liberty Media Group, one
designated by TCI (the "First Appraiser") and one designated by a committee of
the TCI Board of Directors all of whose members are independent directors as
determined under Nasdaq National Market rules (the "Second Appraiser"). The date
upon which the last of such appraisers is selected is hereinafter referred to as
the "Selection Date." Not later than 20 days after the Selection Date, the First
Appraiser and the Second Appraiser will each determine its initial view as to
the private market value of the Liberty Media Group as of the Appraisal Date and
will consult with one another with respect thereto. Not later than the 30th day
after the Selection Date, the First Appraiser and the Second Appraiser will each
have determined its final view as to such private market value. If the higher of
the respective final views of the First Appraiser and the Second Appraiser as to
such private market value (the "Higher Appraised Amount") is not more than 120%
of the lower of such respective final views (the "Lower Appraised Amount"), the
Liberty Media Group Private Market Value (subject to any adjustment described in
the second succeeding paragraph) will be the average of those two amounts. If
the Higher Appraised Amount is more than 120% of the Lower Appraised Amount, the
First Appraiser and the Second Appraiser will agree upon and jointly designate a
third investment banking firm of recognized national standing (the "Mutually
Designated Appraiser") to determine such private market value. The Mutually
Designated Appraiser will not be provided with any of the work of the First
Appraiser and Second Appraiser. The Mutually Designated Appraiser will, no later
than the 20th day after the date the Mutually Designated Appraiser is
designated, determine such private market value (the "Mutually Appraised
Amount"), and the Liberty Media Group Private Market Value (subject to any
adjustment described in the second succeeding paragraph) will be (i) if the
Mutually Appraised Amount is between
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<PAGE>
the Lower Appraised Amount and the Higher Appraised Amount, (a) the average of
(1) the Mutually Appraised Amount and (2) the Lower Appraised Amount or the
Higher Appraised Amount, whichever is closer to the Mutually Appraised Amount,
or (b) the Mutually Appraised Amount, if neither the Lower Appraised Amount nor
the Higher Appraised Amount is closer to the Mutually Appraised Amount, or (ii)
if the Mutually Appraised Amount is greater than the Higher Appraised Amount or
less than the Lower Appraised Amount, the average of the Higher Appraised Amount
and the Lower Appraised Amount. For these purposes, if any such investment
banking firm expresses its final view of the private market value of the Liberty
Media Group as a range of values, such investment banking firm's final view of
such private market value will be deemed to be the midpoint of such range of
values.
Each of the investment banking firms referred to in the immediately
preceding paragraph will be instructed to determine the private market value of
the Liberty Media Group as of the Appraisal Date based upon the amount a willing
purchaser would pay to a willing seller, in an arm's length transaction, if it
were acquiring the Liberty Media Group, as if the Liberty Media Group were a
publicly traded non-controlled corporation and the purchaser was acquiring all
of the capital stock of such corporation and without consideration of any
potential regulatory constraints limiting the potential purchasers of the
Liberty Media Group other than that which would have existed if the Liberty
Media Group were a publicly traded non-controlled entity.
Following the determination of the Liberty Media Group Private Market Value,
the investment banking firms whose final views of the private market value of
the Liberty Media Group were used in the calculation of the Liberty Media Group
Private Market Value will determine the Adjusted Outstanding Shares of Liberty
Media Group Common Stock together with any further appropriate adjustments to
the Liberty Media Group Private Market Value resulting from such determination.
The "Adjusted Outstanding Shares of Liberty Media Group Common Stock" means a
number, as determined by such investment banking firms as of the Appraisal Date,
equal to the sum of the number of shares of Liberty Media Group Common Stock
outstanding, the Number of Shares Issuable with Respect to the Inter-Group
Interest, the number of Committed Acquisition Shares issuable, the number of
shares of Liberty Media Group Common Stock issuable upon the conversion,
exercise or exchange of all Pre-Distribution Convertible Securities and the
number of shares of Liberty Media Group Common Stock issuable upon the
conversion, exercise or exchange of those Convertible Securities (other than
Pre-Distribution Convertible Securities and other than Convertible Securities
which are convertible into or exercisable or exchangeable for Committed
Acquisition Shares) the holders of which would derive an economic benefit from
conversion, exercise or exchange of such Convertible Securities which exceeds
the economic benefit of not converting, exercising or exchanging such
Convertible Securities. The "Liberty Media Group Common Stock Per Share Value"
means the quotient obtained by dividing the Liberty Media Group Private Market
Value by the Adjusted Outstanding Shares of Liberty Media Group Common Stock,
provided that if such investment banking firms do not agree on the
determinations provided for in this paragraph, the Liberty Media Group Common
Stock Per Share Value will be the average of the quotients so obtained on the
basis of the respective determinations of such firms.
If TCI determines to convert shares of LMG Series A Common Stock into TCI
Group Series A Common Stock and shares of LMG Series B Common Stock into TCI
Group Series B Common Stock at the Optional Conversion Ratio, such conversion
will occur on a conversion date on or prior to the 120th day following the
Appraisal Date. If TCI determines not to undertake such conversion, TCI may at
any time thereafter undertake to reestablish the Liberty Media Group Common
Stock Per Share Value as of a subsequent date.
MANDATORY DIVIDEND, REDEMPTION OR CONVERSION OF LIBERTY MEDIA GROUP COMMON
STOCK. Upon the sale, transfer, assignment or other disposition, whether by
merger, consolidation, sale or contribution of assets or stock or otherwise (a
"Disposition"), in one transaction or a series of related transactions by TCI
and its subsidiaries of all or substantially all of the properties and assets of
the Liberty Media Group to one or more persons, entities or groups (other than
(a) in connection with the Disposition by TCI of all of TCI's properties and
assets in one transaction or a series of related transactions in connection with
the liquidation, dissolution or winding up of TCI, (b) a dividend, other
distribution or redemption in accordance with any provision described under "--
Dividends," "--Share Distributions," "--Redemption
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<PAGE>
in Exchange for Stock of Subsidiary" or "--Liquidation Rights," (c) to any
person, entity or group which TCI, directly or indirectly, after giving effect
to the Disposition, controls or (d) in connection with a Related Business
Transaction), TCI will on or prior to the 85th trading day following the
consummation of such Disposition, either:
(i) subject to the limitations described above under "--Dividends,"
declare and pay a dividend in cash and/or securities or other property
(other than a dividend or distribution of TCI Common Stock) to the
holders of the outstanding shares of Liberty Media Group Common Stock
equally on a share for share basis (subject to the provisions
described in the last sentence of the paragraph herein which defines
the term "Net Proceeds"), in an aggregate amount equal to the product
of the Outstanding Interest Fraction as of the record date for
determining the holders entitled to receive such dividend and the Net
Proceeds of such Disposition;
(ii) provided that there are funds of TCI legally available therefor
and the Liberty Media Group Available Dividend Amount would have been
sufficient to pay a dividend in lieu thereof as described in clause
(i) of this paragraph:
(a) if such Disposition involves all (not merely substantially
all) of the properties and assets of the Liberty Media Group, redeem
all outstanding shares of LMG Series A Common Stock and LMG Series B
Common Stock in exchange for cash and/or securities or other property
(other than TCI Common Stock) in an aggregate amount equal to the
product of the Adjusted Outstanding Interest Fraction as of the date
of such redemption and the Net Proceeds of such Disposition, such
aggregate amount to be allocated (subject to the provisions described
in the last sentence of the paragraph herein which defines the term
"Net Proceeds") to shares of LMG Series A Common Stock and LMG Series
B Common Stock in the ratio of the number of shares of each such
series outstanding (so that the amount of consideration paid for the
redemption of each share of LMG Series A Common Stock and each share
of LMG Series B Common Stock is the same); or
(b) if such Disposition involves substantially all (but not all)
of the properties and assets of the Liberty Media Group, apply an
aggregate amount of cash and/or securities or other property (other
than TCI Common Stock) equal to the product of the Outstanding
Interest Fraction as of the date shares are selected for redemption
and the Net Proceeds of such Disposition to the redemption of
outstanding shares of LMG Series A Common Stock and LMG Series B
Common Stock, such aggregate amount to be allocated (subject to the
provisions described in the last sentence of the paragraph herein
which defines the term "Net Proceeds") to shares of LMG Series A
Common Stock and LMG Series B Common Stock in the ratio of the number
of shares of each such series outstanding, and the number of shares of
each such series to be redeemed to equal the lesser of (x) the whole
number nearest the number determined by dividing the aggregate amount
so allocated to the redemption of such series by the average Market
Value of one share of LMG Series A Common Stock during the ten-trading
day period beginning on the 16th trading day following the
consummation of such Disposition and (y) the number of shares of such
series outstanding (so that the amount of consideration paid for the
redemption of each share of LMG Series A Common Stock and each share
of LMG Series B Common Stock is the same); or
(iii) convert (a) each outstanding share of LMG Series A Common Stock into
a number (or fraction) of fully paid and nonassessable shares of TCI
Group Series A Common Stock and (b) each outstanding share of LMG
Series B Common Stock into a number (or fraction) of fully paid and
nonassessable shares of TCI Group Series B Common Stock, in each case
equal to 110% of the average daily ratio (calculated to the nearest
five decimal places) of the Market Value of one share of LMG Series A
Common Stock to
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the Market Value of one share of TCI Group Series A Common Stock
during the ten-trading day period referred to in clause (ii)(b) of
this paragraph.
For these purposes, "substantially all of the properties and assets of the
Liberty Media Group" as of any date means a portion of such properties and
assets that represents at least 80% of the then-current market value (as
determined by the TCI Board of Directors) of the properties and assets of the
Liberty Media Group as of such date.
A "Related Business Transaction" means any Disposition of all or
substantially all of the properties and assets of the Liberty Media Group in
which TCI receives as proceeds of such Disposition primarily equity securities
(including, without limitation, capital stock, convertible securities,
partnership or limited partnership interests and other types of equity
securities, without regard to the voting power or contractual or other
management or governance rights related to such equity securities) of the
purchaser or acquiror of such assets and properties of the Liberty Media Group,
any entity which succeeds (by merger, formation of a joint venture enterprise or
otherwise) to such assets and properties of the Liberty Media Group or a third
party issuer, which purchaser, acquiror or other issuer is engaged or proposes
to engage primarily in one or more businesses similar or complementary to the
businesses conducted by the Liberty Media Group prior to such Disposition, as
determined in good faith by the TCI Board of Directors.
The "Adjusted Outstanding Interest Fraction" means a fraction the numerator
of which is the number of outstanding shares of Liberty Media Group Common Stock
and the denominator of which is the sum of (a) such number of outstanding
shares, (b) the Number of Shares Issuable with Respect to the Inter-Group
Interest, (c) the number of shares of Liberty Media Group Common Stock issuable
upon conversion, exercise or exchange of Pre-Distribution Convertible Securities
and (d) the number of Committed Acquisition Shares issuable.
The "Net Proceeds" with respect to any Disposition of any of the properties
and assets of the Liberty Media Group means an amount, if any, equal to the
gross proceeds of such Disposition after any payment of, or reasonable provision
for, (a) any taxes payable by TCI in respect of such Disposition or in respect
of any resulting dividend or redemption (or which would have been payable but
for the utilization of tax benefits attributable to the TCI Group), (b) any
transaction costs, including, without limitation, any legal, investment banking
and accounting fees and expenses and (c) any liabilities and other obligations
(contingent or otherwise) of, or attributed to, the Liberty Media Group,
including, without limitation, any indemnity or guarantee obligations incurred
in connection with the Disposition or any liabilities for future purchase price
adjustments and any preferential amounts plus any accumulated and unpaid
dividends and other obligations (without duplication of amounts allocated for
the satisfaction of TCI's obligations with respect to Pre-Distribution
Convertible Securities and Committed Acquisition Shares issuable which are
included in the determination of the Adjusted Outstanding Interest Fraction) in
respect of TCI Preferred Stock attributed to the Liberty Media Group. TCI may
elect to pay the dividend or redemption price referred to in clause (i) or (ii)
above either in the same form as the proceeds of the Disposition were received
or in any other combination of cash or securities or other property (other than
TCI Common Stock) that the TCI Board of Directors determines will have an
aggregate market value on a fully distributed basis, of not less than the amount
of the Net Proceeds. If the dividend or redemption price is paid in the form of
securities of an issuer other than TCI, the TCI Board of Directors may determine
either to (i) pay the dividend or redemption price in the form of separate
classes or series of securities, with one class or series of such securities to
holders of LMG Series A Common Stock and another class or series of securities
to holders of LMG Series B Common Stock, provided that such securities (and, if
such securities are convertible into or exercisable or exchangeable for shares
of another class or series of securities, the securities so issuable upon such
conversion, exercise or exchange) do not differ in any respect other than their
relative voting rights and related differences in designation, conversion,
redemption and share distribution provisions with holders of shares of LMG
Series B Common Stock receiving the class or series having the higher relative
voting rights (without regard to whether such rights differ to a greater or
lesser extent than the corresponding differences in voting rights, designation,
conversion, redemption and share distribution provisions between the LMG Series
A Common Stock and the LMG Series B Common Stock), provided that if such
securities constitute capital
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stock of a subsidiary of TCI, such rights will not differ to a greater extent
than the corresponding differences in voting rights, designation, conversion,
redemption and share distribution provisions between the LMG Series A Common
Stock and LMG Series B Common Stock, and otherwise such securities will be
distributed on an equal per share basis, or (ii) pay the dividend or redemption
price in the form of a single class of securities without distinction between
the shares received by the holders of LMG Series A Common Stock and LMG Series B
Common Stock.
At the time of any dividend made as a result of a Disposition referred to
above, the TCI Group will be credited, and the Liberty Media Group will be
charged (in addition to the charge for the dividend paid in respect of
outstanding shares of Liberty Media Group Common Stock), with an amount equal to
the product of (i) the aggregate amount paid in respect of such dividend times
(ii) a fraction the numerator of which is the Inter-Group Interest Fraction and
the denominator of which is the Outstanding Interest Fraction.
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY. At any time at which all of
the assets and liabilities attributed to the Liberty Media Group are held
directly or indirectly by any one or more corporations all of the capital stock
of which is owned by TCI (the "Liberty Media Group Subsidiaries"), the TCI Board
of Directors may, subject to there being funds of TCI legally available
therefor, redeem on a pro rata basis, all of the outstanding shares of Liberty
Media Group Common Stock in exchange for an aggregate number of outstanding
fully paid and nonassessable shares of common stock of each Liberty Media Group
Subsidiary equal to the product of the Adjusted Outstanding Interest Fraction
and the number of all of the outstanding shares of common stock of such Liberty
Media Group Subsidiary.
In effecting such a redemption, the TCI Board of Directors may determine
either to (i) redeem shares of LMG Series A Common Stock and LMG Series B Common
Stock in exchange for shares of separate classes or series of common stock of
each Liberty Media Group Subsidiary with relative voting rights and related
differences in designation, conversion, redemption and share distribution
provisions not greater than the corresponding differences in voting rights,
designation, conversion, redemption and share distribution provisions between
the LMG Series A Common Stock and LMG Series B Common Stock, with holders of
shares of LMG Series B Common Stock receiving the class or series having the
higher relative voting rights, or (ii) redeem shares of LMG Series A Common
Stock and LMG Series B Common Stock in exchange for shares of a single class of
common stock of each Liberty Media Group Subsidiary without distinction between
the shares distributed to the holders of the two series of Liberty Media Group
Common Stock. If TCI determines to undertake a redemption as described in clause
(i) of the preceding sentence, the outstanding shares of common stock of each
Liberty Media Group Subsidiary not distributed to holders of Liberty Media Group
Common Stock would consist solely of the class or series having the lower
relative voting rights.
CERTAIN PROVISIONS RESPECTING CONVERTIBLE SECURITIES. Unless the provisions
of any class or series of Pre-Distribution Convertible Securities or Convertible
Securities which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares provide specifically to the contrary, after any
conversion date or redemption date on which all outstanding shares of Liberty
Media Group Common Stock were converted or redeemed, any share of Liberty Media
Group Common Stock that is issued on conversion, exercise or exchange of any
Pre-Distribution Convertible Securities or any Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition Shares
will, immediately upon issuance pursuant to such conversion, exercise or
exchange and without any notice or any other action on the part of TCI or the
TCI Board of Directors or the holder of such share of Liberty Media Group Common
Stock, be converted into or redeemed in exchange for, as applicable, the kind
and amount of shares of capital stock, cash and/or other securities or property
that a holder of such Pre-Distribution Convertible Securities or any Convertible
Securities which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares would have been entitled to receive pursuant to the
terms of such securities had such terms provided that the conversion, exercise
or exchange privilege in effect immediately prior to any such conversion or
redemption of all outstanding shares of Liberty Media Group Common Stock would
be adjusted so that the holder of any such Pre-Distribution Convertible
Securities or any Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares thereafter
surrendered for conversion, exercise or
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exchange would be entitled to receive the kind and amount of shares of capital
stock, cash and/or other securities or property such holder would have received
as a result of such action had such securities been converted, exercised or
exchanged immediately prior thereto. With respect to any Convertible Securities
which are created, established or otherwise first authorized for issuance
subsequent to the record date for the Distribution (other than Pre-Distribution
Convertible Securities and Convertible Securities which are convertible into or
exercisable or exchangeable for Committed Acquisition Shares), the terms and
provisions of which do not provide for adjustments specifying the kind and
amount of capital stock, cash and/or securities or other property that such
holder would be entitled to receive upon the conversion, exercise or exchange of
such Convertible Securities following any conversion date or redemption date on
which all outstanding shares of Liberty Media Group Common Stock were converted
or redeemed, then upon such conversion, exercise or exchange of such Convertible
Securities, any share of Liberty Media Group Common Stock that is issued on
conversion, exercise or exchange of any such Convertible Securities will,
immediately upon issuance pursuant to such conversion, exercise or exchange and
without any notice or any other action on the part of TCI or the TCI Board of
Directors or the holder of such share of Liberty Media Group Common Stock, be
redeemed in exchange for, to the extent assets of TCI are legally available
therefor, the amount of $.01 per share in cash.
GENERAL CONVERSION AND REDEMPTION PROVISIONS. Not later than the 10th
trading day following the consummation of a Disposition referred to above under
"--Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock," TCI will announce publicly by press release (i) the Net Proceeds of such
Disposition, (ii) the number of outstanding shares of LMG Series A Common Stock
and LMG Series B Common Stock, (iii) the number of shares of LMG Series A Common
Stock and LMG Series B Common Stock into or for which Convertible Securities are
then convertible, exercisable or exchangeable and the conversion, exercise or
exchange prices thereof (and stating which, if any, of such Convertible
Securities constitute Pre-Distribution Convertible Securities or Convertible
Securities which are convertible into or exercisable or exchangeable for
Committed Acquisition Shares) and the number of Committed Acquisition Shares
issuable, (iv) the Outstanding Interest Fraction as of a recent date preceding
the date of such notice and (v) the Adjusted Outstanding Interest Fraction as of
a recent date preceding the date of such notice. Not earlier than the 26th
trading day and not later than the 30th trading day following the consummation
of such Disposition, TCI will announce publicly by press release which of the
actions described in clauses (i), (ii) or (iii) of the first paragraph under
"--Mandatory Dividend, Redemption or Conversion of Liberty Media Group Common
Stock" it has irrevocably determined to take.
TCI also will cause to be given to each holder of outstanding shares of LMG
Series A Common Stock and LMG Series B Common Stock and to each holder of
Convertible Securities convertible into or exercisable or exchangeable for
shares of either such series (unless provision for notice is otherwise made
pursuant to the terms of such Convertible Securities) a notice setting forth (i)
if TCI has determined to pay a dividend described in clause (i) of the first
paragraph under "--Mandatory Dividend, Redemption or Conversion of Liberty Media
Group Common Stock" (a "Dividend Election"), (x) the record date for determining
holders entitled to receive such dividend, which will not be earlier than the
40th trading day, nor later than the 50th trading day, following the
consummation of such Disposition and (y) the anticipated payment date of such
dividend (which will not be more than 85 trading days following the consummation
of such Disposition), (ii) if TCI has determined to redeem shares of Liberty
Media Group Common Stock following a Disposition of all (and not merely
substantially all) of the properties and assets of the Liberty Media Group as
described in clause (ii)(a) of the first paragraph under "--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock" (a "Full
Redemption Election"), (x) the redemption date (which will not be more than 85
trading days following the consummation of such Disposition) and (y) a statement
that all shares of Liberty Media Group Common Stock outstanding on the
redemption date will be redeemed, (iii) if TCI has determined to redeem shares
of Liberty Media Group Common Stock following a Disposition of substantially all
(but not all) of the properties and assets of the Liberty Media Group as
described in clause (ii)(b) of the first paragraph under "--Mandatory Dividend,
Redemption or Conversion of Liberty Media Group Common Stock" (a "Partial
Redemption Election"), (x) a date not earlier than the 40th trading day and not
later than the 50th trading day following the consummation of such Disposition
on which shares of Liberty Media Group Common Stock then outstanding will be
selected for redemption and (y) the anticipated redemption date (which will
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not be more than 85 trading days following the consummation of such Disposition)
and (iv) in the event of any conversion as described above under "--Conversion
of Liberty Media Group Common Stock at the Option of TCI" or as described in
clause (iii) of the first paragraph under "--Mandatory Dividend, Redemption or
Conversion of Liberty Media Group Common Stock" (a "Conversion Election"), (x) a
statement that all outstanding shares of Liberty Media Group Common Stock will
be converted and (y) the conversion date (which will not be more than 85 trading
days following the consummation of the Disposition in the event of conversion
pursuant to the provisions described under "--Mandatory Dividend, Redemption or
Conversion of Liberty Media Group Common Stock" and which will not be more than
120 days after the Appraisal Date in the event of conversion pursuant to the
provisions described under "--Conversion of Liberty Media Group Common Stock at
the Option of TCI"). Each notice of a Dividend Election, a Full Redemption
Election or a Partial Redemption Election also will state, as applicable, (i)
the kind of shares of capital stock, cash and/or other securities or property to
be distributed in respect of shares of Liberty Media Group Common Stock (in the
case of a Dividend Election) or paid as the redemption price with respect to
shares of Liberty Media Group Common Stock outstanding on the redemption date
(in the case of a Full Redemption Election) or selected for redemption (in the
case of a Partial Redemption Election); (ii) the Net Proceeds of such
Disposition; (iii) in the case of a Dividend Election and a Partial Redemption
Election, the Outstanding Interest Fraction as of a recent date preceding the
date of such notice, and in the case of a Full Redemption Election, the Adjusted
Outstanding Interest Fraction as of a recent date preceding the date of such
notice; (iv) the number of outstanding shares of LMG Series A Common Stock and
LMG Series B Common Stock and the number of shares of LMG Series A Common Stock
and LMG Series B Common Stock into or for which outstanding Convertible
Securities are then convertible, exercisable or exchangeable and the conversion,
exercise or exchange price thereof (and, in the case of a Full Redemption
Election, stating which, if any, of such Convertible Securities constitute Pre-
Distribution Convertible Securities or Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition Shares
and the number of Committed Acquisition Shares issuable); (v) in the case of a
Full Redemption Election, the place or places where certificates for shares of
Liberty Media Group Common Stock properly endorsed or assigned for transfer
(unless TCI waives such requirement), are to be surrendered for delivery of
certificates for shares of such capital stock, cash and/or other securities or
property; (vi) in the case of notice to holders of Convertible Securities, a
statement to the effect that holders of such Convertible Securities will be
entitled to receive such dividend (in the case of a Dividend Election) or
participate in such redemption (in the case of a Full Redemption Election) or in
the selection of shares for redemption (in the case of a Partial Redemption
Election) only if such holders appropriately convert, exercise or exchange such
Convertible Securities on or prior to the record date for determining holders
entitled to receive such dividend, the redemption date, or the date fixed for
the selection of shares to be redeemed, respectively, and a statement as to
what, if anything, such holder will be entitled to receive pursuant to the terms
of such Convertible Securities or, if applicable, the provisions described under
"--Certain Provisions Respecting Convertible Securities" if such holder
converts, exercises or exchanges such Convertible Securities following such
redemption date or date for selection of shares to be redeemed, as applicable,
and (vii) in the case of a Partial Redemption Election, a statement that TCI
will not be required to register a transfer of any shares of Liberty Media Group
Common Stock for a period of 15 trading days next preceding the date fixed for
selection of shares to be redeemed. In the case of a Partial Redemption
Election, TCI also will cause to be given to each holder of shares of Liberty
Media Group Common Stock selected for redemption, a notice setting forth (i) the
number of shares of LMG Series A Common Stock and LMG Series B Common Stock held
by such holder to be redeemed, (ii) a statement that such shares of LMG Series A
Common Stock and LMG Series B Common Stock will be redeemed, (iii) the
redemption date (which will not be more than 85 trading days following the
consummation of such Disposition), (iv) the kind and per share amount of shares
of capital stock, cash and/or other securities or property to be received by
such holder with respect to each share of such Liberty Media Group Common Stock
to be redeemed, including details as to the calculation thereof, and (v) the
place or places where certificates for shares of such Liberty Media Group Common
Stock, properly endorsed or assigned for transfer (unless TCI waives such
requirement), are to be surrendered for delivery of certificates for shares of
such capital stock, cash and/or other securities or property. The outstanding
shares of Liberty Media Group Common Stock to be redeemed will be redeemed by
TCI pro rata among the holders of Liberty Media Group Common Stock or by such
other method as may be determined by the TCI Board of Directors to be equitable.
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In the case of a Conversion Election, TCI's notice also will state (i) the
per share number of shares of TCI Group Series A Common Stock or TCI Group
Series B Common Stock, as applicable, to be received with respect to each share
of LMG Series A Common Stock or LMG Series B Common Stock, including details as
to the calculation thereof, (ii) the place or places where certificates for
shares of Liberty Media Group Common Stock, properly endorsed or assigned for
transfer (unless TCI waives such requirement), are to be surrendered, (iii) the
number of outstanding shares of LMG Series A Common Stock and LMG Series B
Common Stock, the number of Committed Acquisition Shares issuable and the number
of shares of LMG Series A Common Stock and LMG Series B Common Stock into or for
which outstanding Convertible Securities are then convertible, exercisable or
exchangeable and the conversion, exercise or exchange prices thereof and (iv) in
the case of a notice to holders of Convertible Securities, a statement to the
effect that holders of such Convertible Securities will be entitled to
participate in such conversion only if such holders appropriately convert,
exercise or exchange such Convertible Securities on or prior to the conversion
date and a statement as to what, if anything, such holders will be entitled to
receive pursuant to the terms of such Convertible Securities or, if applicable,
the provision described under "--Certain Provisions Respecting Convertible
Securities" if such holders convert, exercise or exchange such Convertible
Securities following such conversion date.
Notice of a Dividend Election will be given not later than the 30th trading
day following the consummation of the Disposition; notice of a Full Redemption
Election will be given not less than 35 trading days nor more than 45 trading
days prior to the redemption date; notice of a Partial Redemption Election will
be given not later than the 30th trading day following the consummation of the
Disposition and the notice to holders of shares selected for redemption will be
given promptly following such selection, but not earlier than the 40th trading
day and not later than the 50th trading day following the consummation of the
Disposition; and notice of a Conversion Election will be given not less than 35
trading days nor more than 45 trading days prior to the conversion date. All
such notices will be sent by first-class mail, postage prepaid, to a holder at
such holder's address as the same appears on the transfer books of TCI.
If TCI determines to redeem shares of LMG Series A Common Stock and LMG
Series B Common Stock as described above under "--Redemption in Exchange for
Stock of Subsidiary," TCI will promptly cause to be given to each holder of LMG
Series A Common Stock and LMG Series B Common Stock and to each holder of
Convertible Securities convertible into or exercisable or exchangeable for
shares of either such series (unless provision for such notice is otherwise made
pursuant to the terms of such Convertible Securities), a notice setting forth
(i) a statement that all outstanding shares of Liberty Media Group Common Stock
will be redeemed in exchange for shares of common stock of the Liberty Media
Group Subsidiaries, (ii) the redemption date, (iii) the Adjusted Outstanding
Interest Fraction as of a recent date preceding the date of such notice, (iv)
the place or places where certificates for shares of Liberty Media Group Common
Stock, properly endorsed or assigned for transfer (unless TCI waives such
requirement), are to be surrendered for delivery of certificates for shares of
common stock of the Liberty Media Group Subsidiaries, (v) the number of
outstanding shares of LMG Series A Common Stock and LMG Series B Common Stock
and the number of shares of LMG Series A Common Stock and LMG Series B Common
Stock into or for which outstanding Convertible Securities are then convertible,
exercisable or exchangeable and the conversion, exercise or exchange prices
thereof (and stating which, if any, of such Convertible Securities constitute
Pre-Distribution Convertible Securities or Convertible Securities which are
convertible into or exercisable or exchangeable for Committed Acquisition
Shares) and the number of Committed Acquisition Shares issuable, and (vi) in the
case of a notice to holders of Convertible Securities, a statement to the effect
that holders of such Convertible Securities will be entitled to receive shares
of common stock of the Liberty Media Group Subsidiaries upon redemption only if
such holders appropriately convert, exercise or exchange such Convertible
Securities on or prior to the redemption date referred to in clause (ii) of this
sentence and a statement as to what, if anything, such holders will be entitled
to receive pursuant to the terms of such Convertible Securities or, if
applicable, the provisions described under "--Certain Provisions Respecting
Convertible Securities" if such holders convert, exercise or exchange such
Convertible Securities following the redemption date. Such notice will be sent
by first-class mail, postage prepaid, not less than 35 trading days nor more
than 45 trading days prior to the redemption date, at such holder's address as
the same appears on the transfer books of TCI.
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Neither the failure to mail any notice to any particular holder of Liberty
Media Group Common Stock or of Convertible Securities nor any defect therein
will affect the sufficiency thereof with respect to any other holder of
outstanding shares of Liberty Media Group Common Stock or of Convertible
Securities, or the validity of any conversion or redemption.
TCI will not be required to issue or deliver fractional shares of any class
of capital stock or any fractional securities to any holder of Liberty Media
Group Common Stock upon any conversion, redemption, dividend or other
distribution described above. In connection with the determination of the number
of shares of any class of capital stock that is issuable or the amount of
securities that is deliverable to any holder of record upon any such conversion,
redemption, dividend or other distribution (including any fractions of shares or
securities), TCI may aggregate the number of shares of Liberty Media Group
Common Stock held at the relevant time by such holder of record. If the number
of shares of any class of capital stock or the amount of securities remaining to
be issued or delivered to any holder of Liberty Media Group Common Stock is a
fraction, TCI will, if such fraction is not issued or delivered to such holder,
pay a cash adjustment in respect of such fraction in an amount equal to the fair
market value of such fraction on the fifth trading day prior to the date such
payment is to be made (without interest). For purposes of the preceding
sentence, "fair market value" of any fraction will be (i) in the case of any
fraction of a share of capital stock of TCI, the product of such fraction and
the Market Value of one share of such capital stock and (ii) in the case of any
other fractional security, such value as is determined by the TCI Board of
Directors.
No adjustments in respect of dividends will be made upon the conversion or
redemption of any shares of Liberty Media Group Common Stock; provided, however,
that if the conversion date or the redemption date with respect to the Liberty
Media Group Common Stock is subsequent to the record date for the payment of a
dividend or other distribution thereon or with respect thereto, the holders of
shares of Liberty Media Group Common Stock at the close of business on such
record date will be entitled to receive the dividend or other distribution
payable on or with respect to such shares on the date set for payment of such
dividend or other distribution, notwithstanding the conversion or redemption of
such shares or TCI's default in payment of the dividend or distribution due on
such date.
Before any holder of shares of Liberty Media Group Common Stock will be
entitled to receive certificates representing shares of any kind of capital
stock or cash and/or securities or other property to be received by such holder
with respect to any conversion or redemption of shares of Liberty Media Group
Common Stock, such holder is required to surrender at such place as TCI will
specify certificates for such shares, properly endorsed or assigned for transfer
(unless TCI waives such requirement). TCI will as soon as practicable after such
surrender of certificates representing shares of Liberty Media Group Common
Stock deliver to the person for whose account such shares were so surrendered,
or to the nominee or nominees of such person, certificates representing the
number of whole shares of the kind of capital stock or cash and/or securities or
other property to which such person is entitled, together with any payment for
fractional securities referred to above. If less than all of the shares of
Liberty Media Group Common Stock represented by any one certificate are to be
redeemed, TCI will issue and deliver a new certificate for the shares of Liberty
Media Group Common Stock not redeemed. TCI will not be required to register a
transfer of (i) any shares of Liberty Media Group Common Stock for a period of
15 trading days next preceding any selection of shares of Liberty Media Group
Common Stock to be redeemed or (ii) any shares of Liberty Media Group Common
Stock selected or called for redemption. Shares selected for redemption may not
thereafter be converted pursuant to the provisions described under "--Conversion
of TCI Group Series B Common Stock and LMG Series B Common Stock at the Option
of the Holder."
From and after any applicable conversion date or redemption date, all rights
of a holder of shares of Liberty Media Group Common Stock that were converted or
redeemed will cease except for the right, upon surrender of the certificates
representing shares of Liberty Media Group Common Stock, to receive certificates
representing shares of the kind and amount of capital stock or cash and/or
securities or other property for which such shares were converted or redeemed,
together with any payment for fractional securities and such holder will have no
other or further rights in respect of the shares of Liberty Media Group Common
Stock so converted or redeemed, including, but not limited to, any rights with
respect
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to any cash, securities or other property which are reserved or otherwise
designated by TCI as being held for the satisfaction of TCI's obligations to pay
or deliver any cash, securities or other property upon the conversion, exercise
or exchange of any Convertible Securities outstanding as of the date of such
conversion or redemption or any Committed Acquisition Shares which may then be
issuable. No holder of a certificate that, immediately prior to the applicable
conversion date or redemption date for the Liberty Media Group Common Stock,
represented shares of Liberty Media Group Common Stock will be entitled to
receive any dividend or other distribution with respect to shares of any kind of
capital stock into or in exchange for which the Liberty Media Group Common Stock
was converted or redeemed until surrender of such holder's certificate for a
certificate or certificates representing shares of such kind of capital stock.
Upon such surrender, there will be paid to the holder the amount of any
dividends or other distributions (without interest) which theretofore became
payable with respect to a record date after the conversion date or redemption
date, as the case may be, but that were not paid by reason of the foregoing,
with respect to the number of whole shares of the kind of capital stock
represented by the certificate or certificates issued upon such surrender. From
and after a conversion date or redemption date, as the case may be, for any
shares of Liberty Media Group Common Stock, TCI will, however, be entitled to
treat the certificates for shares of Liberty Media Group Common Stock that have
not yet been surrendered for conversion or redemption as evidencing the
ownership of the number of whole shares of the kind or kinds of capital stock
for which the shares of Liberty Media Group Common Stock represented by such
certificates have been converted or redeemed, notwithstanding the failure to
surrender such certificates.
TCI will pay any and all documentary, stamp or similar issue or transfer
taxes that may be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on conversion or redemption of shares of
Liberty Media Group Common Stock. TCI will not, however, be required to pay any
tax that may be payable in respect of any transfer involved in the issue and
delivery of any shares of capital stock in a name other than that in which the
shares of Liberty Media Group Common Stock so converted or redeemed were
registered and no such issue or delivery will be made unless and until the
person requesting such issue has paid to TCI the amount of any such tax, or has
established to the satisfaction of TCI that such tax has been paid.
LIQUIDATION RIGHTS
In the event of a liquidation, dissolution or winding up of TCI, whether
voluntary or involuntary, after payment or provision for payment of the debts
and other liabilities of TCI and subject to the prior payment in full of the
preferential amounts to which any class or series of TCI Preferred Stock is
entitled, (i) the holders of the shares of TCI Group Common Stock will share
equally, on a share for share basis, in a percentage of the funds of TCI
remaining for distribution to its common stockholders equal to 100% multiplied
by the average daily ratio (expressed as a decimal) of X/Z for the 20-trading
day period ending on the trading day prior to the date of the public
announcement of such liquidation, dissolution or winding up, and (ii) the
holders of the shares of Liberty Media Group Common Stock will share equally, on
a share for share basis, in a percentage of the funds of TCI remaining for
distribution to its common stockholders equal to 100% multiplied by the average
daily ratio (expressed as a decimal) of Y/Z for such 20-trading day period,
where X is the aggregate Market Capitalization of the TCI Group Series A Common
Stock and the TCI Group Series B Common Stock, Y is the aggregate Market
Capitalization of the LMG Series A Common Stock and the LMG Series B Common
Stock, and Z is the aggregate Market Capitalization of the TCI Group Series A
Common Stock, the TCI Group Series B Common Stock, the LMG Series A Common Stock
and the LMG Series B Common Stock. Neither a consolidation, merger nor sale of
assets will be construed to be a "liquidation," "dissolution" or "winding up" of
TCI. The "Market Capitalization" of any class or series of capital stock of TCI
on any trading day means the product of (i) the Market Value of one share of
such class or series on such trading day and (ii) the number of shares of such
class or series outstanding on such trading day.
No holder of Liberty Media Group Common Stock will have any special right to
receive specific assets of the Liberty Media Group in the case of any
dissolution, liquidation or winding up of TCI.
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DETERMINATIONS BY THE TCI BOARD OF DIRECTORS
The TCI Charter provides that any determinations made by the TCI Board of
Directors under any provision described under this section will be final and
binding on all stockholders of TCI, except as may otherwise be required by law.
Such a determination would not be binding if it were established that the
determination was made in breach of a fiduciary duty of the TCI Board of
Directors. TCI will prepare a statement of any such determination by the TCI
Board of Directors respecting the fair market value of any properties, assets or
securities and will file such statement with the Secretary of TCI.
PREEMPTIVE RIGHTS
Holders of the TCI Group Common Stock and Liberty Media Group Common Stock
do not have any preemptive rights to subscribe for any additional shares of
capital stock or other obligations convertible into or exercisable for shares of
capital stock that may hereafter be issued by TCI.
OTHER MATTERS
The DGCL, the TCI Charter and TCI's Bylaws contain provisions which may
serve to discourage or make more difficult a change in control of TCI without
the support of the TCI Board of Directors or without meeting various other
conditions. The principal provisions of the DGCL and the aforementioned
corporate governance documents are outlined below.
DGCL Section 203, in general, prohibits a "business combination" between a
corporation and an "interested stockholder" within three years of the date such
stockholder became an "interested stockholder," unless (i) prior to such date
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, exclusive of shares owned by
directors who are also officers and by certain employee stock plans or (iii) on
or after such date, the business combination is approved by the board of
directors and authorized by the affirmative vote at a stockholders' meeting of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. The term "business combination" is defined to include,
among other transactions between the interested stockholder and the corporation
or any direct or indirect majority-owned subsidiary thereof, a merger or
consolidation; a sale, pledge, transfer or other disposition (including as part
of a dissolution) of assets having an aggregate market value equal to 10% or
more of either the aggregate market value of all assets of the corporation on a
consolidated basis or the aggregate market value of all the outstanding stock of
the corporation; certain transactions that would increase the interested
stockholder's proportionate share ownership of the stock of any class or series
of the corporation or such subsidiary; and any receipt by the interested
stockholder of the benefit of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the corporation or any such
subsidiary. In general, and subject to certain exceptions, an "interested
stockholder" is any person who is the owner of 15% or more of the outstanding
voting stock (or, in the case of a corporation with classes of voting stock with
disparate voting power, 15% or more of the voting power of the outstanding
voting stock) of the corporation, and the affiliates and associates of such
person. The term "owner" is broadly defined to include any person that
individually or with or through his or its affiliates or associates, among other
things, beneficially owns such stock, or has the right to acquire such stock
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement or understanding or upon the exercise of
warrants or options or otherwise or has the right to vote such stock pursuant to
any agreement or understanding, or has an agreement or understanding with the
beneficial owner of such stock for the purpose of acquiring, holding, voting or
disposing of such stock. The restrictions of DGCL Section 203 do not apply to
corporations that have elected, in the manner provided therein, not to be
subject to such section or, with certain exceptions, which do not have a class
of voting stock that is listed on a national securities exchange or authorized
for quotation on an interdealer quotation system of a registered national
securities association or held of record by more than 2,000 stockholders. The
TCI Charter does not contain any provision "opting out" of the application of
DGCL Section 203 and TCI
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has not taken any of the actions necessary for it to "opt out" of such
provision. As a result, the provisions of Section 203 will remain applicable to
transactions between TCI and any of its "interested stockholders."
The TCI Charter also contains certain provisions which could make a change
in control of TCI more difficult. For example, the TCI Charter requires, subject
to the rights, if any, of any class or series of TCI Preferred Stock, the
affirmative vote of 66 2/3% of the total voting power of the outstanding shares
of Voting Securities, voting together as a single class, to approve (i) a merger
or consolidation of TCI with, or into, another corporation, other than a merger
or consolidation which does not require the consent of stockholders under the
DGCL or a merger or consolidation which has been approved by 75% of the members
of the TCI Board of Directors (in which case, in accordance with the DGCL, the
affirmative vote of a majority of the total voting power of the outstanding
Voting Securities would, with certain exceptions, be required for approval),
(ii) the sale, lease or exchange of all or substantially all of the property and
assets of TCI or (iii) the dissolution of TCI. "Voting Securities" is currently
defined as the TCI Group Common Stock, the Liberty Media Group Common Stock and
any class or series of TCI Preferred Stock entitled to vote generally with the
holders of TCI Common Stock on matters submitted to stockholders for a vote. The
TCI Charter also provides for a TCI Board of Directors of not less than three
members, divided into three classes of approximately equal size, with each class
to be elected for a three-year term at each annual meeting of stockholders. The
exact number of directors, currently nine, is fixed by the TCI Board of
Directors. The holders of TCI Group Common Stock, Liberty Media Group Common
Stock, Class B Preferred Stock and certain series of Series Preferred Stock,
voting together as a single class, vote in elections for directors. (TCI's
Convertible Redeemable Participating Preferred Stock, Series F has voting
rights, but outstanding shares are not entitled to vote because they are held by
subsidiaries of TCI.) Stockholders of TCI do not have cumulative voting rights.
The TCI Charter authorizes the issuance of 50,000,000 shares of Series
Preferred Stock of which 33,901,240 shares remain available for designation as
of January 25, 1996. Under the TCI Charter, the TCI Board of Directors is
authorized, without further action by the stockholders of TCI, to establish the
preferences, limitations and relative rights of the Series Preferred Stock. In
addition, 1,900,000,000 shares of the TCI Group Common Stock and 825,000,000
shares of Liberty Media Group Common Stock are currently authorized by the TCI
Charter, of which 1,143,097,437 and 660,906,868 respectively, remained available
for issuance as of November 1, 1995. On January 17, 1996, TCI Communications,
Inc., a subsidiary of TCI, issued 4.6 million shares of Cumulative Exchangeable
Preferred Stock, Series A which shares are initially exchangeable for an
aggregate of 8,606,600 shares of TCI Group Series A Common Stock. On January 25,
1996 TCI issued (i) 7,259,380 shares of the Series G Preferred Stock, which
shares are initially convertible into an aggregate of 7,622,349 whole shares of
TCI Group Series A Common Stock and (ii) 7,259,380 shares of the Series H
Preferred Stock, which shares are initially convertible into an aggregate of
1,905,588 whole shares of LMG Series A Common Stock. The issue and sale of
shares of TCI Group Common Stock, Liberty Media Group Common Stock and/or Series
Preferred Stock could occur in connection with an attempt to acquire control of
TCI, and the terms of such shares of Series Preferred Stock could be designed in
part to impede the acquisition of such control.
The TCI Charter requires the affirmative vote of 66 2/3% of the total voting
power of the outstanding shares of Voting Securities, voting together as a
single class, to approve any amendment, alteration or repeal of any provision of
the TCI Charter or the addition or insertion of other provisions therein.
The TCI Charter and TCI's Bylaws provide that a special meeting of
stockholders will be held at any time, subject to the rights of the holders of
any class or series of TCI Preferred Stock, upon the call of the Secretary of
TCI upon (i) the written request of the holders of not less than 66 2/3% of the
total voting power of the outstanding shares of Voting Securities or (ii) at the
request of not less than 75% of the members of the TCI Board of Directors.
Subject to the rights of any class or series of TCI Preferred Stock, TCI's
Bylaws require that written notice of the intent to make a nomination at a
meeting of stockholders must be received by the Secretary of TCI, at TCI's
principal executive offices, not later than (a) with respect to an election of
directors to be held at an annual meeting of stockholders, 90 days in advance of
such meeting, and (b) with respect to an election of directors to be held at a
special meeting
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of stockholders, the close of business on the seventh day following the day on
which notice of such meeting is first given to stockholders. The notice must
contain: (1) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (2) a representation
that the stockholder is a holder of record of TCI's Voting Securities entitled
to vote at the meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (3) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (4) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each proposed nominee been nominated, or intended to be nominated, by the TCI
Board of Directors; and (5) the consent of each nominee to serve as a director
of TCI if so elected. Any actions to remove directors is required to be for
"cause" (as defined in the TCI Charter) and be approved by the holders of
66 2/3% of the total voting power of the outstanding shares entitled to vote in
the election of directors.
LEGAL MATTERS
Certain legal matters with respect to the Shares will be passed upon for the
Company by Stephen M. Brett, Esq., Executive Vice President and General Counsel
of the Company.
EXPERTS
The consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1994 and 1993, 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, 1994, and all related
financial statement schedules, which appear in Tele-Communications, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1994, as amended,
have been incorporated by reference herein in reliance upon the reports, dated
March 27, 1995, 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
covering the December 31, 1994 consolidated financial statements refer to the
adoption of Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," in 1994.
The consolidated balance sheet of TeleWest Communications plc and
subsidiaries as of 31 December 1994 and 1993, and the related consolidated
statements of operations and cash flows for each of the years in the three year
period ended 31 December 1994, which appear in the 31 December 1994 Annual
Report on Form 10-K of Tele-Communications, Inc., as amended, have been
incorporated by reference herein in reliance upon the report of KPMG,
independent chartered accountants, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
The combined balance sheets of Cablevision (a combination of certain cable
television assets of Cablevision S.A., Televisora Belgrano S.A., Construred S.A.
and Univent's S.A.) as of December 31, 1994 and 1993, and the related combined
statements of operations and deficit and cash flows for each of the years in the
three-year period ended December 31, 1994, which appear in the Current Report on
Form 8-K of Tele-Communications, Inc., dated April 20, 1995, as amended, have
been incorporated by reference herein in reliance upon the report of KPMG
Finsterbusch Pickenhayn Sibille, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated balance sheets of QVC, Inc. and subsidiaries as of
January 31, 1994 and 1993, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended January 31, 1994, which appear in the Current Report on
Form 8-K of Tele-Communications, Inc. dated February 3, 1995, as amended, have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in
30
<PAGE>
accounting and auditing. The report of KPMG Peat Marwick LLP covering the
January 31, 1994 consolidated financial statements refers to a change in the
method of accounting for income taxes.
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 in the Prospectus by reference to the Company'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 auditing and accounting.
31
<PAGE>
================================================================================
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
PAGE
----
AVAILABLE INFORMATION..................................................... 3
INCORPORATION OF DOCUMENTS BY
REFERENCE.............................................................. 3
THE COMPANY............................................................... 4
SELLING STOCKHOLDERS...................................................... 4
PLAN OF DISTRIBUTION...................................................... 8
DESCRIPTION OF TCI COMMON STOCK........................................... 9
LEGAL MATTERS............................................................. 30
EXPERTS................................................................... 30
================================================================================
================================================================================
TELE-COMMUNICATIONS, INC.
Tele-Communications, Inc. Series A TCI Group
Common Stock ($1.00 par value)
Tele-Communications, Inc.
Series A Liberty Media Group
Common Stock ($1.00 par value)
-----------------------------------------
PROSPECTUS
-----------------------------------------
February ___, 1996
================================================================================
<PAGE>
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.............................................. $130,913.00
*Blue Sky Fees and Expenses (including counsel fees)........... 5,000.00
*Legal Fees and Expenses....................................... 15,000.00
*Accounting Fees and Expenses.................................. 10,000.00
Additional Listing Fees....................................... 35,000.00
*Miscellaneous................................................. 1,000.00
----------
*Total.................................................. $196,913.00
</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 threatened, pending or
completed action, 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,
officer, employee or agent of the corporation against all expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person 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 or her
conduct was unlawful. A corporation may similarly indemnify such person for
expenses actually and reasonably incurred by such person 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 or she
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 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 of the Delaware General Corporation Law, 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 became effective.
II-1
<PAGE>
Article V, Section E of the Company's Restated Certificate of Incorporation
provides as follows:
"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.
II-2
<PAGE>
(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
be reduced by any amount such person may collect as indemnification
from such other corporation, partnership, joint venture, trust,
enterprise or nonprofit entity.
3. Amendment or Repeal.
-------------------
Any repeal or modification of the foregoing provisions of this Section
E shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of
such repeal or modification."
Article II, Section 2.9 of the Company's Bylaws also contains an indemnity
provision, requiring the Company to indemnify members of the Board of Directors
and officers of the Company and their respective heirs, personal representatives
and successors in interest for or on account of any action performed on behalf
of the Company, to the fullest extent provided by the laws of the State of
Delaware and the Company's Restated Certificate of Incorporation, as then or
thereafter in effect.
The Company 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 Company or is or was serving at the Company'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 Company 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 Company 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 Company (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 Company will seek legal advice only from independent legal counsel
selected by the indemnitee and approved by the Company.
II-3
<PAGE>
The indemnification agreements impose upon the Company 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 Company's
Bylaws or otherwise. Although not requiring the maintenance of directors' and
officers' liability insurance, the indemnification agreements require that an
indemnitee be provided with the maximum coverage available for any director or
officer of the Company if there is such a policy.
The Company may purchase liability insurance policies covering its directors
and officers.
In addition, each of the Selling Stockholders have agreed to indemnify the
Company, its directors and officers and each person, if any, who controls the
Company within the meaning of either the Securities Act or the Securities
Exchange Act of 1934, as amended, against certain liabilities, including civil
liabilities under the Securities Act, in connection with certain actions arising
out of the sale of the Shares registered hereby.
II-4
<PAGE>
ITEM 16. EXHIBITS
Exhibits Description
- -------- -----------
4.1 Restated Certificate of Incorporation of the Company, dated
August 4, 1994, as amended on August 4, 1994, August 16, 1994,
October 11, 1994, October 21, 1994, January 26, 1995, August 3,
1995 and August 3, 1995 (Incorporated herein by reference to
Exhibit 99.1 of Company's Current Report on Form 8-K, dated
August 10, 1995 (Commission File No. 0-20421)).
4.2 Bylaws of the Company as adopted June 16, 1994 (Incorporated
herein by reference to Exhibit 3.2 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, as amended by
Form 10-K/A (Amendment No. 1) (Commission File No. 0-20421)).
4.3 Specimen Stock Certificate for the Tele-Communications, Inc.
Series A TCI Group Common Stock, par value $1.00 per share
(Incorporated herein by reference to Exhibit 4.3 of Company's
registration statement on Form 8-A, as amended by Form 8-A/A
(Amendments No. 1 and 2) Commission File No. 0-20421).
4.4 Specimen Stock Certificate for Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share
(Incorporated herein by reference to Exhibit 4.5 of Company's
registration statement on Form 8-A, as amended by Form 8-A/A
(Amendments No. 1 and 2) Commission File No. 0-20421).
5 Opinion of Stephen M. Brett, Esq.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG Finsterbusch Pickenhayn Sibille.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Price Waterhouse LLP.
23.6 Consent of Stephen M. Brett, Esq. (included in Exhibit 5).
24 Powers of Attorney (included on page II-10).
99.1 Agreement and Plan of Merger and Reorganization, dated as of
June 28, 1995, by and between The Chronicle Publishing Company
and Tele-Communications, Inc.
99.2 Form of Shareholders Registration Rights Agreement between
shareholders of The Chronicle Publishing Company and Tele-
Communications, Inc.
99.3 Contribution and Assumption Agreement between The Chronicle
Publishing Company and Spinco.
II-5
<PAGE>
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.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(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
II-6
<PAGE>
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-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 February 9,
1996.
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
-----------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
II-8
<PAGE>
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 or 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:
Signature Title Date
--------- ----- ----
/s/ Bob Magness Chairman of the Board February 9, 1996
- --------------------------- and Director
(Bob Magness)
/s/ John C. Malone President and Director February 9, 1996
- --------------------------- (Principal Executive
(John C. Malone) Officer)
/s/ Donne F. Fisher Executive Vice President and February 9, 1996
- --------------------------- Director (Principal Financial
(Donne F. Fisher) and Accounting Officer)
/s/ John W. Gallivan Director February 9, 1996
- ---------------------------
(John W. Gallivan)
/s/ Kim Magness Director February 9, 1996
- ---------------------------
(Kim Magness)
/s/ Robert A. Naify Director February 9, 1996
- ---------------------------
(Robert A. Naify)
/s/ Jerome H. Kern Director February 9, 1996
- ---------------------------
(Jerome H. Kern)
/s/ Tony Coelho Director February 9, 1996
- ---------------------------
(Tony Coelho)
II-9
<PAGE>
EXHIBIT INDEX
4.1 Restated Certificate of Incorporation of the Company, dated
August 4, 1994, as amended on August 4, 1994, August 16, 1994,
October 11, 1994, October 21, 1994, January 26, 1995, August 3,
1995 and August 3, 1995 (Incorporated herein by reference to
Exhibit 99.1 of Company's Current Report on Form 8-K, dated
August 10, 1995 (Commission File No. 0-20421)).
4.2 Bylaws of the Company as adopted June 16, 1994 (Incorporated
herein by reference to Exhibit 3.2 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, as amended by
Form 10-K/A (Amendment No. 1) (Commission File No. 0-20421)).
4.3 Specimen Stock Certificate for the Tele-Communications, Inc.
Series A TCI Group Common Stock, par value $1.00 per share
(Incorporated herein by reference to Exhibit 4.3 of Company's
registration statement on Form 8-A, as amended by Form 8-A/A
(Amendments No. 1 and 2) Commission File No. 0-20421).
4.4 Specimen Stock Certificate for Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share
(Incorporated herein by reference to Exhibit 4.5 of Company's
registration statement on Form 8-A, as amended by Form 8-A/A
(Amendments No. 1 and 2) Commission File No. 0-20421).
5 Opinion of Stephen M. Brett, Esq.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG.
23.3 Consent of KPMG Finsterbusch Pickenhayn Sibille.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Price Waterhouse LLP.
23.6 Consent of Stephen M. Brett, Esq. (included in Exhibit 5).
24 Powers of Attorney (included on page II-10).
99.1 Agreement and Plan of Merger and Reorganization, dated as of June
28, 1995, by and between The Chronicle Publishing Company and
Tele-Communications, Inc.
99.2 Form of Shareholders Registration Rights Agreement between
shareholders of The Chronicle Publishing Company and Tele-
Communications, Inc.
99.3 Contribution and Assumption Agreement between The Chronicle
Publishing Company and Spinco.
II-10
<PAGE>
TELE-COMMUNICATIONS, INC.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
EXHIBIT 5
---------
February 9, 1996
Board of Directors
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Dear Sirs:
I am Executive Vice President and General Counsel of Tele-
Communications, Inc., a Delaware corporation (the "Company"), and this opinion
is being delivered in connection with the filing of the Company's Registration
Statement on Form S-3 (the "Registration Statement"), with respect to the
registration under the Securities Act of 1933, as amended, of shares of the
Company's Tele-Communications, Inc. Series A TCI Group Common Stock, par value
$1.00 per share (the "TCI Group Shares"), and Tele-Communications, Inc. Series A
Liberty Media Group Common Stock, par value $1.00 per share (the "Liberty Group
Shares" and collectively with the TCI Group Shares, the "Shares"), which Shares
are (i) to be acquired by certain individuals pursuant to the Agreement and Plan
of Merger and Reorganization, dated as of June 28, 1995 (the "Merger
Agreement"), by and between the Company and The Chronicle Publishing Company
("Chronicle") and (ii) to be offered and sold from time to time by the holders
thereof named in the Registration Statement (the "Selling Stockholders").
In connection therewith, I have examined, among other things, the
originals, certified copies or copies otherwise identified to my satisfaction as
being copies of originals, of the Restated Certificate of Incorporation and By-
Laws of the Company, as amended; minutes of the proceedings of the Company's
Board of Directors, including committees thereof; the Merger Agreement and all
exhibits thereto; and such other documents, records, certificates of public
officials and questions of law as I deemed necessary or appropriate for the
purpose of this opinion. In rendering this opinion, I have relied, to the extent
I deemed such reliance appropriate, on certificates of officers of the Company
as to factual matters. I have assumed (i) the authenticity of all documents
submitted to me as originals and the conformity to authentic original documents
of all documents submitted to me as certified, conformed or reproduction copies,
(ii) that there will be no changes in applicable law between the date of this
opinion and the date the Shares proposed to be sold by the Selling Stockholders
pursuant to the Registration Statement are actually sold, (iii) that the
representations and warranties of Chronicle contained
<PAGE>
February 9, 1996
Page 2
in the Merger Agreement are true and complete and (iv) that the Shares will be
issued in accordance with the terms of the Merger Agreement.
Based upon the foregoing, I am of the opinion that the Shares proposed
to be sold by the Selling Stockholders have been duly authorized and, when the
Shares have been issued and delivered to the Selling Stockholders pursuant to
the terms of the Merger Agreement, the Shares will be validly issued, fully paid
and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to me contained therein under the
heading "Legal Matters." In giving the foregoing consent, I do not admit that I
am in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Stephen M. Brett
Stephen M. Brett
Executive Vice President and
General Counsel
<PAGE>
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 27, 1995,
relating to the consolidated balance sheets of Tele-Communications, Inc. and
subsidiaries as of December 31, 1994 and 1993, 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, 1994, and all related
financial statement schedules, which reports appear in the December 31, 1994
Annual Report on Form 10-K, as amended, of Tele-Communications, Inc. and to the
reference to our firm under the heading "Experts" in the registration statement.
Our reports covering the December 31, 1994 consolidated financial statements
refer to the adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
February 2, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Shareholders of
TeleWest Communications plc:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Tele-Communications, Inc. of our report dated 21 March 1995,
relating to the consolidated balance sheet of TeleWest Communications plc and
subsidiaries as of 31 December 1994 and 1993, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended 31 December 1994, which report appears in the 31 December 1994
Annual Report on Form 10-K of Tele-Communications, Inc., as amended, and to the
reference to our firm under the heading "Experts" in the registration statement.
/s/ KPMG
KPMG
London, England
2 February 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Shareholders
of Cablevision:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Tele-Communications, Inc. of our report dated March 24, 1995,
relating to the combined balance sheets of Cablevision (A combination of certain
cable television assets of Cablevision S.A., Televisora Belgrano S.A.,
Construred S.A. and Univent's S.A.) as of December 31, 1994 and 1993, and the
related combined statements of operations and deficit and cash flows for each of
the years in the three-year period ended December 31, 1994, which report appears
in the Current Report on Form 8-K of Tele-Communications, Inc., dated April 20,
1995, as amended, and to the reference to our firm under the heading "Experts"
in the registration statement.
KPMG FINSTERBUSCH PICKENHAYN SIBILLE
/s/ Juan Carlos Pickenhayn
Juan Carlos Pickenhayn
Partner
Buenos Aires, Argentina
February 2, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors and Stockholders
QVC Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of Tele-Communications, Inc. of our report, dated March 4, 1994,
relating to the consolidated balance sheets of QVC, Inc. and subsidiaries as of
January 31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended January 31, 1994, which report appears in the Current
Report on Form 8-K of Tele-Communications, Inc. dated February 3, 1995, as
amended, and to the reference to our firm under the heading "Experts" in the
registration statement. Our report refers to a change in the method of
accounting for income taxes.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
February 2, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this 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 and subsidiaries, 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 the Registration Statement.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Norfolk, Virginia
February 2, 1996
<PAGE>
Exhibit 99.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF JUNE 28, 1995
BY AND BETWEEN
THE CHRONICLE PUBLISHING COMPANY
AND
TELE-COMMUNICATIONS, INC.
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF JUNE 28, 1995
BY AND BETWEEN
THE CHRONICLE PUBLISHING COMPANY
AND
TELE-COMMUNICATIONS, INC.
TABLE OF CONTENTS
__________
ARTICLE I
THE MERGER
1.1 Closing and Closing Date..............................2
1.2 The Merger............................................2
1.3 Effective Time of the Merger..........................3
ARTICLE II
CONVERSION OF CAPITAL STOCK
2.1 Conversion of Stock...................................4
2.2 Conversion Number.....................................4
2.3 Definitions Relating to Subscribers...................7
2.4 Provisions Relating to Debt..........................10
2.5 Procedures for Determining Purchase Price............12
2.6 Escrowed Shares......................................13
2.7 Alternative Merger Consideration.....................14
2.8 Exchange of Certificates.............................16
2.9 Distribution With Respect to Shares Represented by
Unsurrendered Chronicle Stock Certificates...........18
2.10 No Fractional Shares.................................19
2.11 No Liability.........................................19
2.12 Lost Certificates....................................19
2.13 Dissenting Shares....................................20
ARTICLE III
OTHER TRANSACTIONS
3.1 Contribution of Assets to and Assumption of
Liabilities by Spinco................................20
3.2 Distribution of Spinco Common Stock and AAA Notes....23
3.3 Prepayment of Certain Indebtedness...................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
4.1 Organization and Authority; Binding Effect...........25
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<PAGE>
4.2 No Breach............................................25
4.3 Governmental Consents and Approvals..................26
4.4 Recommendations of the Board of Directors............26
4.5 Capitalization.......................................26
4.6 Financial Statements.................................27
4.7 Absence of Certain Changes...........................27
4.8 Absence of Undisclosed Liabilities...................27
4.9 Compliance With Law; Litigation......................28
4.10 Title to Assets......................................28
4.11 Real Property........................................29
4.12 Tangible Personal Property...........................29
4.13 Intangible Property..................................29
4.14 Material Contracts...................................29
4.15 Cable Systems........................................30
4.16 Brokers and Finders..................................32
4.17 Taxes................................................32
4.18 Employees; Labor Relations...........................33
4.19 Employee Benefit Plans...............................33
4.20 Environmental Matters................................34
4.21 Transactions with Affiliates.........................35
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
5.1 Organization and Authority; Binding Effect...........35
5.2 No Breach............................................36
5.3 Governmental Consents and Approvals..................36
5.4 Capitalization.......................................37
5.5 SEC Reports..........................................37
5.6 Financial Statements.................................37
5.7 Absence of Certain Changes...........................38
5.8 Absence of Undisclosed Liabilities...................38
5.9 Compliance with Law..................................38
5.10 Brokers and Finders..................................39
5.11 Taxes................................................39
ARTICLE VI
COVENANTS REGARDING CONDUCT OF BUSINESS
6.1 Conduct of Business of Western.......................40
6.2 Conduct of Business of Acquiror......................42
ARTICLE VII
OTHER AGREEMENTS
7.1 No Solicitation......................................42
- ii -
<PAGE>
7.2 Access to Information................................42
7.3 Private Placement Information; Registration of
Acquiror Common Stock................................42
7.4 Reasonable Best Efforts..............................52
7.5 Public Announcements.................................52
7.6 Notification.........................................52
7.7 Meeting of Shareholders of Chronicle.................52
7.8 Regulatory and Other Authorizations..................53
7.9 Further Assurances...................................54
7.10 Internal Revenue Service Ruling......................55
7.11 Records Retention....................................55
7.12 Chronicle Name.......................................56
7.13 Tax Matters..........................................56
7.14 Employee Benefits; Employee Matters..................60
7.15 Bay TV Joint Venture.................................61
7.16 Environmental Reports................................61
7.17 Approval of Acquiror's Board of Directors............61
7.18 Suspension of Chronicle's Covenants..................61
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of Chronicle and
Acquiror.............................................61
8.2 Conditions to the Obligations of Chronicle...........62
8.3 Conditions to Obligations of Acquiror................64
8.4 Exception to Conditions to Obligations of Acquiror...66
ARTICLE IX
TERMINATION
9.1 Termination..........................................66
9.2 Effect of Termination................................67
9.3 Fees and Expenses....................................67
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties..........68
10.2 Entire Agreement....................................68
10.3 Notices.............................................68
10.4 GOVERNING LAW.......................................70
10.5 Rules of Construction...............................70
10.6 Parties in Interest.................................70
10.7 Counterparts........................................70
10.8 Payment of Expenses.................................70
10.9 No Personal Liability...............................70
10.10 Binding Effect; Assignment..........................71
- iii -
<PAGE>
10.11 Amendment...........................................71
10.12 Extension; Waiver...................................71
10.13 Legal Fees; Costs...................................71
10.14 Alternative Structure of Contribution and
Distribution........................................71
10.15 Time................................................72
ARTICLE XI
DEFINITIONS
11.1 Terms Defined Elsewhere in this Agreement...........72
11.2 Terms Defined in this Section.......................75
- iv -
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this "Agreement"),
dated as of June 28, 1995, is made by and between The Chronicle Publishing
Company, a Nevada corporation ("Chronicle"), and Tele-Communications, Inc., a
Delaware corporation ("Acquiror").
PRELIMINARY STATEMENTS
The Board of Directors of Chronicle has approved a plan of distribution
pursuant to which, subject to the terms and conditions of this Agreement,
Chronicle would form a new Nevada corporation ("Spinco"), and contribute to
Spinco, in exchange for all the capital stock of Spinco and other undertakings
of Spinco as set forth in a Contribution and Assumption Agreement, the form of
which is attached to this Agreement as Exhibit A, all the assets of Chronicle
except those relating to the cable television operations of its Western
Communications division ("Western") and an undivided 49% interest in certain
assets relating to the operation of the local cable television network
distributed in the San Francisco Bay area under the name "Bay TV" as described
in Section 3.1(a) of this Agreement, and subsequent to such contribution,
Chronicle would distribute all the shares of capital stock of Spinco and the
AAA Notes (as defined herein) to the shareholders of Chronicle in the manner
described in this Agreement.
The Boards of Directors of Chronicle and, subject to the provisions of
Section 7.17, Acquiror have each determined that it is in the best interests of
their respective corporations and shareholders that, following the contribution
and distribution described in the preceding paragraph, Chronicle merge with and
into Acquiror, as a result of which the shareholders of Chronicle immediately
prior to such merger would become shareholders of Acquiror.
Chronicle and Acquiror intend that, for federal income tax purposes, the
transactions contemplated by this Agreement will qualify as one or more
tax-free reorganizations within the meaning of Section 368(a)(1)(D), Section
355, and Section 368(a)(1)(A) of the Code, and this Agreement is adopted as a
plan of reorganization.
This Agreement constitutes a plan of merger with respect to the Merger
for purposes of Section 78.451 of the Nevada Corporation Law and an agreement
of merger with respect to the Merger for purposes of Section 252 of the
Delaware Corporation Law.
Certain capitalized terms used in this Agreement are defined in Article
XI or in the sections of this Agreement indicated in Article XI.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, and agreements set forth below, the parties to
this Agreement agree as follows:
ARTICLE I
THE MERGER
1.1 Closing and Closing Date.
------------------------
(a) Closing. On the later of (i) January 9, 1996, or (ii) as
-------
soon as practicable after the satisfaction or, to the extent permitted by law,
waiver of the conditions set forth in Article VIII, (but, subject to Section
1.1(b), no later than ten business days after the satisfaction or waiver of the
conditions set forth in Section 8.1 (other than the conditions in Section
8.1(d) and Section 8.1(f)), Section 8.2(e), Section 8.2(i), Section 8.3(c),
Section 8.3(d), Section 8.3(e), Section 8.3(f), Section 8.3(g), Section 8.3(h),
Section 8.3(i), Section 8.3(k), and Section 8.3(l)) and, in the case of (i) or
(ii) above, immediately prior to the filing of the Articles of Merger and the
Certificate of Merger, a closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Cooper, White &
Cooper, San Francisco, California, or on such other date and at such other
location as the parties may agree in writing.
(b) Postponement of Closing. If Acquiror makes a public
-----------------------
announcement during the period that, but for an election by Chronicle or
Acquiror pursuant to this Section 1.1(b), would be the period of 20 trading
days ending on the third trading day preceding the Closing Date, and either
Acquiror's financial adviser has advised Acquiror or Chronicle's financial
adviser has advised Chronicle that such announcement would reasonably be
expected to have a temporary effect on the price of Acquiror Common Stock,
either Acquiror or Chronicle may, by written notice given to the other party
not later than three business days after such announcement, elect to delay the
Closing until the thirtieth trading day after such announcement. If Acquiror
commences or announces an intention to commence a tender offer for any
outstanding shares of Acquiror Common Stock and the last day on which Acquiror
accepts shares for purchase pursuant to such tender offer (or, if applicable,
the date on which Acquiror otherwise terminates or abandons such tender offer)
is within thirty trading days prior to the date that, but for an election by
Chronicle or Acquiror pursuant to this Section 1.1(b), would be the Closing
Date, either Chronicle or Acquiror may, by written notice to the other party,
elect to delay the Closing until the thirtieth trading day following the last
day on which Acquiror accepts shares for purchase pursuant to such tender offer
(or, if applicable, the date on which Acquiror otherwise terminates or abandons
such tender offer).
(c) Closing Date Defined. The date on which the Closing
--------------------
occurs is referred to in this Agreement as the "Closing Date."
1.2 The Merger. Subject to the terms and conditions of this
----------
Agreement, the Nevada Corporation Law, and the Delaware Corporation Law, at the
Effective Time, Chronicle shall be merged with and into Acquiror (the "Merger")
and the separate existence of Chronicle shall cease and Acquiror shall continue
as the surviving corporation in the Merger (the "Surviving Corporation"). From
and after the Effective Time, and without any further action on the part of any
- 2 -
<PAGE>
Person, the Merger will have all the effects provided by applicable law,
including Section 78.459 of the Nevada Corporation Law and Section 259 of the
Delaware Corporation Law, the effects described in Section 2.1 with respect to
the capital stock of Chronicle and Acquiror, and, subject to applicable law, the
following additional effects:
(a) Certificate of Incorporation. At the Effective Time, the
----------------------------
Certificate of Incorporation of Acquiror, as in effect immediately prior to the
Effective Time, shall become the Certificate of Incorporation of the Surviving
Corporation, and such Certificate of Incorporation may thereafter be amended as
provided therein and by the Delaware Corporation Law.
(b) Bylaws. At the Effective Time, the Bylaws of Acquiror,
------
as in effect immediately prior to the Effective Time, shall become the Bylaws
of the Surviving Corporation, and such Bylaws may thereafter be amended or
repealed in accordance with their terms and the Certificate of Incorporation of
the Surviving Corporation and as provided by the Delaware Corporation Law.
(c) Directors. At the Effective Time, the directors of
---------
Acquiror immediately prior to the Effective Time shall become the directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation and the
Delaware Corporation Law and until the earlier of his or her resignation or
removal or until his or her successor is duly elected and qualified, as the
case may be.
(d) Officers. At the Effective Time, the officers of
--------
Acquiror immediately prior to the Effective Time shall become the officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation and the
Delaware Corporation Law and until the earlier of his or her resignation or
removal or until his or her successor is duly appointed and qualified, as the
case may be.
(e) Properties and Liabilities. At the Effective Time, all
--------------------------
the properties, rights, privileges, powers, and franchises of Chronicle and
Acquiror shall vest in the Surviving Corporation, and all debts, liabilities,
and duties of Chronicle and Acquiror shall become the debts, liabilities, and
duties of the Surviving Corporation.
1.3 Effective Time of the Merger. Subject to the terms and
----------------------------
conditions in this Agreement, the parties shall (a) prepare, sign, and
acknowledge, in accordance with the Nevada Corporation Law, articles of merger
(the "Articles of Merger") and deliver the Articles of Merger to the Secretary
of State of the State of Nevada for filing pursuant to the Nevada Corporation
Law on the Closing Date, and (b) prepare, execute, and acknowledge, in
accordance with the Delaware Corporation Law, a certificate of merger (the
"Certificate of Merger") and deliver the Certificate of Merger to the Secretary
of State of the State of Delaware for filing pursuant to the Delaware
Corporation Law on the Closing Date. The Merger shall become effective upon
the later of the filing of the Articles of Merger with the Secretary of State
of the State of Nevada or the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware. As used in this Agreement, the
"Effective
- 3 -
<PAGE>
Time" means the later of the time at which the Articles of Merger are filed with
the Secretary of State of the State of Nevada or the time at which the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware.
ARTICLE II
CONVERSION OF CAPITAL STOCK
2.1 Conversion of Stock. At the Effective Time, by virtue of the
-------------------
Merger and without any action on the part of the holder of any shares of
capital stock of any corporation:
(a) Subject to Section 2.7, each share of Common Stock, $0.01 par
value per share, of Chronicle ("Chronicle Common Stock") issued and outstanding
immediately prior to the Effective Time (except shares subject to Section
2.1(b) and, to the extent provided in Section 2.13, Dissenting Shares) shall be
converted into and shall thereafter evidence and become (i) that number of
validly issued, fully paid, and nonassessable shares of Class A Common Stock,
$1.00 par value per share, having one vote per share, of Acquiror or, if
applicable, any successor class or series of Acquiror's common stock resulting
from a redesignation of such Class A Common Stock in connection with an
Acquiror Restructuring ("Acquiror Class A Common Stock"), equal to the
Conversion Number, (ii) that number of validly issued, fully paid, and
nonassessable shares of each class of Other Acquiror Common Stock, if any,
equal to the product of the Conversion Number times the Other Acquiror Common
Stock Ratio applicable to such class of Other Acquiror Common Stock, and (iii)
the right to receive cash in lieu of fractional shares in accordance with
Section 2.10. "Acquiror Common Stock" means, collectively, Acquiror Class A
Common Stock and any class of Other Acquiror Common Stock (as determined in
accordance with Section 2.7).
(b) Each share of the capital stock of Chronicle issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by Chronicle as treasury stock, if any, shall be cancelled and
retired, and no Acquiror Common Stock or other consideration shall be delivered
in exchange therefor.
(c) Each share of the capital stock of Acquiror issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding.
2.2 Conversion Number. For purposes of this Agreement:
-----------------
(a) The "Conversion Number" shall be equal to the quotient of the
Chronicle Common Stock Value divided by the Acquiror Common Stock Value
(rounded to the nearest one-thousandth).
(b) The "Chronicle Common Stock Value" shall equal the quotient
of the Purchase Price divided by the number of shares of Chronicle Common Stock
issued and outstanding immediately prior to the Effective Time (excluding
shares subject to Section 2.1(b) and any Dissenting Shares).
- 4 -
<PAGE>
(c) The "Acquiror Common Stock Value" shall equal the sum of the
Average Trading Price of Acquiror Class A Common Stock as of the Closing Date
plus, with respect to each class of Other Acquiror Common Stock, the product of
the Average Trading Price of such class of Other Acquiror Common Stock as of
the Closing Date times the Other Acquiror Common Stock Ratio applicable to such
class of Other Acquiror Common Stock. Notwithstanding the foregoing, if the
Acquiror Common Stock Value as calculated pursuant to the preceding sentence
and without regard to this sentence (i) is less than the Minimum Value, then
the Acquiror Common Stock Value shall be equal to the Minimum Value, and (ii)
is greater than the Maximum Value, then the Acquiror Common Stock Value shall
be equal to the Maximum Value.
(d) The "Minimum Value" shall be $20.00 and the "Maximum Value"
shall be $24.00, subject, in each case, to adjustment as provided below:
(i) If between the date of this Agreement and the
Effective Time Acquiror shall (A) pay a dividend or make a distribution on
outstanding shares of any class of Acquiror Common Stock in shares of Acquiror
Class A Common Stock, (B) subdivide the then outstanding shares of Acquiror
Class A Common Stock into a greater number of shares of Acquiror Class A Common
Stock or (C) combine the then outstanding shares of Acquiror Class A Common
Stock into a smaller number of shares of Acquiror Class A Common Stock, then
the Minimum Value and the Maximum Value then in effect shall be adjusted by
multiplying each by a fraction, the numerator of which is the number of shares
of Acquiror Class A Common Stock outstanding immediately before the event
giving rise to such adjustment and the denominator of which is the number of
shares of Acquiror Class A Common Stock outstanding immediately after such
event.
(ii) If between the date of this Agreement and the
Effective Time Acquiror shall pay a dividend or make a distribution on
outstanding shares of Acquiror Class A Common Stock in the form of cash,
securities or other assets (other than any cash dividend payable out of
earnings or any dividend or distribution in the form of Acquiror Common Stock
or in the form of any rights to acquire stock of the kind described in Section
2.7(d)), then the Minimum Value and the Maximum Value then in effect shall be
adjusted by multiplying each by a fraction, the numerator of which is the
Average Trading Price of Acquiror Class A Common Stock on the record date of
such dividend or distribution less the amount of cash or the fair market value
on such record date (as reasonably determined by Acquiror's Board of Directors)
of the portion of the securities or other assets so to be distributed that is
applicable to one share of Acquiror Class A Common Stock, and the denominator
of which is the Average Trading Price of Acquiror Class A Common Stock on such
record date.
(iii) If between the date of this Agreement and the
Effective Time Acquiror shall pay a dividend or make a distribution on
outstanding shares of any class of Acquiror's capital stock other than Acquiror
Class A Common Stock in the form of cash, securities or other assets (other
than any cash dividend payable out of earnings, any dividend payable on any
class or series of preferred stock of Acquiror in accordance with the terms
thereof, any dividend or
- 5 -
<PAGE>
distribution in the form of shares of any class of Acquiror Common Stock or of
shares of any class of Acquiror's common stock that are identical to shares of
Other Acquiror Common Stock except for voting rights and that are distributed on
outstanding shares of Acquiror's Class B Common Stock, par value $1.00 per share
(including, if applicable, any successor class or series of Acquiror's common
stock resulting from a redesignation of such Class B Common Stock in connection
with an Acquiror Restructuring, "Acquiror Class B Common Stock"), or any
dividend or distribution in any form that is paid or made pro rata on shares of
Acquiror Class A Common Stock and Acquiror Class B Common Stock as if Acquiror
Class A Common Stock and Acquiror Class B Common Stock were a single class,
treating as a pro rata dividend or distribution for this purpose any dividend or
distribution on shares of Acquiror Class B Common Stock that is paid or made in
shares of that class in the same proportion as a contemporaneous dividend or
distribution on shares of Acquiror Class A Common Stock in shares of that class)
then the Minimum Value and the Maximum Value then in effect shall be adjusted by
multiplying each by a fraction, the numerator of which is the sum of (A) the
product of the Average Trading Price of Acquiror Class A Common Stock on the
record date of such dividend or distribution and the number of shares of
Acquiror Class A Common Stock outstanding on such date and (B) the product of
the Average Trading Price of Acquiror Class B Common Stock on such record date
and the number of shares of Acquiror Class B Common Stock outstanding on such
date minus (C) the amount of cash or the fair market value on such record date
(as reasonably determined by Acquiror's Board of Directors) of the securities or
other assets so to be distributed, and the denominator of which is the sum of
(A) and (B) above.
(iv) If any event involving distributions with respect to or
any changes in the number of outstanding shares of capital stock of Acquiror
occurs as to which in the reasonable opinion of Acquiror, acting in good faith,
the other provisions of this Section 2.2(d) are not strictly applicable but the
failure to make an adjustment in the Minimum Price or the Maximum Price would
be inconsistent with the general intent and principles reflected in such
provisions, or if strictly applicable would be inconsistent with the general
intent and principles reflected in such provisions, then Acquiror, by action of
its Board of Directors, shall make an adjustment, on a basis that Acquiror's
Board of Directors determines reasonably and in good faith is consistent with
such general intent and principles. Acquiror will respond reasonably and in
good faith to any request by Chronicle that Acquiror's Board of Directors make
a determination pursuant to this Section 2.2(d)(iv). Acquiror may, at its
election, request that Chronicle approve such an adjustment, and if Chronicle,
by action of its Board of Directors, grants such approval, Acquiror shall be
deemed to have acted reasonably and in good faith in making that adjustment.
The failure of Acquiror to request such approval or of Chronicle to approve
such a request shall not be construed as in any way affecting the rights of any
of the parties.
(e) "Average Trading Price" of Acquiror Class A Common Stock,
Acquiror Class B Common Stock, or any class of Other Acquiror Common Stock
shall equal, as of a particular date, the average of the reported closing
market prices of such stock for the 20 consecutive trading days (or, if a
market for such stock first comes into being less than 23 trading days before
the date of determination, those trading days for which reported market prices
for such stock are available) ending on the third trading day prior to such
date. The closing market price for each day in question
- 6 -
<PAGE>
shall be the last sale price, regular way or, if no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system of the principal national securities exchange on which such stock is
listed or admitted to trading or, if such stock is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
no such sale price is quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the Nasdaq National Market System
("Nasdaq") or such other system then in use or, if on any such trading day such
capital stock is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by the professional market maker who has been
most active in making a market in such capital stock during the preceding 12
months. The Average Trading Price of such stock shall be appropriately adjusted
to reflect the effects of any stock dividend, stock split, reclassification,
recapitalization or combination affecting such stock, the record date, ex-
dividend date or similar date of which occurs during the period in which the
Average Trading Price is to be determined or thereafter prior to the Effective
Time.
(f) The "Purchase Price" means $565,580,146 reduced by the sum of
(A) the product of the Per Subscriber Reduction Amount times the amount, if
any, by which the number of Basic Subscribers of Western as of the Closing Date
is less than the Subscriber Target as of the Closing Date (the "Subscriber
Shortfall"), (B) the aggregate principal amount of the Retained Chronicle Debt
immediately prior to the Effective Time, and (C) the aggregate amount of
interest accrued but unpaid on the Retained Chronicle Debt immediately prior to
the Effective Time.
2.3 Definitions Relating to Subscribers. For purposes of this
-----------------------------------
Agreement:
(a) The "Subscriber Target" and the "Per Subscriber Reduction
Amount" shall be (i) if the Closing Date is on the first day of a calendar
month, the number of Basic Subscribers and the dollar amount set forth below
next to the last day of the calendar month immediately preceding the Closing
Date, (ii) if the Closing Date is on the last day of a calendar month, the
number of Basic Subscribers and the dollar amount set forth below next to the
last day of the calendar month on which the Closing Date occurs, or (iii) if
the Closing Date is on a day other than the first day or the last day of a
calendar month, the "Subscriber Target" shall be the sum of the number of Basic
Subscribers set forth below next to the last day of the calendar month
immediately preceding the calendar month in which the Closing occurs plus the
pro rata amount of the difference between the number of Basic Subscribers set
forth below next to the last day of the calendar month in which the Closing
occurs, and the number of Basic Subscribers set forth below next to the last
day of the calendar month immediately preceding the calendar month in which the
Closing occurs and the "Per Subscriber Reduction Amount" shall be the dollar
amount set forth below next to the last day of the calendar month immediately
preceding the calendar month in which the Closing occurs minus the pro rata
amount of the difference between the dollar amount set forth below next to the
last day of the calendar month in which the Closing occurs and the dollar
amount set forth below next to the last day of the calendar month immediately
preceding the calendar month in which the Closing occurs.
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MONTH SUBSCRIBER TARGET PER SUBSCRIBER
December 31, 1995 331,000 Basic Subscribers $1,707
January 31, 1996 331,400 Basic Subscribers $1,705
February 29, 1996 331,700 Basic Subscribers $1,705
March 31, 1996 332,000 Basic Subscribers $1,703
(b) "Basic Subscribers" means, as of any date of determination,
the sum of Household Basic Subscribers and Equivalent Basic Subscribers;
provided, however, that in no event shall the number of Broadcast Basic
Subscribers included in the calculation of the number of Basic Subscribers
exceed 11,700.
(c) "Household Basic Subscribers" means, as of any date of
determination, the total number of households subscribing on such date to cable
television services offered by Western and paying standard monthly service fees
and charges imposed by Western for Broadcast Basic Service, other than:
(i) "second outlets," as such term is commonly understood
in the cable television industry;
(ii) commercial and bulk subscribers;
(iii) any subscriber who is more than 60 days past due
(measured from the first day of the monthly billing period during which the
service to which such billings relate is provided) in the payment of any amount
due to Western in excess of $5.00;
(iv) any subscriber who has not paid at least one full
month's payment for Broadcast Basic Service before the Closing Date, except
with respect to subscribers pending connection to the cable television services
offered by Western in accordance with the last paragraph of this Section
2.3(c);
(v) any subscriber who is pending disconnection for any
reason other than non-payment for cable service and 10% of subscribers who are
pending disconnection due to non-payment for cable service; and
(vi) any subscriber who was solicited by Western within 90
days prior to the Closing Date to purchase any cable television services by any
promotions or by offers of discounts other than those that are consistent with
the promotions and offers of discount of Western as set forth on Schedule
2.3(c).
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<PAGE>
After making the adjustments described in clauses (i) through (vi) above, there
shall be added to the total number of Household Basic Subscribers as so
determined 80% of subscribers pending connection to the cable television
services offered by Western. Pending disconnections, pending non-pay
disconnections and pending connections shall be determined in accordance with
Western's policies and practices for such activities, as described on Schedule
2.3(c).
(d) "Broadcast Basic Service" means, with respect to any
subscriber of Western, the lowest tier of cable television service offered to
such subscriber by Western.
(e) "Broadcast Basic Subscribers" means, as of any date of
determination, the number of Household Basic Subscribers subscribing to
Broadcast Basic Service who do not subscribe to Expanded Basic Service.
(f) "Equivalent Basic Subscribers" means, as of any date of
determination, the sum of the quotients obtained for each System of Western by
dividing (i) the amount billed by Western to commercial or bulk subscribers of
such System for the sale of Broadcast Basic Service or Expanded Basic Service,
whether on a discounted or undiscounted basis, during the most recent calendar
month ended prior to the date of determination, by (ii) the average monthly
rate of such System for such month, where the "average monthly rate" of a
System as of any month equals the sum of:
(A) the total revenues received by Western during such
month from the sale of Broadcast Basic Service to Household Basic Subscribers
of such System divided by the number of Household Basic Subscribers of such
System as of the last day of such month, plus
(B) the total revenues received by Western during such
month from the sale of Expanded Basic Service (excluding any charge for
Broadcast Basic Service) to Household Basic Subscribers of such System divided
by the number of Household Basic Subscribers of such System as of the last day
of such month who purchase Expanded Basic Service.
For purposes of Section 2.3(f)(i) above, the amount billed by Western to
any commercial or bulk subscriber shall exclude:
(i) billings in excess of a single month's charges for such
subscriber's account;
(ii) all billings to any subscriber who is more than 60 days
past due (measured from the first day of the monthly billing period during
which the service to which such billings relate is provided) in the payment of
any amount due to Western in excess of $5.00;
(iii) that portion of the billings to any subscriber that
represents an installation or other non-recurring charge, a charge for
equipment or for any outlet or connection
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other than the first outlet or first connection in any single family household
or in any individual apartment or rental unit of a bulk account, a charge for
any tiered service other than Expanded Basic Service whether or not included
within a premium programming service, or a pass-through charge for sales taxes,
line-itemized franchise fees and charges, and similar charges;
(iv) all billings to a subscriber who has not paid for at
least one full month's service, except with respect to subscribers pending
connection to the cable television services offered by Western in accordance
with the last paragraph of this Section 2.3(f);
(v) all billings to any subscriber who is pending
disconnection for any reason other than non-payment for cable service and 10%
of all billings to subscribers who are pending disconnection due to non-payment
for cable service; and
(vi) all billings to any subscriber who was solicited by
Western within 90 days prior to the Closing Date to purchase any cable
television services by any promotions or by offers of discounts other than
those that are consistent with the promotions and offers of discounts of
Western as set forth on Schedule 2.3(c).
After making the adjustments described in clauses (i) through (vi) above, there
shall be added to the total number of Equivalent Basic Subscribers as so
determined 80% of billings to commercial and bulk subscribers (determined in
accordance with the provisions of this Section 2.3(f)) pending connection to
the cable television services offered by Western. Pending disconnections,
pending non-pay disconnections and pending connections shall be determined in
accordance with Western's policies and practices for such activities as
described on Schedule 2.3(c).
(g) "Expanded Basic Service" means, with respect to any
subscriber of any System of Western, the tier of cable television service
offered to such subscriber by Western that includes ESPN, MTV, and CNN, or any
of such programming services offered on such System, but excludes Broadcast
Basic Service.
2.4 Provisions Relating to Debt.
---------------------------
(a) For purposes of this Agreement, "Retained Chronicle Debt"
means indebtedness and liabilities of Chronicle immediately prior to the
Effective Time, that have not been assumed by Spinco, in the aggregate
principal amount of not less than $295,000,000 nor more than $305,000,000 as
determined by Chronicle in its sole discretion, or such lesser or greater
amount as determined by mutual agreement of Chronicle and Acquiror, and that
shall consist of:
(i) the obligations of Chronicle (as successor to Inland
Valley Cablevision) to make payments pursuant to Section 3.1(b) of the Asset
Purchase Agreement, dated as of February 29, 1988, between Inland Valley
Cablevision and V U West Communications (the "V U West Agreement"), and
pursuant to Section 2 of the Noncompetition Agreement, dated as of March 11,
1988, among Inland Valley Cablevision, V U West Communications, and
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Kemper/Bedford Properties, Inc. (for purposes of this Agreement, the aggregate
principal amount of such obligations as of the Effective Time shall be the
present value thereof as of the Effective Time, calculated at a discount rate of
8.62% per year, compounded annually);
(ii) the capitalized portion of obligations of Chronicle
under capital leases;
(iii) indebtedness and other liabilities incurred by
Chronicle after the date of this Agreement and described in Section 6.1(d)(iv),
Section 6.1(d)(v) or Section 6.1(e)(ii);
(iv) all Acquiror Loans made pursuant to Section 3.3(a);
(v) any indebtedness incurred by Chronicle pursuant to
Section 3.3(c);
(vi) Existing Chronicle Debt that is due and payable in full
or is permitted to be prepaid in full at or immediately after the Closing, as
identified by Chronicle in the schedule to be delivered to Acquiror prior to
Closing pursuant to Section 2.5(a), together with any premium, penalty, or
other fee or charge with respect to such Existing Chronicle Debt that is
required to be included in Retained Chronicle Debt pursuant to Section 3.3(b);
and
(vii) any premium, penalty, or other fee or charge paid by
Acquiror to any holder of any indebtedness or liability described in (iii) or
(vi) above, upon the repayment thereof within 60 days after the Closing Date,
other than any premium, penalty, or other fee or charge that was included in
Retained Chronicle Debt pursuant to Section 3.3(b) or was not required by the
terms of any instrument establishing or evidencing such Existing Chronicle Debt
as in effect at the Effective Time.
(b) For purposes of this Agreement, "Existing Chronicle Debt"
means any of the following indebtedness:
(i) indebtedness of Chronicle arising under the Credit
Agreement, dated as of December 12, 1986, among Chronicle, the financial
institutions named therein as "Banks," and Wells Fargo Bank, National
Association, as agent for such Banks, as amended by Amendment No. 1 thereto
dated November 20, 1987, Amendment No. 2 thereto dated March 2, 1990, Amendment
No. 3 thereto dated December 20, 1991, Amendment No. 4 thereto dated November
1, 1993, and Amendment No. 5 thereto dated as of June 14, 1995;
(ii) indebtedness of Chronicle arising under the Note
Agreement, dated as of March 1, 1987, as amended by letter agreements dated
November 1, 1993 and May 15, 1995, between Chronicle and the "Purchasers" named
therein, and the "Series A Notes," the "Series B Notes," the "Series C Notes,"
and the "Series D Notes," as defined therein; and
(iii) indebtedness of Chronicle arising under the Note
Purchase Agreements, each dated as of January 1, 1986, as amended and restated
by Agreements, each dated
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as of March 1, 987, and as amended by letter agreements dated November 1, 1993
and May 15, 1995, between Chronicle and the "Purchasers" named therein, and the
"11.165% Notes," as defined therein.
2.5 Procedures for Determining Purchase Price.
-----------------------------------------
(a) At least five business days prior to the Closing Date,
Chronicle shall deliver or cause to be delivered to Acquiror a schedule
identifying the Existing Chronicle Debt to be included in the Retained
Chronicle Debt, together with a calculation of any premium, penalty, or other
fee or charge with respect to such Existing Chronicle Debt that is required to
be included in Retained Chronicle Debt pursuant to Section 3.3(b), and setting
forth Chronicle's reasonable and good faith estimates of the Retained Chronicle
Debt, the number of Basic Subscribers in each of Western's Systems as of the
Closing Date, and the Purchase Price, all determined as of the Closing Date.
The Purchase Price as determined on an estimated basis in accordance with the
preceding provisions of this Section 2.5(a) is referred to in this Agreement as
the "Estimated Purchase Price." Such schedule shall be accompanied by a
certificate, executed on behalf of Chronicle by its chief financial officer, to
the effect that the estimates contained therein were made in good faith and on
a reasonable basis. Chronicle shall make available to Acquiror prior to
Closing all information that Acquiror reasonably requests supporting
Chronicle's estimate of the Retained Chronicle Debt and the number of Basic
Subscribers as of the Closing Date.
(b) Not later than 60 days following the Closing Date, Acquiror
shall deliver or cause to be delivered to Spinco a schedule substantially in
the form of the schedule described in Section 2.5(a) setting forth Acquiror's
determination of Retained Chronicle Debt (including any premium, penalty, or
other fee or charge paid by Acquiror after the Closing Date and required to be
included in Retained Chronicle Debt pursuant to Section 2.4(a)(vii)), the
number of Basic Subscribers in each of Western's Systems, and the Purchase
Price. Such schedule shall be accompanied by a certificate, executed on behalf
of Acquiror by a vice president of Acquiror, that such calculations were
prepared in good faith and on a reasonable basis. Acquiror shall make
available to Spinco all information that Spinco reasonably requests supporting
Acquiror's calculation of the Retained Chronicle Debt and the number of Basic
Subscribers as of the Closing Date.
(c) Following receipt of the schedule and other information
referred to in Section 2.5(b), Spinco shall have 20 business days to review
such information and to notify Acquiror in writing of any disagreement with
Acquiror's calculations, which notice shall specify in reasonable detail the
nature and extent of such disagreement.
(d) If Spinco fails to provide a written notice of disagreement
with Acquiror's calculations of Retained Chronicle Debt, numbers of Basic
Subscribers, and the Purchase Price within the period specified in Section
2.5(c), Acquiror's calculations thereof in the schedule delivered pursuant to
Section 2.5(b) shall be final, conclusive, and nonappealable.
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(e) If Spinco provides a written notice of disagreement with
Acquiror's calculations within the period specified in Section 2.5(c), Acquiror
and Spinco shall negotiate in good faith to resolve any such dispute for a
period of 30 days following the notification thereof. At the end of such period,
if the dispute has not been resolved or the negotiation period has not been
extended by agreement between Spinco and Acquiror, the dispute shall be referred
to an independent public accounting firm selected by agreement of Spinco and
Acquiror (or, if Spinco and Acquiror cannot agree to the selection of such a
firm within ten days after Spinco shall have provided a notice of disagreement,
an independent public accounting firm selected by agreement of KPMG Peat Marwick
and Arthur Andersen & Co.), which firm shall render its decision as to whether
Acquiror's position is correct, Spinco's position is correct, or some position
between the two is correct (together with an explanation of the basis therefor)
to the parties to the dispute not later than 45 days following submission of the
dispute to it, which decision shall be final, conclusive, and nonappealable. The
costs of such accounting firm shall be paid one-half by Acquiror and one-half by
Spinco.
(f) Except as otherwise provided herein, Chronicle and Acquiror
shall make the calculations required pursuant to this Section 2.5 in a manner
consistent with the accounting practices and methods utilized by Chronicle in
the preparation of its financial statements as of and for the period ended
December 31, 1994.
2.6 Escrowed Shares.
---------------
(a) The "Escrowed Shares" means a portion of the shares deposited
by Acquiror with the Exchange Agent in accordance with Section 2.8(a)
consisting of (i) that number of shares of Acquiror Class A Common Stock equal
to the quotient of the sum of $15,000,000 plus the amounts used for purposes of
calculating the Estimated Purchase Price of (A) any reduction to the Purchase
Price attributable to the Subscriber Shortfall and (B) any premium, penalty, or
other fee or charge described in Section 2.4(a)(vii) included in the estimate
of the aggregate principal amount of the Retained Chronicle Debt immediately
prior to the Effective Time divided by the Acquiror Common Stock Value, and
(ii) with respect to each class of Other Acquiror Common Stock, if any, that
number of shares of such class of Other Acquiror Common Stock equal to the
product of (A) the quotient of the sum of $15,000,000 plus the amounts used for
purposes of calculating the Estimated Purchase Price of (1) any reduction to
the Purchase Price attributable to the Subscriber Shortfall and (2) any
premium, penalty, or other fee or charge described in Section 2.4(a)(vii)
included in the estimate of the aggregate principal amount of the Retained
Chronicle Debt immediately prior to the Effective Time divided by the Acquiror
Common Stock Value times (B) the Other Acquiror Common Stock Ratio applicable
to such class of Other Acquiror Common Stock. Any cash dividends or other
taxable distributions payable with respect to the Escrowed Shares during the
period of time that the Escrowed Shares are held in escrow by the Exchange
Agent shall be for the benefit of the shareholders of Chronicle in accordance
with their proportional interests in the Acquiror Common Stock to be issued in
the Merger pursuant to this Agreement, and the shareholders of Chronicle shall
include any such taxable dividends or distributions in their gross income for
all purposes related to income taxes. Throughout the period that the Escrowed
Shares are held in escrow by the Exchange Agent, the shareholders of Chronicle
shall be entitled to vote
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<PAGE>
such Escrowed Shares in accordance with their proportional interests in the
Acquiror Common Stock to be issued in the Merger pursuant to this Agreement. The
Escrowed Shares shall be held in escrow by the Exchange Agent in accordance with
Section 2.8 pending final determination of the Purchase Price and distribution
of certificates representing that portion, if any, of the Escrowed Shares
required to be delivered to the shareholders of Chronicle entitled thereto, as
provided in Section 2.8(b) below.
(b) If the Purchase Price as finally determined pursuant to
subsections (b) - (f) of Section 2.5 is less than the Estimated Purchase Price,
the Exchange Agent shall deliver to Acquiror certificates evidencing that
portion of the Escrowed Shares in excess of the number of Escrowed Shares
remaining to be delivered by the Exchange Agent in accordance with Section
2.8(b), taking into account all shares of Acquiror Common Stock previously
delivered in exchange for Chronicle Stock Certificates in accordance with
Section 2.8(b)(i), and all Escrowed Shares evidenced by the certificates
delivered to Acquiror pursuant to this sentence shall be cancelled, together
with all non-taxable distributions payable with respect to the Escrowed Shares.
Any cash dividends or other taxable distributions payable with respect to such
Escrowed Shares during the period of time that the Escrowed Shares are held in
escrow by the Exchange Agent shall continue to be for the benefit of the
shareholders of Chronicle in accordance with Section 2.6(a) notwithstanding the
cancellation of such Escrowed Shares. If the Purchase Price is greater than
the sum of the Estimated Purchase Price plus the amounts used for purposes of
calculating the Estimated Purchase Price of (i) any reduction to the Purchase
Price attributable to the Subscriber Shortfall and (ii) any premium, penalty,
or other fee or charge described in Section 2.4(a)(vii) included in the
estimate of the aggregate principal amount of the Retained Chronicle Debt
immediately prior to the Effective Time, Acquiror shall deposit with the
Exchange Agent for delivery to the shareholders of Chronicle entitled thereto
certificates representing the number of shares of each class of Acquiror Common
Stock equal to the difference between (x) the number of shares of such class of
Acquiror Common Stock issuable in the Merger pursuant to this Agreement upon
final determination of the Purchase Price and (y) the number of shares of such
class of Acquiror Common Stock previously deposited with the Exchange Agent
pursuant to Section 2.8(a).
2.7 Alternative Merger Consideration.
--------------------------------
(a) If Acquiror approves a dividend or other distribution to all
holders of Acquiror Class A Common Stock of any shares of any class of common
stock of Acquiror other than Acquiror Class A Common Stock, on terms not
requiring such holders to deliver any consideration therefor and with respect
to which the record date, ex-dividend date or similar date occurs between the
date of this Agreement and the Closing Date (an "Acquiror Restructuring"),
then, such other class of common stock of Acquiror shall constitute "Other
Acquiror Common Stock," subject to Section 2.7(c), and the consideration to be
received by the holders of Chronicle Common Stock in the Merger pursuant to
Section 2.1(a) shall include a combination of Acquiror Class A Common Stock and
Other Acquiror Common Stock as provided in Section 2.1(a).
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<PAGE>
(b) The "Other Acquiror Common Stock Ratio" applicable to any
class of Other Acquiror Common Stock shall be the quotient of (i) the number of
shares, rounded to the nearest one-thousandth of a share, of Other Acquiror
Common Stock that a holder of one share of Acquiror Class A Common Stock on the
record date, ex-dividend date or other similar date for the Acquiror
Restructuring would hold or have the right to receive as of the Effective Time
pursuant to this Agreement if such holder had participated in the distribution
of the Other Acquiror Common Stock to the fullest extent permitted by Acquiror
and had continued to hold any Other Acquiror Common Stock received by such
holder in the Acquiror Restructuring until the Effective Time, divided by (ii)
the number of shares, rounded to the nearest one-thousandth of a share, of
Acquiror Class A Common Stock that a holder of one share of Acquiror Class A
Common Stock on the record date, ex-dividend date or other similar date for the
Acquiror Restructuring would hold or have the right to receive as of the
Effective Time pursuant to this Agreement if such holder continued to hold such
Acquiror Class A Common Stock until the Effective Time, in each case taking
into account as appropriate any stock dividend, stock split, reclassification,
recapitalization, or combination with respect to any Acquiror Common Stock
prior to the Effective Time.
(c) Notwithstanding the provisions of Section 2.7(a), shares of
any class of stock of Acquiror shall not constitute Other Acquiror Common Stock
if Acquiror has not completed the Acquiror Restructuring with respect to such
stock prior to the Closing Date or if Chronicle notifies Acquiror in writing at
any time prior to the Closing Date that Chronicle has determined reasonably and
in good faith that Chronicle is unable to obtain from the IRS an advance letter
ruling as contemplated by Section 7.10 as a result of inclusion of such class
of stock in the consideration to be received by the holders of Chronicle Common
Stock in the Merger pursuant to this Agreement or that Chronicle is unable to
obtain an opinion of Skadden, Arps, Slate, Meagher & Flom, special tax counsel
to Chronicle, in form and substance reasonably satisfactory to Chronicle
substantially to the effect that such class of stock constitutes common stock
of Acquiror for purposes of Section 368(a) of the Code. For purposes of the
foregoing, Chronicle shall permit Acquiror to participate in the IRS ruling
process in the manner described in Section 7.10 and shall permit Acquiror to
discuss the tax opinion with tax counsel for Chronicle.
(d) With respect to any stock or rights offering made to the
holders of Acquiror Class A Common Stock by Acquiror or any Affiliate of
Acquiror on or before the Closing Date (other than as described in Section
2.7(a)), all (but not less than all) of the holders of Chronicle Common Stock
shall, with respect to the shares of Acquiror Class A Common Stock that are to
be issued to them at the Effective Time, be entitled to participate at the sole
discretion of Chronicle for all purposes, and subject to all requirements and
limitations of such offering, as if they were holders of Acquiror Class A
Common Stock as of the relevant time, and to receive the benefits of such
offering effective as of the Effective Time. Notwithstanding the foregoing,
Chronicle will not elect to have the holders of Chronicle Common Stock
participate in such offering if Chronicle believes such participation would
prevent Chronicle from obtaining from the IRS the advance letter ruling
contemplated by Section 7.10 or would prevent Chronicle from obtaining the
opinion of counsel contemplated by Section 8.2(f).
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2.8 Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to the Closing Date, Acquiror
--------------
shall select a bank or trust company reasonably acceptable to Chronicle to act
as exchange agent (the "Exchange Agent") in connection with the surrender of
certificates that, immediately prior to the Effective Time, evidenced
outstanding shares of Chronicle Common Stock ("Chronicle Stock Certificates").
Prior to the Closing Date, Acquiror shall deposit with the Exchange Agent for
exchange in accordance with this Section 2.8 certificates evidencing the number
of shares of Acquiror Common Stock to be issued in the Merger pursuant to this
Agreement, assuming that the Purchase Price were to be equal to the sum of the
Estimated Purchase Price plus the amounts used for purposes of calculating the
Estimated Purchase Price of (i) any reduction to the Purchase Price attributable
to the Subscriber Shortfall and (ii) any premium, penalty, or other fee or
charge described in Section 2.4(a)(vii) included in the estimate of the
aggregate principal amount of the Retained Chronicle Debt immediately prior to
the Effective Time, which shares of Acquiror Common Stock (including the
Escrowed Shares) shall be deemed to be issued at the Effective Time. At and
following the Effective Time, Acquiror shall deliver to the Exchange Agent such
cash as may be required from time to time to make payments of cash in lieu of
fractional shares in accordance with Section 2.10.
(b) Exchange. As soon as practicable after the Effective
--------
Time, Acquiror shall cause the Exchange Agent to mail to each Person who was a
holder of record of Chronicle Common Stock at the Effective Time, other than
Chronicle, (i) a letter of transmittal (which shall specify that delivery shall
be effective, and risk of loss and title to any Chronicle Stock Certificates
shall pass, only upon delivery of the Chronicle Stock Certificates to the
Exchange Agent and shall be in such form and shall have such other provisions
that are specified by Acquiror and reasonably acceptable to Chronicle or, to
the extent that the form and provisions of the letter of transmittal are
specified by Acquiror after the Effective Time, Spinco) and (ii) instructions
for use in effecting the surrender of Chronicle Stock Certificates in exchange
for certificates representing Acquiror Common Stock (together with any dividend
or distribution with respect thereto made after the Effective Time and any cash
to be paid in lieu of fractional shares pursuant to Section 2.10). Upon
surrender of a Chronicle Stock Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Acquiror and
reasonably acceptable to Spinco, together with such letter of transmittal, duly
executed, and such other documents as may be required by the Exchange Agent or
such other agent, the holder of such Chronicle Stock Certificate shall be
entitled to receive in exchange therefor certificates representing the number
of whole shares of each class of Acquiror Common Stock that such holder has the
right to receive pursuant to the terms of this Agreement (together with any
dividend or distribution with respect thereto made after the Effective Time and
any cash to be paid in lieu of fractional shares pursuant to Section 2.10), and
the Chronicle Stock Certificate so surrendered shall be cancelled. Shares of
Acquiror Common Stock (together with dividends or distributions with respect
thereto made after the Effective Time and any cash to be paid in lieu of
fractional shares pursuant to Section 2.10) shall be delivered to holders of
Chronicle Stock Certificates in accordance with the following:
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(i) If any Chronicle Stock Certificate is presented to the
Exchange Agent accompanied by all documents required by Section 2.8(b) prior to
the final determination of the Purchase Price pursuant to Section 2.5, the
Exchange Agent shall deliver to the holder of such Chronicle Stock Certificate:
(A) certificates representing the number of whole
shares of each class of Acquiror Common Stock that such holder would have the
right to receive pursuant to the terms of this Agreement if the Purchase Price
were to equal the Estimated Purchase Price specified by Chronicle in the
schedule delivered by it pursuant to Section 2.5(a), less such holder's
proportionate share of the Escrowed Shares (together with dividends or
distributions with respect to the shares described in this paragraph (A) made
after the Effective Time); and
(B) upon the final determination of the Purchase
Price pursuant to Section 2.5, certificates representing the number of whole
shares of each class of Acquiror Common Stock that such holder has the right to
receive pursuant to the terms of this Agreement (including Escrowed Shares)
less the number of shares evidenced by the certificates delivered pursuant to
paragraph (A) (together with dividends or distributions with respect to the
shares described in this paragraph (B) made after the Effective Time, such
holder's proportional interest in any cash dividends or other taxable
distributions paid with respect to any Escrowed Shares that are returned to
Acquiror and cancelled pursuant to Section 2.6(b), and any cash to be paid in
lieu of fractional shares pursuant to Section 2.10).
(ii) If any Chronicle Stock Certificate is presented to the
Exchange Agent accompanied by all documents required by Section 2.8(b) after
the final determination of the Purchase Price pursuant to Section 2.5, the
Exchange Agent shall deliver to the holder of such Chronicle Stock Certificate
upon the presentation of such Chronicle Stock Certificate and other documents,
certificates representing the number of whole shares of each class of Acquiror
Common Stock that such holder has the right to receive pursuant to the terms of
this Agreement (together with dividends or distributions with respect thereto
made after the Effective Time, such holder's proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
and any cash to be paid in lieu of fractional shares pursuant to Section 2.10).
(iii) The number of shares of each class of Acquiror Common
Stock that each holder of a Chronicle Stock Certificate shall have the right to
receive pursuant to this Agreement shall not be affected by any change in the
Average Trading Price of any class of Acquiror Common Stock between the time
that the Acquiror Common Stock Value is determined in accordance with Section
2.2(c) and the date on which certificates evidencing any shares of Acquiror
Common Stock are delivered to such holder pursuant to this Section 2.8.
(c) Transfers of Chronicle Common Stock. In the event of a
-----------------------------------
transfer of ownership of Chronicle Common Stock that is not registered in the
transfer records of Chronicle, a certificate representing the proper number of
shares of each class of Acquiror Common Stock may
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be issued to a Person other than the Person in whose name the surrendered
Chronicle Stock Certificate is registered if the Chronicle Stock Certificate
representing such Chronicle Common Stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence reasonably satisfactory to Acquiror that any applicable stock
transfer tax has been paid.
(d) Certificates Not Exchanged. After the Effective Time,
--------------------------
each outstanding Chronicle Stock Certificate (other than certificates for
shares described in Section 2.1(b)) shall, until surrendered for exchange in
accordance with this Section 2.8, be deemed for all purposes to evidence
ownership of the number of whole shares of each class of Acquiror Common Stock
into which the shares of Chronicle Common Stock (which, prior to the Effective
Time, were represented thereby) shall have been converted in accordance with
Section 2.1, together with the right to receive any dividend or distribution
with respect thereto made after the Effective Time, such holder's proportional
interest in any cash dividends or other taxable distributions paid with respect
to any Escrowed Shares that are returned to Acquiror and cancelled pursuant to
Section 2.6(b), and any cash to be paid in lieu of fractional shares pursuant
to Section 2.10.
(e) Expenses. Except as otherwise expressly provided herein,
--------
Acquiror shall pay all charges and expenses, including those of the Exchange
Agent, in connection with the exchange of shares of Acquiror Common Stock for
shares of Chronicle Common Stock, except for any charges or expenses that are
otherwise solely the liability of one or more holders of Chronicle Common
Stock.
(f) Unclaimed Stock. Any Acquiror Common Stock deposited
---------------
with the Exchange Agent that remains unclaimed by the former shareholders of
Chronicle after six months following the Effective Time shall be delivered to
Acquiror, upon demand, and any former shareholders of Chronicle who have not
then complied with the instructions for exchanging their Chronicle Stock
Certificates shall thereafter look only to Acquiror for exchange of Chronicle
Stock Certificates and for any dividend or distribution with respect thereto
made after the Effective Time, such holder's proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
and any cash to be paid in lieu of fractional shares pursuant to Section 2.10.
2.9 Distribution With Respect to Shares Represented by Unsurrendered
-----------------------------------------------------------------
Chronicle Stock Certificates. No dividends or other distributions declared
- ----------------------------
or made after the Effective Time with respect to any class of Acquiror Common
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Chronicle Stock Certificate with respect to the shares of
any class of Acquiror Common Stock issuable upon surrender thereof until the
holder of such Chronicle Stock Certificate shall surrender such Chronicle Stock
Certificate in accordance with Section 2.8. Subject to the effect of
applicable law, following surrender of any such Chronicle Stock Certificate,
Acquiror shall pay or cause to be paid, without interest, to the record holder
of certificates representing shares of such class of Acquiror Common Stock
issued in exchange therefor, (i) at the time of such surrender, the amount of
cash in lieu of fractional shares to which such holder is entitled
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<PAGE>
pursuant to Section 2.10, such holder's proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
and the amount of dividends or other distributions by Acquiror with a record
date after the Effective Time theretofore paid with respect to such whole shares
of such class of Acquiror Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions by Acquiror with a record
date after the Effective Time but prior to surrender of such Chronicle Stock
Certificate and a payment date subsequent to such surrender payable with respect
to such whole shares of such class of Acquiror Common Stock.
2.10 No Fractional Shares.
--------------------
(a) Cash Payment in Lieu of Fractional Shares. No
-----------------------------------------
certificates or scrip representing fractional shares of any class of Acquiror
Common Stock shall be issued upon the surrender of Chronicle Stock Certificates
pursuant to Section 2.8. Such fractional share interests shall not entitle the
owner thereof to any rights as a security holder of Acquiror. In lieu of any
such fractional shares of any class of Acquiror Common Stock, each holder of
Chronicle Common Stock entitled to receive shares of such class of Acquiror
Common Stock in the Merger pursuant to this Agreement, upon surrender of a
Chronicle Stock Certificate for exchange pursuant to Section 2.8, shall be
entitled to receive an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying the Average Trading Price of such class
of Acquiror Common Stock as of the Closing Date by the fractional interest in
such class of Acquiror Common Stock to which such holder would otherwise be
entitled (after taking into account all shares of Chronicle Common Stock held
of record by such holder immediately prior to the Effective Time).
(b) Deposit with Exchange Agent. As soon as practicable
---------------------------
after the determination of the amount of cash, if any, to be paid to holders of
Chronicle Common Stock in lieu of any fractional share interests, Acquiror
shall promptly deposit with the Exchange Agent cash in the required amounts and
the Exchange Agent will mail such amounts without interest to such holders;
provided, however, that no such amount will be paid to any holder with respect
to any Chronicle Stock Certificate prior to the surrender by such holder of
such Chronicle Stock Certificate.
2.11 No Liability. None of Acquiror, Spinco, Chronicle, or the
------------
Exchange Agent will be liable to any holder of shares of Chronicle Common Stock
for any shares of Acquiror Common Stock, dividends, or distributions with
respect thereto or cash payable in lieu of fractional shares delivered to a
state abandoned property administrator or other public official pursuant to any
applicable abandoned property, escheat, or similar law.
2.12 Lost Certificates. If any Chronicle Stock Certificate shall
-----------------
have been lost, stolen, or destroyed, the Exchange Agent or Acquiror will issue
in exchange for such lost, stolen, or destroyed Chronicle Stock Certificate the
shares of Acquiror Common Stock (and any dividend or distribution with respect
thereto made after the Effective Time and any cash payable in lieu of
fractional shares pursuant to Section 2.10) deliverable in respect thereof as
determined in accordance with the terms of this Agreement, subject to the
condition that the Person to whom the Acquiror Common Stock
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<PAGE>
(and any dividend or distribution with respect thereto made after the Effective
Time and any cash payable in lieu of fractional shares pursuant to Section 2.10)
is to be issued, shall have (i) delivered to Acquiror an affidavit claiming such
Chronicle Stock Certificate to be lost, stolen, or destroyed, and (ii) given
Acquiror an indemnity satisfactory to Acquiror against any claim that may be
made against Acquiror with respect to the Chronicle Stock Certificate alleged to
have been lost, stolen, or destroyed.
2.13 Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, shares of Chronicle Common Stock outstanding immediately prior
to the Effective Time that are held by holders of such shares who have not
voted in favor of the Merger or consented thereto in writing and who have
demanded appraisal rights with respect thereto in accordance with Section
78.471 through Section 78.502 of the Nevada Corporation Law (the "Dissenting
Shares") shall not be converted into or be exchangeable for the right to
receive Acquiror Common Stock or any dividend or distribution with respect
thereto made after the Effective Time, any proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
or any cash payable in lieu of fractional shares pursuant to Section 2.10, but
holders of Dissenting Shares shall be entitled to receive payment of the fair
value of their Dissenting Shares in accordance with the provisions of the
Nevada Corporation Law and this Section 2.13. Any shares of Chronicle Common
Stock held by a shareholder who, prior to the Effective Time, withdraws a
demand for appraisal of such shares or loses the right to appraisal as provided
in the Nevada Corporation Law shall not be considered Dissenting Shares.
Chronicle shall give Acquiror prompt notice of any written demands for
appraisal of any shares of Chronicle Common Stock, attempted withdrawals of
such demands, and any other instruments received by Chronicle pursuant to the
Nevada Corporation Law relating to shareholders' rights of appraisal. Spinco
shall make on behalf of Chronicle or Acquiror, as applicable, all payments
required by the Nevada Corporation Law to be made in respect of Dissenting
Shares, including any costs assessed against Chronicle pursuant to Section
78.502 of the Nevada Corporation Law.
ARTICLE III
OTHER TRANSACTIONS
3.1 Contribution of Assets to and Assumption of Liabilities by
-----------------------------------------------------------
Spinco.
- ------
(a) Contribution. Subject to the satisfaction of the
------------
conditions to Closing in Article VIII of this Agreement, other than the
condition in Section 8.1(d), and prior to the Closing, Chronicle shall, and
shall cause Spinco to, enter into a Contribution and Assumption Agreement in
the form attached to this Agreement as Exhibit A (the "Contribution
Agreement"), and, pursuant thereto, Chronicle shall contribute and transfer to
Spinco all of Chronicle's right, title, and interest in any and all assets of
Chronicle, whether tangible or intangible and whether fixed, contingent, or
otherwise, other than those assets that are used or held for use in the conduct
of the cable television business operations of Western, including (to the
extent not disposed of prior to the Contribution in accordance with the terms
of this Agreement) all assets reflected on the balance sheet of Western as
- 20 -
<PAGE>
at December 31, 1994 included in Schedule 4.6(b); provided, however, that: (i)
Chronicle shall in any event contribute and transfer to Spinco an undivided 51%
interest and shall retain an undivided 49% interest in those assets that are to
be contributed to the joint venture to be formed by Acquiror and Spinco
pursuant to Section 7.15; (ii) Chronicle shall in any event retain (A) that
amount of cash necessary to cause the Working Capital Deficit of Western
immediately prior to the Effective Time to be zero, and (B) Chronicle's rights
created pursuant to this Agreement and the Contribution Agreement; and (iii)
Chronicle shall in any event contribute and transfer to Spinco (A) the assets
described on Schedule 3.1(a), except to the extent such assets are disposed of
prior to the Contribution, (B) the Chronicle Employee Benefit Plans and all
assets of Chronicle related to the Chronicle Employee Benefit Plans, (C) all
receivables from shareholders, directors, officers, or employees of Chronicle,
and (D) all rights of Chronicle to any payment of costs assessed against any
holder of Dissenting Shares pursuant to Section 78.502 of the Nevada
Corporation Law. The contribution and transfer by Chronicle to Spinco of the
assets to be contributed and transferred to Spinco pursuant to this Section
3.1(a) are referred to in this Agreement as the "Contribution."
(b) Definition of Working Capital Deficit. For purposes of
-------------------------------------
Section 3.1(a), "Working Capital Deficit" means, as of the Effective Time, the
amount by which (i) the sum, without duplication, of all liabilities as
determined in accordance with GAAP (other than any principal or interest on
Retained Chronicle Debt, any obligations under any capitalized leases which are
included in Retained Chronicle Debt, or any premiums, penalties, or other fees
or charges included in Retained Chronicle Debt pursuant to Section 3.3(b) or
Section 2.4(a)(vii)) of Chronicle after the Contribution, including subscriber
prepayments, unearned income, and deposits with respect to services to be
provided by the Surviving Corporation after the Effective Time, exceeds (ii)
the sum, without duplication, of cash on hand or in banks, cash equivalents,
prepaid pole attachment rentals, other prepaid rentals, subscriber receivables
and other accounts receivable (other than receivables from shareholders,
directors, officers, or employees of Chronicle, and reduced, in the case of
subscriber and other accounts receivable, by allowances for doubtful accounts),
deposits properly characterized as current assets arising in connection with
the business of Western (including deposits attributable to leases of personal
property and postage but in no event including any deposits under leases of
real property, any deposits attributable to Franchises, or any deposits or
other prepayments, however characterized, under developer agreements), and
one-half of the deposits, whether current or long-term, under leases of real
property and one-half of the deposits, whether current or long-term,
attributable to Franchises, as set forth on Schedule 3.1(b), all determined as
of the Effective Time in accordance with GAAP, consistently applied with the
preparation of the balance sheet of Western as at December 31, 1994 included in
Schedule 4.6(b) and the following provisions:
(i) allowances for doubtful accounts shall be calculated
in accordance with the accounting policies of Western used in the preparation
of the balance sheet of Western included in Schedule 4.6(b), provided that all
subscriber receivables from inactive subscribers (regardless of aging) and all
subscriber receivables from subscribers any portion of whose account in excess
of $5.00 is more than 60 days past due shall be treated as doubtful accounts;
- 21 -
<PAGE>
(ii) accrued expenses shall include accruals for vacation
only for those employees of Western who become employees of the Surviving
Corporation as of the Effective Time, subject to reduction in accordance with
Section 7.14(b); and
(iii) current assets shall not include (A) any assets that
are assigned to Spinco pursuant to this Agreement or the Contribution
Agreement, (B) any assets to the extent that Acquiror will not realize the book
value of such assets after the Closing Date (for example, prepaid insurance),
or (C) inventory;
(iv) liabilities shall not include any liability or
obligation (or any reserve for any liability or obligation) that is assumed by
Spinco or with respect to which Spinco is obligated to indemnify the Surviving
Corporation pursuant to this Agreement (including Section 7.13(a) hereof) or
the Contribution Agreement; and
(v) liabilities shall include any obligation of Chronicle
to make payments pursuant to Section 10.1 of the V U West Agreement arising or
relating to the period prior to the Effective Time.
(c) Issuance of Shares and Assumption of Liabilities. In
------------------------------------------------
consideration for the Contribution, Spinco shall, concurrently with the
Contribution,
(i) issue and deliver to Chronicle a number of validly
issued, fully paid, and nonassessable shares of Common Stock, $0.01 par value
per share, of Spinco ("Spinco Common Stock") equal to the number of shares of
Chronicle Common Stock then outstanding;
(ii) in accordance with the terms of the Contribution
Agreement, assume any and all liabilities and obligations (including
contractual obligations to be performed after the Effective Time) of Chronicle
as of the Effective Time, whether fixed, contingent, or otherwise, including
obligations and liability for withholding and payroll taxes accrued prior to
the Effective Time other than (A) the Retained Chronicle Debt and the aggregate
amount of interest accrued but unpaid on the Retained Chronicle Debt
immediately prior to the Effective Time, (B) liabilities and obligations
associated with the business operations of Western which are included in
determining the Working Capital Deficit in accordance with Section 3.1(b), (C)
obligations for the delivery of cable television service to subscribers of
Western's Systems after the Effective Time, and (D) all obligations (1) under
the Franchises and related to the FCC licenses set forth on Schedule 4.15, (2)
under the Material Contracts set forth on Schedule 4.14, (3) under agreements
with developers set forth on Schedule 3.1(c), and (4) under any contract or
agreement (other than any agreement with a developer) entered into in the
ordinary course of the operation of Western's Systems or in compliance with
Chronicle's covenants under Section 6.1, in the case of (1), (2), (3), and (4)
of this clause (D) to the extent required to be performed after the Effective
Time, and (E) Chronicle's liabilities and obligations created pursuant to this
Agreement;
- 22 -
<PAGE>
(iii) in accordance with the terms of the Contribution
Agreement, and whether or not specifically included in clause (B) of Section
3.1(c)(ii), assume (A) all liabilities of the Chronicle Employee Benefit Plans
and all liabilities with respect to employee claims arising or relating to the
period prior to the Effective Time under any employee medical and dental plans
of Chronicle, including employee bonuses, executive deferred compensation of
current or former executives of Chronicle, and any COBRA liability, (B) all
liabilities with respect to any employee of Western terminated prior to the
Effective Time and all obligations for severance pursuant to the severance
plans described on Schedule 3.1(c)(iii), (C) all liabilities of Chronicle to
indemnify any officer or director of Chronicle against liabilities based on or
arising out of any action or omission of such officer or director as an officer
or director of Chronicle at or relating to the period prior to the Effective
Time, (D) all liabilities of Chronicle with respect to workers' compensation
claims arising or relating to the period prior to the Effective Time, and (E)
all liabilities of Chronicle with respect to any claims arising or relating to
the period prior to the Effective Time for which Chronicle is self insured;
(iv) in accordance with the terms of the Contribution
Agreement, assume and undertake to discharge, satisfy, and perform all
obligations and liabilities specified in this Agreement as obligations and
liabilities of Spinco, including the obligation to make payments on behalf of
Chronicle in respect of Dissenting Shares, obligations of Chronicle under the
AAA Notes, obligations of Chronicle under the Guaranty dated as of November 29,
1988, between Chronicle and Bank of America National Trust and Savings
Association, and obligations of Chronicle to Salomon Brothers Inc and Waller
Capital Corporation in connection with the transactions contemplated by this
Agreement;
(v) in accordance with the terms of the Contribution
Agreement, assume all liabilities associated with business activities of
Western other than Western's cable television business, including any
businesses previously operated by Western directly or through any other Person
in which Chronicle held an ownership interest and accounted for as part of the
Western division, including Wescom Productions, Chronicle Videocassettes, and
International Video Network Partnership; and
(vi) in accordance with the terms of the Contribution
Agreement, and subject to the limitations set forth therein, agree to
indemnify, defend, and hold harmless the Surviving Corporation, from and after
the Effective Time, against losses, claims, damages, or liabilities arising
from the operations of Western prior to the Effective Time.
3.2 Distribution of Spinco Common Stock and AAA Notes. Subject to
-------------------------------------------------
the satisfaction of the conditions to Closing in Article VIII of this
Agreement, other than the condition in Section 8.1(d), and immediately
following the Contribution and prior to the Closing, Chronicle shall (a)
distribute to its shareholders, with respect to their shares of Chronicle
Common Stock, all of the shares of Common Stock, $0.01 par value per share, of
Spinco, and (b) distribute to each shareholder, with respect to such
shareholder's shares of Chronicle Common Stock, an unsecured note of Chronicle,
to be assumed by Spinco pursuant to Section 3.1(c)(iv) (the "AAA Note"), in an
- 23 -
<PAGE>
amount equal to such shareholder's share of Chronicle's accumulated adjustments
account immediately before the Contribution and the Distribution, as determined
pursuant to Section 1367(e) of the Code. The distribution of Spinco Common
Stock to the shareholders of Chronicle as described in this Section 3.2 is
referred to in this Agreement as the "Distribution."
3.3 Prepayment of Certain Indebtedness.
----------------------------------
(a) Acquiror Loans. If (i) all conditions to Closing in
--------------
Article VIII of this Agreement, other than the conditions in Section 8.1(d) and
Section 8.2(i), shall have been satisfied, and (ii) the condition in Section
8.2(i) shall not have been satisfied solely as the result of the failure of one
or more holders of any indebtedness that, but for the repayment of such
indebtedness pursuant to this Section 3.3(a), would be Retained Chronicle Debt,
to grant any consent to the transactions contemplated by this Agreement that is
required pursuant to the instrument establishing or evidencing such
indebtedness, and (iii) Chronicle shall have the right (whether pursuant to the
instruments establishing or evidencing such indebtedness or pursuant to
agreements of the holders of such indebtedness) to prepay all such indebtedness,
then Chronicle may elect to require that Acquiror lend to Chronicle, immediately
prior to the Effective Time, the exact amount necessary to satisfy all
obligations of Chronicle to all such holders with respect to all such
indebtedness (including any premium, penalty, or other fee or charge payable to
the holders of such indebtedness as a condition to its prepayment), and
Chronicle shall use all the proceeds of such loans ("Acquiror Loans") solely to
satisfy such obligations. Any Acquiror Loan to Chronicle pursuant to this
Section 3.3(a) shall bear interest at a rate of 9% per year and shall be repaid
on demand (but no such demand shall be made by Acquiror prior to the earlier of
the Effective Time or the termination of this Agreement).
(b) Repayment Upon Merger. If (i) any instrument
---------------------
establishing or evidencing any Existing Chronicle Debt all or any portion of
which is to be included in Retained Chronicle Debt requires the consent of the
holders thereof to the transactions contemplated by this Agreement, and (ii)
the holders of such Retained Chronicle Debt require, as a condition to granting
such consent, that all such indebtedness be repaid immediately upon the
consummation of the Merger, then Acquiror agrees to prepay all such Retained
Chronicle Debt on the Closing Date immediately after the Effective Time,
together with any premium, penalty, or other fee or charge payable to the
holders of such indebtedness as a condition to its prepayment, and the amount
of any such premium, penalty, or other fee or charge shall be included in the
amount of the Retained Chronicle Debt for purposes of Section 2.4(a).
(c) Refinancing. Notwithstanding anything in this Agreement
-----------
to the contrary, Chronicle shall have the right prior to Closing to borrow
money from one or more lenders on commercially reasonable terms provided that
such borrowing may be repaid in full at or immediately after the Closing
without premium, penalty, or other fee or charge and the proceeds of any such
borrowing are used (i) to prepay any Existing Chronicle Debt, (ii) to pay any
premium, penalty, or other fee or charge payable to the holders of such
Existing Chronicle Debt as a condition to its
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<PAGE>
prepayment, and (iii) to pay fees and expenses incurred by Chronicle in
connection with such borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
Chronicle represents and warrants to Acquiror as follows:
4.1 Organization and Authority; Binding Effect. Chronicle is a
------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada. Chronicle has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its business
as now being conducted 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 necessary, except where the failure to have such power or
authority would not have a material adverse effect on the financial condition,
results of operations, liabilities, assets, or business of Western or, following
the Contribution, of Spinco. Any reference in this Article IV to a prospective
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western (or on any one or more of such
attributes of Western) is intended to encompass any such adverse effect that may
arise either before or after the Merger, other than an adverse effect that may
arise after the Merger as a result of the activities, actions, assets,
liabilities, or status of Acquiror or any of its Subsidiaries, either before or
after the Merger and is not intended to encompass any such adverse effect on the
business prospects of Western. Chronicle has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. All necessary corporate action
required to have been taken by or on behalf of Chronicle by applicable law, its
Restated Articles of Incorporation and Bylaws, or otherwise to authorize (a) the
approval, execution, and delivery on behalf of Chronicle of this Agreement and
(b) the performance by Chronicle of its obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement has been taken,
except that this Agreement, the Merger, the Contribution, and the other
transactions contemplated by this Agreement must be approved by the shareholders
of Chronicle in accordance with the Nevada Corporation Law and the Restated
Articles of Incorporation and Bylaws of Chronicle. Assuming that this Agreement
constitutes a valid, binding, and enforceable agreement of Acquiror, this
Agreement constitutes a valid and binding agreement of Chronicle, enforceable
against it in accordance with its terms, except (x) as enforcement of this
Agreement may be limited by applicable bankruptcy, insolvency, moratorium, or
similar laws of general application relating to or affecting creditors' rights,
including the effect of statutory or other laws regarding fraudulent conveyances
and preferential transfers, (y) as the availability of indemnification and other
remedies may be limited by federal and state securities laws, and (z) for the
limitations imposed by general principles of equity. Chronicle has made
available to Acquiror true and complete copies of its Restated Articles of
Incorporation and Bylaws.
4.2 No Breach. The execution and delivery of this Agreement by
---------
Chronicle do not, and the consummation of the transactions contemplated by this
Agreement by Chronicle will not, (a)
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<PAGE>
violate or conflict with the Restated Articles of Incorporation or Bylaws of
Chronicle, or (b) except as set forth on Schedule 4.2, constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third-party right of termination,
cancellation, modification, or acceleration under any Material Contract, or (c)
except as set forth on Schedule 4.2 and, with respect to Franchises, subject to
obtaining the approvals and making the filings described in Section 4.3,
constitute a breach or default (or an event that with notice or lapse of time or
both would become a breach or default) or give rise to any lien, third-party
right of termination, cancellation, modification, or acceleration under any
agreement or undertaking to which Chronicle is a party or by which it or any of
its assets is bound (other than a Material Contract), except where such breach,
default, lien, third-party right of termination, cancellation, modification, or
acceleration would not have a material adverse effect on the financial
condition, results of operations, liabilities, assets, or business of Western
or, following the Contribution, of Spinco, or (d) subject to obtaining the
approvals and making the filings described in Section 4.3, constitute a
violation of any statute, law, ordinance, rule, or regulation, except where such
violation would not have a material adverse effect on the financial condition,
results of operations, liabilities, assets, or business of Western or, following
the Contribution, of Spinco.
4.3 Governmental Consents and Approvals. Neither the execution and
-----------------------------------
delivery of this Agreement by Chronicle nor the consummation of the
transactions contemplated by this Agreement will require any consent, approval,
authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except (a) for notification pursuant to,
and expiration or termination of the waiting period under, the HSR Act, (b) for
consents from the relevant governmental entities necessary to assign or
transfer control of licenses issued to Chronicle by the FCC (including licenses
to be assigned to Spinco in the Contribution) and Franchises, and (c) where the
failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications, would not have a material adverse effect on
the financial condition, results of operations, liabilities, assets, or
business of Western or, following the Contribution, of Spinco, or prevent
Chronicle from performing its obligations under this Agreement.
4.4 Recommendations of the Board of Directors. The Board of
-----------------------------------------
Directors of Chronicle has, by resolution duly adopted at a meeting duly called
and held, adopted this Agreement (as a plan of merger under Section 78.451 of
the Nevada Corporation Law) and approved the Merger, the Contribution, the
Distribution, and the other transactions contemplated by this Agreement on the
terms and conditions set forth herein, in accordance with Section 78.451 of the
Nevada Corporation Law.
4.5 Capitalization. The authorized capital stock of Chronicle
--------------
consists of 5,040,000 shares of Chronicle Common Stock. As of the date of this
Agreement, there are issued and outstanding 3,780,000 shares of Chronicle
Common Stock, and no shares of Chronicle Common Stock are held in treasury.
All issued and outstanding shares of Chronicle Common Stock are validly issued
and are fully paid and nonassessable. There are no existing options, warrants,
calls, subscriptions, or other rights or other agreements or commitments
obligating Chronicle to issue, transfer, or sell any
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<PAGE>
securities of Chronicle. There are no voting trusts or other agreements to which
Chronicle is a party with respect to the voting of capital stock of Chronicle.
4.6 Financial Statements.
--------------------
(a) Chronicle. The financial statements included in Schedule
---------
4.6(a) consist of audited balance sheets of Chronicle and the notes thereto as
at December 31, 1994 and December 31, 1993 and statements of income,
shareholders' equity, and cash flow and the notes thereto for the two fiscal
years ended December 31, 1994 and December 31, 1993, certified by Arthur
Andersen & Co., whose reports thereon are included therewith. The financial
statements of Chronicle included in Schedule 4.6(a) were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and present fairly the financial
position and the results of operations of Chronicle as of the relevant dates
thereof and for the periods covered thereby.
(b) Western. The financial statements included in Schedule
-------
4.6(b) consist of an unaudited balance sheet of Western as at December 31, 1994
and an unaudited statement of income for the fiscal year ended December 31,
1994. The financial statements of Western included in Schedule 4.6(b) fairly
present in all material respects the financial position of Western and results
of operations of Western as of the date thereof and for the period covered
thereby and, except as noted therein, were prepared on a basis consistent with
the financial statements of Chronicle included in Schedule 4.6(a).
4.7 Absence of Certain Changes. Except as set forth on Schedule
--------------------------
4.7, since December 31, 1994, there have not been any (a) material adverse
changes in the financial condition, results of operations, liabilities, assets,
or business of Western, except for material adverse changes due to general
economic or industry-wide conditions, (b) other events or conditions that,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western or, following the Contribution, of
Spinco, except for events or conditions of a general economic nature or of
industry-wide applicability, or (c) other events or conditions that,
individually or in the aggregate, have had or would reasonably be expected to
have a material adverse effect on the ability of Chronicle to perform its
obligations under this Agreement.
4.8 Absence of Undisclosed Liabilities. Except as disclosed on
----------------------------------
Schedule 4.8, Chronicle does not have any indebtedness, liability, or
obligation of a type required by GAAP to be reflected on a balance sheet that
is not reflected or reserved against in the balance sheet dated as at December
31, 1994 included in Schedule 4.6(a) other than liabilities, obligations, and
contingencies that (a) were incurred after December 31, 1994 in the ordinary
course of business, or (b) would not, individually or in the aggregate, have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western or, following the Contribution, of
Spinco, taking into account the consummation of the transactions contemplated
by this Agreement (including the
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<PAGE>
undertakings of Spinco described in Section 3.1(c)), and, in the case of
contingencies, the probability that the contingency would be realized and the
probable liability that would result therefrom.
4.9 Compliance With Law; Litigation.
-------------------------------
(a) Chronicle holds all licenses, franchises, certificates,
consents, permits, and authorizations from all governmental authorities
necessary for the lawful conduct of Western's business, except where the
failure to hold any of the foregoing would not have a material adverse effect
on the financial condition, results of operations, liabilities, assets, or
business of Western. To Chronicle's knowledge, Chronicle has not violated, and
is not in violation of, any such licenses, franchises, certificates, consents,
permits, or authorizations or any applicable statutes, laws, ordinances, rules,
and regulations of any governmental authorities, except where such violations
do not, and in so far as reasonably can be foreseen will not, have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Western, and, except as otherwise set forth on Schedule
4.9, as of the date of this Agreement, Chronicle has not received any notice
from any governmental or regulatory authority within three years of the date of
this Agreement of any such violation.
(b) Except as may affect the cable television industry generally,
and except as set forth on Schedule 4.9, as of the date of this Agreement, with
respect to Western, (i) there is no legal or governmental action or proceeding
pending or, to the knowledge of Chronicle, threatened against Chronicle that,
individually or in the aggregate, relates to or involves more than $100,000 or
seeks any material injunctive relief, and (ii) there are no judgments, orders,
writs, injunctions, decrees, or other similar instruments of any court or
governmental authority outstanding against Chronicle, or by which Chronicle is
bound, that, individually or in the aggregate, would have a material adverse
effect on the financial condition, results of operations, liabilities, assets,
or business of Western.
4.10 Title to Assets. Chronicle has good title to all material
---------------
assets reflected on the balance sheet of Western as at December 31, 1994
included in Schedule 4.6(b), free and clear of any lien, including any right of
any Person to acquire any interest in any System or assets of Western
(including any right of first refusal or similar right), except for (a)
landlord's liens and liens for property taxes not delinquent, (b) statutory
liens that were created in the ordinary course of business and do not
materially detract from the value of such assets or materially impair the use
thereof in the operation of the business of Western, (c) the liens listed on
Schedule 4.10, (d) leased interests in property owned by others and leased
interests in property leased to others, (e) restrictions set forth in, or
rights granted to governmental authorities as set forth in, the Franchises,
licenses issued by the FCC, or applicable law, and (f) zoning, building, or
similar restrictions, easements, rights-of-way, reservations of rights,
conditions, or other restrictions or encumbrances relating to or affecting real
property, that do not, individually or in the aggregate, materially interfere
with the use of such real property in the operation of the business of Western
as now conducted. Chronicle's assets used in the business of Western are
adequate to conduct the business of Western as now conducted in material
compliance with all Franchises, licenses, Material Contracts, and applicable
laws.
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<PAGE>
4.11 Real Property.
-------------
(a) Schedule 4.11 describes all real property (other than
easements, rights-of-way, and similar interests in real property) owned by
Chronicle and used in the business of Western. All of the real property listed
on Schedule 4.11 or leased by Chronicle pursuant to any lease listed on
Schedule 4.14, and all buildings, fixtures, and improvements thereon are in
good operating condition and repair (subject to normal wear and tear), except
where the failure of such property, buildings, fixtures, or improvements to be
in good operating condition would not have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Western.
(b) Except as set forth on Schedule 4.11, Chronicle holds
easements, licenses, and rights-of-way that are valid and in full force and
effect for the location, maintenance, installation, and operation of
substantially all the assets of Western upon, over, or under the property of
any other Person, except where the failure to have any such easement, license,
or right-of-way would not, individually or in the aggregate, have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Western.
4.12 Tangible Personal Property. Except as set forth in Schedule
--------------------------
4.12, all material tangible personal property of Western, taken as a whole, is
in good operating condition and repair (subject to normal wear and tear) and is
suitable for continued use in connection with the operation of the business of
Western immediately after the Merger in the manner in which it is now used,
except where the failure of such property to be in good operating condition
would not have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Western.
4.13 Intangible Property. Except as disclosed on Schedule 4.13,
-------------------
Chronicle possesses or has the right to use all material copyrights, patents,
trademarks, service marks, trade names, trade secrets, technology, and other
intangible property that is necessary for use in the operation and conduct of
the business of Western as now conducted without any known conflicts with the
rights of others that, individually or in the aggregate, would have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Western.
4.14 Material Contracts.
------------------
(a) Schedule 4.14 sets forth a complete list as of the date of
this Agreement of the following contracts, agreements, arrangements, and
commitments to which Chronicle is a party or by which Chronicle or its assets
is bound ("Material Contracts"):
(i) each lease of real property used in the business of
Western;
(ii) each agreement for the borrowing or lending of money
involving an amount in excess of $100,000 or evidencing Retained Chronicle
Debt;
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<PAGE>
(iii) each agreement under which Chronicle guarantees or
otherwise is liable for the obligations or liabilities of others involving an
amount in excess of $50,000;
(iv) each arrangement for the procurement of video or audio
programming carried by any System of Western (including programming carried out
of contract as indicated on Schedule 4.14(a)(iv) and including retransmission
consent agreements); and
(v) each other agreement not listed above relating to the
business of Western that involves aggregate monetary obligations in excess of
$250,000.
(b) Except as set forth in Schedule 4.14, Chronicle is not in
default under any contract, agreement, arrangement, or commitment required to
be listed on Schedule 4.14, except for defaults that in the aggregate would not
have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Western or, following the
Contribution, of Spinco. Chronicle has made available to Acquiror true and
complete copies of all contracts, agreements, arrangements, and commitments
listed on Schedule 4.14.
4.15 Cable Systems.
-------------
(a) Schedule 4.15 includes a list of the Systems of Western, the
Franchise Areas encompassed by each such System, and the approximate number of
homes passed (calculated in accordance with Western's customary practices) and
Basic Subscribers served by each Franchise Area within such System as of June
22, 1995.
(b) Schedule 4.15 also sets forth the following information
relating to the operation of each System of Western: (i) the rates charged by
Western in connection with such System for every service, level of service,
package of services, installations, and outlets or other services, equipment,
or items for which Chronicle has an established charge as of the date of this
Agreement; and (ii) the video signals carried on such System as of the date of
this Agreement.
(c) Schedule 4.15 also includes, for each System of Western, a
list of all Franchises that are necessary or required in order to operate such
System and a list of all FCC licenses held by Chronicle in connection with the
operation of such System as of the date of this Agreement. Chronicle has made
available to Acquiror true and complete copies of all Franchises listed on
Schedule 4.15. Except as disclosed on Schedule 4.15, Chronicle has not made
any commitments (oral or written) to franchise authorities with respect to
Western's Systems other than those contained in the Franchises. Except in
connection with the renewal of a Franchise or as otherwise disclosed in
Schedule 4.15, there are no proceedings pending, or, to the knowledge of
Chronicle, threatened, to cancel, modify, or change in a material way any
Franchise.
(d) Except as set forth in Schedule 4.15, no governmental
authority has any right to acquire any interest in any System or assets of
Western (including any right of first refusal or similar right), other than
rights of condemnation or eminent domain afforded by law.
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<PAGE>
(e) Except as set forth in Schedule 4.15, as of the date of this
Agreement, to the knowledge of Chronicle, no other Person:
(i) has been granted or has applied for the consent or
approval of any governmental authority for the installation, construction,
development, ownership, or operation of a cable television system (as defined
in the Cable Communications Policy Act of 1984, as amended) within all or part
of the geographic area served by any System of Western; or
(ii) operates, or has commenced the construction,
installation, or development of, any cable television system (as defined in the
Cable Communications Policy Act of 1984, as amended) within all or part of the
geographic area served by any System of Western, regardless of whether the
consent or approval of any governmental authority is required or has been
obtained.
(f) Except as set forth on Schedule 4.15, Chronicle has filed
with the appropriate governmental authorities all appropriate requests for
renewal under the Communications Act within 30 to 36 months prior to the
expiration of each Franchise.
(g) Other than requests for network non-duplication, syndicated
exclusivity protection, and sports blackout requirements, and other than as set
forth in Schedule 4.15, as of the date of this Agreement, Chronicle has not
received any written requests, notices, or demands from the FCC, any other
governmental authority, or any other Person, challenging or questioning the
legal rights of Chronicle to operate any System or carry any broadcast
television signal or requesting signal carriage pursuant to the FCC's
"must-carry" rules, other than any such request, notice, or demand that has
since been resolved. All of the local broadcast television signals carried by
the Systems of Western are carried either pursuant to the must-carry
requirements or pursuant to executed retransmission consent agreements. Except
as set forth in Schedule 4.15, as of the date of this Agreement, Chronicle has
not received any notification of any petition or submission that is currently
pending before the FCC to modify any television market or for a waiver of any
rules and regulations of the FCC as they apply to any System of Western.
(h) Chronicle has made available to Acquiror true and complete
copies of all reports and filings for the past three years made or filed by
Chronicle with the FCC pursuant to the Communications Act with respect to the
business of Western.
(i) Chronicle has timely and accurately made all requisite
filings and payments with the Register of Copyrights and is otherwise in
compliance with all applicable rules and regulations of the Copyright Office
except as disclosed on Schedule 4.15 or where such noncompliance would not have
a material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western. Chronicle has made available to
Acquiror true and complete copies of all current reports and filings, and all
reports and filings for the past five
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<PAGE>
years, made or filed pursuant to copyright rules and regulations with respect to
the business of Western.
(j) Chronicle has made available to Acquiror true and complete
copies of (i) the final versions of all FCC Forms 393, 1200, 1205, 1210, 1220,
and 1225 that have been prepared with respect to Western's Systems and filed
with any governmental authority and the most recent draft of any such Form that
has been prepared with respect to Western's Systems in which no version of such
Form was filed with any governmental authority, (ii) all material
correspondence with any governmental body relating to rate regulation under the
Cable Television Consumer Protection and Competition Act of 1992, (iii) any
complaints on FCC Form 329 filed with the FCC with respect to any rates charged
to subscribers of Western's Systems and any correspondence from Chronicle to
any subscriber with respect to any such complaint, and (iv) any documentation
formally prepared by Chronicle to support an exemption from the rate regulation
provisions of the Cable Television Consumer Protection and Competition Act of
1992 claimed by Chronicle with respect to Western's Systems. Schedule 4.15
hereto sets forth (i) a list of all rate complaints on FCC Form 329 filed
pursuant to the Communications Act and received by Chronicle that have not been
deemed invalid by the FCC, (ii) those Systems in which the franchising authority
has been certified upon filing FCC Form 328 or, to Chronicle's knowledge, has
filed FCC Form 328 with the FCC for certification under the Cable Television
Consumer Protection and Competition Act of 1992 to regulate Western's rates, and
(iii) a list of all letters of inquiry from the FCC received by Chronicle since
September 1, 1993 with regard to rate restructuring.
4.16 Brokers and Finders. Neither Chronicle nor any officer,
-------------------
director, or employee of Chronicle has employed any broker or finder or
incurred any liability for any brokerage fees, commissions, or finder's fees
for which Acquiror or Chronicle would be liable, unless such liability is
assumed by Spinco, in connection with the transactions contemplated by this
Agreement, except that Chronicle has employed Salomon Brothers Inc and Waller
Capital Corporation as its financial advisors in connection with such
transactions.
4.17 Taxes.
-----
(a) Chronicle is an S corporation as defined in Section 1361 of
the Code and has been an S corporation since January 1, 1989.
(b) All material Tax Returns required to be filed by Chronicle on
or before the date of this Agreement have been duly and timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax
Returns are required to be filed; all of the foregoing Tax Returns are true and
complete in all material respects; and all Taxes required to have been paid by
Chronicle in connection with such Tax Returns have been paid. All estimated
Taxes payable as of December 31, 1994 by Chronicle but not reflected on any Tax
Return required to be filed prior to December 31, 1994 have been fully paid or
adequate provision therefor has been made and reflected on the balance sheet as
at December 31, 1994 included in Schedule 4.6(a).
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<PAGE>
(c) Except as set forth on Schedule 4.17 hereto, as of the date
of this Agreement there are no claims or investigations pending or, to
Chronicle's knowledge, threatened against Chronicle for past Taxes, and
adequate provision for the claims or investigations set forth on Schedule 4.17
has been made as reflected on Chronicle's balance sheet dated as at December
31, 1994 included in Schedule 4.6(a). Except as set forth on Schedule 4.17,
Chronicle has not waived or extended any applicable statute of limitations
relating to the assessment of federal, state, or local Taxes that would be
payable by Chronicle.
(d) Chronicle does not have any plan or intention to take any
action before or after the Effective Time that would adversely affect the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code or the qualification of the Contribution and Distribution
under Section 355 or Section 368(a) of the Code.
4.18 Employees; Labor Relations. Schedule 4.18 lists as of the date
--------------------------
of this Agreement the identity and position of each person employed by
Chronicle with respect to the business of Western. Except as disclosed on
Schedule 4.18, Chronicle is not a party to any employment agreement of any
kind, oral or written, that would require Acquiror to employ any Person after
the Closing Date. Chronicle has complied with all laws relating to the
employment of labor except where such noncompliance would not have had a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western. Except as disclosed on Schedule
4.18, (a) Chronicle is not a party to any contract with any labor organization
with respect to the operation of the business of Western, (b) Chronicle has not
agreed to recognize any union or other collective bargaining unit with respect
to the operation of the business of Western, and (c) as of the date of this
Agreement, no union or other collective bargaining unit has been certified as
representing any of the employees of Western. To Chronicle's knowledge, as of
the date of this Agreement, there is no representation or organizing effort
pending or threatened against or affecting or involving Western.
4.19 Employee Benefit Plans.
----------------------
(a) Schedule 4.19 lists all Western Employee Benefit Plans and
Pension Plans.
(b) Except as disclosed in Schedule 4.19, neither Chronicle nor
any ERISA Affiliate of Chronicle currently has or in the preceding six years
has (i) had any obligation to make any contribution to a Multiemployer Plan for
the benefit of any employee or former employee of Western, or (ii) incurred any
withdrawal liability under Section 4201 of ERISA with respect to any
Multiemployer Plan providing any benefit to employees or former employees of
Western.
(c) Each Pension Plan that is intended to qualify under Section
401 of the Code and each trust maintained pursuant thereto are the subjects of
favorable determination letters from the IRS regarding their exemptions from
federal income taxation under Section 501 of the Code, and no plan amendment
that is not the subject of a favorable determination letter would affect the
validity of the determination letter previously received from the IRS with
respect to the Pension Plan to which the plan amendment relates.
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<PAGE>
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under the
terms of any of the Chronicle Employee Benefit Plans or by law (without regard
to any waivers granted under Section 412 of the Code) to any funds or trusts
established thereunder or in connection therewith have been made by the due
date thereof (including any valid extension or grace period), and all
contributions for any period ending on or before the Closing Date that are not
yet due will have been paid or accrued on or prior to the Closing Date. No
accumulated funding deficiencies exist in any of the Chronicle Employee Benefit
Plans that are subject to Section 412 of the Code.
(e) The Chronicle Employee Benefit Plans have been maintained, in
all material respects, in accordance with their terms and with the provisions
of ERISA and other applicable federal and state law. Neither Chronicle, any
ERISA Affiliate of Chronicle, nor, to Chronicle's knowledge, any other Person
has engaged in a non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA with respect to the Chronicle
Employee Benefit Plans.
(f) Chronicle has made available to Acquiror true and complete
copies of the following documents with respect to each of the Western Employee
Benefit Plans, where applicable: (i) any plans and related trust documents,
and amendments thereto, (ii) any summary plan descriptions, (iii) written
descriptions of any non-written agreements relating to the Western Employee
Benefit Plans, and (iv) annual reports for the years 1992 to 1994 to the extent
such reports are available.
(g) There are no pending actions, claims, or lawsuits that have
been asserted or instituted against any of the Chronicle Employee Benefit
Plans, the assets of any of the trusts under such plans, or the plan sponsor or
the plan administrator, or against any fiduciary of any of the Chronicle
Employee Benefit Plans with respect to the operation of such plans other than
routine benefit claims.
(h) Except as disclosed on Schedule 4.19, no Chronicle or Western
Employee Benefit Plan provides life or health benefits to retirees or former
employees of Chronicle or Western (or their dependents), except as may be
required under COBRA.
4.20 Environmental Matters. Except as set forth in Schedule 4.20,
---------------------
to the knowledge of Chronicle, there are no flammable, explosive, or
radioactive materials, toxic substances, or other hazardous substances or
wastes on, under, or about any assets of Chronicle that could reasonably be
expected to result in any governmental or third-party action, proceeding, or
claim against Chronicle that, individually or in the aggregate, would have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western or, following the Contribution, of
Spinco. Except as set forth in Schedule 4.20, to the knowledge of Chronicle,
no release of hazardous substances or wastes outside of any real property
owned, leased, or otherwise used by Chronicle has entered or threatened to
enter any such property and to the knowledge of Chronicle there is not any
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<PAGE>
claim pending or threatened in writing based upon any environmental laws
arising from any condition of the land surrounding any such property. Except
as set forth in Schedule 4.20, to the knowledge of Chronicle, no claim or
investigation based on any applicable environmental laws has been asserted or
conducted in the past or is currently pending or threatened in writing with
respect to any real property owned, leased, or otherwise used by Chronicle.
Except as set forth in Schedule 4.20, to the knowledge of Chronicle, (i) no
aboveground or underground storage tanks are currently or have been located at
any of the real property owned, leased, or otherwise used by Western and (ii)
no real property owned, leased, or otherwise used by Western has been used at
any time as a gasoline service station or any other facility for storing,
pumping, dispensing, or producing gasoline or other petroleum products or
wastes. Chronicle has made available to Acquiror true and complete copies of
all (i) environmental audits, investigations, studies, or reports with respect
to any real property of Western that have been performed by or at the direction
of Chronicle or that are in Chronicle's possession, (ii) notices or other
materials in Chronicle's possession from governmental authorities having the
power to administer or enforce any applicable environmental laws relating to
current or past ownership, use, or operation of or activities at any real
property owned, leased, or otherwise used by Chronicle in the business of
Western, and (iii) materials in Chronicle's possession relating to any claim,
allegation, or action by any Person (other than any governmental authority)
under any applicable environmental law. For the purpose of this Section
"hazardous substances" and "hazardous waste" shall have the meanings set forth
in any applicable federal, state, or local laws pertaining to environmental
matters.
4.21 Transactions with Affiliates. Except as set forth in Schedule
----------------------------
4.21, there is no lease, sublease, indebtedness, contract, agreement,
commitment, understanding, or other arrangement of any kind entered into by
Chronicle with respect to Western with any officer, director, or shareholder of
Chronicle or any "affiliate" or "associate" of any of them (as those terms are
defined in the Exchange Act), except, in each case, for management fees and
other compensation paid to directors and officers consistent with previously
established policies (including normal merit increases in such compensation in
the ordinary course of business), reimbursements of ordinary and necessary
expenses incurred in connection with their employment, and amounts paid
pursuant to employee benefit plans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to Chronicle as follows:
5.1 Organization and Authority; Binding Effect. Acquiror is a
------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Acquiror and its Subsidiaries have all
requisite corporate or partnership power and authority to own, lease, and
operate their properties and to carry on their businesses as now being
conducted, except where the failure to have such power or authority would not
have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Acquiror and its Subsidiaries
taken as a whole. Acquiror has all requisite corporate power and authority to
execute and deliver this
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<PAGE>
Agreement and, subject to Section 7.17, to consummate the transactions
contemplated by this Agreement. Subject to Section 7.17, all necessary corporate
action required to have been taken by or on behalf of Acquiror by applicable
law, its charter documents, or otherwise to authorize (a) the approval,
execution, and delivery on behalf of Acquiror of this Agreement and (b) the
performance by Acquiror of its obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement has been taken.
Assuming that this Agreement constitutes a valid, binding, and enforceable
agreement of Chronicle, this Agreement constitutes a valid and binding agreement
of Acquiror, enforceable against it in accordance with its terms, except (x) as
enforcement of this Agreement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws of general application relating to or
affecting creditors' rights, including the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, (y) as the
availability of indemnification and other remedies may be limited by federal and
state securities laws, and (z) for the limitations imposed by general principles
of equity.
5.2 No Breach. The execution and delivery of this Agreement by
---------
Acquiror do not, and, subject to Section 7.17, the consummation of the
transactions contemplated by this Agreement by Acquiror will not, (a) violate
or conflict with the Certificate of Incorporation or Bylaws of Acquiror, (b)
except as set forth on Schedule 5.2, constitute a breach or default (or an event
that with notice or lapse of time or both would become a breach or default) or
give rise to any lien, third-party right of termination, cancellation,
modification, or acceleration under any contract to which Acquiror or any of its
Subsidiaries is a party or by which any of them is bound that has been or is
required to be filed by Acquiror with the SEC, or (c) except as set forth on
Schedule 5.2 and, with respect to cable television franchises, subject to
obtaining the approvals and making the filings described in Section 5.3,
constitute a breach or default (or an event that with notice or lapse of time or
both would become a breach or default) or give rise to any lien, third-party
right of termination, cancellation, modification, or acceleration under any
agreement or undertaking to which Acquiror or any of its Subsidiaries is a party
or by which any of them is bound (other than a contract described in clause
(b)), except where such breach, default, lien, third-party right of termination,
cancellation, modification, or acceleration would not have a material adverse
effect on the financial condition, results of operations, liabilities, assets,
or business of Acquiror and its Subsidiaries taken as a whole, or (c) subject to
obtaining the approvals and making the filings described in Section 5.3,
constitute a violation of any statute, law, ordinance, rule, or regulation,
except where such violation would not have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries taken as a whole.
5.3 Governmental Consents and Approvals. Neither the execution and
-----------------------------------
delivery of this Agreement by Acquiror nor the consummation of the transactions
contemplated by this Agreement by Acquiror will require any consent, approval,
authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except (a) for filings required under the
Securities Act, (b) for filings required under the Exchange Act, (c) for
filings required under state securities or "blue sky" laws, (d) for
notification pursuant to, and expiration or termination of the waiting period
under, the HSR Act, and (e) where the failure to obtain such consents,
approvals, authorizations, or permits, or to make such filings or
notifications, would not have a material adverse
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<PAGE>
effect on the financial condition, results of operations, liabilities, assets,
or business of Acquiror and its Subsidiaries taken as a whole or prevent
Acquiror from performing its obligations under this Agreement.
5.4 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized capital
stock of Acquiror consists of (i) 1,100,000,000 shares of Acquiror Class A
Common Stock, (ii) 150,000,000 shares of Acquiror Class B Common Stock, (iii)
700,000 shares of Class A Preferred Stock ("Class A Preferred"), (iv) 1,675,096
shares of Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
("Class B Preferred"), (v) 10,000,000 shares of Series Preferred Stock of which
80,000 shares have been designated as Convertible Preferred Stock, Series C
("Series C Preferred") and 400,000 shares have been designated as Redeemable
Convertible Preferred Stock, Series E ("Series E Preferred"). As of December
31, 1994, there were issued and outstanding, including treasury stock and
shares held by Affiliates of Acquiror, (i) 571,423,943 shares of Acquiror Class
A Common Stock, (ii) 89,287,429 shares of Acquiror Class B Common Stock, (iii)
592,798 shares of Class A Preferred, (iv) 1,675,096 shares of Class B
Preferred, (v) 70,559 shares of Series C Preferred and (vi) 246,402 shares of
Series E Preferred. All issued and outstanding shares of capital stock of
Acquiror are validly issued and are fully paid and nonassessable.
(b) The shares of Acquiror Common Stock to be issued in the
Merger, upon their issuance in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid, and nonassessable.
5.5 SEC Reports. Acquiror has filed all forms, reports, and
-----------
documents required to be filed by Acquiror with the SEC since January 1, 1992
(collectively, "Acquiror's SEC Reports"). Acquiror's SEC Reports have complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act. As of their respective dates, none of Acquiror's SEC
Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Acquiror has heretofore delivered to Chronicle, in the form filed with the SEC,
those SEC Reports of Acquiror listed in Schedule 5.5.
5.6 Financial Statements. The audited consolidated financial
--------------------
statements of Acquiror contained in Acquiror's SEC Reports comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), and present fairly
Acquiror's consolidated financial condition and the results of its operations
as of the relevant dates thereof and for the periods covered thereby. The
unaudited consolidated interim financial statements of Acquiror contained in
Acquiror's SEC Reports comply in all material respects with applicable
accounting requirements and
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<PAGE>
with the published rules and regulations of the SEC with respect thereto, were
prepared on a basis consistent with prior interim periods, and include all
adjustments (consisting only of normal recurring accruals) that management
considers necessary for a fair presentation of Acquiror's consolidated financial
condition and the results of operations for such periods.
5.7 Absence of Certain Changes. Except as set forth on Schedule
--------------------------
5.7 or as otherwise disclosed in Acquiror's SEC Reports filed prior to the date
of this Agreement, since the date of the most recent balance sheet of Acquiror
included in Acquiror's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, there has not been any (a) material adverse change in the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries, taken as a whole, except for material adverse
changes due to general economic or industry-wide conditions, (b) other events
or conditions that, in the aggregate, have or would reasonably be expected to
have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Acquiror and its Subsidiaries,
taken as a whole, except for events or conditions of a general economic nature
or of industry-wide applicability, or (c) other events or conditions that,
individually or in the aggregate, have had or would reasonably be expected to
have a material adverse effect on the ability of Acquiror to perform its
obligations under this Agreement.
5.8 Absence of Undisclosed Liabilities. Acquiror does not have any
----------------------------------
indebtedness, liability, or obligation of a type required by GAAP to be
reflected on a balance sheet that is not reflected or reserved against in its
consolidated balance sheet dated as at March 31, 1995, included in Acquiror's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 or otherwise
disclosed in such Form 10-Q or in any Form 8-K filed subsequent to such Form
10-Q and included in the Acquiror's SEC Reports listed in Schedule 5.5, other
than liabilities, obligations, and contingencies that (a) were incurred after
March 31, 1995 in the ordinary course of business or (b) would not, in the
aggregate, have a material adverse effect on the financial condition, results
of operations, liabilities, assets, or business of Acquiror and its
Subsidiaries taken as a whole, taking into account, in the case of
contingencies, the probability that the contingency would be realized and the
probable liability that would result therefrom.
5.9 Compliance with Law.
-------------------
(a) Acquiror and its Subsidiaries hold all licenses, franchises,
certificates, consents, permits, and authorizations from all governmental
authorities necessary for the lawful conduct of their businesses, except where
the failure to hold any of the foregoing would not have a material adverse
effect on the financial condition, results of operations, liabilities, assets,
or business of Acquiror and its Subsidiaries taken as a whole. To Acquiror's
knowledge, neither Acquiror nor any of its Subsidiaries has violated, or is in
violation of, any such licenses, franchises, certificates, consents, permits,
or authorizations or any applicable statutes, laws, ordinances, rules, and
regulations of any governmental authorities, except where such violations do
not, and in so far as reasonably can be foreseen will not, have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Acquiror and its Subsidiaries taken as a whole, and,
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except as otherwise set forth on Schedule 5.9, Acquiror has not received any
notice from a governmental or regulatory authority within three years of the
date of this Agreement of any such violation.
(b) Except as may affect the cable television industry generally,
and except as set forth on Schedule 5.9, as of the date of this Agreement (i)
there is no legal or governmental action or proceeding pending or, to the
knowledge of Acquiror, threatened against Acquiror or any of its Subsidiaries
that, if determined adversely, would have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries, taken as a whole, or seeks any material
injunctive relief, and (ii) there are no judgments, orders, writs, injunctions,
decrees, or other similar instruments of any court or governmental authority
outstanding against Acquiror or any of its Subsidiaries, or by which any of
them is bound, that, in the aggregate, would have a material adverse effect on
the financial condition, results of operations, liabilities, assets, or
business of Acquiror and its Subsidiaries taken as a whole.
5.10 Brokers and Finders. Neither Acquiror nor any of its officers,
-------------------
directors, employees, or Affiliates has employed any broker or finder or
incurred any liability for any brokerage fees, commissions, or finder's fees in
connection with the transactions contemplated by this Agreement.
5.11 Taxes.
-----
(a) All material Tax Returns required to be filed by Acquiror or
any of its Subsidiaries on or before the date of this Agreement have been duly
and timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed; all of the
foregoing Tax Returns are true and complete in all material respects; and all
Taxes required to have been paid in connection with such Tax Returns have been
paid. All estimated Taxes payable as of March 31, 1995 by or with respect to
Acquiror and its Subsidiaries but not reflected on any material Tax Return
required to be filed prior to March 31, 1995, have been fully paid or adequate
provision therefor has been made and reflected on the balance sheet of Acquiror
included in Acquiror's Quarterly Report on Form 10-Q for the three months ended
March 31, 1995.
(b) Except as disclosed in Acquiror's SEC Reports filed prior to
the date of this Agreement, there are no claims or investigations pending or,
to Acquiror's knowledge, threatened against Acquiror or any of its Subsidiaries
for past Taxes, except for claims and investigations that would not have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Acquiror and its Subsidiaries taken as a
whole, and adequate provision for the claims or investigations disclosed in
Acquiror's SEC Reports filed prior to the date of this Agreement has been made
as reflected on the most recent balance sheet of Acquiror included in
Acquiror's SEC Reports filed prior to the date of this Agreement.
(c) Acquiror is not, and at the Effective Time, will not be, an
"investment company" within the meaning of Section 368(a)(2)(F)(iii) and (iv)
of the Code.
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<PAGE>
(d) Neither Acquiror nor any of its Affiliates has any plan or
intention to take any action before or after the Effective Time that would
adversely affect the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code or the qualification of the Contribution
and the Distribution under Section 355 or Section 368(a) of the Code.
ARTICLE VI
COVENANTS REGARDING CONDUCT OF BUSINESS
6.1 Conduct of Business of Western. Except as contemplated by this
------------------------------
Agreement, during the period from the date of this Agreement to the Closing
Date, Chronicle will conduct the operations of Western according to its
ordinary and usual course of business consistent with past practices. Without
limiting the generality of the foregoing, Chronicle shall not, without the
prior written consent of Acquiror:
(a) amend its Restated Articles of Incorporation or Bylaws;
(b) declare, set aside, or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
its capital stock, except for (i) the Distribution, (ii) cash dividends and
distributions declared and paid in accordance with past practices as described
on Schedule 6.1(b), and (iii) a dividend or distribution in the form of the AAA
Notes;
(c) redeem or otherwise acquire any of its securities;
(d) create, incur, or assume any indebtedness not currently
outstanding other than:
(i) indebtedness assumed by Spinco pursuant to Section
3.1(c);
(ii) Acquiror Loans incurred pursuant to Section 3.3(a);
(iii) indebtedness incurred pursuant to Section 3.3(c);
(iv) other indebtedness of Chronicle incurred in the
ordinary and usual course of Western's business (other than indebtedness that
will be included in liabilities for purposes of calculating the Working Capital
Deficit pursuant to Section 3.1(b)) that, together with liabilities included in
Section 6.1(e)(ii), does not exceed $500,000 in the aggregate; and
(v) other indebtedness that is permitted to be prepaid in
full without penalty at or immediately after the Closing;
(e) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the obligations
of any other Person, other than:
(i) liabilities assumed by Spinco pursuant to Section
3.1(c); and
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<PAGE>
(ii) other liabilities of Chronicle incurred in the ordinary
and usual course of Western's business (other than liabilities that will be
included in liabilities for purposes of calculating the Working Capital Deficit
pursuant to Section 3.1(b)) that, together with indebtedness included in
Section 6.1(d)(iv), do not exceed $500,000 in the aggregate;
(f) except for the Contribution and except for any investment
transferred to Spinco pursuant to Section 3.1(a), make any loans, advances, or
capital contributions to, or investments in, any one or more Persons, which
loans, advances, capital contributions, or investments in the aggregate exceed
$250,000;
(g) issue, sell, deliver, or agree or commit to issue, sell, or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase, or otherwise) any stock of any
class or any other securities or amend any of the terms of any securities
outstanding on the date of this Agreement;
(h) dispose of or lease (as lessor) any assets material to
Western, other than the disposition of any assets described on Schedule 3.1(a),
sales of inventory in the ordinary and usual course of business consistent with
past practice, and dispositions of assets no longer used in the business or
operations of Western or in connection with the acquisition of replacement
property of equivalent kind and value;
(i) mortgage, pledge, or subject to any lien, lease, security
interest, or other charge or encumbrance any properties or assets, tangible or
intangible, material to Western, other than in the ordinary and usual course of
business consistent with past practice;
(j) acquire or lease (as lessee) any assets for use in Western's
business other than in the ordinary and usual course of business consistent
with past practice or as described on Schedule 6.1(j) (the "Capital Budget");
(k) fail to make capital expenditures substantially in accordance
with the Capital Budget; provided, however, that capital expenditures for
individual projects may vary from the Capital Budget so long as the aggregate
amount of capital expenditures provided for in the Capital Budget are made;
(l) make any affirmative election to commence any cost of service
proceeding conducted in accordance with Part 76.922 of Title 47 of the Code of
Federal Regulations or any similar proceeding, provided that Acquiror's consent
thereto may not be unreasonably withheld; or
(m) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions that would (i) make any representation or
warranty of Chronicle contained in this Agreement untrue or incorrect as of the
date when made or as of the Closing Date or (ii) result in any of the
conditions to Closing in Article VIII of this Agreement not being satisfied.
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<PAGE>
6.2 Conduct of Business of Acquiror. Except as contemplated by
-------------------------------
this Agreement, during the period from the date of this Agreement to the
Closing Date, Acquiror will not take, any actions that would (i) make any
representation or warranty of Acquiror contained in this Agreement untrue or
incorrect as of the date when made or as of the Closing Date or (ii) result in
any of the conditions to Closing in Article VIII of this Agreement not being
satisfied.
ARTICLE VII
OTHER AGREEMENTS
7.1 No Solicitation. Neither Chronicle nor any of its officers,
---------------
directors, representatives, or agents shall, directly or indirectly, knowingly
encourage, solicit, initiate or, unless the Board of Directors of Chronicle
determines, with the advice of outside counsel, to do so in the exercise of its
fiduciary duties, participate in any way in discussions or negotiations with,
or knowingly provide any confidential information to, any Person or group
(other than Acquiror or any Affiliate or associate of Acquiror and their
respective directors, officers, employees, representatives, and agents)
concerning any merger of Chronicle, the sale of any substantial part of the
assets of Western, any issuance of shares of capital stock of Chronicle so as
to effect the acquisition of any substantial part of the assets of Western, or
any similar transaction involving Western; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of Chronicle
from (i) making any disclosure to Chronicle's shareholders, or (ii) responding
to any unsolicited proposal or inquiry by advising the Person making such
proposal or inquiry of the terms of this Section 7.1. Chronicle will promptly
communicate to Acquiror the fact that it has received any proposal or inquiry in
respect of any such transaction and of any such information requested from it or
of any such negotiations or discussions being sought to be initiated with
Chronicle.
7.2 Access to Information. Between the date of this Agreement and
---------------------
the Effective Time, Chronicle and Acquiror will each (a) give the other party
and its authorized representatives reasonable access, during regular business
hours upon reasonable notice, to all offices and other facilities of such party
and its Subsidiaries and to all books and records of such party and its
Subsidiaries, (b) permit the other party to make such reasonable inspections of
the offices, facilities, books, and records described in clause (a) as it may
require, and (c) cause its officers and those of its Subsidiaries to furnish
the other party with such financial and operating data and other information
with respect to the business and properties of Chronicle and Western or
Acquiror and its Subsidiaries, as the case may be, as the other party may from
time to time reasonably request. All such access and information obtained by
either Chronicle or Acquiror and their respective authorized representatives
shall be subject to the confidentiality agreement between Chronicle and
Acquiror dated June 3, 1994.
7.3 Private Placement Information; Registration of Acquiror Common
---------------------------------------------------------------
Stock.
- -----
(a) Private Placement Memorandum. Acquiror, at its expense,
----------------------------
shall prepare a private placement memorandum or similar document (the "PPM")
and shall deliver the PPM to
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<PAGE>
Chronicle for delivery to shareholders of Chronicle before the shareholders'
meeting contemplated by Section 7.7. Acquiror will include in the PPM copies of
Acquiror's SEC Reports described in Rule 502(b)(2)(ii)(B) and (C) of Regulation
D under the Securities Act and such other information concerning Acquiror, its
business and assets and Acquiror Common Stock as Acquiror deems necessary or
appropriate (such SEC Reports and other information being referred to as the
"Acquiror PPM Information"). Chronicle shall have exclusive responsibility for
preparing, or causing its counsel to prepare, and delivering to Acquiror in
writing for inclusion in the PPM all other information to be included in the PPM
(the "Chronicle PPM Information"), for the accuracy and completeness of the
Chronicle PPM Information and for the timely delivery of the PPM to shareholders
of Chronicle.
(b) Preparation and Filing. Acquiror, at its expense, shall
----------------------
prepare and, on or before the date that is 45 days after the date of approval
of this Agreement by the shareholders of Chronicle, file with the SEC a
Registration Statement (the "Registration Statement") on Form S-3, or other
appropriate form, for the offering and sales on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act by those shareholders of
Chronicle as of the Effective Time (and any transferee thereof pursuant to a
transfer described in clauses (i) - (v) of the proviso to the third sentence of
this Section 7.3(b)) who have executed and delivered to Acquiror an instrument
in the form of Exhibit B (the "Selling Shareholders") of the shares of Acquiror
Common Stock to be issued to the Selling Shareholders in the Merger. The section
of the Registration Statement entitled "Plan of Distribution" shall be prepared
in accordance with the requirements of Item 508 of Regulation S-K promulgated
under the Securities Act and, notwithstanding anything to the contrary contained
herein, shall provide that the Selling Shareholders may distribute Acquiror
Common Stock pursuant to such Registration Statement solely in the manner set
forth in Schedule 7.3(b). Notwithstanding any other provision of this Agreement
or the "Plan of Distribution" contained in the Registration Statement, the
Selling Shareholders shall agree pursuant to the instrument in the form of
Exhibit B not to sell or otherwise distribute more than 25% in the aggregate of
the number of shares of each class of Acquiror Common Stock issued to the
Selling Shareholders in the Merger within one year after the Closing Date or
more than 50% in the aggregate of the number of shares of each class of Acquiror
Common Stock issued to the Selling Shareholders in the Merger within two years
after the Closing Date; provided, however, that the foregoing restriction shall
not apply to and shall not be taken into account for purposes of determining
whether any other transfer complies with the foregoing restriction (i) any
transfer by will or the laws of intestacy, (ii) any transfer by a trust which is
a Selling Shareholder to the beneficiaries of such trust, (iii) any transfer by
a Selling Shareholder to another Selling Shareholder, (iv) any transfer by a
Selling Shareholder to such Selling Shareholder's spouse, parents, grandparents,
or lineal descendants of such Selling Shareholder's grandparents, or (v) any
transfer by a Selling Shareholder to a trust all of the beneficial interests in
which are owned by one or more of the members of the group consisting of the
Selling Shareholder and the individuals described in the preceding clause (iv).
For a period of two years after the Closing Date, Acquiror agrees not to
register in its stock transfer records any transfer of shares of Acquiror Common
Stock by shareholders of Chronicle, unless Acquiror receives the written consent
of Spinco to such transfer. Each certificate evidencing shares of Acquiror
Common Stock issued to any shareholder of Chronicle pursuant to this Agreement
shall bear a legend relating to the transfer
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<PAGE>
restrictions set forth in the two immediately preceding sentences and each
certificate evidencing shares of Acquiror Common Stock issued to any shareholder
of Chronicle who is not a Selling Shareholder shall bear a legend to the effect
that the shares evidenced thereby may not be transferred unless such transfer is
registered under the Securities Act and applicable state securities laws or
unless exemptions from such registration requirements are available. Acquiror
will have exclusive responsibility for the preparation, filing, accuracy, and
completeness of the Registration Statement, and any amendments or supplements
thereto, except as to information therein and any amendments or supplements
thereto, that Chronicle, Spinco or any of the Selling Shareholders shall have
furnished in writing to Acquiror expressly for inclusion in the Registration
Statement or any amendment or supplement thereto. Acquiror shall furnish to
Chronicle, for Chronicle's review and comment, copies of the Registration
Statement and any amendment or supplement thereto, in the forms proposed to be
filed by Acquiror, not less than five business days prior to the filing thereof
with the SEC, and Chronicle shall advise Acquiror in writing of any recommended
changes to the Registration Statement or any amendment or supplement thereto
within three business days following receipt of such documents from Acquiror.
Acquiror will furnish to Chronicle and, after the Effective Time, the Selling
Shareholders copies of the Registration Statement, any prospectus relating to
the Registration Statement (as amended or supplemented from time to time, a
"Prospectus"), and any amendments or supplements thereto, in the forms filed,
immediately upon the filing of such documents with the SEC, together with any
other documents that the Selling Shareholders reasonably request in order to
facilitate the disposition of the Acquiror Common Stock registered pursuant to
the Registration Statement. Acquiror shall use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC and shall make
available to the Selling Shareholders, as soon as reasonably practicable (but
not more than 18 months) after the effective date of the Registration Statement,
an earnings statement that satisfies the provisions of Section 11(a) of the
Securities Act; provided, however, that Acquiror shall be deemed to have
complied with this sentence if it has complied with Rule 158 promulgated under
the Securities Act.
(c) Cooperation. Acquiror will use its reasonable best
-----------
efforts to respond to any comments of the SEC with respect to the Registration
Statement and to cause the Registration Statement to become effective as soon
as possible after filing. Chronicle and Acquiror shall cooperate with each
other and provide to each other in writing all information necessary in order
to prepare the PPM and the Registration Statement and shall each provide
promptly to the other party in writing any information that such party may
obtain that could necessitate amending any such document. Acquiror will notify
Chronicle and, after the Effective Time, the Selling Shareholders promptly of
the receipt of any comments from the SEC or its staff or any other government
official and of any requests by the SEC or its staff or any other government
official for any amendment or supplement to the Registration Statement or for
additional information and will supply Chronicle and, after the Effective Time,
the Selling Shareholders with copies of all correspondence between Acquiror or
any of its representatives, on the one hand, and the SEC or its staff or any
other government official, on the other hand, with respect thereto.
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<PAGE>
(d) Information and Compliance with Legal Requirements.
--------------------------------------------------
(i) Acquiror covenants that the PPM, the Registration
Statement, each Prospectus, and any amendment or supplement thereto (other than
the Chronicle PPM Information and any information that Chronicle, any Selling
Shareholder, or any of their respective representatives shall have furnished in
writing to Acquiror expressly for inclusion in any such document) (A) will
comply in all material respects with the Securities Act and the Exchange Act
and (B) will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under
which they are made, not misleading.
(ii) Chronicle covenants that the Chronicle PPM Information
and the information supplied or to be supplied in writing to Acquiror by
Chronicle or any of its representatives expressly for inclusion in the
Registration Statement, each Prospectus, and any amendment or supplement
thereto, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(iii) Each Selling Shareholder, as a condition to the
inclusion in the Registration Statement of the shares of Acquiror Common Stock
to be issued to such Selling Shareholder in the Merger, shall, by his or her
execution and delivery of an instrument in the form of Exhibit B, covenant that
the information supplied or to be supplied in writing to Acquiror by such
Selling Shareholder or any of his or her representatives expressly for inclusion
in the Registration Statement, each Prospectus, and any amendment or supplement
thereto, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Amendments. Until the first to occur of (i) the
----------
expiration of three years after the Effective Time, and (ii) the sale of all
Acquiror Common Stock covered by the Registration Statement, Acquiror shall
promptly prepare and file with the SEC any amendments, post-effective
amendments, and supplements to the Registration Statement or each Prospectus
and shall use its reasonable best efforts to take all actions that are
necessary or appropriate to keep the Registration Statement effective and
current and to comply with the provisions of the Securities Act with respect to
the disposition of all shares of Acquiror Common Stock covered by the
Registration Statement. If the Registration Statement, as from time to time in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or if a post-
effective amendment to the Registration Statement or a supplement to any
Prospectus relating to the Registration Statement is required, Acquiror shall
immediately notify each Selling Shareholder and shall promptly prepare and file
with the SEC and furnish to each Selling Shareholder a supplement or amendment
to the Registration Statement or the Prospectus included therein so that, as
thereafter delivered to purchasers of the Selling Shareholders' shares of
Acquiror Common Stock covered by
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<PAGE>
the Registration Statement, such Prospectus will not contain any untrue
statement of any material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances then existing.
(f) Blackout Periods. Notwithstanding anything to the
----------------
contrary contained in this Section 7.3, if Acquiror determines, in its
reasonable judgment, that the use of the Registration Statement would adversely
affect any financing, acquisition, corporate reorganization, or other material
transaction involving Acquiror or any of its Affiliates or require Acquiror to
disclose matters that otherwise would not be required to be disclosed at such
time, then until such time as Acquiror has no further obligation pursuant to
the first sentence of Section 7.3(e) hereof, Acquiror may require the
suspension by each Selling Shareholder of the distribution of any Acquiror
Common Stock registered pursuant to the Registration Statement for a reasonable
period of time, but not in excess of 15 consecutive business days (a "Blackout
Period"), by giving notice to such Selling Shareholder. Any such notice need
not specify the reasons for such suspension if Acquiror determines, in its
reasonable good faith judgment, that doing so would adversely affect any such
transaction or would result in the disclosure of material non-public
information. In the event that such notice is given, then until Acquiror has
determined, in its reasonable good faith judgment, that such registration and
distribution would no longer have the effect described in the preceding
sentence and has given notice thereof to the Selling Shareholders, Acquiror's
obligations with respect to the Registration Statement under Section 7.3(b),
(c), (d), (e), and (k) will be suspended. In no event, however, may there be
more than four Blackout Periods in any period of 12 consecutive calendar
months, and the number of days Selling Shareholders are required to suspend
distributions of Acquiror Common Stock registered pursuant to the Registration
Statement pursuant to Section 7.3(k)(v) may not exceed 45 business days in any
period of 12 consecutive calendar months. Acquiror shall give written notice to
each Selling Shareholder of the commencement and the termination of any Blackout
Period. Each Blackout Period shall begin and end when the applicable notice is
given (unless it shall earlier terminate pursuant to the terms thereof);
provided, however, in the event Acquiror does not deliver written notice of the
termination of such Blackout Period prior to the end of the fifteenth business
day thereof, Acquiror shall be deemed to have delivered notice of the
commencement of another Blackout Period on the subsequent business day.
(g) Notification. Acquiror shall notify Chronicle and, after
------------
the Effective Time, each Selling Shareholder immediately upon (i) the
effectiveness of the Registration Statement, (ii) the issuance or threatened
issuance of any stop order or other order preventing or suspending the use of
any Prospectus, (iii) any suspension or threatened suspension of the use of any
Prospectus in any state, (iv) any proceedings commenced or threatened to be
commenced by the SEC or any state securities commission that would result in
the issuance of such stop order or other order preventing or suspending the use
of any Prospectus, or (v) any request by the SEC to supplement or amend any
Prospectus after the effectiveness of the Registration Statement. Acquiror
shall use its reasonable best efforts to prevent or promptly remove any stop
order or other order preventing or suspending the use of any Prospectus and to
comply with any such request by the SEC to amend or supplement such Prospectus.
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<PAGE>
(h) Blue-Sky; Nasdaq. Acquiror shall use its reasonable best
----------------
efforts to qualify the shares of Acquiror Common Stock to be issued and
delivered to the Selling Shareholders in the Merger for resale by the Selling
Shareholders under the securities or blue-sky laws of the District of Columbia
and the States of California, Georgia, Massachusetts, Pennsylvania, and
Wyoming, and such other states as shall be reasonably requested by the Selling
Shareholders, or obtain the approval of any state authority that may be
required in connection with the proposed distribution in any of such states,
except, in each case, in any state in which Acquiror must either qualify to do
business or file a general consent to service of process as a condition to the
qualification of such shares of Acquiror Common Stock. Acquiror shall use its
reasonable best efforts to cause all of the Acquiror Common Stock to be issued
and delivered to the Selling Shareholders in the Merger to be listed on Nasdaq
or any securities exchange on which any class of Acquiror Common Stock is then
listed.
(i) Expenses. Acquiror shall be responsible for all expenses
--------
incurred by Acquiror in complying with this Section 7.3, including all
registration, qualification, and filing fees, printing expenses, fees and
disbursements of counsel for Acquiror, applicable blue-sky fees and expenses,
and the expense of any special audits incident to or required by the
registration contemplated hereby. Each Selling Shareholder shall be
responsible for all underwriting discounts and commissions and transfer taxes,
if any, relating to any resale by such Selling Shareholder of his or her
Acquiror Common Stock and of all fees and disbursements of counsel and of any
other advisor to such Selling Shareholder.
(j) Other Filings. Acquiror shall file with the SEC in a
-------------
timely manner all reports and other documents required to be filed by Acquiror
under the Securities Act and the Exchange Act.
(k) Obligations of Selling Shareholders. Acquiror's
-----------------------------------
obligations under this Section 7.3 with respect to registration of shares of
Acquiror Common Stock shall be conditioned upon each Selling Shareholder's
compliance with the following:
(i) The Selling Shareholder shall cooperate with Acquiror
in connection with the preparation of the Registration Statement, and for so
long as Acquiror is obligated to keep a Registration Statement effective, the
Selling Shareholder will provide to Acquiror, in writing, for use in the
Registration Statement, reasonably promptly after a request by Acquiror, all
information relating to the Selling Shareholder as may be necessary to enable
Acquiror to prepare the Registration Statement and to maintain the currency and
effectiveness thereof.
(ii) The Selling Shareholder shall permit Acquiror and its
representatives and agents to examine such documents and records and shall
supply such information relating to the Selling Shareholder as they may
reasonably request in connection with the offering or other distribution of
Acquiror Common Stock registered pursuant to the Registration Statement in
which the Selling Shareholder proposes to participate.
(iii) During such time as the Selling Shareholder may be
engaged in a distribution of Acquiror Common Stock registered pursuant to the
Registration Statement, the
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<PAGE>
Selling Shareholder will comply with all applicable laws including Rules 10b-6
and 10b-7 promulgated under the Exchange Act and pursuant thereto will, among
other things: (A) not engage in any stabilization activity in connection with
the securities of Acquiror in contravention of such rules; (B) distribute the
Acquiror Common Stock registered pursuant to the Registration Statement owned by
such Selling Shareholder solely in the manner described in the Registration
Statement; (C) cause to be furnished to each agent or broker-dealer to or
through whom the Acquiror Common Stock registered pursuant to the Registration
Statement owned by such Selling Shareholder may be offered, or to the offeree if
an offer is made directly by the Selling Shareholder, such copies of each
Prospectus (as amended and supplemented to such date) and documents incorporated
by reference therein as may be required by applicable stock exchange rules, NASD
rules, or law; and (D) not bid for or purchase any securities of Acquiror or
attempt to induce any Person to purchase any securities of Acquiror in any
manner prohibited under the Exchange Act.
(iv) At least 10 days prior to any distribution by the
Selling Shareholder of Acquiror Common Stock registered pursuant to the
Registration Statement, the Selling Shareholder will advise Acquiror in writing
of the dates on which the distribution will commence and the maximum amount of
Acquiror Common Stock to be sold.
(v) Upon receipt of notice from Acquiror pursuant to
Section 7.3(e) or of the commencement of a Blackout Period pursuant to Section
7.3(f), then the Selling Shareholder shall cease offering or distributing
Acquiror Common Stock registered pursuant to the Registration Statement until
such time as Acquiror notifies the Selling Shareholder that offering and
distribution of Acquiror Common Stock registered pursuant to the Registration
Statement may recommence.
(l) Indemnification.
---------------
(i) Acquiror shall indemnify, defend, and hold harmless
Spinco, each of its officers and directors, each Selling Shareholder, and each
underwriting and selling broker of any of the Acquiror Common Stock that is the
subject of the Registration Statement, and each other Person, if any, who
controls any of the foregoing within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the "Selling
Shareholder Indemnified Parties"), against any losses, claims, damages, or
liabilities (collectively, "Losses"), joint or several, to which any Selling
Shareholder Indemnified Party may become subject under the Securities Act or
the Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the PPM, the Registration Statement
or a Prospectus, or any omission or alleged omission to state therein 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; provided, however, that Acquiror will not indemnify or hold
harmless any Selling Shareholder Indemnified Party from or against such Losses
if the untrue statement, omission or allegation thereof upon which such Losses
are based (x) was in the Chronicle PPM Information or was made in reliance upon
and in conformity with written information provided by Chronicle, Spinco or any
Selling Shareholder Indemnified Party or their respective representatives
specifically for use or inclusion in the PPM, the Registration Statement
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or any Prospectus, or (y) was made in any Prospectus used after such time as
Acquiror provided notice to such Selling Shareholder pursuant to Section 7.3(e),
or (z) was made in any Prospectus used after such time as the obligation of
Acquiror hereunder to keep the Registration Statement effective and current has
expired or been suspended hereunder. Acquiror shall promptly reimburse each
Selling Shareholder Indemnified Party for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such Losses or actions in respect thereof.
(ii) Spinco shall indemnify, defend, and hold harmless
Acquiror, each of its officers and directors, and each other Person, if any,
who controls any of the foregoing within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the "Acquiror
Indemnified Parties") against any Losses, joint or several, to which any
Acquiror Indemnified Party may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the PPM, the Registration Statement
or any Prospectus, or any omission or alleged omission to state therein 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, if the statement or omission was in the Chronicle PPM Information
or was made in reliance upon and in conformity with written information
provided by Chronicle or Spinco or their respective representatives
specifically for use or inclusion in the PPM, the Registration Statement or any
Prospectus. Spinco shall promptly reimburse the Acquiror Indemnified Parties
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such Losses or actions in
respect thereof.
(iii) Each Selling Shareholder, as a condition to the
inclusion in the Registration Statement of the shares of Acquiror Common Stock
to be issued to such Selling Shareholder in the Merger, shall, by his or her
execution and delivery of an instrument in the form of Exhibit B, undertake to
indemnify, defend, and hold harmless the Acquiror Indemnified Parties against
any Losses, joint or several, to which any of the Acquiror Indemnified Parties
may become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such Losses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any Prospectus, or any omission
or alleged omission to state therein 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, if the statement or
omission was made in reliance upon and in conformity with written information
provided by or on behalf of such Selling Shareholder or any Person who controls
such Selling Shareholder specifically for use or inclusion in any Registration
Statement or any Prospectus, (ii) the use of any Prospectus by or on behalf of
such Selling Shareholder after such time as Acquiror has provided notice to
such Selling Shareholder pursuant to Section 7.3(e) or the failure by such
Selling Shareholder to comply with the provisions of Section 7.3(k)(v), (iii)
the use by or on behalf of such Selling Shareholder of any Prospectus after
such time as the obligation of Acquiror hereunder to keep the Registration
Statement effective and current has expired or been suspended
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<PAGE>
hereunder, (iv) any violation by such Selling Shareholder or any Person who
controls such Selling Shareholder within the meaning of either the Securities
Act or the Exchange Act (or any agent, broker-dealer or underwriter engaged by
such Selling Shareholder or any such controlling Person) of any federal or state
securities law or rule or regulation thereunder, or (v) any failure by such
Selling Shareholder to give any purchaser of Acquiror Common Stock registered
pursuant to the Registration Statement at or prior to the written confirmation
of such sale, a copy of the most recent Prospectus to the extent required by
law. Each Selling Shareholder, as a condition to the inclusion in the
Registration Statement of the shares of Acquiror Common Stock to be issued to
such Selling Shareholder in the Merger, shall also undertake, by his or her
execution and delivery of an instrument in the form of Exhibit B, to reimburse
promptly the Acquiror Indemnified Parties for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such Losses or actions in respect thereof. For purposes of this Section
7.3(l), any information concerning Chronicle or the plan of distribution
included in the PPM or the Registration Statement or any Prospectus which is
provided to Chronicle for review within a reasonable period before filing or use
thereof and as to which information Chronicle has not promptly provided written
notice of objection to Acquiror shall be deemed to have been written information
provided by Chronicle specifically for use in the PPM or in the Registration
Statement or such Prospectus.
(iv) For purposes of this Section 7.3(l), the term
"Indemnifying Party" shall mean the Person having an obligation hereunder to
indemnify any other Person pursuant to this Section 7.3(l), and the term
"Indemnified Party" shall mean the Person having the right to be indemnified
pursuant to this Section 7.3(l). Whenever any claim shall arise for
indemnification under this Section 7.3(l), the Indemnified Party shall promptly
notify the Indemnifying Party in writing of such claim and, when known, the
facts constituting the basis for such claim (in reasonable detail). Failure by
the Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder except to the extent that such
failure prejudices the Indemnifying Party.
(v) After such notice, if the Indemnifying Party undertakes
to defend any such claim, then the Indemnifying Party shall be entitled, if it
so elects, to take control of the defense and investigation with respect to
such claim and to employ and engage attorneys of its own choice to handle and
defend such claim, at the Indemnifying Party's cost, risk, and expense, upon
written notice to the Indemnified Party of such election, which notice
acknowledges the Indemnifying Party's obligation to provide indemnification
hereunder. The Indemnifying Party shall not settle any third-party claim that
is the subject of indemnification without the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld; provided,
however, that the Indemnifying Party may settle a claim without the Indemnified
Party's consent if the settlement (A) makes no admission or acknowledgment of
liability or culpability with respect to the Indemnified Party, (B) includes a
complete release of the Indemnified Party, and (C) does not require the
Indemnified Party to make any payment or forego or take any action. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and its attorneys in the investigation, trial, and defense
of any lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnified Party's name of appropriate
cross claims and counterclaims).
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<PAGE>
The Indemnified Party may, at its own cost, participate in any investigation,
trial, and defense of such lawsuit or action controlled by the Indemnifying
Party and any appeal arising therefrom. If, after receipt of a claim notice
pursuant to Section 7.3(l)(iv), the Indemnifying Party does not undertake to
defend any such claim, the Indemnified Party may, but shall have no obligation
to, contest any lawsuit or action with respect to such claim and the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party (including the settlement thereof without the consent of
the Indemnifying Party). If there are one or more legal defenses available to
the Indemnified Party that conflict with those available to the Indemnifying
Party, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to participate in the defense of the lawsuit or action;
provided, however, that the Indemnified Party may not settle such lawsuit or
action without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. At any time after the commencement of defense of any
lawsuit or action, the Indemnifying Party may request the Indemnified Party to
agree in writing to the abandonment of such contest or to the payment or
compromise by the Indemnifying Party of such claim, whereupon such action shall
be taken unless the Indemnified Party determines that the contest should be
continued and so notifies the Indemnifying Party in writing within 15 days of
such request from the Indemnifying Party. Any request from the Indemnifying
Party that any contest be abandoned shall specify the amount that the other
party or parties to the contested claim have agreed to accept in payment or
compromise of the claim. If the Indemnified Party determines that the contest
should be continued, the Indemnifying Party shall be liable hereunder only to
the extent of the lesser of (A) the amount that the other party or parties to
the contested claim had agreed to accept in payment or compromise as of the time
the Indemnifying Party made its request therefor to the Indemnified Party, as
specified in the Indemnifying Party's request, or (B) the amount for which the
Indemnifying Party may be liable with respect to such claim by reason of the
provisions of this Agreement.
(vi) If the indemnification provided for in this Section
7.3(l) shall for any reason be unavailable to the Indemnified Party in respect
of any Losses referred to herein, then the Indemnifying Party shall, in lieu of
indemnifying the Indemnified Party, contribute to the amount paid or payable by
the Indemnified Party as a result of such Losses or any action in respect
thereof, in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified Party on the other
with respect to the action, statement or omission that resulted in such Losses,
as well as any other relevant equitable considerations. Relative fault with
respect to an untrue or alleged untrue statement or omission of a material
fact shall be determined by reference to whether the untrue or alleged untrue
statement or omission of a material fact related to information supplied by the
Indemnifying Party on the one hand or the Indemnified Party on the other, the
intent of the parties and their relative knowledge, access to information, and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by the Indemnified Party as a result of the Losses referred to above in
this paragraph shall be deemed to include any legal or other expenses reasonably
incurred by the Indemnified Party in connection with investigating or defending
any such action or claim. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
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<PAGE>
(m) Further Assurances. For the period of time specified in
------------------
the first sentence of Section 7.3(e), each of the Selling Shareholders and
Acquiror will take such other actions and enter into such other agreements as
may be reasonably necessary or advisable in connection with the resale by the
Selling Shareholders of the Acquiror Common Stock covered by the Registration
Statement. Each Selling Shareholder, as a condition to the inclusion in the
Registration Statement of the shares of Acquiror Common Stock to be issued to
such Selling Shareholder in the Merger, shall, by his or her execution and
delivery of an instrument in the form of Exhibit B, undertake to comply with
this Section 7.3(m).
7.4 Reasonable Best Efforts. Subject to the fiduciary duties of
-----------------------
the Board of Directors of Chronicle as advised by outside counsel, each of the
parties to this Agreement agrees to use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable law to consummate and
make effective the transactions contemplated by this Agreement in the most
expeditious manner practicable, including the satisfaction of all conditions to
the Merger.
7.5 Public Announcements. No party to this Agreement shall make
--------------------
any public announcements or otherwise communicate with any news media with
respect to this Agreement or any of the transactions contemplated by this
Agreement without such prior consultation with the other parties as to the
timing and contents of any such announcement as may be reasonable under the
circumstances; provided, however, that nothing contained herein shall prevent
any party from promptly making all filings with governmental authorities that
may, in its judgment, be required or advisable in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement so long as such party gives timely notice to the
other parties of the anticipated disclosure and cooperates with the other
parties in designing reasonable procedural and other safeguards to preserve, to
the maximum extent possible, the confidentiality of all information furnished by
the other parties pursuant to this Agreement.
7.6 Notification. Each party to this Agreement shall, in the event
------------
of, or promptly after obtaining knowledge of the occurrence or threatened
occurrence of, any fact or circumstance that would cause or constitute a breach
of any of its representations and warranties set forth herein, give notice
thereof to the other parties and shall use its reasonable best efforts to
prevent or remedy such breach.
7.7 Meeting of Shareholders of Chronicle. Chronicle shall take all
------------------------------------
action necessary, in accordance with the Nevada Corporation Law and its
Restated Articles of Incorporation and Bylaws, to duly call, give notice of,
convene, and hold a meeting of its shareholders as promptly as practicable, to
consider and vote upon the adoption and approval of this Agreement (as a plan
of merger under Section 78.451 of the Nevada Corporation Law), the Merger, the
Contribution, and the other transactions contemplated by this Agreement, to the
extent such approval is required by the Nevada
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<PAGE>
Corporation Law and Chronicle's Restated Articles of Incorporation. The
shareholder vote required for the adoption and approval of this Agreement, the
Merger, the Contribution, and the other transactions contemplated by this
Agreement shall be the vote required by the Nevada Corporation Law and
Chronicle's Restated Articles of Incorporation. In addition, at such meeting of
the Chronicle shareholders, Chronicle shall request that the shareholders of
Chronicle take any action required to amend any agreement among the shareholders
to permit the Merger, the Contribution, and the other transactions contemplated
by this Agreement to be consummated without contravening such agreement, and if
the shareholders approve this Agreement, the Merger, the Contribution, and the
other transactions contemplated by this Agreement at such meeting, Chronicle
shall use its reasonable best efforts to cause each shareholder to execute and
deliver to Acquiror an instrument in the form of Exhibit B or an investment
letter in form and substance substantially similar to the provisions of Section
1 of Exhibit B. Subject to the fiduciary duty of the Board of Directors of
Chronicle under applicable law as advised by outside counsel, Chronicle shall
use its reasonable best efforts to secure the vote of shareholders required by
the Nevada Corporation Law and Chronicle's Restated Articles of Incorporation to
effect such transactions and to cause all necessary actions to be taken to amend
such shareholders' agreement by the later of 30 days after the date of this
Agreement or 20 days after delivery of the PPM by Acquiror to Chronicle.
7.8 Regulatory and Other Authorizations.
-----------------------------------
(a) Governmental Consents. Chronicle and Acquiror agree to
---------------------
use their respective reasonable best efforts to obtain all authorizations,
consents, orders, and approvals of federal, state, local, and foreign
regulatory bodies and officials and non-governmental third parties that may be
or become necessary for its respective execution and delivery of, and the
performance of its respective obligations pursuant to, this Agreement, and will
cooperate fully with the other parties in promptly seeking to obtain all such
authorizations, consents, orders, and approvals; provided, however, that
neither Acquiror nor Chronicle shall have any obligations under this Section
7.8(a) until this Agreement is approved by the shareholders of Chronicle.
(b) HSR Act Filings. Chronicle and Acquiror shall each make
---------------
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
no later than 45 days after the date of approval of this Agreement by the
shareholders of Chronicle. Each such filing shall request early termination of
the waiting period imposed by the HSR Act. Chronicle and Acquiror shall use
their respective reasonable best efforts to respond as promptly as reasonably
practicable to any inquiries received from the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") for additional information or documentation and to respond as
promptly as reasonably practicable to all inquiries and requests received from
any other governmental authority in connection with antitrust matters;
provided, however, that nothing contained herein shall be deemed to preclude
either Chronicle or Acquiror from negotiating reasonably with any governmental
authority regarding the scope and content of any such requested information or
documentation. Chronicle and Acquiror shall use their respective reasonable
best efforts to overcome any objections that may be raised by the FTC, the
Antitrust Division or any other governmental authority having jurisdiction over
antitrust matters. Notwithstanding the foregoing, Acquiror shall not be
required to make any significant change in the operations or activities of the
business (or any material assets employed therein) of Acquiror or any of its
Affiliates, if Acquiror determines in good faith that such change would be
materially adverse to the operations or activities
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<PAGE>
of the business (or any material assets employed therein) of Acquiror or any of
its Affiliates having significant assets, net worth, or revenue.
(c) Franchise Consents. Any application to any governmental
------------------
authority for any authorization, consent, order, or approval necessary for the
transfer of control of any Franchise shall be mutually acceptable to Chronicle
and Acquiror. Without limiting the obligations of Chronicle and Acquiror under
Section 7.8(a), each of Chronicle and Acquiror agrees, upon reasonable prior
notice, to make appropriate representatives available for attendance at
meetings and hearings before applicable governmental authorities in connection
with the transfer of control of any Franchise.
(d) Restructuring for Franchise Compliance. If any
--------------------------------------
authorization, consent, order, or approval of any governmental authority
necessary for the transfer of control of any Franchise shall not have been
obtained prior to the Effective Time, Spinco and Acquiror shall cooperate with
each other and use their respective reasonable best efforts (i) to restructure
the ownership and control of such Franchise from and after the Effective Time
in such a manner that, to the extent feasible, prevents any violation of the
terms of such Franchise that would have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries taken as a whole or of Spinco yet preserves the
intent of the parties as set forth in this Agreement with respect to the terms
and conditions of the Merger, and (ii) notwithstanding the Closing, to continue
to seek any authorization, consent, order, or approval necessary for the
transfer of control of such Franchise.
(e) Other Transferee. Acquiror shall deliver written notice
----------------
to Chronicle of the identity of any intended assignee of any of the assets of
Western other than Acquiror and its wholly owned subsidiaries within 10 days
after the date of approval of this Agreement by Chronicle's shareholders. If
Acquiror develops any additional plans or intentions for such assignments after
such 10-day period but before the Effective Time, Acquiror will inform Chronicle
promptly of such plans or intentions. Acquiror agrees that any such assignments
described in the preceding two sentences shall not include more than 55% of the
fair market value of the assets to be acquired pursuant to the Merger in the
aggregate. Any obligations set forth in this Section 7.8(e) are in addition to
Acquiror's obligations under Section 7.13(h).
7.9 Further Assurances. Each of the parties to this Agreement
------------------
shall execute such documents and other instruments and take such further
actions as may be reasonably required or desirable to carry out the provisions
of this Agreement and consummate the transactions contemplated by this
Agreement or, at and after the Closing Date, to evidence the consummation of
the transactions contemplated by this Agreement. Upon the terms and subject to
the conditions of this Agreement, each of the parties to this Agreement shall
take or cause to be taken all actions and to do or cause to be done all other
things necessary, proper, or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and to
obtain in a timely manner all necessary waivers, consents, and approvals and to
effect all necessary registrations and filings.
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<PAGE>
7.10 Internal Revenue Service Ruling.
-------------------------------
(a) Cooperation. As promptly as practicable after the date
-----------
of approval of this Agreement by the shareholders of Chronicle, after
reasonable consultation with and review by Acquiror, Chronicle shall prepare
and submit to the IRS a request for an advance letter ruling from the IRS with
respect to the matters described on Schedule 7.10. Chronicle shall furnish to
Acquiror, for Acquiror's review and comment, copies of the ruling request to be
filed by Chronicle, prior to the filing thereof with the IRS, and Acquiror
shall advise Chronicle of any recommended changes to the ruling request as soon
as reasonably practicable following receipt from Chronicle. Chronicle shall
notify Acquiror prior to any in person meeting scheduled with the IRS to
discuss the ruling request and shall provide Acquiror with an opportunity to
participate in any such meeting if requested by Acquiror. Chronicle shall
provide Acquiror promptly with copies of any correspondence between Chronicle
and the IRS with respect to the ruling request. Acquiror shall reasonably
cooperate in good faith with Chronicle in seeking to obtain such ruling.
(b) Drop-down of Assets. If Chronicle determines in good
-------------------
faith that one or more of the contributions referred to in paragraphs 15, 16 or
17 of Schedule 7.10 of this Agreement, other than transfers by Acquiror to TCI
Communications, Inc., are materially interfering with (i) the IRS' willingness
to issue the advance letter ruling referred to in Section 7.10(a) of this
Agreement based on communications with the IRS or (ii) the opinion referred to
in Section 8.2(f) of this Agreement (in either case an "Interfering Transfer"),
then Acquiror shall be given an opportunity to participate in a discussion with
the IRS regarding such contributions. If, after such discussion, Chronicle
determines reasonably and in good faith that any such contribution is an
Interfering Transfer, Acquiror shall abandon any plan or intent to make any
such Interfering Transfer and shall not take steps to make any such Interfering
Transfer within two years after the Effective Time. Any obligations set forth in
this Section 7.10(b) are in addition to Acquiror's obligations under Section
7.13(h).
7.11 Records Retention.
-----------------
(a) Spinco Obligation. For a period of five years after the
-----------------
Closing Date, Spinco shall retain all of its books and records relating to
Western for periods prior to the Closing Date (except that Spinco shall retain
all such books and records relating to Taxes for the period of the applicable
statute of limitation), and the Surviving Corporation shall have the right to
inspect such books and records during normal business hours, upon five days'
prior notice, in connection with the preparation of financial statements,
reports, and filings and any other reasonable purpose.
(b) Surviving Corporation Obligation. For a period of five
--------------------------------
years after the Closing Date, the Surviving Corporation shall retain all of its
books and records relating to Western for periods prior to the Closing Date
(except that the Surviving Corporation shall retain all such books and records
relating to Taxes for the period of the applicable statute of limitation), and
Spinco shall have the right to inspect such books and records during normal
business hours, upon five days' prior
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<PAGE>
notice, in connection with the preparation of financial statements, reports, and
filings and any other reasonable purpose.
7.12 Chronicle Name.
--------------
(a) Acquiror acknowledges that the name "Chronicle," whether
alone or in combination with one or more other words, is an asset of Chronicle
being transferred to Spinco in the Contribution. Promptly after the Closing
Date, Acquiror shall take all actions necessary to permit Spinco to change its
name to "The Chronicle Publishing Company."
(b) Between the consummation of the Contribution and the Closing,
Chronicle shall have a non-exclusive license to use the name "The Chronicle
Publishing Company."
7.13 Tax Matters.
-----------
(a) Spinco Obligations.
------------------
(i) Spinco shall be liable for, shall pay, and shall
indemnify and hold the Surviving Corporation harmless, on an after-tax basis,
against all Chronicle Taxes (including any Taxes resulting from payments made
pursuant to this Section 7.13(a)(i)), and any and all liabilities, losses,
damages, costs, and expenses (including court costs and reasonable professional
fees incurred in the investigation, defense, or settlement of any claims
covered by this indemnity) attributable to any such Chronicle Taxes. Spinco
shall be liable for all Taxes resulting from the failure of the Contribution
and the Distribution to qualify as a tax-free reorganization under Section
368(a)(1)(D) and Section 355 of the Code and the failure of the Merger to
qualify as a tax-free reorganization under Section 368(a) of the Code to the
extent such failure results from any action or omission by Chronicle or its
shareholders before the Effective Time or (B) by Spinco or Spinco's shareholders
(including Spinco's breach of any of its covenants in Section 7.13(h)).
(ii) Spinco or its shareholders, as applicable, shall be
entitled to any credits or refunds of Chronicle Taxes paid or allocable to
Chronicle or its shareholders at any time, and Spinco shall indemnify and hold
harmless the Surviving Corporation against any subsequent disallowance of such
credits or refunds.
(iii) Spinco shall be responsible for the preparation and
filing of all Chronicle Tax Returns for all taxable periods that end on or
before the Closing Date, including Tax Returns of Chronicle with respect to
such periods that are due after the Closing Date, and Spinco shall be
responsible for the payment of all Taxes payable by Chronicle shown to be due
thereon.
(iv) Spinco shall be designated as the agent for Chronicle
with respect to Chronicle Taxes, and shall have the sole authority to deal with
any matters relating to Chronicle Taxes, including but not limited to the
filing of amended returns, except that such authority shall not
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<PAGE>
include a change of accounting method or revocation of tax elections that could
have an adverse effect on the Surviving Corporation after the Effective Time.
(v) Acquiror shall promptly inform Spinco whenever any
taxing authority asserts a claim, makes an assessment, or otherwise disputes
the amount of any Chronicle Taxes. Spinco, at its cost and expense, shall have
the right to control any resulting proceedings and to determine whether and
when to settle any such claim, assessment, or dispute.
(b) Acquiror Obligations.
--------------------
(i) Acquiror shall be liable for, shall pay, and shall
indemnify and hold Spinco and each Person who was a shareholder of Chronicle at
or at any time prior to the Effective Time harmless, on an after-tax basis,
against all Taxes (including any Taxes resulting from any payments made
pursuant to this Section 7.13(b)(i)), and any and all liabilities, losses,
damages, costs, and expenses (including court costs and reasonable professional
fees incurred in the investigation, defense, or settlement of any claims
covered by this indemnity) attributable to any such Taxes, resulting from (A)
the failure of the Merger to qualify as a tax-free reorganization under Section
368(a) of the Code, or (B) the failure of the Contribution and the Distribution
to qualify as a tax-free reorganization under Section 368(a)(1)(D) and Section
355 of the Code, in each case to the extent such failure results from any
action or omission by Acquiror (including Acquiror's breach of any of its
covenants in Section 7.13(h)).
(ii) Whenever any taxing authority asserts a claim or makes
an assessment for Taxes for which Acquiror is or may be liable under Section
7.13(b)(i) of this Agreement, Spinco or the former shareholder of Chronicle
against whom such claim or assessment is asserted shall promptly inform
Acquiror. Acquiror, at its cost and expense, shall have the right to control
any resulting proceedings and to determine whether and when to settle any such
claim, assessment, or dispute.
(iii) (A) Acquiror agrees (1) to claim or to cause one or
more of its Affiliates to claim deductions, losses or credits with respect to
any liabilities assumed by Spinco as described in Section 3.1(c) of this
Agreement or indemnified by Spinco pursuant to the Contribution Agreement
("Spinco Assumed Liabilities") that Spinco reasonably determines and notifies
Acquiror should be reported as an item of deduction, loss or credit on a
federal Tax Return of Acquiror or any of its Affiliates (an "Acquiror Deduction
Item") provided such notice is received by Acquiror at least 30 days before the
filing of such Tax Return and (2) at such time as there is a final
determination relating to Taxes with respect to a federal Tax Return for any
taxable year in which an Acquiror Deduction Item is claimed, to pay to Spinco
an amount equal to the sum of the realized tax benefits from such Acquiror
Deduction Item plus an amount equal to the deemed state tax benefit realized by
Acquiror from such Acquiror Deduction Item determined based upon an imputed
state tax rate of four and one-half percent (4-1/2%), together with interest
from March 15 of the year following the taxable year in which tax benefits are
realized from an Acquiror Deduction Item until the date of payment to Spinco at
a rate equal to the prime rate charged by The Bank of New York as of such
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March 15. If Acquiror has been given notice of an Acquiror Deduction Item,
Acquiror will notify Spinco at least 60 days prior to the date it intends to
file a federal Tax Return of Acquiror or its Affiliates if such Tax Return is to
be filed on a date other than the first date such Tax Return is due without
extensions.
(B) With respect to a taxable year which includes or
begins after the Merger, Acquiror agrees to notify Spinco at least 60 days
prior to the date any amended federal Tax Return of Acquiror or any of its
Affiliates is to be filed. Acquiror further agrees (1) to claim or to cause
one or more of its Affiliates to claim deductions, losses or credits with
respect to any Spinco Assumed Liabilities that Spinco reasonably determines and
notifies Acquiror should be reported as an item of deduction, loss or credit on
an amended federal Tax Return to be filed by Acquiror or any of its Affiliates
(an "Amended Deduction Item") provided such notice is received by Acquiror at
least 30 days before the filing of such amended Tax Return and (2) at such time
as there is a final determination relating to Taxes with respect to a federal
Tax Return for any taxable year in which an Amended Deduction Item is claimed,
to pay to Spinco an amount equal to the sum of the realized tax benefits from
such Amended Deduction Item plus an amount equal to the deemed state tax
benefit realized by Acquiror from such Amended Deduction Item determined based
upon an imputed state tax rate of four and one-half percent (4-1/2%), together
with interest from the later of (A) the date Acquiror or any of its Affiliates
is entitled to interest pursuant to such amended Tax Return or (B) March 15 of
the year following the taxable year in which tax benefits are realized from
such Amended Deduction Item, until the date of payment to Spinco at a rate
equal to the prime rate charged by The Bank of New York as of the later of the
two dates described above.
(C) As used in this Section 7.13(b)(iii) "final
determination" means (i) a decision of the United States Tax Court or a
judgment, decree, or other order by any court of competent jurisdiction that
has become final and unappealable, (ii) a closing agreement under Section
7121 of the Code that is binding on the IRS or other final settlement with the
IRS, or (iii) any final disposition by reason of the expiration of the statute
of limitations. As used in this Section 7.13(b)(iii), "realized tax benefits"
from an Acquiror Deduction Item or an Amended Deduction Item shall be the
positive difference (if any) between (1) income Taxes that would be shown as
due and payable on the consolidated federal Tax Return filed by Acquiror and
its Affiliates without regard to any Acquiror Deduction Item or Amended
Deduction Item, but otherwise taking into account all other information in such
Tax Return as filed (either originally or as amended) and otherwise making such
calculations in conformity with applicable Tax laws and regulations (including
the carryback of losses or credits) and (2) the income Taxes actually shown as
due and payable on such Tax Return as filed (either originally or as amended).
(c) Other Taxes. Except as otherwise provided in Section
-----------
7.13(a) and Section 7.13(b), all Taxes shall be the responsibility of the
taxpayer on which they are imposed, and any refunds and credits of Taxes shall
be for the account of the taxpayer responsible for such Taxes.
(d) Cooperation. Acquiror, Chronicle, and Spinco shall
-----------
cooperate with each other in a timely manner in the preparation and filing of
any Tax Returns, the payment of any Taxes in
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accordance with this Agreement, and the conduct of any audit or other proceeding
and to effect the provisions of this Agreement relating to Taxes including the
determination of tax benefits pursuant to Section 7.13(b)(iii). Each party shall
execute and deliver such powers of attorney and make available such other
documents as are necessary to carry out the intent of this Section 7.13. Each
party agrees to notify the other party of any audit adjustments that do not
result in a tax liability to that party but can reasonably be expected to affect
Tax Returns of the other party or a former shareholder of Chronicle.
(e) Retention of Records. Acquiror, Chronicle, and Spinco
--------------------
shall (i) retain records, documents, accounting data, and other information
(including computer data) necessary for the preparation and filing of all Tax
Returns or the audit of such returns, and (ii) give to each other reasonable
access to such records, documents, accounting data, and other information
(including computer data), to its personnel (and shall insure their
cooperation), and to its premises, for the purpose of the review or audit of
such Tax Returns to the extent relevant to an obligation or liability of a
party under this Agreement.
(f) Payments; Disputes. Except as otherwise provided in this
------------------
Section 7.13, any amounts owed by any party to any other party under this
Section 7.13 shall be paid within ten days after notice from the party entitled
to such payment; provided, however, that if any party entitled to
indemnification under this Section 7.13 has not paid the amount for which such
party is entitled to indemnification and such amount is being contested before
the appropriate governmental authorities in good faith, the indemnifying party
shall not be required to make payment to the indemnified party until an
appropriate governmental authority determines finally that payment is due. If
the parties cannot agree on any calculation of any liabilities under this
Section 7.13, such calculation (but not the determination of whether any
liability in fact exists) shall be made by any independent public accounting
firm acceptable to the disputing parties. The decision of such firm shall be
final and binding. The fees and expenses incurred in connection with such
calculation shall be borne equally by the disputing parties. For purposes of the
immediately preceding sentence, all former shareholders of Chronicle, all
shareholders of Spinco, and Spinco shall collectively be deemed to constitute a
single party.
(g) Termination of Liabilities. Notwithstanding any other
--------------------------
provision in this Agreement, the liabilities of Spinco and Acquiror for any Tax
under this Section 7.13 shall apply only to Taxes properly assessed before the
expiration of the applicable statute of limitations for such Tax.
(h) Other Covenants.
---------------
(i) Spinco will not take or fail to take any action if such
action taken by Spinco or such failure to act by Spinco would cause the Merger
not to qualify as a reorganization within the meaning of Section 368(a) of the
Code or would cause the Contribution and Distribution not to qualify as a
reorganization within the meaning of Section 355 or Section 368(a) of the Code.
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(ii) Neither Acquiror nor any of its Affiliates will take
any action or fail to take any action if such action taken by Acquiror or any
of its Affiliates or such failure to act by Acquiror or any of its Affiliates
would cause the Merger not to qualify as a reorganization under Section 368(a)
of the Code or would cause the Contribution and the Distribution not to qualify
under Section 355 or Section 368(a) of the Code. Neither Acquiror nor any of
its Affiliates will take any action that is inconsistent with any
representation or statement contained in (A) the request (including any
exhibits or supplements thereto) for an advance letter ruling from the IRS as
contemplated by Section 7.10 unless such representation or statement is
objected to by Acquiror prior to the filing of such request (including any
exhibits or supplements thereto) with the IRS or (B) a certificate of an
appropriate officer of Acquiror in the form of Exhibit 7.13(h) to be executed
in conjunction with the tax opinion described in Section 8.2(f).
7.14 Employee Benefits; Employee Matters.
-----------------------------------
(a) Each employee of the Surviving Corporation or any of its
Subsidiaries who was an employee of Western immediately prior to the Effective
Time and such employee's eligible dependents (i) shall be entitled to
participate in the Surviving Corporation's Employee Benefit Plans to the same
extent as similarly situated employees of Acquiror and their dependents; (ii)
shall receive credit for such employee's past service with any cable television
system owned by Chronicle as of the Effective Time (including past service with
any prior owner or operator of such cable television system) for purposes of
eligibility and vesting under the Surviving Corporation's Employee Benefit
Plans, including for purposes of eligibility and participation under the
Surviving Corporation's severance policies and plans, including the calculation
of such employee's "Years of Continuous Service" under the Tele-Communications,
Inc. Severance Pay Plan, effective January 1, 1995, as amended, to the extent
such service was credited under the Western Employee Benefit Plans on the
Closing Date; and (iii) shall not be subject to any waiting periods or
limitations on benefits for pre-existing conditions under the Surviving
Corporation's Employee Benefit Plans, including any group health and disability
plans, except to the extent such employees were subject to such limitations
under the Western Employee Benefit Plans.
(b) Employees of the Surviving Corporation or any of its
Subsidiaries who were employees of Western immediately prior to the Effective
Time shall be entitled to carry forward (i) ten days of sick leave to be
applied to the year in which the Closing occurs and (ii) vacation accrued by
them as employees of Chronicle, in either case to the extent accrued by
Chronicle for purposes of determining the Working Capital Deficit under Section
3.1(b); provided, however, that if requested by Acquiror, the amount of accrued
vacation permitted to be carried over by such employees shall be limited to the
maximum amount of vacation permitted to be accrued by employees of Acquiror in
accordance with Acquiror's standard practices, Chronicle shall pay such
employees for any accrued vacation not permitted to be carried over prior to
the Effective Time, and the amount accrued for purposes of determining the
Working Capital Deficit under Section 3.1(b) shall be reduced by the amount
paid by Chronicle to such employees pursuant to this Section 7.14(b).
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(c) Not later than 30 days prior to the Closing Date, Acquiror
shall notify Chronicle of any employees of Western whom Acquiror does not
intend to employ after the Effective Time; provided, however, that any such
notification by Acquiror shall include only (i) any "corporate" employees of
Western identified on Schedule 4.18 under Location Code "SF" and (ii) up to 30
"non-corporate" employees of Western. At Chronicle's option, Chronicle shall
offer employment to such employees with Spinco after the Effective Time or
shall terminate such employees effective prior to the Effective Time. Spinco
shall assume all liabilities with respect to any such employees terminated by
Chronicle prior to the Effective Time.
7.15 Bay TV Joint Venture. At Closing, Acquiror and Spinco shall
--------------------
execute and deliver a joint venture agreement and related documents
substantially in accordance with the term sheet attached as Exhibit C.
7.16 Environmental Reports. Acquiror, at its expense, may cause to
---------------------
be prepared for any owned real property of Western a current Phase I
Environmental Site Assessment prepared by a nationally known environmental
engineering firm. Acquiror will provide to Chronicle a copy of any such Phase
I environmental report that is prepared for Acquiror.
7.17 Approval of Acquiror's Board of Directors. Acquiror shall use
-----------------------------------------
reasonable best efforts to obtain, within 10 days after the execution of this
Agreement by Chronicle and Acquiror, the ratification by Acquiror's Board of
Directors in accordance with its charter documents and applicable law for the
execution and delivery of this Agreement on behalf of Acquiror and the
performance by Acquiror of its obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement.
7.18 Suspension of Chronicle's Covenants. Notwithstanding anything
-----------------------------------
in this Agreement to the contrary, if the condition set forth in Section 8.1(a)
is not satisfied within 120 days after the date of this Agreement, then
Chronicle will not be deemed to be in default under this Agreement for
any failure prior to the satisfaction of such condition to perform or comply
with any of its covenants under this Agreement (except its covenants under
Section 7.1, Section 7.5 and Section 7.7) to be performed or complied with by
it prior to the Closing. If, however, any such failure causes the condition
set forth in Section 8.3(b) not to be satisfied on the Closing Date, Acquiror
shall not be obligated to effect the transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of Chronicle and Acquiror. The
-------------------------------------------------------
respective obligations of Chronicle and Acquiror to consummate the transactions
contemplated by this Agreement are subject to the requirements that:
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(a) This Agreement, the Merger, the Contribution, and the other
transactions contemplated by this Agreement shall have been approved and
adopted by the shareholders of Chronicle to the extent provided in Section 7.7;
(b) Any waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated;
(c) The Registration Statement shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order;
(d) The transactions contemplated by Section 3.1(a) and Section
3.2 shall have been consummated in accordance with the terms of this Agreement
and the Contribution Agreement;
(e) Chronicle shall have received from the IRS an advance letter
ruling as contemplated by Section 7.10, substantially to the effect set forth
in paragraphs 1 through 14 of Schedule 7.10; and
(f) No federal, state, or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced, or entered any statute or rule, regulation,
injunction, or other order (whether temporary or preliminary or permanent) that
remains in effect and has the effect of making the transactions contemplated by
this Agreement illegal or otherwise prohibiting the transactions contemplated
by this Agreement, or that questions the validity or the legality of the
transactions contemplated by this Agreement and that could reasonably be
expected to materially and adversely affect the value of the business of
Western or Acquiror; provided, however, that this condition shall not apply
with respect to any statute or rule, regulation, injunction, or other order
that prohibits the transfer of control of any Franchise if the condition in
Section 8.3(d) has been satisfied or waived by Acquiror and Chronicle.
8.2 Conditions to the Obligations of Chronicle. The obligations of
------------------------------------------
Chronicle to effect the transactions contemplated by this Agreement are subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) The representations and warranties of Acquiror contained in
this Agreement or in any other document delivered pursuant to this Agreement
shall be true and correct in all material respects on and as of the Closing
Date with the same effect as if made on and as of the Closing Date and Acquiror
shall have delivered to Chronicle and Spinco at the Closing a certificate
executed on behalf of Acquiror by an executive officer of Acquiror to that
effect;
(b) Each of the covenants of Acquiror to be performed on or
before the Closing Date pursuant to the terms of this Agreement shall have been
duly performed in all material respects
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on or before the Closing Date and Acquiror shall have delivered to Chronicle at
the Closing a certificate executed on behalf of Acquiror by an executive officer
of Acquiror to that effect;
(c) Acquiror shall have performed its obligations under Section
3.3(a);
(d) The Acquiror Class A Common Stock shall not have been
suspended from trading on Nasdaq and the shares of Acquiror Class A Common
Stock to be issued in the Merger shall have been authorized for listing on
Nasdaq, subject only to official notice of issuance, and each other class of
Acquiror Common Stock shall not have been suspended from trading on Nasdaq or
any securities exchange on which each such other class of Acquiror Common Stock
is then listed and the shares of such other class of Acquiror Common Stock to
be issued in the Merger shall have been authorized for listing on Nasdaq or any
securities exchange on which such other class of Acquiror Common Stock is then
listed, subject only to official notice of issuance;
(e) The FCC shall have consented, to the extent such consent is
legally required, to the assignment to Spinco of all FCC licenses possessed by
Chronicle in connection with its business (other than that conducted by
Western), except where the failure to obtain any such consent would not have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Spinco;
(f) Chronicle shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom, special tax counsel to Chronicle, in form and substance
reasonably satisfactory to Chronicle, dated as of the Effective Time,
substantially to the effect that, on the basis of facts, representations, and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code (in rendering
such opinion, Skadden, Arps, Slate, Meagher & Flom may require and rely upon
representations and covenants contained in certificates of officers of
Acquiror, Chronicle, and others, including shareholders of Chronicle);
(g) Chronicle and Spinco shall have received an opinion of
Sherman & Howard L.L.C., counsel for Acquiror, dated as of the Closing Date
(which opinion may rely on the opinions of other counsel for Acquiror), in form
and substance reasonably satisfactory to Chronicle, Spinco, and their counsel;
(h) The Acquiror Common Stock Value as defined in the first
sentence of Section 2.2(c), without regard to the adjustments set forth in the
second sentence of Section 2.2(c), shall be equal to or greater than the
Minimum Value; and
(i) Those consents of third parties listed on Schedule 8.2(i)
shall have been obtained.
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8.3 Conditions to Obligations of Acquiror. The obligations of
-------------------------------------
Acquiror to effect the transactions contemplated by this Agreement are subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Subject to Section 8.4, the representations and warranties of
Chronicle contained in this Agreement or in any other document delivered
pursuant to this Agreement shall be true and correct in all material respects
on and as of the Closing Date with the same effect as if made on and as of the
Closing Date and Chronicle shall have delivered to Acquiror at the Closing a
certificate executed on behalf of Chronicle by an executive officer of
Chronicle to that effect;
(b) Subject to Section 8.4, each of the covenants of Chronicle to
be performed on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed in all material respects on or before
the Closing Date and Chronicle shall have delivered to Acquiror at the Closing
a certificate executed on behalf of Chronicle by an executive officer of
Chronicle to that effect;
(c) The FCC shall have consented, to the extent such consent is
legally required, to the transfer to Acquiror of all FCC licenses possessed by
Chronicle in connection with Western's business, except where the failure to
obtain any such consent would not have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries taken as a whole;
(d) The aggregate number of Basic Subscribers in those Franchise
Areas that are Transferable Franchise Areas shall be at least 90% of the
aggregate number of Basic Subscribers in all Franchise Areas. For purposes of
this Section 8.3(d) and Section 8.3(e):
(i) The number of Basic Subscribers in a Franchise Area
shall be the number of Basic Subscribers set forth next to the name of such
Franchise Area on Schedule 4.15 (regardless of any change in the number of
Basic Subscribers in such Franchise Area between June 22, 1995 and the Closing
Date) and the aggregate number of Basic Subscribers in all Franchise Areas
shall be the total number of Basic Subscribers for all Franchise Areas as set
forth on Schedule 4.15 (regardless of any change in the aggregate number of
Basic Subscribers between June 22, 1995 and the Closing Date); and
(ii) A "Transferable Franchise Area" means any Franchise
Area with respect to which (A) any authorization, consent, order, or approval
of any governmental authority necessary for the transfer of control of the
Franchise for such Franchise Area in connection with the consummation of the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory, based on cable industry standards, to Acquiror, shall have been
obtained and shall be in full force and effect as of the Effective Time, and
the right of any governmental authority to acquire the System serving any
Franchise Area shall have been waived, other than rights of condemnation or
eminent domain afforded by law; or (B) no authorization, consent, order, or
approval of any governmental authority is necessary for the transfer of control
of the Franchise for
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such Franchise Area in connection with the consummation of the transactions
contemplated by this Agreement, or (C) no Franchise is required for the
provision of cable television service in the Franchise Area;
(e) Each of the Franchise Areas designated on Schedule 8.3(e)
shall have become a Transferable Franchise Area (as defined in Section
8.3(d)(ii));
(f) The Franchises for the following Franchise Areas shall have
been renewed or extended on terms and conditions reasonably satisfactory to
Acquiror:
(i) Thousand Oaks, California (and related franchises in
Ventura County, California);
(ii) South San Francisco, California; and
(iii) Carmel-By-The-Sea, California;
(g) The rebuild required under the Franchise for Camarillo,
California shall have been completed;
(h) The retransmission consent agreement for KITV in Hawaii shall
have been amended such that no cash consideration shall be required to be paid
thereunder on or after the Effective Time and the retransmission consent
agreement for KDBC in Las Cruces, New Mexico shall have been amended to clarify
that the obligation of the Surviving Corporation thereunder on or after the
Effective Time shall be limited to purchasing promotional spots up to the
stated dollar amounts, not to make cash payments;
(i) The programming affiliation agreements for carriage of Nippon
Golden Network and all agreements pursuant to which programming is acquired by
Chronicle through Telesynergy, Inc. shall have been terminated prior to the
Effective Time and, after the Effective Time, carriage of Bay TV in Western's
Systems shall be governed by the affiliation agreement with Satellite Services,
Inc., an Affiliate of Acquiror, in effect at the Effective Time;
(j) Acquiror shall have received an opinion of Dow, Lohnes &
Albertson, counsel for Chronicle, and Cole Raywid & Braverman, FCC counsel for
Chronicle, dated as of the Closing Date (which opinions may rely on the
opinions of other counsel for Chronicle), in form and substance reasonably
satisfactory to Acquiror and its counsel;
(k) The lease for office space at Two Rincon Center, 121 Spear
Street, Suite 205, San Francisco, California shall have been extended on a
month-to-month basis or for a term of no longer than six months after December
31, 1995 on terms and conditions reasonably satisfactory to Acquiror or the
facilities located at such location shall have been moved to another location
reasonably satisfactory to Acquiror and Chronicle; and
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(l) Those consents of third parties described on Schedule 8.3(l)
shall have been obtained.
8.4 Exception to Conditions to Obligations of Acquiror.
--------------------------------------------------
(a) For purposes of the conditions contained in Section 8.3(a)
and Section 8.3(b) to the obligations of Acquiror to effect the Merger, the
representations and warranties of Chronicle shall be true and correct in all
material respects as of the Closing Date, and the covenants of Chronicle to be
performed on or before the Closing Date shall have been performed in all
material respects, if the aggregate amount of damages that could reasonably be
expected to be suffered by the Surviving Corporation as a result of any
failures of such representations and warranties to be true and correct as of
the Closing Date or as a result of the nonperformance by Chronicle of any such
covenant would not exceed $1,000,000.
(b) The conditions contained in Section 8.3(a) and Section 8.3(b)
to the obligations of Acquiror to effect the Merger shall be deemed satisfied
notwithstanding the failures of any representations and warranties of Chronicle
to be true and correct as of the Closing Date or the nonperformance by
Chronicle of any covenant to be performed on or before the Closing Date if (i)
the aggregate amount of damages that could reasonably be expected to be
suffered by the Surviving Corporation as a result of the failures of such
representations and warranties to be true and correct as of the Closing Date or
as a result of the nonperformance by Chronicle of any such covenant would not
exceed $100,000,000 and (ii) Spinco agrees to indemnify the Surviving
Corporation against any such damages actually suffered by the Surviving
Corporation to the extent they exceed, in the aggregate, $500,000.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing Date:
(a) by mutual written consent duly authorized by the Boards of
Directors of Chronicle and Acquiror;
(b) by either Chronicle or Acquiror, if Acquiror's Board of
Directors has not approved the transactions contemplated by this Agreement
within 10 days after execution of this Agreement as provided in Section 7.17,
at any time prior to the date on which Acquiror's Board of Directors has
approved the transactions contemplated by this Agreement;
(c) by Acquiror, if the condition set forth in Section 8.1(a)
shall not have been satisfied within 60 days after the date of this Agreement
unless Acquiror is in default of its
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obligations under Section 7.3(a) of this Agreement, at any time prior to the
satisfaction of the condition set forth in Section 8.1(a);
(d) by either Chronicle or Acquiror, so long as the terminating
party is not in default under this Agreement in any material respect, after the
later of (i) March 31, 1996 (or, at Acquiror's option, if the condition set
forth in Section 8.1(a) shall not have been satisfied as of such date, June 30,
1996), or (ii) any date to which the Closing has been postponed pursuant to
Section 1.1(b) (such later date, the "Termination Date"), if the Merger has not
been consummated on or before such date;
(e) by Chronicle, if it is not in default under this Agreement in
any material respect, and either (i) Acquiror has failed to perform in any
material respect, any covenant in this Agreement when performance thereof was
due and has not cured the failure within twenty business days after Chronicle
delivered written notice thereof to Acquiror, or (ii) any condition in Section
8.1 or Section 8.2 has not been satisfied in any material respect, and is not
capable of being satisfied prior to the Termination Date; or
(f) by Acquiror, if it is not in default under this Agreement in
any material respect, and either (i) Chronicle has failed to perform in any
material respect, any covenant in this Agreement when performance thereof was
due and has not cured the failure within 20 business days after Acquiror
delivered written notice thereof to Chronicle, except where the failure to
perform such covenant would not cause the condition in Section 8.3(b) not to be
satisfied, after giving effect to Section 8.4, (ii) any condition in Section
8.1 or Section 8.3 has not been satisfied and is not capable of being satisfied
prior to the Termination Date, or (iii) the Board of Directors of Chronicle has
materially modified or withdrawn the approval, determination, or recommendation
referred to in Section 4.4.
9.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 9.1, this Agreement, except for the provisions of
Section 7.3(i), Section 7.3(l), Section 9.3, Section 10.8 (subject to Section
9.3), and Section 10.13, shall immediately become null and void and have no
effect, without any liability on the part of any party or its directors,
officers, or shareholders. Nothing in this Section 9.2 shall relieve any party
to this Agreement of liability for breach of this Agreement.
9.3 Fees and Expenses.
-----------------
(a) If this Agreement is terminated by Acquiror (i) pursuant to
Section 9.1(f), other than as a result of the failure of any condition in
Section 8.1 or the condition in Section 8.3(a) or Section 8.3(l) to be
satisfied or to be capable of being satisfied prior to the Termination Date, or
(ii) pursuant to Section 9.1(f) as a result of the failure of the condition in
Section 8.3(a) to be satisfied or to be capable of being satisfied prior to the
Termination Date, unless such condition was not satisfied and was not capable
of being satisfied as a result of a change in circumstances after the date of
this Agreement, Chronicle shall promptly pay to Acquiror an amount equal to the
actual
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reasonable fees and expenses paid or payable by or on behalf of Acquiror to its
attorneys, accountants, environmental consultants, management consultants, and
other consultants and advisors in connection with the negotiation, execution,
and delivery of this Agreement and the transactions contemplated by this
Agreement; provided, however, that such payment shall in no event exceed
$1,500,000. Such payment shall be made in same day funds no later than five
business days after receipt by Chronicle of detailed written statements
describing the fees and expenses.
(b) If this Agreement is terminated by Chronicle (i) pursuant to
Section 9.1(e), other than as a result of the failure of any condition in
Section 8.1 or the condition in Section 8.2(a) or Section 8.2(i) to be
satisfied or to be capable of being satisfied prior to the Termination Date, or
(ii) pursuant to Section 9.1(e) as a result of the failure of the condition in
Section 8.2(a) to be satisfied or to be capable of being satisfied prior to the
Termination Date, unless such condition was not satisfied and was not capable
of being satisfied as a result of a change in circumstances after the date of
this Agreement, Acquiror shall pay promptly to Chronicle an amount equal to the
actual reasonable fees and expenses paid or payable by or on behalf of
Chronicle and Spinco to their attorneys, accountants, environmental
consultants, management consultants, and other consultants and advisors in
connection with the negotiation, execution, and delivery of this Agreement;
provided, however, that such payment shall in no event exceed the sum of
$1,500,000. Such payment shall be made in same day funds no later than five
business days after receipt by Acquiror of detailed written statements
describing the fees and expenses.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. The
------------------------------------------
representations of Chronicle in Section 4.17(d) and the representations of
Acquiror in Section 5.11(d) shall survive beyond the Closing Date. All other
representations and warranties contained in this Agreement shall not survive
beyond the Closing Date. This Section 10.1 shall not limit (a) any covenant or
agreement of the parties to this Agreement that by its terms requires
performance after the Closing Date, including the covenants of Acquiror in
Section 7.10(b), Section 7.13(b), and Section 7.13(h), or (b) the obligations
of Spinco under the Contribution Agreement and this Agreement.
10.2 Entire Agreement. This Agreement, the Exhibits and Schedules
----------------
to this Agreement, and the Confidentiality Agreement referred to in Section
7.2, together constitute the entire agreement between the parties with respect
to the subject matter of this Agreement and supersede all prior written and
oral and all contemporaneous oral agreements and understandings with respect to
the subject matter of this Agreement.
10.3 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
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<PAGE>
if to Acquiror: Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111
Telecopy: (303) 488-3219
Attention: Robert J. Lewis
with copies to: Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111
Telecopy: (303) 488-3217
Attention: Mary S. Willis, Esq.
Legal Department
and Sherman & Howard L.L.C.
3000 First Interstate Tower North
633 Seventeenth Street
Denver, Colorado 80202
Telecopy: (303) 298-0940
Attention: Charles Y. Tanabe, Esq.
if to Chronicle: The Chronicle Publishing Company
901 Mission Street
San Francisco, California 94103
Telecopy: (415) 495-5057
Attention: W. Ronald Ingram, Esq.
with copies to: Dow, Lohnes & Albertson
1255 23rd Street, N.W., Suite 500,
Washington, D.C. 20037
Telecopy: (202) 857-2900
Attention: Leonard J. Baxt, Esq.
and Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-2000
Attention: Matthew A. Rosen, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person
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<PAGE>
shall be deemed effective on delivery. Any notice or communication sent by
telecopy shall be deemed effective when confirmed. Any notice or communication
sent by registered or certified mail, return receipt requested, shall be deemed
effective when received, as evidenced by the return receipt. This Section 10.3
shall not preclude delivery of any notice or communication by means other than
those specified in this Section 10.3.
10.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF CONFLICTS OF LAWS
APPLICABLE THERETO, EXCEPT THAT CERTAIN PROVISIONS OF THIS AGREEMENT RELATING
TO THE MERGER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE NEVADA
CORPORATION LAW TO THE EXTENT PROVIDED IN THIS AGREEMENT.
10.5 Rules of Construction. The descriptive headings in this
---------------------
Agreement are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
Words used in this Agreement, regardless of the gender and number specifically
used, shall be deemed and construed to include any other gender, masculine,
feminine, or neuter, and any other number, singular or plural, as the context
requires. As used in this Agreement, the word "including" is not limiting, and
the word "or" is not exclusive.
10.6 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party to this Agreement, and nothing in
this Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement except (a) for Section 7.3, Section 7.13(b) and Section 10.9, which
are intended to be for the benefit of the Persons provided for therein and may
be enforced by such Persons, and (b) for those other provisions of this
Agreement that by their terms afford certain rights and remedies to Spinco,
which are intended to be for the benefit of Spinco and may be enforced by
Spinco.
10.7 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
10.8 Payment of Expenses. Except as otherwise expressly provided in
-------------------
this Agreement, each of the parties to this Agreement shall bear its own
expenses, including the fees of any attorneys and accountants engaged by such
party, in connection with this Agreement and the consummation of the
transactions contemplated herein. Any sales or other transfer taxes payable in
connection with the Contribution and the Distribution shall be paid by Spinco,
and any such sales or other transfer taxes payable in connection with the Merger
shall be paid by Acquiror and Spinco in equal shares.
10.9 No Personal Liability. This Agreement shall not create or be
---------------------
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of any
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<PAGE>
party to this Agreement or any officer, director, employee, agent,
representative, or investor of any party to this Agreement.
10.10 Binding Effect; Assignment. This Agreement shall inure to the
--------------------------
benefit of and be binding upon the parties to this Agreement and their
respective legal representatives and successors. This Agreement may not be
assigned by any party to this Agreement.
10.11 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of all the parties. To the extent
permitted by applicable law, any amendment to this Agreement after the meeting
of the shareholders of Chronicle referred to in Section 7.7 may be made without
seeking the approval of such shareholders.
10.12 Extension; Waiver. Any party to this Agreement may (a) extend
-----------------
the time for the performance of any of the obligations or other acts of the
other parties to this Agreement, (b) waive any inaccuracies in the
representations and warranties of any other party contained herein or in any
document, certificate, or writing delivered pursuant to this Agreement by any
other party, or (c) waive compliance by any other party with any of the
agreements or conditions contained herein or any breach thereof. Any agreement
on the part of any party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
10.13 Legal Fees; Costs. If any party to this Agreement institutes
-----------------
any action or proceeding, whether before a court or arbitrator, to enforce any
provision of this Agreement, the prevailing party therein shall be entitled to
receive from the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
10.14 Alternative Structure of Contribution and Distribution.
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, at any
time prior to 60 days prior to the Closing Date, or such later date as Acquiror
shall agree, such agreement not to be unreasonably withheld, Chronicle shall be
entitled to revise the structure of the Contribution and the Distribution
provided that any such revised structure (i) has been approved by the requisite
shareholders of Chronicle, (ii) does not adversely affect the status of the
Merger as a tax-free reorganization under Section 368(a) of the Code, (iii)
requires Chronicle to form one or more new corporations (each corporation
referred to as "New Spinco" and collectively the "New Spincos") to which all
the assets described in Section 3.1(a) are in the aggregate transferred, (iv)
requires all the outstanding shares of all the New Spincos to be issued to and
held by Chronicle immediately prior to the Distribution, (v) requires the New
Spincos to jointly and severally assume all the liabilities of Chronicle
required to be assumed by Spinco pursuant to this Agreement and the Contribution
Agreement, (vi) requires Chronicle to transfer (pursuant to a pro rata
distribution, a non-pro rata exchange offer or otherwise) all the outstanding
stock of all the New Spincos to the shareholders of Chronicle prior to the
Merger, (vii) will be consummated in as timely a manner as the structure
contemplated by this Agreement, and (viii) provides Acquiror with
indemnification rights against New Spincos, jointly and severally, that are at
least as favorable to Acquiror, determined by Acquiror in its reasonable, good
faith discretion, as Acquiror's indemnification rights against Spinco pursuant
to this Agreement. If Chronicle elects
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<PAGE>
to revise the structure of the Contribution and Distribution pursuant to this
Section 10.14, this Agreement and any related documents, including the
Contribution Agreement, shall be appropriately amended in order to reflect any
such revised structure. If Chronicle elects to pursue any such revised
structure, it shall promptly notify Acquiror and provide it with sufficient
detail as to such revised structure.
10.15 Time. Time is of the essence under this Agreement. If the
----
last day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
business day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in Denver, Colorado or San
Francisco, California are required or authorized to be closed.
ARTICLE XI
DEFINITIONS
11.1 Terms Defined Elsewhere in this Agreement. The following
-----------------------------------------
terms, as used in this Agreement, have the meanings set forth in the sections
indicated below:
Term Section
---- -------
AAA Note Section 3.2
Acquiror Preamble
Acquiror Class A Common Stock Section 2.1(a)
Acquiror Class B Common Stock Section 2.2(d)(iii)
Acquiror Common Stock Section 2.1(a)
Acquiror Common Stock Value Section 2.2(c)
Acquiror Deduction Item Section 7.13(b)(iii)(A)
Acquiror Indemnified Parties Section 7.3(l)(ii)
Acquiror Loans Section 3.3(a)
Acquiror PPM Information Section 7.3(a)
Acquiror Restructuring Section 2.7(a)
Acquiror's SEC Reports Section 5.5
Agreement Preamble
Amended Deduction Item Section 7.13(b)(iii)(B)
Antitrust Division Section 7.8(b)
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<PAGE>
Term Section
---- -------
Articles of Merger Section 1.3
Average Trading Price Section 2.2(e)
Basic Subscribers Section 2.3(b)
Bay TV Preliminary Statements
Blackout Period Section 7.3(f)
Broadcast Basic Service Section 2.3(d)
Broadcast Basic Subscribers Section 2.3(e)
Capital Budget Section 6.1(j)
Certificate of Merger Section 1.3
Chronicle Preamble
Chronicle Common Stock Section 2.1(a)
Chronicle Common Stock Value Section 2.2(b)
Chronicle PPM Information Section 7.3(a)
Chronicle Stock Certificates Section 2.8(a)
Class A Preferred Section 5.4(a)
Class B Preferred Section 5.4(a)
Closing Section 1.1(a)
Closing Date Section 1.1(c)
Contribution Section 3.1(a)
Contribution Agreement Section 3.1(a)
Conversion Number Section 2.2(a)
Dissenting Shares Section 2.13
Distribution Section 3.2
Effective Time Section 1.3
Equivalent Basic Subscribers Section 2.3(f)
Escrowed Shares Section 2.6(a)
Estimated Purchase Price Section 2.5(a)
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<PAGE>
Term Section
---- -------
Exchange Agent Section 2.8(a)
Existing Chronicle Debt Section 2.4(b)
Expanded Basic Service Section 2.3(g)
FTC Section 7.8(b)
Household Basic Subscribers Section 2.3(c)
Indemnified Party Section 7.3(l)(iv)
Indemnifying Party Section 7.3(l)(iv)
Interfering Transfer Section 7.10(b)
Losses Section 7.3(l)(i)
Material Contracts Section 4.14(a)
Maximum Value Section 2.2(d)
Merger Section 1.2
Minimum Value Section 2.2(d)
Nasdaq Section 2.2(e)
New Spinco Section 10.14
Other Acquiror Common Stock Section 2.7(a)
Other Acquiror Common Stock Ratio Section 2.7(b)
Per Subscriber Reduction Amount Section 2.3(a)
PPM Section 7.3(a)
Prospectus Section 7.3(b)
Purchase Price Section 2.2(f)
Registration Statement Section 7.3(b)
Retained Chronicle Debt Section 2.4(a)
Selling Shareholder Indemnified Parties Section 7.3(l)(i)
Selling Shareholders Section 7.3(b)
Series C Preferred Section 5.4(a)
Series E Preferred Section 5.4(a)
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<PAGE>
Term Section
---- -------
Spinco Preliminary Statements
Spinco Assumed Liabilities Section 7.13(b)(iii)(A)
Spinco Common Stock Section 3.1(c)(i)
Subscriber Shortfall Section 2.2(f)
Subscriber Target Section 2.3(a)
Surviving Corporation Section 1.2
Termination Date Section 9.1(d)
Transferable Franchise Area Section 8.3(d)(ii)
V U West Agreement Section 2.4(a)(i)
Western Preliminary Statements
Working Capital Deficit Section 3.1(b)
11.2 Terms Defined in this Section. The following terms, as used in
-----------------------------
this Agreement, shall have the meanings set forth in this Section:
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, controls, or is under common control with, or is controlled by such
Person. As used in this definition, "control" means possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies of a Person (whether through the ownership of voting securities, by
contract, or otherwise), and the terms "controlling," "controlled by," and
"under common control with" have meanings corresponding to that of the term
"control."
"Chronicle Employee Benefit Plan" means any Employee Benefit Plan that is
(i) currently maintained or sponsored by Chronicle or any ERISA Affiliate of
Chronicle, or (ii) to which Chronicle or any ERISA Affiliate of Chronicle is
obligated to contribute on behalf of any current or former employee of
Chronicle or any ERISA Affiliate of Chronicle.
"Chronicle Taxes" means (a) any Tax payable by Chronicle attributable to
any taxable period ending on or before the Effective Time, and (b) all Taxes
not associated with the business operations of Western.
"Chronicle Tax Returns" means any Tax Return with respect to Chronicle
Taxes.
"COBRA" means Section 4980B of the Code and Part 6 of Subtitle B of Title
I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
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<PAGE>
"Communications Act" means, collectively, the Communications Act of 1934,
as amended, the Cable Communications Policy Act of 1984, as amended, and the
Cable Television Consumer Protection and Competition Act of 1992, and the
applicable rules and regulations thereunder.
"Delaware Corporation Law" means the General Corporation Law of Delaware.
"Employee Benefit Plan" means any "employee benefit plan," as defined in
Section 3(3) of ERISA, including any plan providing severance pay, disability
benefits, or death benefits, any retirement plan, and any hospitalization,
medical, or life insurance plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any Person, any trade or
business that at any relevant time is treated as a single employer with or
under common control with such Person, within the meaning of Section 414(b),
Section 414(c), Section 414(m), or Section 414(o) of the Code.
"Exchange Act" means, collectively, the Securities Exchange Act of 1934,
as amended, and, unless the context indicates otherwise, the rules and
regulations thereunder.
"FCC" means the Federal Communications Commission.
"Franchise" means any governmental franchise or similar authorization
(other than any license issued by the FCC or any municipal business licenses)
pursuant to which Western is authorized to provide cable television service.
"Franchise Area" means any of the geographic areas in which Western is
authorized to provide cable television service pursuant to a Franchise or
provides cable television service in any geographic area in which a Franchise
is not required pursuant to applicable law.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"HSR Act" means, collectively, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"IRS" means the Internal Revenue Service.
"Multiemployer Plan" means any "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
"Nevada Corporation Law" means the General Corporation Law of Nevada,
Nevada Revised Statutes, Title 7, Chapter 78, as in effect from time to time.
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<PAGE>
"Pension Plan" means any "employee pension plan," as defined in Section
3(2) of ERISA (but excluding any Multiemployer Plan) that is (i) currently
maintained or sponsored by Chronicle or any ERISA Affiliate of Chronicle and
under which any current or former employees of Western are covered, or (ii) to
which Chronicle or any ERISA Affiliate of Chronicle is obligated to contribute
on behalf of any current or former employee of Western.
"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, or other entity or organization.
"Securities Act" means, collectively, the Securities Act of 1933, as
amended, and, unless the context indicates otherwise, the rules and regulations
thereunder.
"Subsidiary" means, with respect to any Person, any other Person, whether
or not incorporated, of which (a) such Person or any other Subsidiary of such
Person is a general partner or (b) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect
to such other Person is directly or indirectly owned or controlled by such
Person, by one or more Subsidiaries of such Person, or by such Person and one
or more of its Subsidiaries.
"System" means a cable television reception and distribution system
consisting of one or more headends, trunk cable, subscriber drops, and
associated electronic equipment, that is operated, or is capable of being
operated, as an independent system without interconnection to another system.
"Tax" means any income, gross receipts, ad valorem, premium, excise,
value-added, sales, use, transfer, gains, franchise, license, severance, stamp,
occupation, service, lease, withholding, employment, payroll, premium,
property, or windfall profits tax, alternative or add-on-minimum tax, or other
tax, fee, or assessment, together with any interest and any penalty, addition
to tax, or additional amount imposed by any governmental authority responsible
for the imposition of any such tax.
"Tax Return" means any return, report, statement, information statement,
or similar document required to be filed with any authority with respect to
Taxes.
"Western Employee Benefit Plan" means any Employee Benefit Plan that is
(i) currently maintained or sponsored by Chronicle or any ERISA Affiliate of
Chronicle and under which any current or former employee of Western is covered,
or (ii) to which Chronicle or any ERISA Affiliate of Chronicle is obligated to
contribute on behalf of any current or former employee of Western.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
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<PAGE>
THE CHRONICLE PUBLISHING COMPANY
By: /s/ John B. Sias
------------------------------------------
Name: John B. Sias
Title: President & Chief Executive Officer
TELE-COMMUNICATIONS, INC.
By: /s/ Brendan R. Clouston
-------------------------------------
Name: Brendan R. Clouston
Title: Executive Vice President
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<PAGE>
SCHEDULE 7.3(B)
Registrable Securities may be sold by Selling Shareholders directly or
through agents designated from time to time or to or through broker-dealers
designated from time to time. To the extent required, any such agent or
broker-dealer involved in the offer and sale of Registrable Securities and any
applicable commissions, discounts or other items constituting compensation to
such agents or broker-dealers will be set forth in a Prospectus Supplement.
The distribution of Registrable Securities may be effected from time to
time in one or more public or private 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. Registrable Securities may be sold
through a broker-dealer acting as agent or broker for a Selling Shareholder, or
to a broker-dealer acting as principal. In the latter case, the broker-dealer
may then resell such Registrable Securities to the public at varying prices to
be determined by such broker-dealer at the time of resale. Registrable
Securities may be sold in connection with equity swap, put or call, margin and
similar transactions entered into by a Selling Shareholder, including sales by
or at the direction of the counterparty to any of such transactions.
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<PAGE>
Exhibit 99.2
[FORM OF]
SHAREHOLDER REGISTRATION RIGHTS AGREEMENT
This Agreement (this "Agreement"), dated as of ________________, 1995,
is made by and between the undersigned shareholder (the "Shareholder") of The
Chronicle Publishing Company, a Nevada corporation ("Chronicle"), and
__________________, a _____________ corporation ("Acquiror").
PRELIMINARY STATEMENTS
Concurrently with the execution of this Agreement, Chronicle and
Acquiror have entered into an Agreement and Plan of Merger and Reorganization
(as the same may be amended from time to time, the "Merger Agreement"),
providing for the merger (the "Merger") of Chronicle with and into Acquiror
pursuant to the terms and conditions of the Merger Agreement.
Upon consummation of the Merger, the shareholders of Chronicle will be
entitled to receive the Conversion Number (as defined in the Merger Agreement)
of shares of Acquiror Common Stock for each share of Common Stock, par value
$0.01 per share, of Chronicle owned by them.
Pursuant to the terms of the Merger Agreement, Acquiror has agreed to
prepare and file with the Securities and Exchange Commission a Registration
Statement on Form S-3, or other appropriate form, with respect to the public
resale by those shareholders of Chronicle as of the Effective Time who have
executed and delivered to Acquiror an agreement in the form of this Agreement of
the shares of Acquiror Common Stock to be issued to the Selling Shareholders in
the Merger. The Shareholder desires to have the shares of Acquiror Common Stock
to be issued to the Shareholder in the Merger (the "Shares") covered by the
Registration Statement.
Capitalized terms used in this Agreement and not otherwise defined in
this Agreement have the meanings assigned to them in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties to this
Agreement agree as follows:
1. Investment Intent. The Shareholder represents and warrants to
-----------------
Acquiror that: (i) the Shareholder is an "accredited investor" as defined in
Rule 501(a) of Regulation D under the Securities Act [IF THE FOREGOING IS NOT
TRUE, PLEASE SO INDICATE BY STRIKING THROUGH IT]; (ii) the Shareholder is
acquiring the Shares for the Shareholder's own account for investment only and
without a view to the distribution thereof except in a transaction permitted
under the following clause (iii); and (iii) the Shareholder will not sell or
otherwise dispose of such Shares
<PAGE>
except in a transaction registered or qualified under the Securities Act and
applicable state securities laws or unless an exemption from those requirements
is available.
2. Limitation on Transfers. In no event will the Shareholder sell
-----------------------
or otherwise distribute more than 25% in the aggregate of the number of shares
of each class of Acquiror Common Stock issued to the Shareholder in the Merger
within one year after the Closing Date or more than 50% in the aggregate of the
number of shares of each class of Acquiror Common Stock issued to the
Shareholder in the Merger within two years after the Closing Date; provided
that the foregoing restrictions will not apply to any of the following
transfers, and none of such transfers will be taken into account for purposes
of determining whether any other transfer complies with the foregoing
restriction: (i) any transfer by will or the laws of intestacy; (ii) if the
Shareholder is a trust, any transfer to the beneficiaries of the trust; (iii)
any transfer by the Shareholder to another Selling Shareholder; (iv) any
transfer by the Shareholder to the Shareholder's spouse, parents, grandparents
or lineal descendants of the Shareholder's grandparents; or (v) any transfer by
the Shareholder to a trust all the beneficial interests in which are owned by
one or more members of the group consisting of the Shareholder and the
individuals described in the preceding clause (iv).
3. Registration. In accordance with and subject to the terms and
------------
conditions of the Merger Agreement, Acquiror will take such actions with respect
to the Registration Statement and the registration of the Shares as are provided
in the Merger Agreement.
4. Covenants for Benefit of the Shareholder; Covenants of the
----------------------------------------------------------
Shareholder. All covenants of Acquiror in Section 7.3 of the Merger Agreement
- -----------
are intended to be for the benefit of, and may be enforced by, the Shareholder,
and all such covenants are incorporated in this Agreement by reference as if set
forth fully in this Agreement. The Shareholder will comply with the covenants
of a Selling Shareholder described in Section 7.3(k) of the Merger Agreement,
all of which are incorporated in this Agreement by reference as if set forth
fully in this Agreement.
5. Information and Compliance with Legal Requirements. The
--------------------------------------------------
Shareholder covenants that all information supplied or to be supplied in writing
to Acquiror by the Shareholder or any of the Shareholder's representatives
expressly for inclusion in the Registration Statement, any Prospectus relating
to the Registration Statement and any amendment or supplement thereto will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6. Expenses. The Shareholder will be responsible for all
--------
underwriting discounts and commissions and transfer taxes, if any, relating to
the resale by the Shareholder of the Shareholder's Shares, as well as all fees
and expenses of counsel and of any other advisor to the Shareholder.
-2-
<PAGE>
7. Indemnification. The Shareholder will, in accordance with the
---------------
terms and conditions of Section 7.3(l) of the Merger Agreement, indemnify,
defend and hold harmless Acquiror and each of the Acquiror Indemnified Parties
against any Losses, joint or several, to which any of the Acquiror Indemnified
Parties may become subject under the Securities Act or the Exchange Act or
otherwise, insofar as such Losses (or actions in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any Prospectus, or any
omission or alleged omission to state therein 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, if the statement or
omission was made in reliance upon and in conformity with written information
provided by or on behalf of the Shareholder or any Person who controls the
Shareholder specifically for use or inclusion in any Registration Statement or
any Prospectus, (ii) the use of any Prospectus by or on behalf of the
Shareholder after such time as Acquiror has provided notice to the Shareholder
pursuant to Section 7.3(e) of the Merger Agreement or any failure by the
Shareholder to comply with the covenant described in Section 7.3(k)(v) of the
Merger Agreement, (iii) the use by or on behalf of the Shareholder of any
Prospectus after such time as the obligation of Acquiror hereunder to keep the
Registration Statement effective and current has expired or been suspended
hereunder, (iv) any violation by the Shareholder or any Person who controls the
Selling Shareholder within the meaning of either the Securities Act or the
Exchange Act (or any agent, broker-dealer or underwriter engaged by such Selling
Shareholder or any such controlling Person) of any federal or state securities
law or rule or regulation thereunder, or (v) any failure by the Shareholder to
give any purchaser of Shares registered pursuant to the Registration Statement,
at or prior to the written confirmation of such sale, a copy of the most recent
Prospectus to the extent required by law. The Shareholder also promptly will
reimburse the Acquiror Indemnified Parties for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such Losses or actions in respect thereof.
8. Further Assurances. For three years after the Effective Time, the
------------------
Shareholder will take such other actions and enter into such other agreements as
may be reasonably necessary or advisable in connection with the resale by the
Shareholder of the Shares covered by the Registration Statement.
9. Specific Performance. Each party to this Agreement acknowledges
--------------------
that it will be impossible to measure in money the damage to the other party if
any party to this Agreement fails to comply with the obligations imposed by this
Agreement, and that, in the event of any such failure, the other party will not
have an adequate remedy at law or in damages. Accordingly, each party to this
Agreement agrees that injunctive relief or other equitable remedy, in addition
to remedies at law or damages, is the appropriate remedy for any such failure
and will not oppose the granting of such relief on the basis that the other
party has an adequate remedy at law. Each party to this Agreement agrees that
it will not seek, and agrees to waive any requirement for, the securing or
posting of a bond in connection with any other party's seeking or obtaining such
equitable relief.
-3-
<PAGE>
10. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter of this Agreement.
(b) Notices. All notices and other communications hereunder will be
-------
in writing and will be deemed to have been duly given when delivered in person,
by telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to Acquiror: Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Telecopy: (303) 488-3217
Attention: Legal Department
With a copy to: Sherman & Howard L.L.C.
633 Seventeenth Street
Suite 3000
Denver, Colorado 80202
Telecopy: (303) 298-0940
Attention: Charles Y. Tanabe, Esq.
If to Shareholder: To the address or telecopy number set forth for the
Shareholder on the signature page hereof
With a copy to: The Chronicle Publishing Company
901 Mission Street
San Francisco, California 94103
Telecopy: (415) 495-7148
Attention: W. Ronald Ingram, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person will be deemed effective on
delivery. Any notice or communication sent by telecopy will be deemed effective
when confirmed. Any notice or communication sent by registered or certified
mail, return receipt requested, will be deemed effective when received, as
evidenced by the return receipt. This Section 10(b) will not preclude delivery
of any notice or communication by means other than those specified in this
Section 10(b).
-4-
<PAGE>
(c) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF CONFLICTS OF LAWS APPLICABLE THERETO.
(d) Rules of Construction. The descriptive headings in this Agreement
---------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement. Words used in
this Agreement, regardless of the gender and number specifically used, will be
deemed and construed to include any other gender, masculine, feminine, or
neuter, and any other number, singular or plural, as the context requires. As
used in this Agreement, the word "including" is not limiting, and the word "or"
is not exclusive.
(e) Parties in Interest. This Agreement will be binding upon and
-------------------
inure solely to the benefit of the parties to this Agreement and their legal
successors-in-interest, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
(f) Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed to be an original, but all of which will constitute
one and the same agreement.
(g) Assignment. This Agreement may not be assigned by either party to
----------
this Agreement.
(h) Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of both the parties.
(i) Extension; Waiver. Either party to this Agreement may (a) extend
-----------------
the time for the performance of any of the obligations or other acts of the
other party to this Agreement, (b) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document,
certificate, or writing delivered pursuant to this Agreement by the other party,
or (c) waive compliance by the other party with any of the agreements or
conditions contained herein or any breach thereof. Any agreement on the part of
either party to any such extension or waiver will be valid only if set forth in
an instrument in writing signed on behalf of such party.
(j) Legal Fees; Costs. If either party to this Agreement institutes
-----------------
any action or proceeding, whether before a court or arbitrator, to enforce any
provision of this Agreement, the prevailing party therein will be entitled to
receive from the losing party reasonable attorneys, fees and costs incurred in
.such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
TELE-COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
[SHAREHOLDER]
------------------------------------
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<PAGE>
Exhibit 99.3
CONTRIBUTION AND ASSUMPTION AGREEMENT
DATED AS OF ______________, 199__
BY AND BETWEEN
THE CHRONICLE PUBLISHING COMPANY
AND
[SPINCO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
CONTRIBUTION AND ASSUMPTION
<C> <S> <C>
1.1 Contribution of Assets........................................................................ 1
(a) Contribution................................................................... 1
(b) Retained Assets................................................................ 2
(c) Cash Contribution.............................................................. 3
1.2 Assumption of Liabilities..................................................................... 4
(a) Liabilities Assumed............................................................ 4
(b) Retained Liabilities........................................................... 5
1.3 Issuance of Spinco Stock...................................................................... 6
1.4 Tax Matters................................................................................... 6
1.5 Further Assurances............................................................................ 6
1.6 Cooperation................................................................................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
2.1 Organization and Authority.................................................................... 7
2.2 No Breach..................................................................................... 7
2.3 Consents and Approvals........................................................................ 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPINCO
3.1 Organization and Authority.................................................................... 8
3.2 No Breach..................................................................................... 8
3.3 Consents and Approvals........................................................................ 8
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by Chronicle.................................................................. 9
4.2 Indemnification by Spinco..................................................................... 9
4.3 Indemnification Procedures.................................................................... 9
4.4 Limitations on Indemnification by Spinco......................................................11
4.5 Liability for Post-Closing Rate Regulation Matters............................................12
4.6 Liability for Consents........................................................................12
4.7 Spinco's Financial Viability; Reporting Obligations to Surviving Corporation..................13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
MISCELLANEOUS
<C> <S> <C>
5.1 Entire Agreement..............................................................................14
5.2 Notices.......................................................................................14
5.3 GOVERNING LAW.................................................................................15
5.4 Rules of Construction.........................................................................16
5.5 Parties in Interest...........................................................................16
5.6 Counterparts..................................................................................16
5.7 No Personal Liability.........................................................................16
5.8 Assignment....................................................................................16
5.9 Amendment.....................................................................................16
5.10 Extension; Waiver.............................................................................16
5.11 Legal Fees; Costs.............................................................................16
5.12 Time..........................................................................................16
</TABLE>
ii
<PAGE>
CONTRIBUTION AND ASSUMPTION AGREEMENT
This Contribution and Assumption Agreement (this "Agreement"), dated
as of _______________ is made by and between The Chronicle Publishing Company, a
Nevada corporation ("Chronicle"), and _________________, a Nevada corporation
("Spinco").
PRELIMINARY STATEMENTS
Chronicle and Tele-Communications, Inc., a Delaware corporation
("Acquiror"), have entered into an Agreement and Plan of Merger and
Reorganization, dated as of June ___, 1995 (the "Merger Agreement"), providing
for the merger of Chronicle with and into Acquiror pursuant to the terms and
conditions of the Merger Agreement.
Pursuant to the Merger Agreement, Chronicle has agreed to contribute
and transfer to Spinco certain assets of Chronicle, excluding assets used or
held for use in the conduct of the cable television operations of Chronicle's
Western Communications division ("Western") and an undivided 49% interest in
certain assets relating to the operation of the local cable television network
distributed in the San Francisco Bay area under the name "Bay TV," in exchange
for all the issued and outstanding stock of Spinco, the assumption by Spinco of
certain liabilities of Chronicle, and the other undertakings of Spinco set forth
in this Agreement. Following the contribution, Spinco will conduct the
businesses previously conducted by Chronicle (other than the cable television
operations of Western and the operation of Bay TV).
Capitalized terms used in this Agreement and not otherwise defined in
this Agreement have the meanings assigned to them in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency, and adequacy of which are hereby acknowledged, the parties to this
Agreement agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
1.1 Contribution of Assets.
---------------------
(a) Contribution. Subject to Section 1.1(b), Chronicle hereby
------------
contributes, grants, conveys, assigns, transfers, and delivers to Spinco all of
Chronicle's right, title, and interest in and to any and all assets of
Chronicle, whether tangible or intangible and whether fixed, contingent, or
otherwise, including:
(i) any and all real property, wherever located;
<PAGE>
(ii) any and all furniture, fixtures, equipment, tools,
vehicles, supplies, buildings, and improvements, wherever located;
(iii) any and all accounts receivable, other receivables and
amounts payable to Chronicle (including tax refunds), notes, prepaid expenses,
securities, copyrights, trademarks, trade names, leases, and contract rights;
(iv) all cash of Chronicle, on hand or in banks, other than
cash required to be retained by Chronicle pursuant to Section 1.1(b)(iii), as
determined in accordance with Section 1.1(c);
(v) the assets described on Schedule 3.1(a) to the Merger
Agreement, except to the extent such assets have been disposed of prior to the
Contribution;
(vi) all Chronicle Employee Benefit Plans;
(vii) all assets of Chronicle related to the Chronicle
Employee Benefit Plans;
(viii) all rights of Chronicle to any payment of costs
assessed against any holder of Dissenting Shares pursuant to Section 78.502 of
the Nevada Corporati on Law;
(ix) an undivided 51% interest in those assets to be
contributed to the joint venture to be formed by Acquiror and Spinco pursuant to
Section 7.15 of the Merger Agreement ;
(x) all rights in and to the name "Chronicle" and
derivations thereof, subject to the provisions of Section 7.12(b) of the Merger
Agreement; and
(xi) all receivables from shareholders, directors, officers,
and employees of Chronicle.
The contribution and transfer by Chronicle to Spinco of the assets contributed
and transferred to Spinco pursuant to this Section 1.1(a) are referred to in
this Agreement as the "Contribution," and the assets so contributed and
transferred are referred to in this Agreement collectively as the "Contributed
Assets."
(b)Retained Assets.
---------------
Notwithstanding Section 1.1(a), Chronicle hereby retains and does not contribute
to Spinco:
(i) except for those assets specifically described in
Section 1.1(a)(v), Section 1.1(a)(vi), Section 1.1(a)(vii), Section
1.1(a)(viii), Section 1.1(a)(ix), Section 1.1(a)(x), and Section 1.1(a)(xi),
those assets that are used or held for use in the conduct of the cable
television business operations of Western, including (to the extent not disposed
of prior to the Contribution in
-2-
<PAGE>
accordance with the terms of the Merger Agreement) all assets (other than cash)
reflected on the balance sheet of Western as at December 31, 1994 included in
Schedule 4.6(b) to the Merger Agreement;
(ii) an undivided 49% interest in those assets that are to
be contributed to the joint venture to be formed by Acquiror and Spinco pursuant
to Section 7.15 of the Merger Agreement;
(iii) that amount of cash necessary to cause the Working
Capital Deficit of Western immediately prior to the Effective Time to be zero;
and
(iv) any rights of Chronicle created by the Merger Agreement
or this Agreement.
The assets retained by Chronicle are referred to in this Agreement collectively
as the "Retained Assets"; the Working Capital Deficit of Western immediately
prior to the Effective Time is referred to in this Agreement as the "Closing
Date Working Capital Deficit."
(c) Cash Contribution. The amount of cash to be contributed by
-----------------
Chronicle to Spinco pursuant to Section 1.1(a)(iv), taking into account that
amount of cash to be retained by Chronicle pursuant to Section 1.1(b)(iii),
shall be determined in accordance with the following procedures:
(i) Prior to the date of this Agreement, Chronicle has
prepared and delivered to Acquiror a balance sheet of Western as at the
Effective Time (the "Closing Date Balance Sheet"), which was prepared in
accordance with GAAP, consistently applied with the preparation of the balance
sheet of Western as at December 31, 1994 included in Schedule 4.6(b) to the
Merger Agreement. The Closing Date Balance Sheet represents Chronicle's good
faith estimate of those items constituting the Closing Date Working Capital
Deficit, calculated in accordance with Section 3.1(b) of the Merger Agreement.
(ii) On the date of this Agreement, Chronicle shall transfer
to Spinco cash in the amount of $__________________, which amount represents
Chronicle's good faith estimate of the amount by which Chronicle's cash on hand
or in banks as of the Effective Time will exceed the amount necessary to cause
the Closing Date Working Capital Deficit to be zero. Chronicle's good faith
estimate of the Closing Date Working Capital Deficit for purposes of this
calculation shall reflect the estimate of assets and liabilities used in the
preparation by Chronicle of the Closing Date Balance Sheet.
(iii) Within 60 days after the Closing Date, Spinco will
deliver to the Surviving Corporation a statement setting forth Spinco's
determination of the Closing Date Working Capital Deficit. If the Surviving
Corporation disputes the amount of the Closing Date Working Capital Deficit as
determined by Spinco, it shall deliver to Spinco within 30 days after its
receipt of
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<PAGE>
Spinco's statement a notice setting forth the basis of the dispute regarding the
determination of the Closing Date Working Capital Deficit. If the Surviving
Corporation notifies Spinco of its acceptance of Spinco's statement, or if the
Surviving Corporation fails to deliver a notice of a dispute within the 30-day
period specified in the preceding sentence, Spinco's determination of the
Closing Date Working Capital Deficit shall be conclusive and binding on the
parties as of the last day of the 30-day period.
(iv) The Surviving Corporation and Spinco shall use good
faith efforts to resolve any dispute involving the determination of the Closing
Date Working Capital Deficit. If the parties are unable to resolve the dispute
within 30 days following the delivery of the Surviving Corporation's notice of
the dispute, the Surviving Corporation and Spinco shall jointly designate an
independent certified public accounting firm to resolve the dispute described in
the Surviving Corporation's notice. If the parties are unable to agree on the
designation of an independent certified public accounting firm, the selection of
such firm shall be determined by agreement of KPMG Peat Marwick and Arthur
Andersen & Co. The accounting firm's resolution of the dispute shall be final
and binding on the parties, and a judgment may be entered thereon in any court
of competent jurisdiction. Any fees of the accounting firm shall be split
equally between the Surviving Corporation and Spinco.
(v) If the amount of cash to be contributed by Chronicle to
Spinco pursuant to Section 1.1(a)(iv) exceeds the amount of cash transferred to
Spinco by Chronicle on the date of this Agreement, the Surviving Corporation
shall transfer to Spinco, in immediately available funds within five business
days after the date on which the Closing Date Working Capital Deficit is finally
determined pursuant to this Section 1.1(c), the amount of such excess. If the
amount of cash transferred to Spinco by Chronicle on the date of this Agreement
exceeds the amount of cash to be contributed by Chronicle to Spinco pursuant to
Section 1.1(a)(iv), Spinco shall refund to the Surviving Corporation, in
immediately available funds within five business days after the date on which
the Closing Date Working Capital Deficit is finally determined pursuant to this
Section 1.1(c), the amount of such excess.
1.2 Assumption of Liabilities.
-------------------------
(a) Liabilities Assumed. In consideration for the Contribution,
-------------------
but subject to Section 1.2(b), Spinco hereby assumes and undertakes to
discharge, satisfy, and perform:
(i) any and all liabilities and obligations (including
contractual obligations to be performed after the Effective Time) of Chronicle
as of the Effective Time, whether fixed, contingent, or otherwise, including
obligations and liability for withholding and payroll taxes accrued prior to the
Effective Time;
(ii) all liabilities of all Chronicle Employee Benefit Plans
and all liabilities with respect to employee claims arising or relating to the
period prior to the Effective Time under
-4-
<PAGE>
any employee medical or dental plans of Chronicle, including employee bonuses,
executive deferred compensation of current or former executives of Chronicle,
and any COBRA liability;
(iii) all liabilities with respect to any employee of
Western terminated prior to the Effective Time and all liabilities for severance
pursuant to the severance plans described on Schedule 3.1(c)(iii) of the Merger
Agreement;
(iv) all liabilities of Chronicle to indemnify any officer
or director of Chronicle against liabilities based on or arising out of any
action or omission of such officer or director as an officer or director at or
relating to the period prior to the Effective Time;
(v) all liabilities of Chronicle with respect to worker's
compensation claims arising or relating to the period prior to the Effective
Time;
(vi) all liabilities of Chronicle with respect to any claims
arising or relating to the period prior to the Effective Time for which
Chronicle is self insured;
(vii) all obligations and liabilities specified in the
Merger Agreement as obligations and liabilities of Spinco, including the
obligation to make payments on behalf of Chronicle in respect of Dissenting
Shares, obligations of Chronicle under the AAA Notes, obligations of Chronicle
under the Guaranty dated as of November 29, 1988, between Chronicle and Bank of
America National Trust and Savings Association, and obligations of Chronicle to
Salomon Brothers Inc and Waller Capital Corporation in connection with the
transactions contemplated by the Merger Agreement; and
(viii) all liabilities associated with any business
activities of Western other than Western's cable television business, including
any businesses previously operated by Western directly or through any Person in
which Chronicle held an ownership interest and accounted for as part of the
Western division, including Wescom Productions, Chronicle Videocassettes, and
International Video Network Partnership.
The liabilities assumed by Spinco are referred to in this Agreement collectively
as the "Assumed Liabilities."
(b) Retained Liabilities. Notwithstanding Section 1.2(a),
--------------------
Chronicle hereby retains, and Spinco does not assume and shall have no liability
with respect to:
(i) the Retained Chronicle Debt and any interest accrued but
unpaid on the Retained Chronicle Debt immediately prior to the Effective Time;
(ii) liabilities and obligations associated with the
business operations of Western which were included in determining the Closing
Date Working Capital Deficit;
-5-
<PAGE>
(iii) obligations for the delivery of cable television
service to subscribers of Western's Systems after the Effective Time;
(iv) all obligations (A) under the Franchises and related to
the FCC licenses set forth on Schedule 4.15 to the Merger Agreement, (B) under
the Material Contracts set forth on Schedule 4.14 to the Merger Agreement, (C)
under agreements with developers set forth on Schedule 3.1(c) to the Merger
Agreement, and (D) under any contract or agreement (other than any agreement
with a developer) entered into in the ordinary course of the operation of
Western's Systems or in compliance with Chronicle's covenants under Section 6.1
of the Merger Agreement, in each case to the extent required to be performed
after the Effective Time; and
(v) Chronicle's obligations created pursuant to the Merger
Agreement.
The liabilities retained by Chronicle are referred to in this Agreement
collectively as the "Retained Liabilities."
1.3 Issuance of Spinco Stock. In consideration for the Contribution,
------------------------
Spinco hereby issues and delivers to Chronicle, and Chronicle hereby
acknowledges receipt of, _________* validly issued, fully paid, and
nonassessable shares of Spinco Common Stock, $0.01 par value per share, which
shares shall represent all the issued and outstanding shares of capital stock of
Spinco immediately after the Contribution.
1.4 Tax Matters. Notwithstanding anything to the contrary in this
-----------
Agreement, liabilities of the parties for Taxes that are associated with the
business operations of Western are subject to Section 7.13 of the Merger
Agreement, and all obligations of Spinco under Section 7.13 of the Merger
Agreement shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement. The transactions contemplated by the Merger
Agreement are intended to qualify as tax-free reorganizations within the meaning
of Section 355 and Section 368(a) of the Code.
1.5 Further Assurances. If after the Effective Time, either party
------------------
holds assets that by the terms of this Agreement were intended to be assigned
and transferred to, or retained by, the other party, the party holding such
assets shall promptly assign and transfer or cause to be assigned or transferred
such assets to the other party. Each of the parties to this Agreement promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions of this
Agreement and to consummate the transactions contemplated by this Agreement.
- -------------------------
*insert number of shares of stock of The Chronicle Publishing Company
outstanding at Closing
-6-
<PAGE>
1.6 Cooperation. The parties shall cooperate with each other in all
-----------
reasonable respects regarding the transfer of the Contributed Assets, the
Assumed Liabilities, and the business related thereto, including entering into
any service or other sharing agreements that may be necessary.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
Chronicle represents and warrants to Spinco as follows:
2.1 Organization and Authority. Chronicle is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the State of
Nevada. Chronicle has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated by
this Agreement. All necessary corporate action required to have been taken by
or on behalf of Chronicle by applicable law, its Restated Articles of
Incorporation and Bylaws, or otherwise to authorize (a) the approval, execution,
and delivery on behalf of Chronicle of this Agreement, and (b) the performance
by Chronicle of its obligations under this Agreement and the consummation of the
transactions contemplated by this Agreement has been taken. This Agreement
constitutes a valid and binding agreement of Chronicle, enforceable against it
in accordance with its terms, except (x) as enforcement of this Agreement may be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws of
general application relating to or affecting creditors' rights, including the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers, (y) as the availability of indemnification and other
remedies may be limited by federal and state securities laws, and (z) for the
limitations imposed by general principles of equity.
2.2 No Breach. The execution and delivery of this Agreement by
---------
Chronicle do not, and the consummation of the transactions contemplated by this
Agreement by Chronicle will not, (a) violate or conflict with the Restated
Articles of Incorporation or Bylaws of Chronicle, or (b) constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third-party right of termination,
cancellation, modification, or acceleration under any agreement or undertaking
to which Chronicle is a party or by which it is bound, except where such breach,
default, lien, third-party right of termination, cancellation, modification, or
acceleration would not prevent Chronicle from performing its obligations under
this Agreement, or (c) constitute a violation of any statute, law, ordinance,
rule, or regulation, except where such violation would not prevent Chronicle
from performing its obligations under this Agreement.
2.3 Consents and Approvals. Neither the execution and delivery of this
----------------------
Agreement by Chronicle nor the consummation of the transactions contemplated by
this Agreement will require any consent, approval, authorization, or permit of,
or filing with or notification to, any governmental or regulatory authority,
except for such consents, approvals, authorizations, permits, filings, or
notifications that have been obtained or made, as applicable, or where the
failure to obtain such
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<PAGE>
consents, approvals, authorizations, or permits, or to make such filings or
notifications, would not prevent Chronicle from performing its obligations
under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPINCO
Spinco represents and warrants to Chronicle as follows:
3.1 Organization and Authority. Spinco is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the State of
Nevada. Spinco has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. All necessary corporate action required to have been taken by or on
behalf of Spinco by applicable law, its Articles of Incorporation and Bylaws, or
otherwise to authorize (a) the approval, execution, and delivery on behalf of
Spinco of this Agreement, and (b) the performance by Spinco of its obligations
under this Agreement and the consummation of the transactions contemplated by
this Agreement has been taken. This Agreement constitutes a valid and binding
agreement of Spinco, enforceable against it in accordance with its terms, except
(x) as enforcement of this Agreement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws of general application relating to or
affecting creditors' rights, including the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, (y) as the
availability of indemnification and other remedies may be limited by federal and
state securities laws, and (z) for the limitations imposed by general principles
of equity.
3.2 No Breach. The execution and delivery of this Agreement by Spinco
---------
do not, and the consummation of the transactions contemplated by this Agreement
by Spinco will not, (a) violate or conflict with the Articles of Incorporation
or Bylaws of Spinco, or (b) constitute a breach or default (or an event that
with notice or lapse of time or both would become a breach or default) or give
rise to any lien, third-party right of termination, cancellation, modification,
or acceleration under any agreement or undertaking to which Spinco is a party or
by which it is bound, or (c) constitute a violation of any statute, law,
ordinance, rule, or regulation.
3.3 Consents and Approvals. Neither the execution and delivery of this
----------------------
Agreement by Spinco nor the consummation of the transactions contemplated by
this Agreement will require any consent, approval, authorization, or permit of,
or filing with or notification to, any governmental or regulatory authority,
except for such consents, approvals, authorizations, permits, filings, or
notifications that have been obtained or made, as applicable, or where the
failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications, would not prevent Spinco from performing its
obligations under this Agreement.
-8-
<PAGE>
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by Chronicle. Chronicle and, after the Effective
----------------------------
Time, the Surviving Corporation, shall indemnify, defend, and hold harmless
Spinco and each of its successors-in-interest against any losses, claims,
damages, or liabilities, joint or several, arising out of the Retained
Liabilities, the Retained Assets, the Surviving Corporation Refund Liability (as
defined in Section 4.2(b)), or the operations of Chronicle after the Effective
Time, and Chronicle shall reimburse Spinco and each such successor-in-interest
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such indemnified loss, claim,
damage, or liability.
4.2 Indemnification by Spinco.
-------------------------
(a) Spinco shall indemnify, defend, and hold harmless Chronicle
and each of its successors-in-interest, against any losses, claims, damages, or
liabilities, joint or several, arising out of the Assumed Liabilities, the
Contributed Assets, or the operations of Spinco after the Effective Time, and
Spinco shall reimburse Chronicle and each such successor-in-interest for any
legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such indemnified loss, claim, damage, or
liability.
(b) Following consummation of the Merger, Spinco shall indemnify,
defend, and hold harmless the Surviving Corporation against any losses, claims,
damages, or liabilities, joint or several, arising from the operations of
Western prior to the Effective Time, including any fine or penalty or refund to
subscribers of Western's Systems ordered by any franchise authority or the FCC
to the extent relating to the period prior to the Effective Time (collectively,
"Refund Liability"), whether such order is issued prior to, on, or after the
Closing Date, except to the extent that any Refund Liability results from any
proceeding that was commenced after any change by the Surviving Corporation of
any regulated rates charged by the Western System to which such Refund Liability
relates ("Surviving Corporation Refund Liability"), and Spinco shall reimburse
the Surviving Corporation and each such successor-in-interest for any legal or
any other expenses reasonably incurred by any of them in connection with
investigating or defending any such indemnified loss, claim, damage, or
liability.
4.3 Indemnification Procedures.
--------------------------
(a) For the purpose of this Article IV, the term "Indemnifying
Party" shall mean the party having an obligation hereunder to indemnify any
Person pursuant to this Article IV and the term "Indemnified Party" shall mean
any Person having the right to be indemnified pursuant to this Article IV.
Whenever any claim shall arise for indemnification under this Article IV, the
Indemnified Party shall promptly notify the Indemnifying Party in writing of
such claim and, when known, the facts constituting the basis for such claim (in
reasonable detail). Failure by the
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<PAGE>
Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder except to the extent that such
failure prejudices the Indemnifying Party.
(b) If, after receipt of a claim notice pursuant to Section
4.3(a), the Indemnifying Party undertakes to defend any such claim, the
Indemnifying Party shall be entitled, if it so elects, to take control of the
defense and investigation with respect to such claim and to employ and engage
attorneys of its own choice to handle and defend such claim, at the Indemnifying
Party's cost, risk, and expense, upon written notice to the Indemnified Party of
such election, which notice acknowledges the Indemnifying Party's obligation to
provide indemnification under this Agreement. The Indemnifying Party shall not
settle any third-party claim that is the subject of indemnification without the
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided, however, that the Indemnifying Party may settle
a claim without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party,
and (iii) does not require the Indemnified Party to make any payment or forego
or take any action. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial, and defense of any lawsuit or action with respect to such claim and any
appeal arising therefrom (including the filing in the Indemnified Party's name
of appropriate cross claims and counterclaims). The Indemnified Party may, at
its own cost, participate in any investigation, trial, and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal arising
therefrom.
(c) If, after receipt of a claim notice pursuant to Section
4.3(a), the Indemnifying Party does not undertake to defend any such claim, the
Indemnified Party may, but shall have no obligation to, contest any lawsuit or
action with respect to such claim, and the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party (including the
settlement thereof without the consent of the Indemnifying Party). If there are
one or more legal defenses available to the Indemnified Party that conflict with
those available to the Indemnifying Party, the Indemnified Party shall have the
right, at the expense of the Indemnifying Party, to assume the defense of the
lawsuit or action; provided, however, that the Indemnified Party may not settle
such lawsuit or action without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(d) At any time after the commencement of defense of any lawsuit
or action, the Indemnifying Party may request the Indemnified Party to agree in
writing to the abandonment of such contest or to the payment or compromise by
the Indemnifying Party of such claim, whereupon such action shall be taken
unless the Indemnified Party determines that the contest should be continued and
so notifies the Indemnifying Party in writing within fifteen days of such
request from the Indemnifying Party. Any request from the Indemnifying Party
that any contest be abandoned shall specify the amount that the other party or
parties to the contested claim have agreed to accept in payment or compromise of
the claim. If the Indemnified Party determines that the contest should be
continued, the Indemnifying Party shall be liable hereunder only to the extent
of the lesser of (i) the amount that the other party or parties to the contested
claim had agreed to accept in payment or
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<PAGE>
compromise as of the time the Indemnifying Party made its request therefor to
the Indemnified Party, as specified in the Indemnifying Party's request, or (ii)
the amount for which the Indemnifying Party may be liable with respect to such
claim by reason of the provisions of this Agreement.
4.4 Limitations on Indemnification by Spinco.
----------------------------------------
Notwithstanding anything in this Agreement to the contrary:
(a) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim described in
Section 4.2(b) unless the Surviving Corporation gives notice of the claim to
Spinco pursuant to Section 4.3(a) within three years after the Closing Date,
except for claims related to Refund Liability (other than Surviving Corporation
Refund Liability) or Employee Benefit Plans as to which the Surviving
Corporation may give notice of a claim related thereto without limitation.
(b) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim made under Section
4.2(b) related to liabilities for environmental matters that arise after the
Effective Time but result from hazardous substances present prior to the
Effective Time on any real property owned or leased by Western, including claims
related to hazardous substances the presence of which constituted a violation of
Chronicle's representations and warranties contained in Section 4.20 of the
Merger Agreement, (i) unless, and then only to the extent that, the losses,
liabilities, and damages of the Surviving Corporation arising from all such
claims exceed in the aggregate $100,000 or (ii) to the extent that the losses,
liabilities, and damages of the Surviving Corporation arising from all such
claims exceed in the aggregate $50,000,000; provided, however, that the
limitation on Spinco's indemnification obligations contained in this Section
4.4(b) shall not apply to claims related to liabilities in existence at the
Effective Time or to any liabilities with respect to environmental matters that
are Assumed Liabilities.
(c) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim described in
Section 4.2(b) to the extent (i) that the Surviving Corporation is compensated
for any loss, liability, or damage arising from such claim under the Surviving
Corporation's insurance policies in the absence of any indemnity hereunder if
the insurers under such policy waive their rights of subrogation with respect
thereto; or (ii) of any realized tax benefits of the Surviving Corporation
arising from any loss, liability, or damage arising from such claim. For purpose
of this Section 4.4(c), "realized tax benefits" of the Surviving Corporation
arising from any loss, liability, or damage arising from any such claim shall
mean the positive difference (if any) between (i) income Taxes that would be
shown as due and payable on the consolidated federal Tax Return filed by the
Surviving Corporation and its Affiliates on which any item of deduction, loss,
or credit attributable to any loss, liability, or damage arising from such claim
is reported without regard to such item, but otherwise taking into account all
other information in such Tax Return as filed (either originally or as amended)
and otherwise making such calculations in conformity with applicable Tax laws
and regulations (including the carryback of losses or credits)
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<PAGE>
and (ii) the income Taxes actually shown as due and payable on such Tax Return
as filed (either originally or as amended); provided, however, that realized tax
benefits in no event shall include any realized tax benefits with respect to an
Acquiror Deduction Item or an Amended Deduction Item to be paid to Spinco
pursuant to Section 7.13(b)(iii) of the Merger Agreement.
(d) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim described in
Section 4.2(b) that relates to any liability or obligation that was taken into
account in calculating the Closing Date Working Capital Deficit.
(e) Spinco shall not be obligated or otherwise be liable to the
Surviving Corporation with respect to any claim for Taxes under Section 7.13 of
the Merger Agreement unless the Surviving Corporation gives notice of the claim
to Spinco prior to the expiration of the applicable statute of limitations with
respect to such claim.
4.5 Liability for Post-Closing Rate Regulation Matters.
--------------------------------------------------
Notwithstanding any provision of this Agreement or the Merger Agreement to the
contrary, Spinco shall not be obligated to indemnify or otherwise be liable to
the Surviving Corporation with respect to any claim to the extent relating to
the period after the Effective Time arising from or relating to:
(a) the rate regulation provisions of the Cable Television
Consumer Protection and Competition Act of 1992, and any rules and regulations
of the FCC, or any state or local governmental authority promulgated thereunder
or in connection therewith, or any Federal, state, or local consumer protection,
trade practice, or other similar law, statute, rule, regulation, or ordinance
relating to the rates of cable television systems;
(b) any investigation, certification, proceeding, inquiry, or
similar matter by or before any governmental authority or other Person arising
from, relating to, or in connection with any law, statute, rule, regulation, or
ordinance described in Section 4.5(a);
(c) any rate reductions, refunds, penalties, or similar actions
(or investigations, certifications, proceedings, or inquiries relating thereto)
instituted against or imposed on Chronicle by any governmental authority or
other Person; or
(d) any changes to programming, billing, or marketing practices
instituted or implemented by Chronicle in accordance with, and as permitted by,
the Merger Agreement.
4.6 Liability for Consents. Notwithstanding any provision of this
----------------------
Agreement or the Merger Agreement to the contrary, Spinco shall not be obligated
to indemnify or otherwise be liable to the Surviving Corporation with respect to
any claim arising from the failure of Chronicle to obtain any consent, approval,
authorization, or permit of, or make any filing with or notification to, any
governmental or regulatory authority or any other third party in connection with
the consummation of the transactions contemplated by the Merger Agreement;
provided, however, that Spinco shall
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<PAGE>
indemnify the Surviving Corporation with respect to any claim arising from the
failure of Chronicle to obtain any consent, approval, authorization, or permit
of, or make any filing with or notification to, any governmental or regulatory
authority or any other third party in connection with the Contribution or the
Distribution.
4.7 Spinco's Financial Viability; Reporting Obligations to Surviving
----------------------------------------------------------------
Corporation.
- ----------
(a) Subject to Section 4.7(c), Spinco covenants that it will
maintain a minimum net worth in the amount of the greater of (i)(A) $100,000,000
at all times during the period beginning on the Closing Date and ending on the
fifth anniversary of the Closing Date, or (B) $50,000,000 all times during the
period beginning on the day after the fifth anniversary of the Closing Date and
ending on the seventh anniversary of the Closing Date, and (ii) the aggregate
amount of claims for indemnification then pending against Spinco pursuant to
Article IV of this Agreement. In calculating the net worth of Spinco for
purposes of this Section 4.7(a), all assets of Spinco, both tangible and
intangible, shall be valued at their fair market value, as reasonably determined
in good faith from time to time by the board of directors of Spinco, whether or
not such value is the same as such assets' "book value" or any other value used
in the preparation of any balance sheet of Spinco, and Spinco's liabilities
shall not include the amount of claims for indemnification then pending against
Spinco pursuant to Article IV of this Agreement.
(b) Subject to Section 4.7(c), Spinco shall provide the Surviving
Corporation:
(i) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, financial statements consisting of balance
sheets and statements of income and cash flows for such quarter and for the
period from the beginning of the current fiscal year through the end of such
quarter;
(ii) within 90 days after the end of each fiscal year,
financial statements consisting of balance sheets and statements of income,
shareholders' equity, and cash flows for such fiscal year;
(iii) with each set of financial statements delivered
pursuant to this Section 4.7(b), a certificate, executed on behalf of Spinco by
its chief financial officer, that such financial statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and present fairly the financial position and the results of operations
of Spinco as of the relevant dates thereof and for the periods covered thereby;
(iv) with each set of financial statements delivered
pursuant to this Section 4.7(b) that are audited, a copy of the auditor's report
with respect thereto; and
(v) with each set of financial statements delivered pursuant
to this Section 4.7(b), a certificate executed on behalf of Spinco by an
authorized officer, setting forth
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<PAGE>
the fair market value of all assets of Spinco, as most recently determined by
the board of directors of Spinco in accordance with Section 4.7(a).
(c) The obligations of Spinco pursuant to this Section 4.7 shall
terminate automatically on the later of (i) the seventh anniversary of the
Closing Date, and (ii) the fi rst date on which no claims for indemnification
are pending against Spinco pursuant to Article IV of this Agreement.
(d) The Surviving Corporation's remedies in the event of any
breach by Spinco of its covenant in Section 4.7(a) shall be limited to money
damages in an amount equal to the actual damages (excluding any special,
incidental, consequential, exemplary, or punitive damages) suffered by the
Surviving Corporation as a result of such breach, except that the Surviving
Corporation shall have the right to seek equitable remedies prohibiting or
rescinding any distribution by Spinco to its shareholders to the extent such
distribution would cause Spinco to be in violation of its covenant in Section
4.7(a). The provisions of this Section 4.7(d) are not intended to limit the
amount of any claim for indemnification by the Surviving Corporation against
Spinco under this Agreement or the Merger Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter of this Agreement.
5.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when delivered in person,
by telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to Chronicle (prior to the The Chronicle Publishing Company
Merger) or Spinco: 901 Mission Street
San Francisco, California 94103
Telecopy: (415) 495-5057
Attention: W. Ronald Ingram, Esq.
With a copy to: Dow, Lohnes & Albertson
255 Twenty-Third Street, N.W.
Suite 500
Washington, D.C. 20037
Telecopy: (202) 857-2900
Attention: Leonard J. Baxt, Esq
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<PAGE>
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-2000
Attention: Matthew A. Rosen, Esq.
If to Chronicle (after the Merger): Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Telecopy: (303) 488-3219
Attention: Gary S. Howard and
Robert J. Lewis
With copies to: Tele-Communications, Inc.
Legal Department
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Telecopy: (303) 488-3217
Attention: Mary S. Willis, Esq.
and
Sherman & Howard L.L.C.
3000 First Interstate Tower North
633 Seventeenth Street
Denver, Colorado 80202
Telecopy: (303) 298-0940
Attention: Charles Y. Tanabe, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed
effective when confirmed. Any notice or communication sent by registered or
certified mail, return receipt requested, shall be deemed effective when
received, as evidenced by the return receipt. This Section 5.2 shall not
preclude delivery of any notice or communication by means other than those
specified in this Section 5.2.
5.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
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<PAGE>
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF CONFLICTS
OF LAWS APPLICABLE THERETO.
5.4 Rules of Construction. The descriptive headings in this Agreement
---------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement. Words used in
this Agreement, regardless of the gender and number specifically used, shall be
deemed and construed to include any other gender, masculine, feminine, or
neuter, and any other number, singular or plural, as the context requires. As
used in this Agreement, the word "including" is not limiting, and the word "or"
is not exclusive.
5.5 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of the parties to this Agreement and their legal
successors-in-interest, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement except for Article IV and
Section 5.7 (which are intended to be for the benefit of the persons provided
for therein, and may be enforced by such persons).
5.6 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
5.7 No Personal Liability. This Agreement shall not create or be
---------------------
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of either party to this Agreement (other
than, with respect to Spinco, Chronicle) or any officer, director, employee,
agent, representative, or investor of either party to this Agreement.
5.8 Assignment. This Agreement may not be assigned by either party to
----------
this Agreement.
5.9 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of both the parties.
5.10 Extension; Waiver. Either party to this Agreement may (a) extend
-----------------
the time for the performance of any of the obligations or other acts of the
other party to this Agreement, (b) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document,
certificate, or writing delivered pursuant to this Agreement by the other party,
or (c) waive compliance by the other party with any of the agreements or
conditions contained herein or any breach thereof. Any agreement on the part of
either party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
5.11 Legal Fees; Costs. If either party to this Agreement institutes
-----------------
any action or proceeding, whether before a court or arbitrator, to enforce any
provision of this Agreement, the prevailing party therein shall be entitled to
receive from the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
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<PAGE>
5.12 Time. Time is of the essence under this Agreement. If the last
----
day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
business day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in Denver, Colorado or San
Francisco, California are required or authorized to be closed.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized on the day
and year first above written.
THE CHRONICLE PUBLISHING COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[SPINCO]
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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