<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 26, 1995
Date of Earliest Event Reported: July 24, 1995
TELE-COMMUNICATIONS, INC.
AND
TCI COMMUNICATIONS, INC.
------------------------------------------------------------------
(Exact name of Registrants as specified in their charters)
State of Delaware
----------------------------------------------------
(State or other jurisdiction of incorporation)
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0-20421 and 0-5550 84-1260157 and 84-0588868
-------------------------------- -----------------------------------
(Commission File Numbers) (I.R.S. Employer Identification Nos.)
5619 DTC Parkway
Englewood, Colorado 80111
- --------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
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Registrants' telephone number, including area code: (303) 267-5500
<PAGE> 2
Item 5. Other Events.
TCI Communications, Inc. (the "Company") and its sole shareholder,
Tele-Communications, Inc. ("Parent"), have entered into certain agreements with
Viacom Inc. ("Viacom") and certain subsidiaries of Viacom regarding the
purchase by the Company of all of the common stock of a subsidiary of Viacom
("Cable Sub") which, at the time of purchase, will own Viacom's cable systems
and related assets. Viacom's cable systems, at June 30, 1995, served an
aggregate of approximately 1.2 million basic subscribers in the following
areas: the Bay area of San Francisco, California; Seattle/Tacoma, Washington;
Salem, Oregon; Nashville, Tennessee; and Dayton, Ohio.
The transaction has been structured as a tax-free reorganization in
which Cable Sub will initially transfer all of its non- cable assets, as well
as all of its liabilities other than current liabilities, to a new subsidiary
of Viacom ("New Viacom Sub"). Cable Sub will also transfer to New Viacom Sub
the proceeds (the "Loan Proceeds") of a $1.7 billion loan facility (the "Loan
Facility") to be arranged by the Company, Parent and Cable Sub. Following
these transfers, Cable Sub will retain cable assets with an estimated value at
closing of approximately $2.25 billion and the obligation to repay the Loan
Proceeds borrowed under the Loan Facility. Repayment of the Loan Proceeds
will be non-recourse to Viacom and New Viacom Sub.
Viacom will offer to the holders of shares of Viacom Class A Common
Stock and Viacom Class B Common Stock (collectively, "Viacom Common Stock") the
opportunity to exchange (the "Exchange Offer") a portion of their shares of
Viacom Common Stock for shares of Class A Common Stock, par value $100 per
share, of Cable Sub ("Cable Sub Class A Stock"). The total number of shares of
Cable Sub Class A Stock issuable in the Exchange Offer (the "Total Number")
will be a number equal to (x) the estimated gross value of Cable Sub (which is
estimated to be approximately $2.25 billion) minus the Loan Proceeds, divided
by (y) $100 (the par value of the Cable Sub Class A Stock. The Exchange Offer
will be conducted as a "dutch auction" in which stockholders of Viacom will be
able to specify a minimum fraction of a share of Cable Sub Class A Stock that
they are willing to receive in exchange for a share of Viacom Common Stock.
The maximum exchange ratio that a Viacom stockholder will be permitted to
specify will be equal to the equivalent of 112.5% of the average intraday sales
prices for a share of Viacom Class B Common Stock, as reported on the American
Stock Exchange, during the 20 trading-day period ending the date prior to the
commencement of the Exchange Offer. The Exchange Offer will be subject to a
number of conditions, including a condition (the "Minimum Condition") that
sufficient tenders are made of Viacom Common Stock that permit the number of
shares of Cable Sub Class A Stock issued pursuant to the Exchange Offer to
equal the Total Number.
Immediately following the completion of the Exchange Offer, the
Company will acquire from Cable Sub shares of Cable Sub Class B Common Stock in
exchange for a capital contribution of $350 million. (which will be used to
reduce Cable Sub's obligations under the Loan Facility). At the time of such
contribution, the Cable Sub Class A Stock received by Viacom stockholders
pursuant to the Exchange Offer will automatically convert into a series of
senior cumulative exchangeable preferred stock (the "Exchangeable Preferred
Stock") of Cable Sub with a stated value of $100 per share (the "Stated
Value"). The terms of the Exchangeable Preferred Stock, including its
dividend, redemption and exchange features, will be designed to cause the
Exchangeable Preferred Stock to initially trade at the Stated Value. The
Exchangeable Preferred Stock will be exchangeable, at the option of the holder
commencing after the fifth anniversary of the date of issuance, for shares of
Parent Class A Common Stock (or, in the event of a recapitalization or
reclassification, the shares of common stock of Parent into which shares of
such Class A Common Stock are converted) ("Parent Common Stock"). The
Exchangeable Preferred Stock will also be redeemable, at the option of Cable
Sub, after the fifth anniversary of the date of issuance, and will be subject
to mandatory redemption on the tenth anniversary of the date of issuance at a
price equal to the Stated Value per share plus accrued and unpaid dividends,
payable in cash or, at the election of Cable Sub, in shares of Parent Common
Stock. If insufficient tenders are made by Viacom stockholders in the Exchange
Offer to permit the Minimum Condition to be satisfied, Viacom will extend the
Exchange Offer for up to 15 business days and, during such extension, TCI and
Viacom are to negotiate in good faith to determine mutually acceptable terms
and conditions for the Exchangeable Preferred Stock and the Exchange Offer that
each believes in good faith will cause the Minimum Condition to be fulfilled
and that would cause the Exchangeable Preferred Stock to trade at a price equal
to the Stated Value immediately following the expiration of the Exchange Offer.
In the event the Minimum Condition is not thereafter met, TCI and Viacom will
each have the right to terminate the transaction.
<PAGE> 3
Upon the closing of the transaction, Cable Sub will have a
capitalization consisting of approximately $1.35 billion of borrowings under
the Loan Facility, Exchangeable Preferred Stock with a Stated Value of
approximately $550 million and $350 million of paid-in capital for the Cable
Sub Class B Common Stock. Consummation of the transaction is subject to a
number of conditions, including receipt of a favorable letter ruling from the
Internal Revenue Service that the transaction qualifies as a tax-free
transaction, the expiration or early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, receipt of necessary
consents of the Federal Communications Commission and local cable franchise
authorities, and the satisfaction or waiver of all of the conditions of the
Exchange Offer. Accordingly, no assurance can be given that the transaction
will be consummated.
The foregoing description of the proposed transaction with Viacom is
qualified in its entirety by reference to (i) the Parents Agreement among
Viacom, the Company and Parent, (ii) the Implementation Agreement between Cable
Sub and New Viacom Sub and (iii) the Subscription Agreement among Cable Sub,
the Company and Parent, which are attached as exhibits to this Form 8-K and
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
None.
(b) Pro Forma Financial Information
None
(c) Exhibits:
(2.1) Parents Agreement, dated as of July 24, 1995, among Viacom,
Inc., Tele-Communications, Inc. and TCI Communications,
Inc.
(2.2) Subscription Agreement, dated as of July 24, 1995, among
Viacom International Inc., Tele-Communications, Inc. and
TCI Communications, Inc.
(2.3) Implementation Agreement, dated as of July 24, 1995, between
Viacom International Inc. and Viacom International
Services Inc.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by
the undersigned hereunto duly authorized.
Date: July 26, 1995
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
-------------------------------------
Stephen M. Brett
Executive Vice President and
Secretary
TCI COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
-------------------------------------
Stephen M. Brett
Senior Vice President
and Secretary
<PAGE> 5
EXHIBIT INDEX
The following exhibits are filed herewith or are incorporated by reference
herein (according to the number assigned to them in Item 601 of Regulation S-K)
as noted:
(2.1) Parents Agreement, dated as of July 24, 1995, among Viacom,
Inc., Tele-Communications, Inc. and TCI Communications,
Inc.
(2.2) Subscription Agreement, dated as of July 24, 1995, among
Viacom International Inc., Tele-Communications, Inc. and
TCI Communications, Inc.
(2.3) Implementation Agreement, dated as of July 24, 1995, between
Viacom International Inc. and Viacom International
Services Inc.
<PAGE> 1
Exhibit 2.1
- -------------------------------------------------------------------------------
PARENTS AGREEMENT
among
VIACOM INC.,
TELE-COMMUNICATIONS, INC.
and
TCI COMMUNICATIONS, INC.
Dated as of July 24, 1995
- -------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS............................................................. 1
Section 1.1 Definitions............................................ 1
ARTICLE II THE EXCHANGE OFFER...................................................... 6
Section 2.1 Exchange Offer......................................... 6
Section 2.2 Number of Shares of Class A Common Stock............... 9
Section 2.3 Exchange Offer Mechanics............................... 9
Section 2.4 Recapitalization....................................... 11
ARTICLE III OTHER AGREEMENTS........................................................ 11
Section 3.1 Execution of Other Agreements.......................... 11
Section 3.2 Amendments of Implementation Agreement................. 11
Section 3.3 Designation of Agent for PCI Group..................... 12
Section 3.4 Prohibited Transactions................................ 12
Section 3.5 No Inconsistent Provisions............................. 12
Section 3.6 Operation of the Business.............................. 12
Section 3.7 Right of First Offer................................... 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF VI.................................... 13
Section 4.1 Corporate Existence and Power.......................... 13
Section 4.2 Corporate Authorization................................ 13
Section 4.3 Governmental Authorization............................. 13
Section 4.4 Consents............................................... 13
Section 4.5 Non-Contravention...................................... 14
Section 4.6 Binding Effect......................................... 14
Section 4.7 Finders' Fees.......................................... 14
Section 4.8 Exchange Offer......................................... 14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF TCI AND
TCI SUB................................................................. 14
Section 5.1 Corporate Existence and Power.......................... 14
Section 5.2 Corporate Authorization................................ 14
Section 5.3 Governmental Authorization............................. 15
Section 5.4 Consents............................................... 15
Section 5.5 Non - Contravention.................................... 15
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TABLE OF CONTENTS
(Continued)
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Section 5.6 Binding Effect......................................... 15
Section 5.7 Finders' Fees.......................................... 15
ARTICLE VI CONDITIONS PRECEDENT.................................................... 16
Section 6.1 Conditions to Obligations of VI........................ 16
Section 6.2 Further Condition...................................... 17
ARTICLE VII TERMINATION............................................................. 17
Section 7.1 Termination............................................ 17
Section 7.2 Effect of Termination.................................. 18
ARTICLE VIII MISCELLANEOUS........................................................... 19
Section 8.1 Expenses............................................... 19
Section 8.2 Headings............................................... 19
Section 8.3 Notices................................................ 19
Section 8.4 Assignment............................................. 20
Section 8.5 Entire Agreement....................................... 20
Section 8.6 Amendment; Waiver...................................... 20
Section 8.7 Counterparts........................................... 20
Section 8.8 Governing Law.......................................... 20
Section 8.9 Severability........................................... 20
Section 8.10 Consent to Jurisdiction................................ 20
Section 8.11 Third Person Beneficiaries............................. 21
Section 8.12 Specific Performance................................... 21
Section 8.13 Survival............................................... 21
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EXHIBITS
Exhibit A - Exchange Offer Conditions
Exhibit B - Implementation Agreement
SCHEDULES
Schedule 5.4 - Consents Required by Contracts of TCI and TCI Sub
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PARENTS AGREEMENT
Parents Agreement, dated as of July 24, 1995 (this
"Agreement"), among Viacom Inc., a Delaware corporation ("VI"),
Tele-Communications, Inc., a Delaware corporation ("TCI") and TCI
Communications, Inc., a Delaware corporation ("TCI Sub").
WHEREAS, Viacom International Inc., a Delaware corporation
("Old VII") is a wholly-owned subsidiary of VI; and
WHEREAS, VI desires to make an exchange offer to its
shareholders pursuant to which shares of VI Common Stock would be exchanged for
Class A Common Stock of Old VII; and
WHEREAS, it is the intent of VI that prior to the consummation
of the Exchange Offer Old VII will (i) convey all of the Non-Cable Assets to
New VII and (ii) distribute its shares in New VII to VI; and
WHEREAS, TCI Sub desires to purchase from Old VII shares of
Class B Common Stock of Old VII immediately following the Exchange Time; and
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein between the parties referred to above, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For purposes of this
Agreement the following terms, when used in capitalized form, shall have the
following meanings (and such meanings shall be equally applicable to both the
singular and plural forms of the terms defined herein):
"Affiliate" shall have the meaning specified in the
Implementation Agreement.
"Aggregate Loan Amount" shall have the meaning set forth in
Section 6.1(vi).
"Agreement" shall mean this Parents Agreement, including the
Exhibits and Schedules hereto.
"Amended and Restated Certificate of Incorporation" shall have
the meaning specified in the Implementation Agreement.
"Anticipated Commencement Date" shall have the meaning
specified in Section 2.3(ii).
"Assumption of Liabilities" shall have the meaning specified
in the Implementation Agreement.
<PAGE> 6
2
"Bill of Sale" shall have the meaning specified in the
Implementation Agreement.
"Business Day" shall have the meaning specified in the
Implementation Agreement.
"Cable Division Subsidiary" shall have the meaning specified
in the Implementation Agreement.
"Cash Collateral Account" shall have the meaning specified in
the Subscription Agreement.
"Class A Common Stock" shall mean the Class A Common Stock,
par value $100, of Old VII, after giving effect to the filing of the Amended
and Restated Certificate of Incorporation with the Secretary of State of
Delaware.
"Communications Act" shall have the meaning specified in the
Implementation Agreement.
"Consented Subscribers" shall have the meaning specified in
the Subscription Agreement.
"Conversion Ratio" shall have the meaning specified in Section
2.3(ii).
"Conversion Ratio Spread" shall have the meaning specified in
Section 2.3(ii).
"Conveyance of Assets" shall have the meaning specified in the
Implementation Agreement.
"Estimated Asset Value" shall have the meaning specified in
the Implementation Agreement.
"Estimated Exchange Date Basic Subscribers" shall have the
meaning specified in the Subscription Agreement.
"Exchange Date" shall mean the date on which the Exchange Time
occurs.
"Exchange Offer" shall mean an offer by VI to exchange Class A
Common Stock for VI Common Stock on the basis set forth in Article II and
subject to the Exchange Offer Conditions.
"Exchange Offer Commencement Date" shall mean the date on
which the Exchange Offer commences in accordance with the 1934 Act.
"Exchange Offer Conditions" shall mean the conditions set
forth on Exhibit A.
"Exchange Ratio" shall have the meaning specified in Section
2.3.
<PAGE> 7
3
"Exchange Time" shall mean, if the Exchange Offer is
consummated, the first Business Day following announcement of the proration
factor (which in no event shall be more than ten (10) Business Days after the
Expiration Date), in accordance with the terms and conditions of the Exchange
Offer and applicable SEC rules and regulations, at which time VI shall exchange
share certificates of Class A Common Stock for share certificates of VI Common
Stock pursuant to the Exchange Offer.
"Expiration Date" shall mean the date on which the Expiration
Time occurs in accordance with its terms.
"Expiration Time" shall mean the time at which the Exchange
Offer finally expires.
"FCC Authorizations" shall have the meaning specified in the
Implementation Agreement.
"Final Exchange Ratio" shall have the meaning specified in
Section 2.3(i).
"Force Majeure Event" means any event described in paragraph
(e) of the Exchange Offer Conditions.
"Force Majeure Notice" shall have the meaning specified in
Section 2.1(e).
"Governmental Authority" shall have the meaning specified in
the Implementation Agreement.
"HSR Act" shall have the meaning specified in the
Implementation Agreement.
"Implementation Agreement" shall mean the Implementation
Agreement, dated as of the date hereof, between New VII and Old VII, in the
form of Exhibit B.
"Inconsistent Terms" shall mean, with respect to the Loans or
Loan Documentation, terms or conditions thereof that (i) are inconsistent with
the terms of the Transaction Documents or the Preferred Stock or (ii) would
require the grant of any security interest in an asset of VI or any of its
Affiliates (other than (x) a grant by Old VII of a security interest in the
Cash Collateral Account prior to the Exchange Time, (y) the pledge by Old VII
or any Cable Division Subsidiary of stock in a Cable Division Subsidiary that
is effective upon (but not before) the release of all funds to Old VII from the
Cash Collateral Account or (z) pursuant to Section 2.17 of the Implementation
Agreement, in each case consistent with the terms of the Transaction
Documents).
"InterMedia" shall mean InterMedia Partners IV, L.P., a
California limited partnership.
<PAGE> 8
4
"Intraday Price" shall mean, with respect to a day, the
weighted average of the sale prices for all trades of shares of VI Class B
Common Stock on such date, as reported by the ADP Financial Information
Services reporting service.
"Legal Requirement" shall have the meaning specified in the
Implementation Agreement.
"Loan Documentation" shall have the meaning specified in the
Subscription Agreement.
"Loan Proceeds" shall have the meaning specified in the
Subscription Agreement.
"Loans" shall have the meaning specified in the Subscription
Agreement.
"Local Authority" shall have the meaning specified in the
Implementation Agreement.
"Local Authorizations" shall have the meaning specified in the
Implementation Agreement.
"Minimum Condition" shall mean the condition that a number of
shares of VI Common Stock shall have been validly tendered and not withdrawn
prior to the expiration of the Exchange Offer that is sufficient to enable VI
to exchange the Number of Shares to be Exchanged at the Final Exchange Ratio in
accordance with the terms and conditions of the Exchange Offer.
"ML&Co." shall have the meaning specified in Section 2.3(ii).
"NASDAQ" shall mean the electronic inter-dealer quotation
system operated by NASDAQ, Inc., a subsidiary of the National Association of
Securities Dealers, Inc.
"Negotiation Period" shall have the meaning specified in
Section 3.7.
"New VII" means Viacom International Services Inc., a Delaware
corporation.
"1933 Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as amended.
"Non-Cable Assets" shall have the meaning specified in the
Implementation Agreement.
"Non-Cable FCC Authorizations" shall have the meaning
specified in the Implementation Agreement.
<PAGE> 9
5
"Number of Shares to be Exchanged" shall have the meaning
specified in Section 2.2.
"Offered Business" shall have the meaning specified in Section
3.7.
"Offering Materials" means the Offering Circular/Prospectus
relating to the Exchange Offer included in the Registration Statement and each
of the other documents mailed to stockholders of VI in connection with the
Exchange Offer and, if a TCI Registration Statement is required pursuant to
Section 2.1(b) to be declared effective prior to the commencement of the
Exchange Offer, the Prospectus relating to the TCI Stock issuable upon
conversion of the Preferred Stock included in such TCI Registration Statement.
"Offer Period" shall have the meaning specified in Section 3.7.
"Old VII" shall have the meaning specified in the preamble of
this Agreement.
"PCI Group" shall have the meaning specified in the
Implementation Agreement.
"PCI Subsidiaries" shall have the meaning specified in the
Implementation Agreement.
"Person" shall have the meaning specified in the
Implementation Agreement.
"Preferred Stock" shall mean the Series A Senior Cumulative
Exchangeable Preferred Stock of Old VII, having the rights and privileges set
forth in the term sheet set forth as Exhibit K to the Implementation Agreement,
and having a yield and conversion ratio determined in accordance with Section
2.3 and having such other terms as are customary for such securities and
consistent with such term sheet.
"Price Notice" shall have the meaning specified in Section 3.7.
"RCS" shall mean RCS Pacific, L.P., a California limited
partnership.
"Registration Statement" shall have the meaning specified in
Section 2.1.
"SEC" shall mean the Securities and Exchange Commission.
"Share Purchase Closing" shall have the meaning specified in
the Implementation Agreement.
"Spread" shall have the meaning specified in Section 2.3.
"Subscription Agreement" shall mean a Subscription Agreement,
dated as of the date hereof, among Old VII, TCI and TCI Sub, provided that the
definition of Subscription Agreement shall not include any amendment thereto
entered into from and after the Exchange Time without the written consent of VI
(which consent may be withheld for any reason).
<PAGE> 10
6
"TCI Information" shall have the meaning specified in Section
2.1(f).
"TCI Registration Statement" shall have the meaning specified
in Section 2.1(b).
"TCI Stock" shall mean (i) the Class A Common Stock, $1.00 par
value per share, of TCI, or (ii) if the "Liberty Media Group Stock Proposal"
(as such term is defined in the proxy statement/prospectus of TCI dated June
29, 1995) is adopted by the stockholders of TCI and the Distribution (as so
defined) contemplated thereby is made, the Series A TCI Group Common Stock,
$1.00 par value per share, of TCI.
"TCI Sub" shall have the meaning specified in the preamble of
this Agreement.
"Tiebreaker Investment Bank" shall have the meaning specified
in Section 2.3(ii).
"Transaction" shall mean the Conveyance of Assets, the
Assumption of Liabilities, the Loans, the Exchange Offer, the sale of the
Shares (as such term is defined in the Subscription Agreement) and all other
transactions contemplated by the Transaction Documents.
"Transaction Documents" shall mean this Agreement, the
Implementation Agreement, the Subscription Agreement, the Bill of Sale and any
other agreements, documents, instruments and certificates dated as of the date
hereof and executed and delivered by TCI or any of its Affiliates, on the one
hand, and VI or any of its Affiliates, on the other hand, in connection with
the transactions contemplated by the foregoing.
"VI" shall have the meaning specified in the preamble of this
Agreement.
"VI Class B Common Stock" shall mean the Class B Common Stock,
par value $0.01, of VI.
"VI Common Stock" means the Class A Common Stock, par value
$0.01 per share of VI, and the VI Class B Common Stock.
"WP&Co." shall have the meaning specified in Section 2.3(ii).
ARTICLE II
THE EXCHANGE OFFER
Section 2.1 Exchange Offer. (a) VI shall (i) cause Old
VII to prepare and file with the SEC as promptly as practicable following the
date hereof a registration statement on Form S-4 (or another appropriate form)
under the 1933 Act with respect to the Exchange Offer (the "Registration
Statement"); (ii) use its commercially reasonable efforts to have the
Registration Statement declared effective by the SEC under the 1933 Act; and
(iii) take all such action as may be required under state blue sky or
securities laws in connection with the Exchange Offer.
<PAGE> 11
7
(b) TCI agrees to prepare and file with the SEC, and use
its commercially reasonable efforts to cause to be declared effective (which,
if required by the SEC, shall be prior to the commencement of the Exchange
Offer), a registration statement under the 1933 Act which will permit the
exchange of TCI Stock for shares of Preferred Stock upon conversion thereof to
be made in compliance with the 1933 Act and the rules and regulations of the
SEC promulgated thereunder (the "TCI Registration Statement").
(c) Subject to the fulfillment of the conditions set
forth in Section 6.1, promptly after both the Registration Statement and the
TCI Registration Statement (if required pursuant to Section 2.1(b) to be
declared effective prior to the commencement of the Exchange Offer) become
effective, VI shall commence the Exchange Offer (and file with the SEC a
Schedule 13E-4 under the 1934 Act relating to the Exchange Offer), cause the
Offering Materials to be mailed to the record holders of its Common Stock and,
subject to the terms and conditions of the Exchange Offer and this Agreement,
take all action necessary to consummate the Exchange Offer. It is agreed that
VI shall have no obligation to make a recommendation to its shareholders
concerning the Exchange Offer.
(d) VI shall accept for exchange, in accordance with the
terms of the Exchange Offer, shares of VI Common Stock tendered prior to the
Expiration Time and not theretofore withdrawn if all Exchange Offer Conditions
shall have been satisfied or waived by VI in accordance with the terms of the
Exchange Offer. VI agrees that it will not exercise its right to terminate the
Exchange Offer as a result of the failure of an Exchange Offer Condition
without a reasonable basis for believing that such Exchange Offer Condition has
not been satisfied.
(e) VI agrees that it will not accept for exchange shares
of VI Common Stock tendered to it in the Exchange Offer and shall extend the
Expiration Date (provided that the Expiration Date has not already been
extended) if it receives written notice from TCI and TCI Sub to it prior to
5:00 P.M. on the date the Exchange Offer is scheduled to expire that they have
determined that any Force Majeure Event has occurred (a "Force Majeure
Notice"), provided that TCI and TCI Sub must have a reasonable basis for making
such a determination. In the event that a Force Majeure Notice has been
delivered to VI and no Force Majeure Event shall exist on the subsequent
Expiration Date following extension of the Exchange Offer pursuant to Section
2.3(ii), VI may give written notice to such effect to TCI and TCI Sub prior to
5:00 p.m. on such subsequent Expiration Date, in which case such Force Majeure
Notice shall be deemed to be withdrawn and of no further force and effect at
8:59 A.M. on the Business Day following the date such notice is delivered by
VI.
(f) TCI and TCI Sub agree to provide VI with such
information with respect to TCI, TCI Sub, the Loans and, with respect to any
period after the Exchange Time, Old VII or any Cable Division Subsidiary, as is
necessary for VI to complete the Registration Statement in accordance with the
requirements of the 1933 Act. TCI and TCI Sub covenant that the information
supplied or to be supplied by TCI or TCI Sub in writing specifically for
inclusion in, and which is included in, the Registration Statement or any
amendment or supplement thereto, or the Offering Materials, which concerns TCI,
TCI Sub, or the Loans or, with respect to any period after the Exchange Time,
Old VII or any Cable Division Subsidiary (the "TCI Information"), will
<PAGE> 12
8
not, at the respective times such documents are filed and at the Expiration
Time, and, in the case of the Registration Statement or any amendment or
supplement thereto, when the same becomes effective, and, in the case of the
Offering Materials, at the time of mailing thereof to VI's stockholders,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or necessary to
correct any statement in any earlier communication with respect to the Exchange
Offer. For this purpose, any TCI Information included in any such document
will be deemed to have been so supplied in writing specifically for inclusion
therein if such document was available for review by TCI a reasonable time
before such document was filed and not objected to in writing by TCI prior to
the filing thereof. If at any time prior to the Exchange Date any event or
circumstance relating to TCI, TCI Sub or any of their Affiliates or their
officers or directors, the Loans or, with respect to any period after the
Exchange Time Old VII or any Cable Division Subsidiary, should be discovered by
TCI which should be set forth in an amendment or supplement to the Registration
Statement or Offering Materials, as required by applicable law, TCI shall
promptly inform VI. VI and its Affiliates, officers, directors, employees,
agents, successors and assigns shall be indemnified and held harmless by TCI
and TCI Sub (who shall be jointly and severally liable) for any and all
liabilities, losses, damages, claims, costs and expenses (including, without
limitation, attorneys' fees and expenses) actually suffered or incurred by them
arising out of or resulting from any untrue statement of a material fact
contained in the Registration Statement or the Offering Materials, or any
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 the TCI Information.
(g) VI covenants that the information in the Registration
Statement and Offering Materials (other than the TCI Information) shall not, at
the time (i) the Registration Statement is declared effective, (ii) the
Offering Materials (or any amendment thereof or supplement thereto) is first
mailed to the shareholders of VI, and (iii) at the Expiration Time contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If any time prior to
the Exchange Date any event or circumstance relating to VI or any of its
Affiliates or its officers or directors, should be discovered by VI which
should be set forth in an amendment or a supplement to the Registration
Statement or Offering Materials, as required by applicable law, VI shall
promptly inform TCI and TCI Sub. TCI, TCI Sub and their Affiliates, officers,
directors, employees, agents, successors and assigns shall be indemnified and
held harmless by VI for any and all liabilities, losses, damages, claims, costs
and expenses (including, without limitation, attorneys' fees and expenses)
actually suffered or incurred by them arising out of or resulting from any
untrue statement of a material fact contained in the Registration Statement or
the Offering Materials, or any 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, in each
case except to the extent that the statement or omission was made in reliance
upon and in conformity with the TCI Information.
<PAGE> 13
9
Section 2.2 Number of Shares of Class A Common Stock.
The number of shares of Class A Common Stock that VI shall exchange for VI
Common Stock in the Exchange Offer shall be a number (the "Number of Shares to
be Exchanged") equal to (x) the Estimated Asset Value, minus $1,700,000,000
(one billion, seven hundred million dollars), divided by (y) $100 (the par
value of the Class A Common Stock and the stated amount of the liquidation
preference (before provision for accrued and unpaid dividends) of one share of
the Preferred Stock.)
Section 2.3 Exchange Offer Mechanics.
(i) Unless otherwise agreed, the Exchange Offer shall be
a "Dutch Auction" tender offer pursuant to which
stockholders of VI who tender their shares of VI
Common Stock shall be provided with the opportunity
to state the minimum fraction of a share or shares of
Class A Common Stock (an " Exchange Ratio") that such
shareholder will accept in exchange for each share of
such VI Common Stock accepted by VI for exchange
pursuant to the Exchange Offer. The Exchange Offer
shall state a maximum Exchange Ratio and a minimum
Exchange Ratio, provided, that the maximum Exchange
Ratio times $100 shall represent a price not less
than 112.5% of the average of the Intraday Prices for
a share of VI Class B Common Stock reported by the
American Stock Exchange during the twenty trading day
period ended the date prior to the Exchange Offer
Commencement Date. The final Exchange Ratio shall be
the smallest Exchange Ratio (within applicable SEC
rules and regulations) equal to or less than the
specified maximum Exchange Ratio (the "Final Exchange
Ratio") that would result in the issuance of the
Number of Shares to be Exchanged in exchange for the
shares of VI Common Stock validly tendered prior to
the Expiration Date, and, subject to satisfaction of
all conditions to the Exchange Offer and to
proration, VI shall accept for exchange at the Final
Exchange Ratio all shares validly tendered and not
withdrawn with respect to which an Exchange Ratio has
been designated which is equal to or less than the
Final Exchange Ratio. If there is no such Final
Exchange Ratio, the Minimum Condition shall be deemed
not met as of such expiration date.
(ii) The terms of the Exchange Offer shall specify (a)
that the yield on the Preferred Stock to be issued in
exchange for the Class A Common Stock upon the Share
Purchase Closing shall bear a dividend yield equal to
(x) the yield on ten (10) year treasury bonds
immediately prior to the commencement of the Exchange
Offer, plus a specified spread (the "Spread") which
shall not be greater than one and one-quarter (1.25)
percentage points over such yield or (y) such higher
dividend yield as may be specified by TCI as provided
below and (b) the conversion ratio (the " Conversion
Ratio") on the Preferred Stock for the conversion of
the Preferred Stock into TCI Stock, which shall be
based upon a percentage
<PAGE> 14
10
premium of twenty-five percent (25%) (the "Conversion
Ratio Spread") over the weighted average of the sale
prices for all trades of shares of TCI Stock on
NASDAQ during the twenty (20) trading days ending on
the second Business Day (or such longer period as is
required by the 1934 Act) prior to the expiration of
the Exchange Offer. VI shall notify TCI Sub not less
than fifteen (15) Business Days prior to the
anticipated commencement date of the Exchange Offer
(the " Anticipated Commencement Date") of such
Anticipated Commencement Date. Merrill, Lynch & Co.,
Incorporated ("ML&Co.") and Wasserstein, Perella &
Co. ("WP&Co.") shall use their best efforts to agree
on the Spread not later than the fifth Business Day
after the date of such notice. In the event that
ML&Co. and WP&Co. are unable to agree on the Spread
by such date, they shall immediately notify TCI Sub
and VI of their respective positions with respect to
the appropriate Spread and Smith Barney Inc. (the
"Tiebreaker Investment Bank") shall select a Spread,
which Spread shall be within the range of the two
Spreads proposed by ML&Co. and WP&Co.
Notwithstanding the foregoing, TCI shall have the
right to specify a dividend yield that is higher than
the dividend yield that would result from the Spread
determined by ML&Co. and WP&Co. or the Tiebreaker
Investment Bank, as the case may be, by giving VI
written notice of such higher dividend yield by the
third Business Day after the date of such
determination of the Spread. Spreads shall be
determined pursuant to this Section 2.3, such that,
in the opinion of the entity proposing the Spread, if
the Preferred Stock bears a dividend yield equal to
the ten (10) year treasury bond yield plus such
Spread, the Preferred Stock would be expected to
trade at a price equal to the liquidation preference
thereof immediately following the Exchange Date.
ML&Co. and WP&Co. shall provide the Tiebreaker
Investment Bank with full access to all significant
information employed by them, and TCI and VI shall
provide such other information that is reasonably
requested in estimating the Spread. In the event
that the Minimum Condition is not met on the first
expiration date of the Exchange Offer, VI shall, not
later than the last day permitted under the 1934 Act,
extend the Exchange Offer for not less than ten (10)
Business Days nor more than fifteen (15) Business
Days (or such greater period as is required under the
1934 Act). During the period of the extension, TCI
and VI shall negotiate in good faith in order to
determine mutually acceptable terms and conditions
for the Preferred Stock (including, without
limitation, the dividend yield and Conversion Ratio)
and the Exchange Offer (including, without
limitation, the duration of any further extension
thereof and the maximum Exchange Ratio) that each
believes in good faith would cause the Minimum
Condition to be fulfilled at the Expiration Date of a
further extension of the Exchange Offer, and that
would cause the Preferred Stock to trade at a price
equal to the liquidation preference thereof
immediately following the
<PAGE> 15
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Exchange Date. In the event that the parties agree
with respect to such terms prior to the Expiration
Date of such extension, the Exchange Offer shall be
further extended to the extent mutually agreed and in
accordance with the requirements of the 1934 Act. In
the event that the Minimum Condition is not met at
the expiration date of the Exchange Offer after such
extension, either party shall have the right to
terminate this Agreement pursuant to Section 7.1(f).
(iii) VI shall be responsible for the fees and expenses of
WP&Co. and TCI and TCI Sub shall be responsible for
the fees and expenses of ML&Co., and each of VI, on
the one hand, and TCI and TCI Sub, on the other hand,
shall be responsible for one-half the fees and
expenses of the Tiebreaker Investment Bank (which
fees shall be negotiated in good faith by VI and TCI
Sub).
Section 2.4 Recapitalization. Subject to the fulfillment
of the conditions set forth in Section 6.1, prior to the Exchange Time, VI
shall cause Old VII to take the action contemplated by Section 2.1(c) of the
Implementation Agreement and shall cause all of the capital stock of Old VII
held by VI to be reclassified into a number of shares of Class A Common Stock
equal to the Number of Shares to be Exchanged.
ARTICLE III
OTHER AGREEMENTS
Section 3.1 Execution of Other Agreements. (a)
Concurrently with the execution and delivery hereof, TCI and TCI Sub shall
execute and deliver to Old VII the Subscription Agreement.
(b) Concurrently with the execution and delivery hereof,
VI shall cause (i) Old VII and New VII to execute and deliver to each other the
Implementation Agreement and (ii) Old VII to execute and deliver to TCI and TCI
Sub the Subscription Agreement.
Section 3.2 Amendments of Implementation Agreement. VI
agrees that prior to the Exchange Time it shall not cause or permit Old VII or
New VII to amend or waive performance of any provision of the Implementation
Agreement without the prior written consent of TCI or TCI Sub, provided that
upon the written notice of TCI Sub delivered to VI, or upon written notice of
VI delivered to TCI Sub, in either case within ninety (90) days of the date
certifications under Section 617 of the Communications Act are delivered to the
Local Authorities pursuant to Section 7.9(c)(iii) of the Subscription
Agreement, to the effect that in its reasonable judgment consents of Local
Authorities are required for the consummation of the Transaction that are not
reflected on Schedule 4.9 of the Implementation Agreement, VI shall cause Old
VII and New VII to amend Schedule 4.9 of the Implementation Agreement to
indicate such additional Local Authorizations requiring the consent of the
Local Authority for consummation of the Transaction.
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Section 3.3 Designation of Agent for PCI Group. TCI and
TCI Sub hereby (i) acknowledge that the PCI Subsidiaries of Old VII which were
formerly includible in the consolidated federal income tax returns of the PCI
Group intend to apply to the Internal Revenue Service for permission to
designate Paramount Pictures Corporation or another PCI Subsidiary as the agent
for the PCI Group pursuant to Treas. Reg. Section 1.1502-77(d) and (ii) agree
to cooperate in attempting to have such permission granted.
Section 3.4 Prohibited Transactions. TCI shall not
consummate any transaction in which all or a majority in value (as determined
in good faith by the management of TCI) of its assets are distributed without
fair consideration to its direct or indirect stockholders unless (x) the
transferee of such assets or, if such assets represent principally an equity
interest in an entity, such entity, assumes, by instrument reasonably
satisfactory to VI, TCI's obligations under the Transaction Documents to which
TCI is a party and (y) the equity of such transferee or entity has a fair
market value immediately following such transaction of at least $1,500,000,000
(one billion five hundred million dollars).
Section 3.5 No Inconsistent Terms. TCI Sub and TCI
covenant and agree with VI that the Loan Documentation will not contain, and
that the Loans will not be made on, any Inconsistent Terms.
Section 3.6 Operation of the Business. TCI and TCI Sub
shall not permit Old VII or any Cable Division Subsidiary to engage in any
transaction on the Closing Date other than in the ordinary course of business
and other than transactions, if any, required to take place on the Closing Date
by the Parents Agreement, Implementation Agreement or Subscription Agreement.
Section 3.7 Right of First Offer. In the event this
Agreement is terminated pursuant to Section 7.1 solely as a result of the
failure of the condition set forth in Section 6.1(iv), then if at any time
during the period commencing on the date of such termination and ending on the
date which is eighteen (18) months after the date of such termination (the
"Offer Period") VI intends to sell all or substantially all of the Business, or
all or substantially all of the Bay Area System or the Puget Sound System, or
all or substantially all of the stock of any Subsidiary or Subsidiaries the
assets of which consist primarily of all or substantially all of the Business,
the Bay Area System or the Puget Sound System (in any such case, an "Offered
Business"), VI shall deliver to TCI a written notice to such effect. If TCI
notifies VI in writing of its desire to conduct negotiations regarding such
sale within five Business Days of its receipt of such notice from VI, VI and
TCI shall negotiate in good faith during the period ending on the sixtieth day
after the date of such notice by VI (the "Negotiation Period") to reach an
agreement for the sale of the Offered Business to TCI. During the Negotiation
Period, VI shall notify TCI of the amount, and material terms, of the
consideration VI would be willing to accept for a sale of the Offered Business
(a "Price Notice") on one or more occasions. If a binding agreement for a sale
of the Offered Business is not reached by the end of the Negotiation Period,
for a period of 120 days following the termination of the Negotiation Period VI
may sell (or enter into a binding agreement to sell) the Offered Business for
an aggregate consideration equal to or greater than the fair market value of
the consideration set forth in the Price Notice delivered by VI during the
<PAGE> 17
13
Negotiation Period reflecting the lowest fair market value consideration, and,
if such sale is consummated, TCI shall have no further rights under this
Section 3.7. If (i) at the end of such 120 day period, a binding agreement for
a sale of the Offered Business has not been reached or (ii) such a binding
agreement has been reached and is terminated prior to its consummation during
the Offer Period, VI shall not, for the remainder of the Offer Period, if any,
sell or negotiate to sell any Offered Business without complying with the
procedures set forth in this Section 3.7.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VI
VI represents and warrants to TCI and TCI Sub that:
Section 4.1 Corporate Existence and Power. VI (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, (ii) is authorized to transact
business and is in good standing in each state in which its ownership of assets
or conduct of business requires such qualification, and (iii) has all corporate
powers required to carry on its business as conducted on the date hereof, with
such exceptions to clauses (i), (ii) and (iii) as would not materially and
adversely affect the ability of VI to consummate the Transactions to be
consummated by it.
Section 4.2 Corporate Authorization. The performance by
VI of this Agreement and the consummation by VI of the Transactions to be
consummated by it are within the corporate powers of VI and have been duly
authorized by all necessary corporate action on the part of VI. The approval
of the stockholders of VI is not required in order to consummate the
Transaction.
Section 4.3 Governmental Authorization. The execution
and delivery of this Agreement by VI, and the performance by VI of this
Agreement, and the consummation by VI of the Transactions to be consummated by
it pursuant hereto, require no material action by or in respect of, or material
filing with, any Governmental Authority other than (x) compliance with any
applicable requirements of the HSR Act, the FCC Authorizations, the Non-Cable
FCC Authorizations and the Local Authorizations, (y) compliance with any
applicable requirements of the 1933 Act and the 1934 Act and state blue sky and
securities laws in connection with the Exchange Offer and (z) those that may be
applicable as a result of the regulatory status of TCI, TCI Sub or their
Affiliates.
Section 4.4 Consents. Except as set forth on Schedule
4.5 to the Implementation Agreement, no consent by any Person under any
contract as to which VI is a party or to which its assets are subject is
required or necessary for the execution and delivery of this Agreement by VI,
or the performance by VI of this Agreement, or the consummation by VI of the
Transactions to be consummated by it pursuant hereto with such exceptions as
would not materially and adversely affect the ability of VI to consummate the
Transactions to be consummated by it.
<PAGE> 18
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Section 4.5 Non-Contravention. The execution, delivery
and performance of this Agreement by VI, and the consummation by VI of the
Transactions contemplated to be consummated by it pursuant hereto, do not or
before the Exchange Date will not, (x) contravene the certificate of
incorporation or bylaws of VI or (y) subject to obtaining the consents set
forth in Schedules 4.5, 4.9, 4.14 and 4.16 of the Implementation Agreement and
subject to obtaining, making or taking the actions and filings described in
clauses (x), (y) and (z) of Section 4.3, result in, or constitute a breach or
default (including any event that, with the passage of time or giving of
notice, or both, would become a breach or default) under any applicable Legal
Requirement or any judgment, injunction, order, decree, contract, license,
lease, indenture, mortgage, loan agreement, note or other agreements or
instrument as to which VI is a party or by which any of its properties may be
bound, the effect of which would be to materially and adversely impair the
ability of VI to consummate the Transactions to be consummated by it.
Section 4.6 Binding Effect. This Agreement has been duly
executed and delivered by VI, and this Agreement constitutes a valid and
binding obligation of VI, enforceable against VI in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies.
Section 4.7 Finders' Fees. There is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of VI or any of its Affiliates who might be
entitled to any fee or commission from TCI or TCI Sub or any of their
Affiliates in connection with the execution, delivery or performance of this
Agreement or the consummation of the Transactions.
Section 4.8 Exchange Offer. The Exchange Offer shall be
conducted in compliance with the 1933 Act, the 1934 Act and any relevant state
securities laws (provided that no representation is made in this Section 4.8 as
to any non-compliance resulting from actions of TCI, TCI Sub or their
Affiliates or from information included in (or omitted from) the Offering
Materials or Registration Statement).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TCI AND TCI SUB
Each of TCI and TCI Sub jointly and severally represent and warrant to VI that:
Section 5.1 Corporate Existence and Power. It is (i) a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware, (ii) is authorized to transact business and is
in good standing in each state in which its ownership of assets or conduct of
business requires such qualification, and (iii) has all corporate powers
required to carry on its business as now conducted, with such exceptions as
would not materially and adversely affect its ability to consummate the
Transactions to be consummated by it.
Section 5.2 Corporate Authorization. The execution,
delivery and performance by it of this Agreement and the consummation by it of
the Transactions to be consummated by it
<PAGE> 19
15
are within its corporate powers and have been duly authorized by all necessary
corporate action on its part.
Section 5.3 Governmental Authorization. The execution,
delivery and performance by it of this Agreement, and the consummation by it of
the Transactions to be consummated by it, require no material action by or in
respect of, or filing with, any governmental body, agency, official or
authority other than compliance with any applicable requirements of the HSR
Act, the Non- Cable FCC Authorizations, the FCC Authorizations, and the Local
Authorizations.
Section 5.4 Consents. Except as set out in Schedule 5.4,
no consent by any Person under any contract to which it is a party or to which
its assets are subject is required or necessary for the execution, delivery and
performance by it of this Agreement or the consummation by it of the
Transactions to be consummated by it, with such exceptions as would not
materially and adversely affect its ability to consummate the Transactions to
be consummated by it.
Section 5.5 Non-Contravention. The execution, delivery
and performance by it of this Agreement and the consummation by it of the
Transactions contemplated to be consummated by it pursuant hereto do not and
will not (x) contravene its certificate of incorporation or by-laws or (y)
subject to obtaining, making or taking the actions and filings described in
Section 5.3, result in a, or constitute a breach or default (including any
event that, with the passage of time or giving of notice, or both, would become
a breach or default) under any applicable Legal Requirement or any judgment,
order, decree, contract, license, lease, indenture, mortgage, loan agreement,
note, security agreement or other agreement or instrument, as to which it is a
party or by which any of its properties may be bound, the effect of which would
materially and adversely impair its ability to consummate the Transactions to
be consummated by it.
Section 5.6 Binding Effect. This Agreement has been duly
executed and delivered by it and this Agreement constitutes its valid and
binding obligation, enforceable against it in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies.
Section 5.7 Finders' Fees. There is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of TCI, TCI Sub, RCS, InterMedia or any of their
Affiliates who might be entitled to any fee or commission from VI or any of its
Affiliates in connection with the execution, delivery or performance of this
Agreement or the consummation of the Transactions.
<PAGE> 20
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Obligations of VI. The
obligations of VI to take the action required to be taken by it pursuant to
Sections 2.1(c) and 2.4 are subject to the satisfaction of each of the
following conditions, each of which may be waived by VI (except that the
conditions contained in clauses (vii) and (viii) may not be waived without the
prior consent of TCI Sub, such consent not to be unreasonably withheld):
(i) HSR Act. Any applicable waiting period (and any
extension thereof) under the HSR Act shall have
expired or been terminated without the commencement
or threat of any litigation by a Governmental
Authority of competent jurisdiction to restrain the
consummation of the Exchange Offer, Subscription
Agreement or other material action contemplated by
the Transaction in any material respect.
(ii) Consented Subscribers. The number of Consented
Subscribers shall be not less than 90% of Estimated
Exchange Date Basic Subscribers.
(iii) Absence of Injunction. No order, stay, judgment or
decree shall have been issued by any court and be in
effect restraining or prohibiting the consummation of
the Transaction in any material respect.
(iv) Tax Matters. VI shall be satisfied with the
treatment of the Transaction for Federal income tax
purposes.
(v) Subscription Agreement. The Subscription Agreement
shall remain in full force and effect and there shall
be no condition to TCI's, TCI Sub's or Old VII's
obligations thereunder that is incapable of being
satisfied at the Expiration Time.
(vi) Loans. The Loan Documentation shall have been duly
executed and delivered by all parties thereto and
shall remain in full force and effect and VI shall
have received confirmation, in form and substance
satisfactory to it, that Old VII shall be able to
draw down Loan Proceeds in an aggregate principal
amount equal to $1,700,000,000 (one billion, seven
hundred million dollars) (the "Aggregate Loan
Amount") thereunder on the Expiration Date prior to
the Expiration Time and such Loan Proceeds that are
equal to the Aggregate Loan Amount shall be available
for transfer as a contribution to New VII without
condition (but without limiting VI's obligation to
provide the notice required for the release of funds
from the Cash Collateral Account as specified in the
definition of Cash Collateral Account) prior to the
Exchange Time as contemplated in the Implementation
Agreement.
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(vii) FCC. All consents of the FCC listed on Schedule 4.9
of the Implementation Agreement and all Non-Cable FCC
Authorizations shall have been obtained and shall
remain in full force and effect.
(viii) Registration Statements. The Registration Statement
and, if the effectiveness of the TCI Registration
Statement is required by the 1933 Act or the SEC
prior to the consummation of the Exchange Offer, the
TCI Registration Statement shall have been declared
effective, and no stop order suspending the
effectiveness of the Registration Statement or, if
the effectiveness of the TCI Registration Statement
is required by the 1933 Act or the SEC prior to the
consummation of the Exchange Offer, the TCI
Registration Statement, shall have been issued and no
proceeding for that purpose shall have been initiated
or threatened by the SEC.
Section 6.2 Further Condition. The obligations of VI to
take the action required to be taken by it pursuant to Section 2.4 is subject
to the further condition that VI shall have accepted shares of VI Common Stock
for exchange in the Exchange Offer in accordance with Section 2.1(d).
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be
terminated at any time prior to the Expiration Time:
(a) by written consent of VI, TCI and TCI Sub;
(b) by TCI or TCI Sub, if any condition contained
in Article VIII of the Subscription Agreement has become
incapable of satisfaction (other than if such incapacity
results from actions or omissions of TCI or TCI Sub that are
in contravention of the provisions of the Transaction
Documents);
(c) by VI, if any condition contained in Sections
6.1 or 6.2 hereof or in Article IX of the Subscription
Agreement has become incapable of satisfaction (other than if
such incapacity results from actions or omissions of VI or its
Affiliates that are in contravention of the provisions of the
Transaction Documents);
(d) by TCI or TCI Sub, (x) if the Expiration Time
has not occurred on or prior to the date that is twelve (12)
months from the date of this Agreement (other than as a result
of (i) the failure by TCI or TCI Sub to consummate the
transactions contemplated hereby when all conditions to their
obligations contained in Article VIII of the Subscription
Agreement have been satisfied or waived, (ii) the failure by
TCI or TCI Sub or their Affiliates to duly comply with
<PAGE> 22
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their covenants and obligations in the Transaction Documents
or (iii) the failure of a condition contained in Sections 6.1
or 6.2 hereof or in Articles VIII or IX of the Subscription
Agreement resulting from actions or omissions of TCI or TCI
Sub or their Affiliates that are in contravention of the
provisions of the Transaction Documents) or (y) if the
Exchange Offer has not commenced on or prior to the date that
is eleven (11) months from the date of this Agreement (other
than as a result of the failure of a condition contained in
Section 6.1 hereof resulting from actions or omissions of TCI
or TCI Sub or their Affiliates that are in contravention of
the provisions of the Transaction Documents);
(e) by VI, (x) if the Expiration Time has not
occurred on or prior to the date that its twelve (12) months
from the date of this Agreement (other than as a result of (i)
the failure by VI to consummate the transactions contemplated
hereby when all conditions to its obligations contained in
Section 6.1 hereof or in Article IX of the Subscription
Agreement have been satisfied or waived, (ii) the failure by
VI or its Affiliates to duly comply with their covenants and
obligations under the Transaction Documents or (iii) the
failure of a condition contained in Sections 6.1 or 6.2 hereof
or in Article VIII or IX of the Subscription Agreement
resulting from actions or omissions of VI or its Affiliates
that are in contravention of the provisions of the Transaction
Documents) or (y) if the Exchange Offer has not commenced on
or prior to the date that is eleven (11) months from the date
of this Agreement (other than as a result of the failure of a
condition contained in Section 6.1 hereof resulting from
actions or omissions of VI or its Affiliates that are in
contravention of the provisions of the Transaction Documents);
or
(f) by TCI, TCI Sub or VI if the Exchange Offer
terminates or finally expires after one extension thereof
without any shares of VI Common Stock having been accepted for
exchange by VI thereunder in accordance with Section 2.1(d).
If TCI, TCI Sub or VI terminates this Agreement pursuant to the provisions
hereof, such termination will be effected by written notice to the other
parties specifying the provision hereof pursuant to which such termination is
made.
Section 7.2 Effect of Termination. (a) Upon termination
of this Agreement pursuant to Section 7.1 hereof, except as provided in clause
(b) below: (i) this Agreement will forthwith become null and void, (ii) such
termination will be the sole remedy with respect to any breach of any
representation, warranty, covenant or agreement contained herein and (iii) no
party hereto or any of their respective officers, directors, partners,
employees, agents, consultants, shareholders or principals will have any
liability or obligation hereunder or with respect hereto.
(b) The provisions of clause (a) above notwithstanding,
no party will be relieved of: (i) liability for any breach of Articles IV and
V and (ii) liability for any breach of any material covenant or agreement
contained herein or made pursuant hereto, provided, however, that no party to
this Agreement shall be entitled to recover consequential damages in
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respect of any breach of this Agreement or any other Transaction Document. The
provisions of Sections 2.1(f), 2.1(g), 2.3(iii), 3.7, 7.2, 8.1, 8.8 and 8.10
will survive termination hereof.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Expenses. Except as expressly set forth
herein, the fees and expenses (including the fees of any lawyers, accountants,
investment bankers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby whether or not the
Transaction is consummated will be paid by the party incurring the same.
Section 8.2 Headings. The section headings herein are
for convenience of reference only, do not constitute part of this Agreement and
will not be deemed to limit or otherwise affect any of the provisions hereof.
References to Sections and Exhibits, unless otherwise indicated, are references
to Sections and Exhibits hereof.
Section 8.3 Notices. Any notice or other communication
required or permitted to be given hereunder will be in writing and will be
mailed by prepaid registered or certified mail, timely deposited with an
overnight courier such as Federal Express, or delivered against receipt, as
follows:
(a) In the case of TCI and TCI Sub, to:
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: Chief Executive Officer,
with a copy similarly addressed to the
attention of General Counsel
(b) In the case of VI to:
Viacom Inc.
1515 Broadway
New York, NY 10036
Attention: General Counsel
with a copy to:
Hughes Hubbard & Reed
One Battery Park Plaza
New York, NY 10004
Attention: Ed Kaufmann, Esq.
<PAGE> 24
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or to such other address as the party may have furnished in writing in
accordance with the provisions of this Section 8.3. Any notice or other
communication shall be deemed to have been given, made and received upon
receipt. Either party may change the address to which notices are to be
addressed by giving the other party notice in the manner herein set forth.
Section 8.4 Assignment. This Agreement and all
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors, however, neither this Agreement nor any
right, interest, or obligation hereunder may be assigned by any party hereto
(other than by operation of law) without the prior written consent of the other
parties, and any such assignment or purported assignment without such consent
shall be void.
Section 8.5 Entire Agreement. This Agreement together
with the other Transaction Documents embody the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior written or oral commitments, arrangements or
understandings with respect thereto.
Section 8.6 Amendment; Waiver. (a) This Agreement may
only be amended or modified in writing signed by the party against whom
enforcement of any such amendment or modification is sought.
(b) Any party hereto may, by an instrument in
writing, waive compliance with any term or provision of this Agreement on the
part of such other party hereto. The waiver by any party hereto of a breach of
any term or provision of this Agreement will not be construed as a waiver of
any subsequent breach.
Section 8.7 Counterparts. This Agreement may be executed
in two or more counterparts, all of which will be considered one and the same
agreement and each of which will be deemed an original. All signatures need
not be on one counterpart.
Section 8.8 Governing Law. THIS AGREEMENT WILL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT
MIGHT BE APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS,
INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND
PERFORMANCE.
Section 8.9 Severability. If any one or more of the
provisions of this Agreement is held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining provisions of this
Agreement will not be affected thereby, and VI, TCI and TCI Sub will use their
reasonable efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
Section 8.10 Consent to Jurisdiction. Each party hereby
submits to the non-exclusive jurisdiction of the courts of general jurisdiction
of the States of New York and Colorado and the federal courts of the United
States of America, located in the City of New
<PAGE> 25
21
York, New York, and Denver, Colorado solely in respect of the interpretation
and enforcement of the provisions of this Agreement and hereby waives, and
agrees not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement of this Agreement that it is not subject thereto
or that such action, suit or proceeding may not be brought or is not
maintainable in such courts or that this Agreement may not be enforced in or by
such courts or that its property is exempt or immune from execution, that the
suit, action or proceeding is brought in an inconvenient forum, or that the
venue of the suit, action or proceeding is improper. Service of process with
respect thereto may be made upon any party by mailing a copy thereof by
registered or certified mail, postage prepaid, to such party at its address as
provided in Section 8.3 hereof, provided that service of process may be
accomplished in any other manner permitted by applicable law.
Section 8.11 Third Person Beneficiaries. This Agreement is
not intended and shall not be construed to confer upon any Person (other than
VI, TCI and TCI Sub) any rights or remedies hereunder.
Section 8.12 Specific Performance. VI, TCI and TCI Sub
recognize that any breach of any covenant or agreement contained in this
Agreement may give rise to irreparable harm for which money damages would not
be an adequate remedy, and accordingly agree that, in addition to other
remedies, any non-breaching party will be entitled to enforce the agreements
and covenants contained herein of TCI and TCI Sub or VI, as the case may be, by
a decree of specific performance without the necessity of proving the
inadequacy as a remedy of money damages.
Section 8.13 Survival. The representations and warranties
contained in or made pursuant to this Agreement shall terminate and be of no
further force on and as of April 30, 1997.
<PAGE> 26
22
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed in New York, New York, as of the day and year
first above written.
VIACOM INC.
By:
-------------------------------------
Name:
Title:
TELE-COMMUNICATIONS, INC.
By:
-------------------------------------
Name:
Title:
TCI COMMUNICATIONS, INC.
By:
-------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 2.2
- -------------------------------------------------------------------------------
SUBSCRIPTION AGREEMENT
among
VIACOM INTERNATIONAL INC.,
TELE-COMMUNICATIONS, INC.
and
TCI COMMUNICATIONS, INC.
Dated as of July 24, 1995.
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I DEFINITIONS........................................................................... 1
Section 1.1 Definitions......................................................... 1
ARTICLE II SUBSCRIPTION AND PURCHASE OF STOCK.................................................... 7
Section 2.1 Subscription, Issuance, Purchase and Sale of Stock.................. 7
Section 2.2 Payment of Purchase Price........................................... 7
ARTICLE III CERTAIN BORROWINGS.................................................................... 8
Section 3.1 Certain Borrowings.................................................. 8
ARTICLE IV CLOSING............................................................................... 9
Section 4.1 Closing............................................................. 9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF TCI AND TCI SUB..................................... 9
Section 5.1 Corporate Existence and Power....................................... 9
Section 5.2 Corporate Authorization............................................. 9
Section 5.3 Governmental Authorization.......................................... 9
Section 5.4 Consents............................................................ 10
Section 5.5 Non-Contravention................................................... 10
Section 5.6 Binding Effect...................................................... 10
Section 5.7 Finders' Fees....................................................... 10
Section 5.8 Acquisition of Shares for Investment................................ 10
Section 5.9 Preferred Stock..................................................... 11
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF OLD VII............................................. 11
Section 6.1 Corporate Existence and Power....................................... 11
Section 6.2 Corporate Authorization............................................. 11
Section 6.3 Governmental Authorization.......................................... 11
Section 6.4 Consents............................................................ 11
Section 6.5 Non-Contravention................................................... 12
Section 6.6 Binding Effect...................................................... 12
Section 6.7 Finders' Fees....................................................... 12
Section 6.8 Shares.............................................................. 12
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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Section 6.9 Material Contracts.................................................. 12
Section 6.10 Tank Test Reports................................................... 13
Section 6.11 Forms I-9........................................................... 13
ARTICLE VII COVENANTS............................................................................. 13
Section 7.1 Conduct of the Business............................................. 13
Section 7.2 Telecom Partnerships................................................ 14
Section 7.3 Access to Information; Confidentiality.............................. 14
Section 7.4 Additional Financial Statements and Reports......................... 15
Section 7.5 Material Adverse Changes............................................ 15
Section 7.6 Local Authorization and Material Contract Amendments................ 16
Section 7.7 Telecom Partnership Leases.......................................... 16
Section 7.8 Hart-Scott-Rodino................................................... 16
Section 7.9 Efforts; Filing and Consents........................................ 16
Section 7.10 Notices of Certain Events........................................... 20
Section 7.11 Further Assurances.................................................. 21
Section 7.12 Confidentiality of Transaction...................................... 21
Section 7.13 TCI Undertaking as to TCI Sub's Obligations......................... 21
Section 7.14 Consummation of Transaction......................................... 21
Section 7.15 Estimated Exchange Time Basic Subscribers........................... 22
Section 7.16 Estimate Statement; List of Service................................. 22
Section 7.17 Approved Capital Expenditure Plan................................... 22
Section 7.18 Reimbursement of Capital Expenditures............................... 22
Section 7.19 Sale of Dayton and Nashville Systems................................ 23
Section 7.20 Employment.......................................................... 23
Section 7.21 1996 Capital Expenditure Plan....................................... 23
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF TCI AND TCI SUB...................................... 24
Section 8.1 Funding Conditions.................................................. 24
Section 8.2 Closing Conditions.................................................. 25
Section 8.2.1 Representations and Warranties; Covenants........................... 25
Section 8.2.2 HSR Act............................................................. 25
Section 8.2.3 Consented Subscribers............................................... 25
Section 8.2.4 Required Consents................................................... 26
Section 8.2.5 Absence of Injunction............................................... 26
Section 8.2.6 Opinions............................................................ 26
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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Section 8.2.7 Exchange Offer...................................................... 26
Section 8.2.8 Resignation of Officers and Directors............................... 26
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF OLD VII.............................................. 26
Section 9.1 Representations and Warranties; Covenants........................... 26
Section 9.2 HSR Act............................................................. 27
Section 9.3 Consented Subscribers............................................... 27
Section 9.4 Opinions............................................................ 27
Section 9.5 Consents............................................................ 27
Section 9.6 Absence of Injunction............................................... 27
Section 9.7 Exchange Offer...................................................... 27
ARTICLE X TERMINATION........................................................................... 27
Section 10.1 Termination......................................................... 27
Section 10.2 Effect of Termination............................................... 27
ARTICLE XI MISCELLANEOUS......................................................................... 28
Section 11.1 Legend.............................................................. 28
Section 11.2 Expenses............................................................ 28
Section 11.3 Headings............................................................ 28
Section 11.4 Notices............................................................. 28
Section 11.5 Assignment.......................................................... 29
Section 11.6 Entire Agreement.................................................... 29
Section 11.7 Amendment; Waiver................................................... 30
Section 11.8 Counterparts........................................................ 30
Section 11.9 Governing Law....................................................... 30
Section 11.10 Severability........................................................ 30
Section 11.11 Consent to Jurisdiction............................................. 30
Section 11.12 Third Person Beneficiaries.......................................... 30
Section 11.13 Specific Performance................................................ 31
Section 11.14 Survival............................................................ 31
Section 11.15 Preferred Stock Conversion.......................................... 31
</TABLE>
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<PAGE> 5
EXHIBITS
Exhibit A-1 - Old VII Opinion
Exhibit A-2 - Old VII Communications Act Opinion
Exhibit B - TCI Sub Opinion
Exhibit C - Form of Section 617 Certification
SCHEDULES
Schedule 5.4 - Consents Required by Contracts of TCI and TCI Sub
Schedule 7.1 - Absence of Changes
Schedule 7.18 - Additional Capital Expenditures
<PAGE> 6
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of July 24, 1995, by and
among Viacom International Inc., a Delaware corporation ("Old VII"),
Tele-Communications, Inc., a Delaware corporation ("TCI") and TCI
Communications, Inc., a Delaware corporation ("TCI Sub").
WHEREAS, TCI Sub wishes to subscribe to and purchase from Old
VII, and Old VII desires to issue and sell to TCI Sub 100 shares of Class B
Common Stock; and
WHEREAS, TCI Sub is a wholly-owned subsidiary of TCI and in
order to induce Old VII to enter into this Agreement TCI is agreeing to cause
TCI Sub to pay and perform all of TCI Sub's obligations under this Agreement;
NOW THEREFORE, the parties hereto, in consideration of the
premises and mutual promises hereinafter set forth and intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms, as used in this
Agreement, shall have the following meanings (and such meanings shall be equally
applicable to both the singular and plural forms of the terms defined herein):
"Affiliate" shall have the meaning specified in the
Implementation Agreement.
"Agents" shall have the meaning specified in Section 7.3.
"Aggregate Loan Amount" shall have the meaning specified in
the Parents Agreement.
"Agreement" shall mean this Subscription Agreement, including
the Exhibits and Schedules hereto.
"Amended and Restated Certificate of Incorporation" shall have
the meaning specified in the Implementation Agreement.
"Anticipated Commencement Date" shall have the meaning
specified in the Parents Agreement.
"Antitrust Laws" shall have the meaning specified in Section
7.9(b).
<PAGE> 7
2
"Approved Capital Expenditure Plan" shall have the meaning
specified in the Implementation Agreement.
"Asset Value" shall have the meaning specified in the
Implementation Agreement.
"Basic Subscriber" shall have the meaning specified in the
Implementation Agreement.
"Basic Subscriber Rate" shall have the meaning specified in
the Implementation Agreement.
"Benefit Plans" shall have the meaning specified in the
Implementation Agreement.
"Business" shall have the meaning specified in the
Implementation Agreement.
"Business Day" shall have the meaning specified in the
Implementation Agreement.
"Cable Assets" shall have the meaning specified in the
Implementation Agreement.
"Cable Division Subsidiaries" shall have the meaning specified
in the Implementation Agreement.
"Cable Group" shall have the meaning specified in the
Implementation Agreement.
"Cable Group Bargaining Agreement" shall have the meaning
specified in Section 7.20.
"Cash Collateral Account" shall mean a cash collateral account
maintained by Old VII at The Bank of New York into which the Loan Proceeds will
be deposited in which the Lenders shall be granted a security interest to secure
the Loans, the terms of which shall provide that upon notice from VI that it
will consummate the Exchange Offer and that all Exchange Offer Conditions have
been satisfied or waived, all funds held therein will be released without
condition to Old VII on the Exchange Date immediately prior to the Conveyance of
Assets and the Exchange Time for transfer to New VII as a contribution as
contemplated by the Implementation Agreement.
"Certificate" shall have the meaning specified in Section
4.1(c).
"Class A Common Stock" shall have the meaning specified in the
Parents Agreement.
<PAGE> 8
3
"Class B Common Stock" means the Class B Common Stock, par
value $0.01, of Old VII, after giving effect to the filing of the Amended and
Restated Certificate of Incorporation with the Secretary of State of Delaware.
"Closing" shall have the meaning specified in Section 4.1(a).
"Closing Date" shall have the meaning specified in Section
4.1(a).
"Code" shall have the meaning specified in the Implementation
Agreement.
"Commitments to Lend" shall mean commitments of commercial
banks or other lending institutions or other institutional investors reasonably
acceptable to TCI Sub ("Lenders") to make the Loans in the Aggregate Loan Amount
to Old VII on the Expiration Date prior to the Expiration Time. Without
limitation of any other instruments that may constitute Commitments to Lend,
Loan Documentation, when duly executed and delivered by the parties thereto,
shall constitute Commitments to Lend.
"Communications Act" shall have the meaning specified in the
Implementation Agreement.
"Company" shall have the meaning specified in the
Implementation Agreement.
"Consented Subscribers" shall mean the number of Basic
Subscribers as of a date within ten days prior to the Exchange Date residing:
(a) in those Franchise Areas for which Local
Authority Consents have been obtained on or before such date
and in respect of which the ordinances, resolutions or other
appropriate governmental actions evidencing the grant of such
Local Authority Consents shall not have imposed any material
adverse change in the terms of the relevant Local
Authorization, except for such material adverse changes as TCI
Sub shall have expressly accepted or as otherwise agreed to by
TCI Sub; and
(b) in those Franchise Areas for which a Local
Authority Consent is not required for the consummation of the
Transaction.
"Continuing Employee" shall have the meaning specified in
Section 7.20.
"Conveyance of Assets" shall have the meaning specified in the
Implementation Agreement.
"DOJ" shall mean the United States Department of Justice.
"Estimated Exchange Date Basic Subscribers" shall have the
meaning specified in Section 7.15.
<PAGE> 9
4
"Estimate Statement" shall have the meaning specified in the
Implementation Agreement.
"Exchange Date" shall have the meaning specified in the
Parents Agreement.
"Exchange Date Basic Subscribers" shall have the meaning
specified in the Implementation Agreement.
"Exchange Offer" shall have the meaning specified in the
Parents Agreement.
"Exchange Offer Conditions" shall have the meaning specified
in the Parents Agreement.
"Exchange Time" shall have the meaning specified in the
Parents Agreement.
"Expiration Date" shall have the meaning specified in the
Parents Agreement.
"Expiration Time" shall have the meaning specified in the
Parents Agreement.
"FCC" shall have the meaning specified in the Implementation
Agreement.
"FCC Authorizations" shall have the meaning specified in the
Implementation Agreement.
"Franchise Areas" shall have the meaning specified in the
Implementation Agreement.
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall have the meaning specified in the Implementation
Agreement.
"Governmental Authority" shall have the meaning specified in
the Implementation Agreement.
"HSR Act" shall have the meaning specified in the
Implementation Agreement.
"Implementation Agreement" shall have the meaning specified in
the Parents Agreement.
"Inconsistent Terms" shall have the meaning specified in the
Parents Agreement.
"InterMedia" shall mean InterMedia Partners IV, L.P., a
California limited partnership.
"Legal Requirement" shall have the meaning specified in the
Implementation Agreement.
<PAGE> 10
5
"Lenders" shall have the meaning specified in the definition
of "Commitments to Lend".
"Loan Documentation" shall mean all agreements and other
documentation containing terms and conditions that are reasonably acceptable to
TCI Sub, which shall not contain any obligation of VI or any of its Affiliates
other than Old VII (including guarantees by Old VII to be effective after the
Closing), or after the Closing, a wholly-owned direct or indirect subsidiary of
Old VII and containing no Inconsistent Terms and pursuant to which Lenders agree
to make the Loans to Old VII on the Expiration Date prior to the Expiration
Time.
"Loan Proceeds" shall mean all amounts borrowed by Old VII as
Loans.
"Loans" shall mean loans by Lenders to Old VII, or after the
Closing, a wholly-owned direct or indirect subsidiary of Old VII, pursuant to
the Loan Documentation of an aggregate principal amount (after deduction of all
interest, fees and other expenses paid or payable by Old VII in connection with
the Loans or otherwise pursuant to the Commitments to Lend or Loan
Documentation) at least equal to the Aggregate Loan Amount on terms and
conditions that are reasonably acceptable to TCI Sub (which, without limitation,
shall not contain any obligation of VI or any of its Affiliates other than Old
VII or, after the Closing, a wholly-owned direct or indirect subsidiary of Old
VII or include any Inconsistent Terms).
"Local Authority Consent" shall have the meaning specified in
the Implementation Agreement.
"Local Authorizations" shall have the meaning specified in the
Implementation Agreement.
"Material Adverse Effect" shall have the meaning specified in
the Implementation Agreement.
"Material Contract" shall have the meaning specified in the
Implementation Agreement.
"Minimum Condition" shall have the meaning specified in the
Parents Agreement.
"New Borrowing Obligations" shall mean all liabilities and
obligations of Old VII, the Cable Division Subsidiaries and, after the Closing,
any wholly-owned direct or indirect subsidiary of Old VII under, with respect to
or in connection with the Loan Documentation, the Commitments to Lend or
otherwise to repay the Loans, including without limitation for the payment of
principal, interest, premium, fees, expenses or indemnities in connection
therewith.
"New VII" shall have the meaning specified in the
Implementation Agreement.
"1995 Plan" shall have the meaning specified in Section 7.21.
"1996 Capital Expenditure Plan" shall have the meaning
specified in Section 7.21.
<PAGE> 11
6
"1934 Act" shall have the meaning specified in the Parents
Agreement.
"1933 Act" shall have the meaning specified in the Parents
Agreement.
"Non-Cable FCC Authorizations" shall have the meaning
specified in the Implementation Agreement.
"Non-Continuing Employees" shall have the meaning specified in
Section 7.20.
"Offering Materials" shall have the meaning specified in the
Parents Agreement.
"Old VII" has the meaning specified in the preamble of this
Agreement.
"Old VII Bank Borrowing Condition" shall mean the Old VII Bank
Borrowing Condition included in the Exchange Offer Conditions.
"Parents Agreement" shall have the meaning specified in the
Implementation Agreement.
"Person" shall have the meaning specified in the
Implementation Agreement.
"Preferred Stock" shall have the meaning specified in the
Parents Agreement.
"Purchase Price" shall have the meaning specified in Section
2.1.
"RCS" shall mean RCS Pacific, L.P., a California limited
partnership.
"Regulatory Approvals" shall have the meaning specified in
Section 7.9(c).
"SEC" shall have the meaning specified in the Parents
Agreement.
"Second Request" shall mean a request for additional
information or documentary material pursuant to 16 C.F.R. ss. 803.20.
"Shares" shall have the meaning specified in Section 2.1.
"Social Contract" shall mean a negotiated settlement with the
FCC resolving regulated rate disputes or challenges which imposes any
obligations on the Company after the Exchange Date.
"System" shall have the meaning specified in the
Implementation Agreement.
"TCI" shall have the meaning specified in the preamble of this
Agreement.
"TCI Stock" shall have the meaning specified in the Parents
Agreement.
"TCI Sub" shall have the meaning specified in the preamble of
this Agreement.
<PAGE> 12
7
"Telecom Agreements" shall have the meaning specified in the
Implementation Agreement.
"Telecom Capital Expenditure Amount" shall have the meaning
specified in the Implementation Agreement.
"Telecom Partnership Agreements" shall have the meaning
specified in the Implementation Agreement.
"Telecom Partnerships" shall have the meaning specified in the
Implementation Agreement.
"Transaction" shall have the meaning specified in the Parents
Agreement.
"Transaction Documents" shall have the meaning specified in
the Parents Agreement.
"Transferred Assets" shall have the meaning specified in the
Implementation Agreement.
"VI" shall mean Viacom Inc., a Delaware corporation.
ARTICLE II
SUBSCRIPTION AND PURCHASE OF STOCK
Section 2.1 Subscription, Issuance, Purchase and Sale of
Stock. Upon the terms and subject to the conditions set forth in this Agreement,
TCI Sub hereby subscribes for and agrees to purchase, and Old VII agrees to
sell, 100 shares of Class B Common Stock (the "Shares") for a purchase price of
three hundred fifty million dollars ($350,000,000) (the "Purchase Price"). Upon
the terms and subject to the conditions set forth in this Agreement, upon
payment in full of the Purchase Price, Old VII hereby agrees to issue and sell
100 shares of Class B Common Stock to TCI Sub, and issue and deliver a
certificate in the name of TCI Sub for 100 shares of Class B Common Stock.
Section 2.2 Payment of Purchase Price. The Purchase Price
shall be payable by wire transfer of immediately available funds to an account
designated by written notice by Old VII to TCI Sub delivered at least
forty-eight (48) hours prior to the Closing.
<PAGE> 13
8
ARTICLE III
CERTAIN BORROWINGS
Section 3.1 Certain Borrowings. (a) As soon as practicable
following the date hereof, TCI and TCI Sub shall cause Commitments to Lend (or
other evidence of the willingness of Lenders to make the Loans that is
acceptable to Old VII) to be delivered to Old VII. Old VII shall at such time
execute and deliver the Commitments to Lend. TCI and TCI Sub shall be
responsible for and pay any and all fees and expenses (including, but not
limited to commitment fees) arising from the Commitments to Lend.
(b) No less than ten Business Days prior to the
Anticipated Commencement Date, TCI and TCI Sub shall procure the execution and
delivery by Lenders of Loan Documentation. Old VII shall at such time execute
and deliver such Loan Documentation. TCI Sub shall be responsible for and pay
any and all fees and expenses arising from the Loan Documentation.
(c) Subject to the fulfillment of the conditions set
forth in Section 8.1, TCI and TCI Sub shall cause the Lenders under the Loan
Documentation to make the Loans to Old VII on the Expiration Date prior to the
Expiration Time and prior to the Conveyance of Assets. Old VII shall take any
reasonable commercial action required to be taken by Old VII under the Loan
Documentation in order to permit TCI and TCI Sub to cause the Loans to be so
made on the Expiration Date prior to the Expiration Time and prior to the
Conveyance of Assets, including the granting to the Lenders under the Loan
Documentation of a security interest in the Cash Collateral Account and pledges
of stock of the Cable Division Subsidiaries effective upon the release to Old
VII of cash from the Cash Collateral Account. If the Closing does not occur
within ten (10) Business Days after the Expiration Date, at the option of the
Lenders, the Loans will be repaid in full from the Cash Collateral Account.
(d) It is agreed by the parties hereto that (i) the Loan
Proceeds will be conveyed to New VII pursuant to the Conveyance of Assets and
that Old VII will retain responsibility for repayment of and will be liable and
responsible for the Loans and (ii) following the Exchange Time, neither VI, New
VII nor any of their Affiliates after the Exchange Time will have any liability,
responsibility or obligation under or in connection with the Commitments to
Lend, the Loan Documentation or otherwise for or with respect to the Loans or
Loan Proceeds, including without limitation for payment of the principal,
interest, fees (including Lender's attorneys' fees), expenses or indemnities,
and TCI and TCI Sub shall indemnify and hold harmless New VII and its Affiliates
from any such liability, responsibility or obligation.
(e) Without limitation of TCI's and TCI Sub's obligations
under Sections 3.1(a), (b) and (c) above, TCI and TCI Sub agree that in the
event the Closing does not occur, they will be responsible for and pay (or, in
the case of fees already paid, reimburse Old VII for) any and all fees and
expenses (including, but not limited to, commitment fees, but not including
principal and interest on principal) payable under or in connection with the
Commitments to Lend, the Loan Documentation, the Loans or any action by Old VII
pursuant to Sections 3.1(a),
<PAGE> 14
9
(b) or (c) or by TCI or TCI Sub pursuant to Section 3.1(a), whether incurred
before or after the date hereof and whether or not the Commitments to Lend or
the Loan Documentation is entered into, and TCI and TCI Sub will indemnify and
hold harmless Old VII from any and all such fees and expenses.
ARTICLE IV
CLOSING
Section 4.1 Closing. (a) The issuance and purchase of the
Class B Common Stock pursuant to Section 2.1 and the closing of the transactions
herein set forth (the "Closing") shall take place at the offices of Hughes
Hubbard & Reed, New York, New York on the Exchange Date immediately following
the Exchange Time (the "Closing Date"). The Closing shall be deemed to be
effective at the close of business on the Closing Date.
(b) At the Closing, TCI Sub shall pay the Purchase Price
to Old VII in the manner specified in Section 2.2.
(c) At the Closing, Old VII shall deliver to TCI Sub a
share certificate representing 100 shares of Class B Common Stock (the
"Certificate") and a receipt executed by Old VII for the Purchase Price.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TCI AND TCI SUB
Each of TCI and TCI Sub jointly and severally represent and
warrant to Old VII that:
Section 5.1 Corporate Existence and Power. It (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, (ii) is authorized to transact business and is in good
standing in each state in which its ownership of assets or conduct of business
requires such qualification, and (iii) has all corporate powers required to
carry on its business as now conducted, with such exceptions as would not
materially and adversely affect its ability to consummate the Transactions
contemplated to be consummated by it pursuant hereto.
Section 5.2 Corporate Authorization. The execution, delivery
and performance by it of this Agreement and the consummation by it of the
Transactions contemplated to be consummated by it pursuant hereto are within its
corporate powers and have been duly authorized by all necessary corporate action
on its part.
Section 5.3 Governmental Authorization. The execution,
delivery and performance by it of this Agreement, and the consummation by it of
the Transactions
<PAGE> 15
10
contemplated to be consummated by it pursuant hereto, require no material action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than compliance with any applicable requirements of the HSR Act,
the Non-Cable FCC Authorizations, the FCC Authorizations, and the Local
Authorizations.
Section 5.4 Consents. Except as set out in Schedule 5.4, no
consent by any Person under any contract to which it is a party or to which its
assets are subject is required or necessary for the execution, delivery and
performance by it of this Agreement or the consummation by it of the
Transactions contemplated to be consummated by it pursuant hereto, with such
exceptions as would not materially and adversely affect its ability to
consummate the Transactions contemplated to be consummated by it pursuant
hereto.
Section 5.5 Non-Contravention. The execution, delivery and
performance by it of this Agreement and the consummation by it of the
Transactions contemplated to be consummated by it pursuant hereto do not and
will not (x) contravene its certificate of incorporation or by-laws or (y)
subject to obtaining, making or taking actions and filings described in Section
5.3, result in or constitute a breach or default (including any event that, with
the passage of time or giving of notice, or both, would become a breach or
default) under any applicable Legal Requirement or any judgment, order, decree,
contract, license, lease, indenture, mortgage, loan agreement, note, security
agreement or other agreement or instrument as to which it is a party or by which
any of its properties may be bound, the effect of which would materially and
adversely impair its ability to consummate the Transactions contemplated to be
consummated by it pursuant hereto.
Section 5.6 Binding Effect. This Agreement has been duly
executed and delivered by it and this Agreement constitutes its valid and
binding obligation, enforceable against it in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies.
Section 5.7 Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of TCI or TCI Sub (or InterMedia or RCS) or any of their
Affiliates who might be entitled to any fee or commission from Old VII or any of
the Cable Division Subsidiaries in connection with the execution, delivery or
performance of this Agreement or the consummation of the Transactions
contemplated hereby.
Section 5.8 Acquisition of Shares for Investment. TCI Sub is
acquiring the Shares for investment and not with a present view toward, or for
sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the Shares. TCI Sub agrees that the Shares
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of (i) without registration under the 1933 Act, except
pursuant to an exemption from such registration available under the 1933 Act,
and (ii) except in accordance with any applicable provisions of state blue sky
and securities laws.
<PAGE> 16
11
Section 5.9 Preferred Stock. The issuance of shares of TCI
Stock to Old VII upon exercise by the holders of Preferred Stock of their
conversion rights as specified in the terms of the Preferred Stock has been
authorized by all necessary corporate action on the part of TCI and TCI has
available and has reserved sufficient shares of authorized and unissued TCI
Stock to satisfy its obligation to issue shares of TCI Stock to Old VII upon
conversion of the Preferred Stock.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF OLD VII
Old VII represents and warrants to TCI Sub that:
Section 6.1 Corporate Existence and Power. Old VII (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, (ii) is authorized to transact business and
is in good standing in each state in which its ownership of assets or conduct of
business requires such qualification, and (iii) has all corporate powers
required to carry on its business as conducted on the date hereof, with such
exceptions to clauses (ii) and (iii) as would not materially and adversely
affect the ability of Old VII to consummate the Transactions contemplated to be
consummated by it pursuant hereto.
Section 6.2 Corporate Authorization. The Company has the
corporate power to own its assets and carry on its business as currently
conducted. The performance by Old VII of this Agreement and the consummation by
Old VII of the Transactions contemplated to be consummated by it pursuant hereto
are within the corporate powers of Old VII and have been duly authorized by all
necessary corporate and shareholder action on the part of Old VII.
Section 6.3 Governmental Authorization. The execution and
delivery of this Agreement by Old VII, and the performance by Old VII of this
Agreement, and the consummation by Old VII of the Transactions contemplated to
be consummated by it pursuant hereto, require no material action by or in
respect of, or material filing with, any Governmental Authority other than (x)
compliance with any applicable requirements of the HSR Act, the FCC
Authorizations, the Non-Cable FCC Authorizations and the Local Authorizations,
(y) compliance with any applicable requirements of the 1933 Act and the 1934 Act
and state blue sky and securities laws in connection with the Exchange Offer and
(z) compliance with any requirements that may be applicable as a result of the
regulatory status of TCI, Buyer or their Affiliates.
Section 6.4 Consents. Except as set forth on Schedules 4.5,
4.9, 4.14 and 4.16 of the Implementation Agreement, no consent by any Person
under any contract as to which Old VII is a party or to which its assets are
subject is required or necessary for the execution and delivery of this
Agreement by Old VII, or the performance by Old VII of this Agreement, or the
consummation by Old VII of the Transactions contemplated to be consummated by it
pursuant
<PAGE> 17
12
hereto with such exceptions as would not materially and adversely affect the
ability of Old VII to consummate the Transactions contemplated to be consummated
by it pursuant hereto.
Section 6.5 Non-Contravention. The execution, delivery and
performance of this Agreement by Old VII, and the consummation by Old VII of the
Transactions contemplated to be consummated by it pursuant hereto, do not or
before the Exchange Date will not, (x) contravene the certificate of
incorporation or bylaws of Old VII or (y) subject to obtaining the consents
described in Schedules 4.5, 4.9, 4.14 and 4.16 of the Implementation Agreement,
and subject to obtaining, making or taking the actions and filings described in
clauses (x), (y) and (z) of Section 6.3, result in or constitute a breach or
default (including any event that, with the passage of time or giving of notice,
or both, would become a breach or default) under any applicable Legal
Requirement or any judgment, injunction, order, decree, contract, license,
lease, indenture, mortgage, loan agreement, note or other agreement or
instrument as to which Old VII is a party or by which any of its properties may
be bound, the effect of which would be to materially and adversely impair the
ability of Old VII to consummate the Transactions contemplated to be consummated
by it pursuant hereto.
Section 6.6 Binding Effect. This Agreement has been duly
executed and delivered by Old VII, and this Agreement constitutes a valid and
binding obligation of Old VII, enforceable against Old VII in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by the principles governing the availability of equitable
remedies.
Section 6.7 Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Old VII or any of its Affiliates who might be entitled to
any fee or commission from TCI or TCI Sub or, after the Exchange Time, Old VII,
or any of their Affiliates in connection with the execution, delivery or
performance of this Agreement or the consummation of the Transactions
contemplated hereby.
Section 6.8 Shares. The Shares, when paid for by and issued to
TCI Sub in accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and non-assessable, and will constitute all of the issued and
outstanding shares of Class B Common Stock. Upon issuance of the Shares, Old VII
will deliver to TCI Sub good and valid title to the Shares, free and clear of
any Liens. Assuming that the representations and warranties of TCI and TCI Sub
contained in Section 5.8 are true and correct in all respects at the Closing and
that TCI Sub is an "accredited investor" (as such term is used in Regulation D
under the 1933 Act), when issued to TCI Sub in accordance with the provisions
hereof, the Shares will have been issued in accordance with the registration or
qualification provisions of the 1933 Act and any relevant state securities laws
or pursuant to valid exemptions therefrom.
Section 6.9 Material Contracts. Old VII has made available to
RCS or TCI Sub or representatives of RCS or TCI Sub, true and correct copies of
all Material Contracts, including without limitation all Material Contracts that
are programming agreements.
<PAGE> 18
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Section 6.10 Tank Test Reports. Old VII has delivered to TCI
Sub or RCS copies of the most recent tank test reports relating to the tanks
listed on Schedule 4.20 to the Implementation Agreement.
Section 6.11 Forms I-9. Old VII has made available to TCI Sub
or RCS true and complete copies of all Immigration and Naturalization Service
Forms I-9 for all Continuing Employees.
ARTICLE VII
COVENANTS
Section 7.1 Conduct of the Business. Subject to Section 7.2,
and except for (v) any increase in the Basic Subscriber Rate or any other rate
charged the Company's subscribers or otherwise contemplated by the Transaction
Documents, (w) the incurrence of the New Borrowing Obligations, (x) the
amendment of Old VII's Certificate of Incorporation contemplated by the
Transaction Documents, (y) any change described in clause (a), (b) or (c) of the
definition of Material Adverse Effect or described on Schedule 7.1 or (z)
compliance with VI's obligations under the Parents Agreement or Old VII's
obligations under the Implementation Agreement or any other event or action
contemplated by the Transaction Documents, from the date hereof until the
Exchange Date, Old VII shall cause the Company to conduct the Business only in
the ordinary course of business consistent with past practices. Without limiting
the generality of the foregoing, Old VII shall not permit the Company to do any
of the following, without the consent of TCI Sub:
(i) (w) enter into a Social Contract, (x)
materially amend or, other than in
accordance with its terms, terminate any
Material Contract, or enter into any
Material Contract outside of the ordinary
course of business, (y) enter into any
programming agreement with any programming
service owned or operated by VI or any of
its Subsidiaries or Affiliates, or (z)
enter into any programming agreement that
would require carriage of programming or is
not terminable at any time by Old VII
(without any out-of-pocket cost to Old
VII), in each case following the date that
is six months after the Closing Date;
(ii) enter into any employment agreement
providing for a term of employment other
than as an employee at will, except as
disclosed to TCI Sub (or RCS or InterMedia)
on or prior to the date hereof;
(iii) increase the rate of compensation or bonus
payments to any employee of the Company,
except in the ordinary course of
<PAGE> 19
14
business and except for bonus payments in
conjunction with the Transaction where the
cost is borne by New VII or VI;
(iv) sell or dispose of assets relating to the
Business (other than Transferred Assets)
except for sales or dispositions of assets
in the ordinary course of business,
provided that such assets (other than
assets listed as vacant land on Schedule
4.19 of the Implementation Agreement) are
replaced with other assets in the ordinary
course of business;
(v) amend the certificate of incorporation or
by-laws (or other such governing
instruments with different names) of Old
VII or any Cable Division Subsidiary;
(vi) issue or sell any shares of the capital
stock of Old VII or any Cable Division
Subsidiary (except for shares of the Class
A Common Stock which are issued as
contemplated by Section 2.4 of the Parents
Agreement);
(vii) incur any indebtedness for borrowed money
outside the ordinary course of business
(other than the New Borrowing Obligations);
and
(viii) extend the term of (or fail to exercise a
right of termination with respect to) the
Company's programming agreement with the
Science Fiction Channel or Comedy Central.
Section 7.2 Telecom Partnerships. Prior to the Exchange Date,
Old VII shall cause the Company to make or cause to be made, when due and
payable, all capital contributions required to be made by the Company under, and
shall otherwise comply in all material respects with all material terms and
conditions of, the Telecom Partnership Agreements. Old VII shall use
commercially reasonable efforts prior to the Exchange Time to formalize and
enter into agreements with each Telecom Partnership covering the lease, license
or use by such Telecom Partnership of the plant, property and equipment of the
Company relating to capital expenditures covered by the definition of Telecom
Capital Expenditure Amount, to the extent such lease, license or use is not
otherwise covered by the Telecom Agreements. Old VII shall not sell, transfer or
assign its interest in the Telecom Partnerships.
Section 7.3 Access to Information; Confidentiality. Old VII
shall cause the Company to give TCI Sub, its counsel, financial advisors,
accountants and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of the Company, and
to furnish to TCI Sub, its counsel, financial advisors, accountants and
authorized representatives such financial and operating data and other
<PAGE> 20
15
information as such Persons may reasonably request. Prior to the Exchange Time,
TCI Sub shall, and shall cause its Affiliates, and its and their respective
officers, directors, employees, attorneys, financial advisors, accountants,
authorized representatives and agents (collectively, "Agents"), to keep secret
and retain in strictest confidence any and all confidential information relating
to the Business or the Systems or otherwise not available to the general public
(provided that such confidential information shall not include any information
that (i) has become generally available to the public other than as a result of
a disclosure by TCI Sub, its Affiliates or its Agents, (ii) has been
independently developed by TCI Sub or such Affiliate of TCI Sub or (iii) was
available to TCI Sub or an Affiliate of TCI Sub on a nonconfidential basis from
a third party having no obligation of confidentiality to Old VII or any
Affiliate of Old VII and which has not itself received such information directly
or indirectly in breach of any such obligation of confidentiality), and shall
not disclose such confidential information, and shall cause its Affiliates and
Agents not to disclose such confidential information, to any Person other than
TCI Sub, its Affiliates, or their respective Agents who have a need to know such
confidential information, except as may be required by law or legal process (in
which event TCI Sub shall so notify Old VII as promptly as practicable (and if
possible, prior to making such disclosure) and, if requested by Old VII, shall
seek confidential treatment of such information).
Section 7.4 Additional Financial Statements and Reports. As
soon as available, Old VII shall furnish TCI Sub with a consolidated balance
sheet and related statement of income of the Company for all fiscal quarters
ending after June 30, 1995 but prior to the Exchange Date certified by the Chief
Financial Officer of Old VII to present fairly in all material respects in
conformity with GAAP, the financial position and results of operations of the
Company at and for the fiscal quarter then ended, except to the extent that such
unaudited financial statements omit footnotes (and the disclosure contained
therein) and are subject to normal quarter - end and/or year - end adjustments.
Promptly following filing with the SEC, Old VII shall deliver copies of each
Annual Report on Form 10 - K, Quarterly Report on Form 10 - Q, Current Report on
Form 8 - K and definitive proxy statement filed by VI or Old VII with the SEC
(in each case without exhibits) and each prospectus of VI or Old VII filed with
the SEC under the 1933 Act (other than any prospectus related to securities
offered to employees). Promptly after the preparation thereof, Old VII will
deliver to TCI Sub (a) copies of (i) each final monthly profit and loss
statement for the Business, (ii) each final monthly capital spending statement
for the Business, and (iii) final monthly customer reports for the Business
showing the number of limited, tier and premium households and (b) to the extent
that any statement referred to in clause (a)(i), (a)(ii) or (a)(iii) above is
available on a System or combined System basis, copies of such statement or
report on such basis; provided, however, that Old VII does not and shall not be
deemed to have made any representations or warranties as to any such statement
or report.
Section 7.5 Material Adverse Changes. Old VII shall promptly
notify TCI Sub in writing of any material adverse developments affecting any
System which become known to Old VII, including, without limitation: (a) any
material adverse change in the condition, financial or otherwise, of any System;
(b) any material damage, destruction or loss (whether or not covered by
insurance) adversely affecting any Cable Asset or material to any System; (c)
any material notice of violation, forfeiture or complaint under any Local
Authorization; or
<PAGE> 21
16
(d) anything which, if not corrected prior to the Exchange Date, will prevent
Old VII from fulfilling any condition precedent described in Article VIII.
Section 7.6 Local Authorization and Material Contract
Amendments. (a) Old VII shall assist TCI Sub in obtaining modifications,
renewals or extensions of the terms of Local Authorizations, as necessary to the
extent Old VII determines that such modification, renewal or extension will not
have an adverse effect on the transfer of such Local Authorization, so that all
will have unexpired terms for at least five (5) years after the Exchange Date;
provided that such modifications, renewals or extensions shall be upon terms
reasonably satisfactory to TCI Sub and Old VII.
(b) Old VII shall consider in good faith any request by TCI
Sub that the Company seek to amend a Material Contract (other than any contract
or agreement between Old VII and VI or Affiliates of VI), and Old VII shall, at
TCI Sub's expense, seek to amend such Material Contract on the terms requested
by TCI Sub so long as both such amendment and seeking such amendment would not
in Old VII's good faith opinion have any adverse effect on the ability of the
Company or any Affiliate of Old VII to consummate the Transaction.
Section 7.7 Telecom Partnership Leases. Old VII shall use
reasonable commercial efforts to cause each Telecom Partnership to enter into
leases with respect to its communications plant as required by the Telecom
Partnership Agreements.
Section 7.8 Hart-Scott-Rodino. As soon as practicable (and
in any event within ten (10) Business Days after the date of this Agreement), if
required by applicable Legal Requirements, TCI Sub, and Old VII shall complete
and file, or cause to be completed and filed, any notification and report
required to be filed under the HSR Act in connection with the Transaction. TCI,
TCI Sub and Old VII shall promptly take or cause to be taken any additional
action that may be necessary, proper or advisable, will cooperate to prevent
inconsistencies between their respective filings and will furnish to each other
such necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of necessary filings or submissions
under the HSR Act. TCI Sub and Old VII shall use commercially reasonable efforts
(including the filing of a request for early termination) to obtain the early
termination of the waiting period under the HSR Act. TCI Sub and Old VII will
each pay one-half of the fee payable in connection with the filing of such
notification and report under the HSR Act.
Section 7.9 Efforts; Filing and Consents. (a) General. Each of
Old VII and TCI Sub shall take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary or advisable to consummate and
make effective as promptly as practicable the Transaction and to cooperate with
the other in connection with the foregoing, including using its reasonable
commercial efforts:
(i) to obtain all Local Authority Consents (but
without Old VII being required to provide
any consideration therefor);
<PAGE> 22
17
(ii) to obtain (but without Old VII being
required to provide any consideration
therefor) all necessary consents from other
parties to Material Contracts;
(iii) to obtain (but without Old VII being
required to provide any consideration
therefor) all consents, actions and
authorizations that are required to be
obtained under applicable Legal
Requirements in order to consummate the
Transaction;
(iv) to lift or rescind any injunction or
restraining order or other order adversely
affecting the ability of the parties to
consummate the Transaction;
(v) to effect all necessary registrations and
filings and submissions of information
requested by Governmental Authorities; and
(vi) to fulfill all conditions to this
Agreement.
Each of Old VII and TCI Sub shall, with respect to a threatened or pending
action seeking a preliminary or permanent injunction or other order, decree or
ruling or statute, rule, regulation or executive order that would adversely
affect the ability of the parties and their Affiliates to consummate the
Transaction, use its best efforts to prevent the entry, enactment or
promulgation thereof, as the case may be.
(b) Antitrust Matters. In furtherance and not in
limitation of the foregoing, Old VII, TCI and TCI Sub shall use their reasonable
commercial efforts to resolve such objections, if any, as may be asserted with
respect to the Transaction under any antitrust or trade regulatory laws of any
government or Governmental Authority ("Antitrust Laws"). If any such objection
is made or any suit is instituted challenging any part of the Transaction as
violative of any Antitrust Law, Old VII, TCI and TCI Sub shall use reasonable
commercial efforts to take such reasonable action as may be required, as the
case may be:
(i) by the applicable government or
Governmental Authority (including, without
limitation, the FCC, DOJ or FTC) in order
to promptly resolve such objections as such
government or authority may have to such
transactions under such Antitrust Law; or
(ii) by any court or similar tribunal, in any
suit brought by a private party or
Governmental Authority challenging the
transactions contemplated hereby as
violative of any Antitrust Law, in order to
avoid the entry of, or to effect the
dissolution of, any injunction, temporary
restraining order
<PAGE> 23
18
or other order that has the effect of
preventing the consummation of any of such
transactions.
Each of Old VII, TCI and TCI Sub shall promptly inform the other of any material
communication from the FCC, DOJ or FTC or any other Governmental Authority
regarding any matter related to the Antitrust Laws as they bear upon the
Transaction. If either Old VII, TCI or TCI Sub receives a request for additional
information or documentary material (including without limitation a Second
Request) from any Governmental Authority with respect to the Transaction, such
party will, after consultation with the other, supply any such requested
information or documentary material as promptly as practicable (it being
understood that this obligation does not preclude a party from negotiating with
such Governmental Authority regarding the scope of and content of such requested
information provided such negotiations are conducted as promptly as
practicable).
(c) Consents Process. Old VII and TCI Sub shall use
their best efforts (including, without limitation, by attendance at FCC or state
regulatory hearings, City Council or similar or related meetings and hearings
before state, local and county administrative bodies, by giving the other
reasonable notice of the time and date of such meetings and hearings and by
responding promptly to any requests by Governmental Authorities) to apply for
and obtain, and shall cooperate and assist one another in applying for and
obtaining, all requisite consents, actions and authorizations (including
ordinances or resolutions approving transfers) of Governmental Authorities (the
"Regulatory Approvals") required to be received by or on the part of Old VII,
New VII, VI or TCI Sub in order to consummate the Transaction contemplated by
this Agreement. Without limiting the foregoing, in respect of all such
applications for such Regulatory Approvals:
(i) Old VII will coordinate the efforts to
obtain the necessary consents of the Local
Authorities. In this role, Old VII shall
submit all filings required by the Local
Authorities after TCI Sub has reviewed and
approved the same. TCI Sub will be
responsible for negotiating with the Local
Authorities the form of the Local
Authorizations, which will be provided to
Old VII for its prior review and approval.
(ii) TCI Sub will coordinate the effort to
obtain all FCC Authorizations.
(iii) Form 394's or, with the consent of Old VII,
amendments to Form 394's (which shall
include all information required by the
Local Authorities including pro forma and
price allocations if required or requested)
shall be completed by TCI Sub for each
franchise, as identified in Schedule 4.9 to
the Implementation Agreement, as requiring
consent. The Form 394's (or amendments to
Form 394's) shall be in form
<PAGE> 24
19
and substance acceptable to Old VII and
delivered to Old VII within twenty (20)
Business Days from the date hereof (or
within five (5) Business Days of any
amendment of Schedule 4.9 to the
Implementation Agreement that gives rise to
the need to file such Form 394). Old VII
shall be responsible for the filing of the
Form 394's (or amendments to Form 394's)
and shall file certifications under Section
617 of the Communications Act promptly
after the date hereof for each Local
Authorization not identified as requiring
consent in Schedule 4.9 to the
Implementation Agreement. Such
certifications under Section 617 of the
Communications Act shall be prepared by Old
VII, shall be substantially in the form
attached hereto as Exhibit C, and shall
state that such Local Authority consent is
not required for consummation of the
Transaction.
(iv) After the Form 394's (or amendments to Form
394's) are filed, TCI Sub and Old VII shall
respond to all lawful requests from Local
Authorities for additional information as
soon as reasonably practicable after the
receipt of such request. If TCI Sub
receives requests which it deems to be
unlawful, TCI Sub shall use its best
efforts to seek to resolve the issues with
the Local Authorities as soon as
practicable. If a resolution cannot be
reached within this time frame, Old VII and
TCI Sub will agree upon appropriate
administrative or judicial procedures to
achieve such a clarification.
(v) Old VII shall consult with TCI Sub in
connection with proceedings relating to any
renewal of a Local Authorization, and,
insofar as Old VII is concerned, TCI Sub
may participate in such proceedings,
subject to Old VII's control. TCI Sub
agrees to accept the Local Authorizations
on their terms existing and in effect as of
the date hereof, with such changes in the
case of Local Authorizations that are
renewed prior to the Closing Date as are
not materially adverse to TCI Sub.
(vi) Old VII and the Cable Division Subsidiaries
and New VII and its Affiliates shall not be
obligated to agree to any continuing
obligation under any Local Authorization as
a condition of any consent or approval to
the consummation of the Transaction
(provided that TCI Sub may agree on its
<PAGE> 25
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own behalf to such a continuing obligation
so long as it would not have an effect on
the calculation of the Asset Value).
(vii) TCI Sub and Old VII shall each be
responsible for its own out-of-pocket costs
incurred in applying for and obtaining all
of the Regulatory Approvals.
(viii) TCI Sub and Old VII shall provide each
other with informal weekly progress reports
with respect to the status of obtaining the
Regulatory Approvals consisting of such
information as the parties may from time to
time reasonably request.
(ix) TCI Sub and Old VII shall provide to each
other copies of all correspondence between
any franchising authority, the FCC, any
federal, city, state or local Governmental
Authority or regulatory body having
jurisdiction and their respective agents
and advisers in connection with the
Regulatory Approvals and the sender of such
correspondence will provide to the other a
copy in advance of its sending.
(x) If any regulatory or judicial proceeding
arises from a dispute relating to the
process of obtaining the Regulatory
Approvals, Old VII shall have the right to
name the legal counsel to defend against
such action subject to the consent of TCI
Sub. Such expenses shall be borne by TCI
Sub and Old VII in equal shares.
If there should be any change in Legal Requirements applicable to obtaining
Regulatory Approvals after the date hereof, the parties shall, to the extent
necessary, adapt the procedures set forth in paragraphs (i) - (x) above to take
into account such changes.
Section 7.10 Notices of Certain Events. Each of TCI and TCI
Sub, on the one hand, and Old VII, on the other hand, shall promptly notify the
other of:
(a) any notice or other communication received
from any Person (other than with respect to consents
identified on any Schedule to this Agreement, the
Implementation Agreement or the Parents Agreement) alleging
that the consent of such Person is or may be required in
connection with the Transaction;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection
with the Transaction;
<PAGE> 26
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(c) any actions, suits, claims, investigations
or proceedings commenced, or to its knowledge threatened,
against, relating to, involving or otherwise affecting Old
VII, TCI, TCI Sub or their Affiliates, relating to the
consummation of the Transaction;
(d) any information known to such party that
indicates that any representation and warranty contained
herein will not be true and correct in any material respect as
of the Exchange Time; and
(e) the occurrence of any event known to such
party which will result, or has a reasonable prospect of
resulting, in the failure to satisfy a condition specified in
Article VIII or IX hereof.
Section 7.11 Further Assurances. From time to time after the
Exchange Time and without further consideration, the parties will execute and
deliver, or arrange for the execution and delivery of such other instruments of
conveyance and transfer or other instruments or documents and take or arrange
for such other actions as may reasonably be requested to complete more
effectively the Transaction, to confirm the transfer to TCI Sub of title to the
Shares as provided herein, and to vest in TCI Sub all rights of a record owner
of the Shares. Old VII shall use its reasonable commercial efforts (but without
Old VII being required to incur any out-of-pocket expenses or costs) to remove
or clear any defects to its title to real property.
Section 7.12 Confidentiality of Transaction. Prior to the
Exchange Time, other than the release of information required by Lenders to Old
VII or its Affiliates or by applicable law (including, but not limited to, the
preparation and dissemination of the Offering Materials in the Exchange Offer),
each party shall, and shall cause its respective Affiliates, directors,
officers, agents and employees to, keep the existence and terms of this
Agreement confidential, except as the disclosure thereof may be required by law
or pursuant to any listing agreement with, or the rules or regulations of, any
national securities exchange on which securities of such party or any such
Affiliate are listed or traded or except as may be required to satisfy the "due
diligence" inquiries of any purchaser or underwriter with respect to any
securities of such party or Affiliate or of any lender to such party or
Affiliate. Any press release concerning this Agreement or the Transaction must
be jointly approved by the parties prior to its release.
Section 7.13 TCI Undertaking as to TCI Sub's Obligations. TCI
hereby agrees with Old VII to cause TCI Sub to pay when due all of TCI Sub's
payment obligations under this Agreement and to perform when due all of TCI
Sub's other obligations under this Agreement.
Section 7.14 Consummation of Transaction. Each of TCI, TCI Sub
and Old VII shall use reasonable commercial efforts to consummate and make
effective as promptly as practicable the Transaction, and will not take any
action that would cause the consummation of the Transaction to result in a
violation of the Communications Act or the rules and regulations promulgated
thereunder that would materially and adversely impair the ability of the parties
and their Affiliates to consummate the Transaction.
<PAGE> 27
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Section 7.15 Estimated Exchange Time Basic Subscribers. Prior
to the Anticipated Commencement Date, Old VII will determine in good faith its
estimates of Exchange Date Basic Subscribers ("Estimated Exchange Date Basic
Subscribers"). At least five (5) Business Days prior to the Anticipated
Commencement Date, Old VII will deliver to TCI Sub a statement setting forth
Estimated Exchange Date Basic Subscribers, which statement shall: (i) contain
the information in reasonable detail required to calculate Estimated Exchange
Date Basic Subscribers; (ii) be prepared in accordance with the requirements of
this Agreement; and (iii) be certified by an authorized officer of Old VII to be
Old VII's good faith estimate as of the date thereof. Old VII shall not be
deemed to have made any representations or warranties as to the statements
delivered pursuant to this Section, except that they were prepared in good
faith.
Section 7.16 Estimate Statement; List of Service. Old VII
will, at the time it delivers an Estimate Statement or a statement described in
the third sentence of Section 3.1 of the Implementation Agreement to New VII,
deliver a copy thereof to TCI Sub. Old VII will, at the time it delivers to New
VII a list setting forth the service accrued by each Continuing Employee
pursuant to Section 8.1(b) of the Implementation Agreement, deliver a copy
thereof to TCI Sub.
Section 7.17 Approved Capital Expenditure Plan. Old VII shall
make or cause to be made the capital expenditures called for by the Approved
Capital Expenditure Plan in all material respects except that Old VII shall not
be required to make or cause to be made (i) expenditures which were required by
law at the time the Approved Capital Expenditure Plan was approved but are no
longer so required, (ii) expenditures which TCI Sub has agreed in writing do not
have to be made, (iii) expenditures which it is commercially unreasonable to
make because the assumptions used in developing and underlying the Approved
Capital Expenditure Plan prove to be incorrect in any material respect and (iv)
expenditures which cannot be made for reasons not within Old VII's control
(including, without limitation, unavailability of equipment, lack of access to
real property, delays in orders being filled, unavailability of pole attachment
agreements and force majeure). In the event clause (iii) above is applicable,
Old VII and TCI Sub shall cooperate and negotiate in good faith to amend the
Approved Capital Expenditure Plan to preserve for the parties, to the extent
reasonably practicable and commercially reasonable, the economic benefits
originally intended to be afforded by the expenditures not made as a consequence
of clause (iii) above.
Section 7.18 Reimbursement of Capital Expenditures. If this
Agreement terminates without the Exchange Time having occurred, TCI Sub shall
reimburse Old VII for the amount of additional capital expenditures that the
Company shall have made after January 20, 1995 as a result of complying with
RCS's or TCI Sub's rebuild standards as determined pursuant to the Approved
Capital Expenditure Plan. The incremental costs per mile of such capital
expenditures made prior to the date hereof are set forth under column A on
Schedule 7.18 and of such capital expenditures made after the date hereof are
set forth under column B on Schedule 7.18. TCI Sub shall promptly pay to Old VII
the amount of all such expenditures as to which Old VII has provided to TCI Sub
documentation establishing that such expenditures were made, provided that no
such payment shall be required earlier than the fifth Business Day after the
date of such termination, and the aggregate amount of such payments shall not
exceed
<PAGE> 28
23
$6,215,000 if the Exchange Date occurs on or prior to December 31, 1995 or
$11,495,000 if the Exchange Date occurs after December 31, 1995, unless TCI Sub
shall have approved the capital expenditures to which such reimbursements in
excess of such amount relate. Notwithstanding any provision of any Transaction
Document, Old VII shall not be required to make any capital expenditure in order
to comply with RCS's or TCI Sub's rebuild standards if it would not be
reimbursed for the incremental cost thereof pursuant to this Section 7.18 upon
the termination of this Agreement without the Exchange Time having occurred.
Section 7.19 Sale of Dayton and Nashville Systems. Old VII
will cooperate with TCI Sub on a reasonable basis in seeking consents to the
Transaction in a manner that will facilitate the sale or exchange by Old VII of
the Dayton and Nashville Systems on or after the day following the Closing Date,
provided that Old VII will not be required to cooperate with TCI Sub pursuant to
this Section 7.19 to the extent such cooperation involves any out-of-pocket
expenditure by Old VII or could in Old VII's judgment reasonably be expected to
delay the Exchange Date.
Section 7.20 Employment. (a) Not less than 120 days prior to
the Exchange Date, Old VII shall provide to TCI Sub a list of all active
employees of the Company as of a recent date showing then current job titles,
work locations and rates of compensation. Within twenty-five (25) days after Old
VII's delivery of such list, TCI Sub shall notify Old VII in writing of which
employees TCI Sub or its Affiliates intend to retain as employees of the Company
(the "Continuing Employees") and which employees TCI Sub and its Affiliates do
not intend to retain as employees of the Company (the "Non - Continuing
Employees") after the Exchange Time, provided, however, that TCI Sub shall not
require the Company to and the Company shall not violate any applicable
employment discrimination laws, any contractual or promissory rights of any
employee or the terms of any collective bargaining agreement then in effect with
respect to any employee of the Company covered by such agreement ("Cable Group
Bargaining Agreement"). All employees of the Company immediately prior to the
Exchange Time which are Non-Continuing Employees shall not be retained by the
Company after the Exchange Time.
(b) After the date Old VII provides to TCI Sub a list of
active employees of the Company pursuant to paragraph (a) above, TCI Sub may, by
notice to Old VII stating that TCI Sub is in good faith considering designating
such an employee a Continuing Employee, request that it be given access to any
employment agreement between such employee and Old VII or any Cable Division
Subsidiary, in which case Old VII will offer TCI Sub access to such agreement.
(c) Old VII has provided to TCI Sub true and complete
copies of the most recent Internal Revenue Service Form 5500 with respect to
each Benefit Plan which is tax qualified under Code Section 401(a) and which
covers employees or former employees of the Company.
Section 7.21 1996 Capital Expenditure Plan. Old VII and TCI
Sub shall in good faith endeavor to agree on a capital expenditure plan for the
Company for 1996 (the "1996
<PAGE> 29
24
Capital Expenditure Plan"). If Old VII and TCI Sub cannot agree on a 1996
Capital Expenditure Plan by December 31, 1995, the 1996 Capital Expenditure Plan
shall be prepared by Old VII and shall provide for quarterly aggregate capital
expenditures not in excess of the amount required to be spent pursuant to the
capital expenditure plan attached as Exhibit A to the Implementation Agreement
(the "1995 Plan") plus an amount equal to the percentage growth in the consumer
price index for 1995 (expressed as a decimal) multiplied by such amount,
provided that such amount shall be allocated among different categories of
expenditures in a manner consistent with the 1995 Plan with such changes as are
consistent with the progress of rebuilds and other projects reflected thereon.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF TCI AND TCI SUB
Section 8.1 Funding Conditions. The obligations of TCI and TCI
Sub to take the action required to be taken by them pursuant to Section 3.1(c)
shall be subject to the satisfaction of each of the following conditions, each
of which may be waived by TCI and TCI Sub:
(i) HSR Act. Any applicable waiting period (and
any extension thereof) under the HSR Act
shall have expired or been terminated
without the commencement or threat of any
litigation by a Governmental Authority of
competent jurisdiction to restrain the
consummation of the Transaction
contemplated by this Agreement in any
material respect.
(ii) Consented Subscribers. The number of
Consented Subscribers shall be not less
than 90% of Estimated Exchange Date Basic
Subscribers.
(iii) Absence of Injunction. No order, stay,
judgment or decree shall have been issued
by any court and be in effect restraining
or prohibiting the consummation of the
Transaction in any material respect.
(iv) Conditions to Exchange Offer. All Exchange
Offer Conditions (other than the Minimum
Condition and the Old VII Bank Borrowing
Condition) shall have been satisfied or
waived.
(v) Other Conditions. No condition contained in
Section 8.2 shall have become incapable of
satisfaction.
<PAGE> 30
25
(vi) Certificate. Old VII shall have delivered
to TCI Sub a certificate in which it
certifies that to its knowledge the
conditions set forth in Section 8.2 are
reasonably likely to be satisfied.
Section 8.2 Closing Conditions. The obligations of TCI Sub
required to be performed by TCI Sub at the Closing are subject to the
satisfaction, at or prior to the Expiration Time (or, in the case of the
conditions set forth in Sections 8.2.1(c) and 8.2.7, the Closing), of each of
the following conditions, each of which may be waived by TCI Sub:
Section 8.2.1 Representations and Warranties; Covenants. (a)
Each representation and warranty of Old VII contained in Article VI of this
Agreement and each representation and warranty of New VII in Article IV of the
Implementation Agreement that (i) is qualified by a reference therein to
"Material Adverse Effect", shall be true and correct as of the Expiration Time
as though such representation and warranty was made at and as of such time
(except to the extent a different date is specified therein, in which case such
representation and warranty will be true and correct as of such date), or (ii)
is not so qualified, shall be true and correct as of the Expiration Time as
though such representation and warranty were made at and as of such time (except
to the extent a different date is specified therein, in which case such
representation and warranty will be true and correct as of such date), with such
exceptions that do not, individually or in the aggregate, result in a Material
Adverse Effect, and except in the case of both clauses (i) and (ii) for changes
occurring after the date of this Agreement (x) pursuant to the terms of
Transaction Documents, (y) not prohibited by Section 7.1 or (z) consented to by
RCS prior to the date hereof or by TCI Sub.
(b) Each material covenant and obligation of Old VII and
New VII required by this Agreement or the Implementation Agreement to be
performed by it at or prior to the Expiration Time will have been duly performed
and complied with in all material respects as of the Expiration Time.
(c) Old VII shall have delivered the Certificate to TCI
Sub.
(d) TCI Sub shall have received a certificate, dated as
of the Closing Date and duly executed by an executive officer of Old VII on
behalf of Old VII, to the effect that the conditions set forth in Section
8.2.1(a) and Section 8.2.1(b) have been satisfied.
Section 8.2.2 HSR Act. Any applicable waiting period (and any
extension thereof) under the HSR Act will have expired or been terminated
without the commencement or threat of any litigation by a Governmental Authority
of competent jurisdiction to restrain the consummation of the transactions
contemplated by this Agreement in any material respect.
Section 8.2.3 Consented Subscribers. The number of Consented
Subscribers shall be not less than 90% of Estimated Exchange Date Basic
Subscribers.
<PAGE> 31
26
Section 8.2.4 Required Consents. Notwithstanding the
provisions of Sections 2.2 and 2.3 of the Implementation Agreement, all consents
required to be obtained by VI or Old VII in connection with the transactions
contemplated by this Agreement shall have been obtained and remain in full force
and effect, with such exceptions as would not have a Material Adverse Effect.
Section 8.2.5 Absence of Injunction. No order, stay, judgment
or decree shall have been issued by any court and be in effect restraining or
prohibiting the consummation of the Transaction in any material respect.
Section 8.2.6 Opinions. Legal opinions of counsel to Old VII
(who may be the general counsel or deputy general counsel of VI or any Affiliate
thereof with respect to Exhibit A-1 only) given as of the time immediately prior
to the Exchange Time and covering the substance of the matters set forth in
Exhibits A-1 and A-2 shall be delivered to TCI Sub.
Section 8.2.7 Exchange Offer. The Exchange Time shall have
occurred.
Section 8.2.8 Resignation of Officers and Directors. Old VII
shall have delivered to TCI Sub the resignation of each of its directors and
corporate officers, effective as of the Closing.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF OLD VII
The obligations of Old VII to be performed by Old VII at the
Closing are subject to the satisfaction, at or prior to the Expiration Time (or,
in the case of the conditions set forth in Sections 9.1(c) and 9.7, the Closing)
of each of the following conditions, each of which may be waived by Old VII:
Section 9.1 Representations and Warranties; Covenants. (a)
Each representation and warranty of TCI and TCI Sub contained in Article V of
this Agreement will be true and correct in all material respects as of the
Expiration Time as though such representation and warranty was made at and as of
such time (except to the extent a different date is specified therein, in which
case such representation and warranty will be true and correct as of such date).
(b) Each material covenant and obligation of each of TCI
and TCI Sub required by this Agreement to be performed by it at or prior to the
Expiration Time will have been duly performed and complied with in all material
respects as of the Expiration Time.
(c) TCI Sub shall have paid the Purchase Price to Old
VII in the manner specified by Section 2.2.
<PAGE> 32
27
(d) Old VII will have received a certificate, dated as
of the Closing Date and duly executed by an executive officer of TCI Sub to the
effect that the conditions set forth in Sections 9.1(a) and 9.1(b) have been
satisfied.
Section 9.2 HSR Act. Any applicable waiting period under the
HSR Act (and any extension thereof) shall have expired or been terminated
without the commencement or threat of any litigation by a Governmental Authority
of competent jurisdiction to restrain the consummation of the Transaction
contemplated by this Agreement in any material respect.
Section 9.3 Consented Subscribers. The number of Consented
Subscribers shall not be less than 90% of Estimated Exchange Date Basic
Subscribers.
Section 9.4 Opinions. A legal opinion of counsel to TCI and
TCI Sub (who may be the general counsel or deputy general counsel of TCI, TCI
Sub or any Affiliate thereof) covering the substance of the matters set forth on
Exhibit B shall be delivered to Old VII.
Section 9.5 Consents. All consents required to be obtained by
TCI and TCI Sub in connection with the transactions contemplated hereby shall
have been obtained and remain in full force and effect, with such exceptions as
do not result in a material adverse effect on TCI's and TCI Sub's ability to
consummate the transactions contemplated hereby.
Section 9.6 Absence of Injunction. No order, stay, judgment or
decree will have been issued by any court and be in effect restraining or
prohibiting the consummation of the Transaction in any material respect.
Section 9.7 Exchange Offer. The Exchange Time shall have
occurred.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement shall automatically
terminate upon any termination of the Parents Agreement pursuant to Section 7.1
thereof.
Section 10.2 Effect of Termination. (a) Upon termination of
this Agreement pursuant to Section 10.1 hereof, except as provided in clause (b)
below (i) this Agreement will forthwith become null and void, (ii) such
termination will be the sole remedy with respect to any breach of any
representation, warranty, covenant or agreement contained in or made pursuant to
this Agreement and (iii) no party hereto or any of their respective officers,
directors, employees, agents, consultants, shareholders or principals will have
any liability or obligation hereunder or with respect hereto; provided, however,
that no party to this Agreement shall be entitled to recover consequential
damages in respect of any breach of this Agreement or any other Transaction
Document.
<PAGE> 33
28
(b) The provisions of clause (a) above notwithstanding,
no party will be relieved of: (i) liability for any breach of representations
and warranties of Articles V and VI (other than Sections 6.9, 6.10 and 6.11
hereof), and (ii) liability for any breach of any material covenant or agreement
contained herein or made pursuant hereto (for purposes of this Section 10.2 the
covenants and agreements of TCI and TCI Sub contained in Sections 2.2 and 3.1,
and the obligations of Old VII contained in Section 2.1, will be deemed to be
material). The provisions of Sections 3.1(e), 7.12, 7.13 (insofar as it applies
to the provisions referred to in this sentence), 7.18, 10.2, 11.2, 11.9 and
11.11 will survive termination hereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Legend. The certificates representing the Shares
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THEY MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SAID ACT.
Section 11.2 Expenses. Except as expressly set forth herein,
the fees and expenses (including the fees of any lawyers, accountants,
investment bankers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby whether or not the
transactions contemplated hereby are consummated will be paid by the party
incurring the same.
Section 11.3 Headings. The Section headings herein are for
convenience of reference only, do not constitute part of this Agreement and will
not be deemed to limit or otherwise affect any of the provisions hereof.
References to Sections and Exhibits, unless otherwise indicated, are references
to Sections and Exhibits hereof.
Section 11.4 Notices. Any notice or other communication
required or permitted to be given hereunder will be in writing and will be
mailed by prepaid registered or certified mail, timely deposited with an
overnight courier such as Federal Express, or delivered against receipt, as
follows:
<PAGE> 34
29
(a) In the case of TCI or TCI Sub, to:
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: Chief Executive Officer
with a copy to:
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: General Counsel
(b) In the case of Old VII to:
Viacom Inc.
1515 Broadway
New York, NY 10036
Attention: General Counsel
with a copy to:
Hughes Hubbard & Reed
One Battery Park Plaza
New York, NY 10004
Attention: Ed Kaufmann, Esq.
or to such other address as the party may have furnished in writing in
accordance with the provisions of this Section 11.4. Any notice or other
communication shall be deemed to have been given, made and received upon
receipt. Either party may change the address to which notices are to be
addressed by giving the other party notice in the manner herein set forth.
Section 11.5 Assignment. This Agreement and all provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors, however, neither this Agreement nor any right,
interest, or obligation hereunder may be assigned by any party hereto (other
than by operation of law) without the prior written consent of the other
parties, and any such assignment or purported assignment without such consent
shall be void.
Section 11.6 Entire Agreement. This Agreement and the other
Transaction Documents embody the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior written or oral commitments, arrangements or understandings with respect
thereto.
<PAGE> 35
30
Section 11.7 Amendment; Waiver. (a) This Agreement may only be
amended or modified in writing signed by the party against whom enforcement of
any such amendment or modification is sought.
(b) Any party hereto may, by an instrument in writing,
waive compliance with any term or provision of this Agreement on the part of
such other party hereto. The waiver by any party hereto of a breach of any term
or provision of this Agreement will not be construed as a waiver of any
subsequent breach.
Section 11.8 Counterparts. This Agreement may be executed in
two or more counterparts, all of which will be considered one and the same
agreement and each of which will be deemed an original. All signatures need not
be on one counterpart.
Section 11.9 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT BE
APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING
BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE.
Section 11.10 Severability. If any one or more of the
provisions of this Agreement is held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining provisions of this
Agreement will not be affected thereby, and Old VII, TCI Sub and TCI will use
their reasonable efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
Section 11.11 Consent to Jurisdiction. Each party hereby
submits to the non-exclusive jurisdiction of the courts of general jurisdiction
of the States of New York and Colorado and the federal courts of the United
States of America, located in the City of New York, New York, and Denver,
Colorado solely in respect of the interpretation and enforcement of the
provisions of this Agreement and hereby waives, and agrees not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
of this Agreement that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in such courts or that this
Agreement may not be enforced in or by such courts or that its property is
exempt or immune from execution, that the suit, action or proceeding is brought
in an inconvenient forum, or that the venue of the suit, action or proceeding is
improper. Service of process with respect thereto may be made upon any party by
mailing a copy thereof by registered or certified mail, postage prepaid, to such
party at its address as provided in Section 11.4 hereof, provided that service
of process may be accomplished in any other manner permitted by applicable law.
Section 11.12 Third Person Beneficiaries. This Agreement is
not intended and shall not be construed to confer upon any Person (other than
TCI, TCI Sub and Old VII) any
<PAGE> 36
31
rights or remedies hereunder, except that New VII shall be a third-party
beneficiary of Section 3.1(d), entitled to enforce said Section as if it were a
party hereto.
Section 11.13 Specific Performance. Old VII, TCI and TCI Sub
recognize that any breach of any covenant or agreement contained in this
Agreement may give rise to irreparable harm for which money damages would not be
an adequate remedy, and accordingly agree that, in addition to other remedies,
any non-breaching party will be entitled to enforce the agreements and covenants
contained herein of TCI and TCI Sub or Old VII, as the case may be, by a decree
of specific performance without the necessity of proving the inadequacy as a
remedy of money damages.
Section 11.14 Survival. The representations and warranties
contained in or made pursuant to this Agreement shall terminate and be of no
further force on and as of April 30, 1997, except that the representation and
warranty contained in Sections 5.7, 6.7 and 6.8 and the provisions of the last
sentence of Section 3.1(a) shall survive indefinitely.
Section 11.15 Preferred Stock Conversion. TCI shall contribute
to Old VII or otherwise cause Old VII to have available sufficient shares to
enable Old VII to issue to holders of the Preferred Stock, shares of TCI Stock
upon exercise by the holders of the Preferred Stock of their conversion rights
as specified in the terms of the Preferred Stock. TCI shall reserve and keep
available at all times, out of its authorized and unissued stock, sufficient
shares of TCI Stock to satisfy its obligations to Old VII in connection with
such conversion of the Preferred Stock. TCI agrees to comply with its
obligations specified herein and further agrees that any such TCI Stock, when
issued, will be registered under the 1933 Act, and all state securities and blue
sky laws applicable to such issuance shall have been complied with respect
thereto.
<PAGE> 37
32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed in New York, New York, as of the day and year
first above written.
VIACOM INTERNATIONAL INC.
By:
------------------------------------------
Name: Thomas E. Dooley
Title: Executive Vice President Finance,
Corporate Development and
Communications
TELE-COMMUNICATIONS, INC.
By:
------------------------------------------
Name:
Title:
TCI COMMUNICATIONS, INC.
By:
------------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 2.3
- --------------------------------------------------------------------------------
IMPLEMENTATION AGREEMENT
between
VIACOM INTERNATIONAL INC.
and
VIACOM INTERNATIONAL SERVICES INC.
Dated as of July 24, 1995
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS...................................................... 1
Section 1.1 Defined Terms............................................ 1
ARTICLE II CONVEYANCE; LACK OF CONSENTS OR
REGULATORY APPROVALS; RIGHT OF FIRST
REFUSAL; DISASTERS............................................... 18
Section 2.1 Conveyance of Assets and Assumption of Liabilities:
Transfers to New VII, Recapitalization................... 18
Section 2.2 Lack of Consents......................................... 19
Section 2.3 Lack of Regulatory Approvals............................. 20
Section 2.4 Right of First Refusal................................... 22
Section 2.5 Lost Service Subscribers................................. 22
Section 2.6 Release of Old VII....................................... 23
Section 2.7 Receipt of Consents...................................... 23
Section 2.8 Execution of Other Instruments........................... 23
Section 2.9 Use of Viacom Name....................................... 23
Section 2.10 Name Change.............................................. 24
Section 2.11 Bank Accounts............................................ 24
Section 2.12 Intercompany Debt........................................ 24
Section 2.13 Consents................................................. 24
Section 2.14 Books and Records........................................ 24
Section 2.15 Confidentiality.......................................... 24
Section 2.16 Control of Litigation.................................... 25
Section 2.17 Security Interest........................................ 25
ARTICLE III ADJUSTMENTS...................................................... 26
Section 3.1 Determination of Estimated Asset Value................... 26
Section 3.2 Calculation of Adjustment Amounts........................ 27
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 3.3 Adjustment Payment............................................ 27
Section 3.4 Fixed Amount.................................................. 28
Section 3.5 Proration..................................................... 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEW VII............................. 28
Section 4.1 Corporate Existence and Power................................. 28
Section 4.2 Corporate Authorization....................................... 29
Section 4.3 Capitalization; Subsidiaries; Certificates of Incorporation
and By-Laws................................................... 29
Section 4.4 Governmental Authorization.................................... 30
Section 4.5 Consents...................................................... 30
Section 4.6 Non-Contravention............................................. 30
Section 4.7 Binding Effect................................................ 31
Section 4.8 Financial Statements; Undisclosed Liabilities................. 31
Section 4.9 Systems; Local Authorizations and FCC Authorizations.......... 31
Section 4.10 Absence of Changes............................................ 32
Section 4.11 Subsidiaries.................................................. 32
Section 4.12 Assets........................................................ 33
Section 4.13 Intellectual Property......................................... 33
Section 4.14 Material Contracts............................................ 33
Section 4.15 Litigation.................................................... 33
Section 4.16 Compliance with Legal Requirements............................ 33
Section 4.17 Employees..................................................... 34
Section 4.18 Finders' Fees................................................. 35
Section 4.19 Real Property................................................. 35
Section 4.20 Environmental Matters......................................... 35
Section 4.21 FCC and Copyright............................................. 36
Section 4.22 Covenants not to Compete...................................... 36
Section 4.23 Telecom Capital Expenditures.................................. 36
Section 4.24 Accounts Receivable, Net...................................... 37
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 4.25 Number of Basic Subscribers.............................. 37
Section 4.26 Adjustment Amounts....................................... 37
Section 4.27 Ranking of Payment Obligations........................... 37
ARTICLE V NONCOMPETITION................................................... 37
Section 5.1 Noncompetition........................................... 37
ARTICLE VI TERMINATION...................................................... 38
Section 6.1 Termination.............................................. 38
Section 6.2 Effect of Termination.................................... 38
ARTICLE VII SURVIVAL AND INDEMNIFICATION..................................... 38
Section 7.1 Survival................................................. 38
Section 7.2 Indemnification.......................................... 38
ARTICLE VIII EMPLOYEE MATTERS................................................. 41
Section 8.1 Employment............................................... 41
ARTICLE IX TAX MATTERS...................................................... 44
Section 9.1 Obligation of New VII to Indemnify....................... 44
Section 9.2 Refunds.................................................. 44
Section 9.3 Final Returns............................................ 45
Section 9.4 Conduct of Audits and Disputes........................... 45
Section 9.5 Carrybacks............................................... 46
Section 9.6 Designation of Agent for PCI Group....................... 46
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE X MISCELLANEOUS.................................................... 47
Section 10.1 Expenses................................................. 47
Section 10.2 Headings................................................. 47
Section 10.3 Notices.................................................. 47
Section 10.4 Assignment............................................... 48
Section 10.5 Entire Agreement......................................... 48
Section 10.6 Amendment; Waiver........................................ 48
Section 10.7 Counterparts............................................. 49
Section 10.8 Governing Law............................................ 49
Section 10.9 Severability............................................. 49
Section 10.10 Consent to Jurisdiction.................................. 49
Section 10.11 Third Person Beneficiaries............................... 49
Section 10.12 Representations and Warranties; Schedules................ 49
Section 10.13 Specific Performance..................................... 50
</TABLE>
-iv-<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Approved Capital Expenditure Plan
Exhibit B - Front End Loaded Programming Payments
Exhibit C - Bill of Sale, Instrument of Assumption and Provision of Benefits Agreement
Exhibit D - Cable Division Subsidiaries
Exhibit E - Access Fee Conditions
Exhibit F - PVIT Assets
Exhibit G - PVIT Bill of Sale
Exhibit H - Systems
Exhibit I - Transferred Assets
Exhibit J - Amended and Restated Certificate of Incorporation
Exhibit K - Term Sheet for Series A Senior Cumulative Exchangeable Preferred Stock
SCHEDULES
Schedule 4.5 - Consents
Schedule 4.8 - Financial Statements
Schedule 4.9 - Systems: Local Authorizations and FCC Authorizations
Schedule 4.10 - Material Changes
Schedule 4.14 - Material Contracts
Schedule 4.15 - Litigation
Schedule 4.16 - Non-compliance with Legal Requirements
Schedule 4.17 - Employment Agreements; Labor Disputes; Labor
Agreements; Benefit Plans
Schedule 4.19 - Owned Real Property
Schedule 4.20 - Underground Storage Tanks
Schedule 4.21 - Equal Employment Opportunity Rules
Schedule 4.22 - Covenants not to Compete
</TABLE>
-i-
<PAGE> 7
IMPLEMENTATION AGREEMENT
Implementation Agreement, dated July 24, 1995 (this
"Agreement") by and among Viacom International Inc., a Delaware corporation
("Old VII") and Viacom International Services Inc., a Delaware corporation ("New
VII").
WHEREAS, Old VII is a wholly-owned subsidiary of Viacom Inc.,
a Delaware corporation ("VI") and New VII is a wholly-owned subsidiary of Old
VII; and
WHEREAS, VI desires to make an exchange offer to its
shareholders in which shares of VI Common Stock would be exchanged for Class A
Common Stock of Old VII; and
WHEREAS, VI has entered into a Parents Agreement, dated as of
the date hereof, with Tele-Communications, Inc., a Delaware corporation ("TCI"),
and TCI Communications, Inc., a Delaware corporation ("TCI Sub"), which contains
certain agreements of VI, TCI and TCI Sub regarding the Transaction; and
WHEREAS, in connection with the Exchange Offer, Old VII and
New VII desire to enter into the agreements set forth below;
NOW, THEREFORE, in consideration of the mutual promises,
covenants and other agreements contained herein, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. The following terms, as used in
this Agreement, shall have the following meanings (and such meanings shall be
equally applicable to both the singular and plural forms of the terms defined
herein):
"Accounts Payable" shall mean the book value of all accounts
payable of the Company as of the Exchange Date (other than those constituting
New Borrowing Obligations) after giving effect to the Assumption of Liabilities,
calculated in accordance with GAAP on a basis consistent with the application of
such principles in the preparation of the Financial Statements.
"Accounts Receivable, Net" shall mean the book value of all
accounts receivable of the Company as of the Exchange Date net of the allowance
for doubtful accounts and advance billings (other than deferred customer revenue
and accounts receivable relating to payments of principal due from the Telecom
Partnerships referred to in clause (ii) of the definition of Telecom Capital
Expenditure Amount), calculated in accordance with GAAP on a basis consistent
with the application of such principles in the preparation of the Financial
Statements and after giving effect to the Conveyance of Assets.
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"Ad Interconnect Assets" shall mean all right, title and
interest of Old VII and each Cable Division Subsidiary in and to the Bay Cable
Advertising and Northwest Cable Advertising Partnerships described on Schedule
4.14.
"Adjustment Amounts" shall have the meaning specified in
Section 3.2.
"Affiliate" of any Person at any time shall mean any other
Person directly or indirectly controlling, controlled by or under common control
with such Person at such time.
"Aggregate Loan Amount" shall have the meaning specified in
the Parents Agreement.
"Agents" shall have the meaning specified in the Subscription
Agreement.
"Agreement" shall mean this Implementation Agreement,
including the Exhibits and Schedules hereto.
"Amended and Restated Certificate of Incorporation" shall have
the meaning specified in Section 2.1(c).
"Anticipated Commencement Date" shall have the meaning
specified in the Parents Agreement.
"Appraised Value" shall mean, with respect to any System (or
portion thereof) at any date of determination, an amount equal to the sum of (A)
(x) Cash Flow of such System (or portion thereof) for the twelve full calendar
months ending the calendar month ended prior to such date of determination,
multiplied by (y) ten, plus (B) the Specified Capital Expenditure Amount for
such System (or portion thereof). The Appraised Value of a System (or portion
thereof) shall be established by mutual agreement of Old VII and New VII. If Old
VII and New VII are unable to agree on the Appraised Value of a System (or
portion thereof), such Appraised Value will be determined by an Arbitrating
Firm, whose determination shall be binding upon the parties. The Arbitrating
Firm will render its determination within ten (10) Business Days of its
engagement. Each of New VII and Old VII shall be responsible for one-half the
fees and expenses of the Arbitrating Firm (which fees shall be negotiated in
good faith by New VII and Old VII). As used herein, "Cash Flow" of a System (or
portion thereof) for a period shall mean the operating income of such System (or
portion thereof) for such period, before provision for income taxes, interest
expense, depreciation and amortization, but including allocations for direct and
indirect operating expenses and overhead (excluding any allocation of VI
administrative overhead and any management fees), determined in accordance with
accounting principles applied on a basis consistent with the application of such
principles by Old VII prior to the Exchange Time.
"Approved Capital Expenditure Plan" shall mean the capital
expenditure plan for the Company, by System, which identifies Covered Capital
Expenditures and Line Extension and Other Capital Expenditures, attached as
Exhibit A hereto, together with the 1996 Capital Expenditure Plan (as defined in
the Subscription Agreement).
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"Arbitrating Firm" shall mean Arthur Andersen & Co. or, if it
cannot serve in such capacity, another "big six" independent public accounting
firm (other than KPMG Peat Marwick LLP and Price Waterhouse & Co. LLP and their
respective successors) selected by agreement of Old VII and New VII or, if they
cannot agree, chosen by lot from among the aforesaid firms.
"Asset Value" shall mean an amount equal to (i) the Fixed
Amount, plus (ii) the Capital Expenditure Amount, plus (iii) the Inventory
Amount, plus (iv) the Telecom Amount plus (v) an amount equal to Working
Capital, if Working Capital is a positive number, minus (vi) an amount, if any,
equal to the amount by which Working Capital is a negative number, minus (vii)
the amount of the front-end loaded programming payments set forth on Exhibit B,
plus (viii) an amount equal to interest on the sum of the foregoing amounts at
the LIBOR Rate for the period from (and including) September 1, 1995 to (but
excluding) the Exchange Date.
"Assumption of Liabilities" shall have the meaning specified
in Section 2.1(a).
"Balance Sheet Date" shall mean March 31, 1995.
"Banked Sick Leave Days" shall have the meaning specified in
Section 8.1(f).
"Basic Subscriber" shall mean the sum of the following amounts
for all Franchise Areas:
(a) with respect to a Franchise Area, the number of
all private and residential customer accounts (regardless of
whether in a single-family home or in an individually billed
unit in a multiple-unit building) who are receiving basic
cable television service at the Basic Subscriber Rate (but
excluding "complimentary subscribers," "second connects" and
"additional outlets" as such terms are customarily used in the
cable television industry); plus
(b) with respect to a Franchise Area, the number of
private and residential customer accounts (regardless of
whether in a single-family home or in an individually billed
unit in a multiple unit building) who are receiving basic
cable television service at a discount to the Basic Subscriber
Rate because the account is or was to the knowledge of New VII
a "low income" and/or "senior citizen" account in accordance
with the Company's policy as of January 1, 1995, determined as
the quotient of the total monthly basic service revenue
derived from these customers as of the date of determination
thereof (excluding any charges for taxes or nonrecurring items
(including, without limitation, nonrecurring charges for
installation, equipment, any outlet or connection or a
pass-through charge for sales taxes, line-itemized franchise
fees and charges)) divided by the Basic Subscriber Rate; plus
(c) with respect to a Franchise Area, without
duplication of clauses (a) and (b) above, the number of
commercial and bulk billed accounts (including, without
limitation, hotels, motels, apartment houses and multi-family
homes) that
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receive basic cable television service, determined as the
quotient of the total monthly basic service revenue derived
from the commercial and bulk billed accounts as of the date of
determination thereof (excluding any charges for taxes or
nonrecurring items (including, without limitation,
nonrecurring charges for installation, equipment, any outlet
or connection or a pass-through charge for sales taxes,
line-itemized franchise fees and charges)) divided by the
Basic Subscriber Rate.
"Basic Subscriber Rate" shall mean for each Franchise Area,
the monthly fees and charges for the provision of the "basic service" (as such
term is customarily used in the cable television industry and regardless of
whether customers taking basic service take any other tier of regulated or
unregulated service (excluding (i) any charges for installation fees and
revenues derived from the rental of converters, remote control devices and other
like charges for equipment and (ii) any charges for taxes or nonrecurring items
(including, without limitation, nonrecurring charges for installation,
equipment, any outlet or connection or a pass-through charge for sales taxes,
line-itemized franchise fees and charges))) charged to customers served by the
Franchise Area, as of the date of determination.
"Benefit Plans" shall have the meaning specified in Section
4.17(c)(i).
"Bill of Sale" shall mean a Bill of Sale, Instrument of
Assumption and Provision of Benefits Agreement executed by Old VII, New VII and
the Cable Division Subsidiaries in the form of Exhibit C.
"Business" shall mean and include the business of each and all
of the Systems.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which banks in New York City are required to or may be closed.
"Cable Act" shall mean the Cable Television Consumer
Protection and Competition Act of 1992, as amended, and the rules and
regulations promulgated thereunder.
"Cable Assets" shall mean (i) all right, title and interest of
Old VII and the Cable Division Subsidiaries in all assets, rights, privileges,
interests, claims and properties owned, used or held for use by Old VII and the
Cable Division Subsidiaries in the Business (including without limitation (aa)
all equity and other ownership interests of Old VII in the Cable Division
Subsidiaries, (bb) the Telecom Assets, (cc) the Ad Interconnect Assets and (dd)
all interest earned on the Cash Collateral Account) and (ii) all rights of Old
VII under the Transaction Documents with respect to periods after the Exchange
Date (including, without limitation, rights of Old VII under Section 7.2(b)
hereof).
"Cable Cash Balances" shall mean the petty cash, cash drawer
and imprest account balances of the Company, as of the Exchange Date, excluding
the Loan Proceeds.
"Cable Division Assets" shall have the meaning specified in
Section 4.12.
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"Cable Division Subsidiaries" or "Cable" shall mean the
Persons set out on Exhibit D.
"Cable Group Bargaining Agreement" shall have the meaning
specified in the Subscription Agreement.
"Cable Group Contracts" shall mean all contracts, purchase
orders and other agreements of the Company to the extent relating to the
Business.
"Cable Group Welfare Plans" shall have the meaning specified
in Section 8.1(h).
"Cable Liabilities" shall mean all obligations and liabilities
(other than Pre-Closing Specified Liabilities) of Old VII and the Cable Division
Subsidiaries arising out of the operation of or with respect to the Business
(but not including any liability of Old VII arising out of the breach by Old
VII, on or prior to the Exchange Date, of any representation, warranty, covenant
or agreement of Old VII contained in the Subscription Agreement), together with
all obligations and liabilities (x) of Old VII under the Transaction Documents
with respect to periods after the Exchange Date, (y) constituting or arising
from the New Borrowing Obligations (including, without limitation, the payment
of principal, interest, premium, fees, expenses and indemnities) or (z) of Old
VII or any Cable Division Subsidiary arising with respect to periods after the
Exchange Date under employment agreements with any Continuing Employee.
"Cable Television Business" shall mean the business of owning
and operating a coaxial or fiber optic cable television signal distribution
system.
"Capital Expenditure Amount" shall mean (i) the aggregate
amount of all Covered Capital Expenditures, plus (ii) the aggregate amount of
the Covered Line Extension and Other Capital Expenditures, plus (iii) without
duplication of clauses (i) and (ii) above, the aggregate amount of all capital
expenditures made by the Company during the period from January 20, 1995 through
the Exchange Date at the request of, or with the express written consent of
(whether prior to or after the date of this Agreement) TCI Sub, or (prior to the
date of this Agreement) RCS.
"Cash Collateral Account" shall have the meaning specified in
the Subscription Agreement.
"CERCLA" shall have the meaning specified in Section 4.20.
"Class A Common Stock" shall have the meaning specified in the
Parents Agreement.
"Class B Common Stock" shall have the meaning specified in the
Subscription Agreement.
"COBRA" shall have the meaning specified in Section 8.1(h).
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
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"Communications Act" shall mean the Communications Act of 1934
including the Cable Communications Policy Act of 1984, and the Cable Television
Consumer Protection and Competition Act of 1992, each as amended, and all rules
and regulations promulgated thereunder, as amended (the "Rules and
Regulations").
"Company" shall mean (x) Old VII after giving effect to the
Conveyance of Assets and Assumption of Liabilities and as if such conveyance and
assumption occurred immediately prior to the execution and delivery of this
Agreement (with the same effect as if the Conveyance of Assets and Assumption of
Liabilities occurred at the time they are to occur pursuant to Section 2.1) and
(y) each of the Cable Division Subsidiaries.
"Continuing Employee" shall have the meaning specified in the
Subscription Agreement.
"Conveyance of Assets" shall have the meaning specified in
Section 2.1.
"Copyright Act" shall mean Title 17 of the United States Code,
as amended, and all rules and regulations promulgated thereunder, as amended.
"Covered Capital Expenditures" shall mean the sum of (i) the
aggregate amount of all capital expenditures made by the Company during the
period from January 1, 1995 through the Exchange Date relating to (a) upgrades
and rebuilds and associated items (including, without limitation, head-end sites
and head-end equipment to expand channel capacity, but excluding costs of
repairing damage caused by a Disaster that would not have been incurred if such
Disaster had not occurred) and (b) converter change-outs (including the purchase
of converters for such purpose), (ii) without duplication of clause (i) above,
any capital expenditure identified as a Covered Capital Expenditure in the
Approved Capital Expenditure Plan and (iii) a reasonable allocation of
construction overhead (other than capitalized interest) for such period related
to such upgrades and rebuilds (other than with respect to repairing damage
caused by a Disaster).
"Covered Line Extension and Other Capital Expenditures" shall
mean the sum of (i) the aggregate amount of all Line Extension and Other Capital
Expenditures made by the Company during the period from February 23, 1995
through the Exchange Date plus (ii) a reasonable allocation of construction
overhead (other than capitalized interest) for such period related to such Line
Extension and Other Capital Expenditures.
"Deferred Closing Date" shall have the meaning specified in
Section 2.3(c).
"Delaware Corporation Law" shall mean the General Corporation
Law of the State of Delaware.
"Disaster" shall have the meaning specified in Section 2.5(a).
"Disclosing Party" shall have the meaning specified in Section
2.15.
"Dispute Notice" shall have the meaning specified in Section
3.2(c).
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"Disqualified Person" shall have the meaning specified in
Section 5.1.
"Employees" shall mean all employees of the Company with
respect to the Systems at the relevant time.
"Equipment" shall mean all equipment and other personal
property of the Company owned, used or held for use by the Company in connection
with the Business or the Systems.
"ERISA" shall have the meaning specified in Section
4.17(c)(i).
"ERISA Affiliate" shall have the meaning specified in Section
8.1(b).
"Estimate Statement" shall have the meaning specified in
Section 3.1.
"Estimated Adjustment Amounts" shall have the meaning
specified in Section 3.1.
"Estimated Asset Value" shall have the meaning specified in
Section 3.1.
"Estimated Capital Expenditure Amount" shall have the meaning
specified in Section 3.1.
"Estimated Fixed Amount" shall have the meaning specified in
Section 3.1.
"Estimated Inventory Amount" shall have the meaning specified
in Section 3.1.
"Estimated Net Asset Value" shall mean an amount equal to the
Estimated Asset Value, minus $1,700,000,000 (one billion, seven hundred million
dollars).
"Estimated Telecom Amount" shall have the meaning specified in
Section 3.1.
"Estimated Working Capital" shall have the meaning specified
in Section 3.1.
"Exchange Date" shall have the meaning specified in the
Parents Agreement.
"Exchange Date Basic Subscribers" shall mean the average
number of Basic Subscribers for the nine (9) consecutive Thursdays (or such
other day used by the Company for accounts receivable cutoffs) ending on or
immediately prior to the Exchange Date, calculated by summing the number of
Basic Subscribers as of each such Thursday (or such other day) and dividing such
sum by nine (9), without, for these purposes, giving effect to the loss, if any,
of Basic Subscribers as a result of a Disaster (defined for these purposes
without regard to the number of Basic Subscribers affected).
"Exchange Offer" shall have the meaning specified in the
Parents Agreement.
"Exchange Offer Conditions" shall have the meaning specified
in the Parents Agreement.
"Exchange Time" shall have the meaning specified in the
Parents Agreement.
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"Expiration Time" shall have the meaning specified in the
Parents Agreement.
"FCC" shall mean the Federal Communications Commission.
"FCC Authorizations" shall mean all authorizations, approvals,
certifications, franchises, licenses and permits of the FCC granted to the
Company with respect to the Systems.
"Final Certificate" shall have the meaning set out in Section
3.2(b).
"Final Determination" shall mean (1) a decision, judgment,
decree or other order by any court of competent jurisdiction, which decision,
judgment, decree or other order has become final after all allowable appeals by
either party to the action have been exhausted (it being understood that for
purposes of this definition, the term "allowable appeals" means an appeal taken
or required to be taken under the provisions of the contest provisions with
respect to the applicable indemnification obligation and permitted by applicable
law) or the time for filing such appeal has expired, (2) a closing agreement
entered into under Section 7121 of the Code (or comparable state or local law)
or any other binding settlement agreement entered into in connection with an
administrative or judicial proceeding (including, without limitation, any
settlement entered into in accordance with the contest provisions with respect
to the applicable indemnification obligation), or (3) the expiration of the time
for instituting a claim for refund, or if such a claim was filed, the expiration
of the time for instituting suit with respect thereto.
"Financial Statements" shall have the meaning set out in
Section 4.8(a).
"Fixed Amount" shall mean $2,000,000,000 (two billion
dollars), subject to adjustment pursuant to Section 3.4.
"Franchise Areas" shall mean the areas in which the Company is
authorized to provide cable television service under the Local Authorizations
and the areas served by any System in which the Company provides cable
television service without a Local Authorization.
"GAAP" shall mean generally accepted accounting principles
applied on a consistent basis.
"Governmental Authority" shall mean any federal, state,
municipal or local governmental authority or political subdivision thereof.
"Hazardous Materials" shall have the meaning specified in
Section 4.20.
"Homes Passed" shall mean the sum of (a) each single family
residence in the Franchise Areas, and (b) each townhouse, condominium or
dwelling unit which is part of a building containing multiple dwelling units in
the Franchise Areas, but excluding single family residences and units in
multiple dwelling unit buildings which (i) are located more than 150 feet from
an activated trunk or feeder cable of a System, (ii) require an underground
service stub in order to be connected to activated trunk or feeder cable of a
System or (iii) are located in multiple dwelling unit buildings to which a
System does not have a right of access.
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"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder,
as amended.
"Indemnified Party" shall have the meaning specified in
Section 7.2(a).
"Indemnifying Party" shall have the meaning specified in
Section 7.2(a).
"INS" shall mean the Immigration and Naturalization Service.
"Intangible Assets" shall mean subscriber lists and customer
records of the Systems, construction and engineering maps and data, schematics
and blueprints, books and financial records pertaining to the operation of the
Business or the Systems, and all correspondence and documents pertaining to
subscribers, Governmental Authorities and other third parties relevant to the
Systems' ongoing relationships with subscribers, Governmental Authorities and
other third parties, in each case then in the possession of the Company; and all
trademarks, trade names, service marks, copyrights and other intangible property
used primarily in the Business (other than Transferred Assets).
"Inventory" shall mean the inventory and supplies of the
Company.
"Inventory Amount" shall mean the book value of all Inventory
as of the Exchange Date in accordance with GAAP on a basis consistent with the
application of such principles in the preparation of the Financial Statements
after giving effect to the Conveyance of Assets, multiplied by a fraction: (i)
the numerator of which is equal to the aggregate book value of all Inventory
consumed during the two-month period ending on the last day of the monthly
accounting period ending prior to the Exchange Date to the extent such Inventory
was consumed in connection with the Covered Capital Expenditures, Covered Line
Extension and Other Capital Expenditures, the Telecom Capital Expenditure Amount
or capital expenditures made by the Company at the request of, or with the
express written consent of, TCI Sub (or, prior to the date of this Agreement,
RCS) and (ii) the denominator of which is equal to the aggregate book value of
all Inventory consumed during such two-month period.
"knowledge" of New VII shall mean the knowledge of VI, Old
VII, New VII, or any Cable Division Subsidiary.
"Leased Real Property" shall mean leasehold interests of the
Company in the real property used in connection with any System.
"Legal Requirement" shall mean the requirements of any law,
ordinance, statute, rule, regulation, code, order, judgment, decree, injunction,
franchise, determination, approval, permit, license, authorization or other
requirement of any Governmental Authority.
"LIBOR Rate" shall mean a per annum fluctuating rate of
interest equal to the sum of (i) the London Interbank Offered Rate for one month
published as such from time to time in the Money Rates column of The Wall Street
Journal (Eastern Edition) (or, if the Wall Street Journal (Eastern Edition) is
not published or if such rate is for any other reason unavailable on any
relevant date, the highest offered rate for deposits in U.S. Dollars for the one
month period
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which appears on the Reuters Screen London Interbank Offered Rates Page at
approximately 11:00 a.m. (London time) on the relevant date) plus (ii) 1-1/4
percentage points. For all purposes of this Agreement, interest at the LIBOR
Rate shall be calculated on the basis of the actual number of days elapsed in
the relevant period over a year of 360 days, as applicable.
"Lien" shall mean, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset.
"Line Extension and Other Capital Expenditures" shall mean any
capital expenditure made after January 20, 1995 (calculated on a basis
consistent with the Company's policies prior to the Exchange Date) for (i)
extension of trunk and feeder cable within the Franchise Areas to serve new
commercial accounts, new residential developments and/or additional residential
dwelling units, thereby adding new Homes Passed, (ii) initial connections from
trunk and feeder cable in the Franchise Areas to any single family residence,
townhouse, condominium or dwelling unit which is part of a building containing
multiple dwelling units or to any potential commercial or bulk-billed account
which relate to extensions covered in clause (i) above, (iii) the purchase of
converters (but without duplication of the amounts included in Covered Capital
Expenditures pursuant to clause (i)(b) of the definition thereof), (iv) fees or
similar payments made to owners or managers of multiple dwelling units (e.g.,
apartments or condominiums) in order to obtain access and the exclusive right to
serve such units in accordance with the conditions and limitations set forth in
Exhibit E and (v) without duplication of clauses (i), (ii), (iii) and (iv)
above, any capital expenditure identified as a Line Extension and Other Capital
Expenditure in the Approved Capital Expenditure Plan.
"Lender" shall have the meaning specified in the Subscription
Agreement.
"Loan Documentation" shall have the meaning specified in the
Subscription Agreement.
"Loan Proceeds" shall have the meaning specified in the
Subscription Agreement.
"Loans" shall have the meaning specified in the Subscription
Agreement.
"Local Authority" shall mean any Governmental Authority having
jurisdiction to grant a cable television franchise with respect to all or a
portion of any System.
"Local Authority Consent" shall mean any approval,
authorization or consent of a Local Authority necessary for a change in control
of a Local Authorization or otherwise in connection with the consummation of the
Transaction.
"Local Authorizations" shall mean all authorizations,
approvals, franchises, licenses and permits of Local Authorities granted to the
Company which permit the operation of the Systems as amended, modified or
supplemented.
"Losses" shall mean losses, liabilities, claims and reasonable
expenses of defense thereof (including, without limitation, expenses of
investigation, defense and fees and disbursements of counsel, but excluding
compensation paid to employees of the relevant Indemnified Party or its
Affiliates), and Liens or other obligations of any nature whatsoever,
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other than Losses to the extent recoverable by the relevant Indemnified Party
under any applicable insurance policy, computed on an after-Tax basis.
"Lost Service Subscriber Cumulative Deemed Net Cash Flow"
shall mean, for any period after the Exchange Date during which an Exchange Date
Basic Subscriber is a Lost Service Subscriber, an amount equal to $13.16 for
each month (or $0.44 on a daily basis in the case of a portion of any month)
that such Exchange Date Basic Subscriber is a Lost Service Subscriber, subject
to reduction as provided in Section 2.5(b).
"Lost Service Subscribers" shall have the meaning set out in
Section 2.5(a).
"Material Adverse Effect" shall mean a material adverse effect
on the business, financial condition or results of operations of the Business,
any System or the Company, except for:
(a) changes resulting from general economic,
financial or market conditions;
(b) changes in, or changes required in order to
comply with, applicable legislation or regulations affecting
U.S. cable television operators generally, including but not
limited to any adjustment in subscriber rates implemented in a
manner consistent with the rate regulations promulgated under
the Cable Act from time to time; and
(c) changes resulting from technological changes
generally applicable to the cable television industry.
"Material Contract" shall mean any contract of the Company
that (i) is material to the Business or any System or (ii) requires aggregate
payments by a party thereto in excess of $500,000. Material Contract shall not
include any Local Authorization or FCC Authorization.
"Net Asset Value" shall mean an amount equal to the Asset
Value, minus the amount of Loan Proceeds actually transferred to New VII
pursuant to the Conveyance of Assets.
"New Borrowing Obligations" shall have the meaning specified
in the Subscription Agreement.
"New VII" shall have the meaning specified in the preamble of
this Agreement.
"1993 Act" shall have the meaning specified in the Parents
Agreement.
"1934 Act" shall have the meaning specified in the Parents
Agreement.
"Non-Cable Assets" shall mean all right, title and interest of
Old VII and the Cable Division Subsidiaries in and to all of their assets,
rights, privileges, interests, claims and properties other than the Cable
Assets, provided that notwithstanding any other provision hereof, Non-Cable
Assets shall include (and Cable Assets shall not include), (i) the Transferred
Assets,
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(ii) all equity and other ownership interests of Old VII in its Subsidiaries
(other than the Cable Division Subsidiaries), (iii) all rights of Old VII under
the Transaction Documents with respect to periods prior to the Exchange Time
(but excluding any right to indemnification pursuant to Section 7.2 (b)) and
(iv) all rights of Old VII and its Subsidiaries under (x) employment agreements
with Non-Continuing Employees, (y) the lease dated December 27, 1985 between
A.L. McCormick and Viacom International, Inc., an Ohio corporation, as amended
by Lease Amendment No. 1 dated January 15, 1986 and (z) all Benefit Plans (other
than the Company's vacation and sick pay policies).
"Non-Cable FCC Authorizations" shall mean consents of the FCC
under FCC licenses and permits of Old VII and its Affiliates (other than the FCC
Authorizations) (x) to the transfer thereof to New VII in connection with the
Transaction or (y) to the change in control of Old VII in connection with the
Transaction.
"Non-Cable Liabilities" means all obligations and liabilities
of Old VII and its Subsidiaries, other than (x) those constituting Cable
Liabilities and (y) those arising from or with respect to the operation of the
business of Old VII and the Cable Division Subsidiaries after the Exchange Date
(other than Pre-Closing Specified Liabilities), provided that notwithstanding
any other provision hereof, Non-Cable Liabilities shall include (and Cable
Liabilities shall not include) (i) the Old VII Debt (including without
limitation principal, interest, premium, fees, expenses and indemnities in
connection therewith), (ii) liability for the breach by Old VII, on or prior to
the Exchange Date, of any representation, warranty, covenant or agreement of Old
VII contained in the Subscription Agreement, (iii) liabilities for Taxes of the
members of the Old VII Subgroup for taxable years or portions thereof ending on
or prior to the Exchange Date, (iv) Pre-Closing Specified Liabilities and (v)
liabilities and obligations of Old VII and its Subsidiaries under (x) employment
agreements with Non-Continuing Employees, (y) the lease dated December 27, 1985
between A.L. McCormick and Viacom International, Inc., an Ohio corporation, as
amended by Lease Amendment No. 1 dated January 15, 1986 and (z) all Benefit
Plans (other than the Company's vacation and sick pay policies).
"Non-Continuing Employee" shall have the meaning specified in
the Subscription Agreement.
"Number of Shares to be Exchanged" shall have the meaning set
forth in the Parents Agreement.
"Old VII" shall have the meaning specified in the preamble of
this Agreement.
"Old VII Debt" shall mean all indebtedness of Old VII for
borrowed money incurred prior to the Exchange Time (other than such indebtedness
owed to VI (which will not be outstanding at the Exchange Time as provided in
Section 2.12) or constituting or arising from New Borrowing Obligations).
"Old VII Subgroup" shall mean Old VII and the Cable Division
Subsidiaries, including any predecessor of any such corporation.
<PAGE> 19
13
"Other Current Liabilities" shall mean all current liabilities
(including, but not limited to, current liabilities on account of Covered
Capital Expenditures and Covered Line Extension and Other Capital Expenditures,
accrued vacation pay for Continuing Employees, subscriber security deposits,
customer prepayments for service to be rendered after the Exchange Date and
deferred customer revenues (other than any deferred revenues arising out of any
payments of principal due from the Telecom Partnerships referred to in clause
(ii) of the definition of Telecom Capital Expenditure Amount), but excluding (i)
Accounts Payable, (ii) any advance billings subtracted in the calculation of
Accounts Receivable, Net) of the Company relating to the conduct of the Business
as of the Exchange Date after giving effect to the Assumption of Liabilities and
(iii) New Borrowing Obligations, calculated in accordance with GAAP on a basis
consistent with the application of such principles in the preparation of the
Financial Statements.
"Owned Real Property" shall mean all fee interests of the
Company in the real property used in connection with any System.
"Parents Agreement" shall mean the Parents Agreement, dated as
of the date hereof, among VI, TCI and TCI Sub.
"PCI Group" shall have the meaning specified in Section 9.6.
"PCI Subsidiaries" shall have the meaning specified in Section
9.6.
"Per Subscriber Amount" shall mean $1,763.67, provided that if
the Fixed Amount is adjusted pursuant to Section 3.4, the Per Subscriber Amount
shall be reduced to an amount equal to the product of $1,763.67, multiplied by a
fraction, the numerator of which is the new Fixed Amount (expressed as a number)
and the denominator of which is 2,000,000,000 (two billion).
"Permits" shall mean all authorizations, approvals,
certifications, franchises, licenses and permits of Governmental Authorities
necessary to the continued operation of, or owned, used or held for use by the
Company in connection with, the Business as conducted immediately prior to the
Exchange Time, including, without limitation, all Local Authorizations and all
FCC Authorizations.
"Permitted Liens" shall mean (i) Liens for Taxes not yet due
and payable; (ii) any carrier's, warehousemen's, mechanic's, materialmen's,
repairmen's, employees' or other like Lien arising in the ordinary course of
business, to the extent the obligation secured thereby constitutes Cable
Liabilities or relates to an obligation that was paid by the Company; (iii)
easements, rights-of-way, restrictions, encroachments and other similar
encumbrances which do not materially interfere with the use of the Cable Assets
as presently used in the Business; (iv) Liens arising under or specifically
permitted by this Agreement or as a result of any action by TCI Sub or any of
its Affiliates; (v) rights of first refusal in favor of, and restrictions
imposed by, Governmental Authorities; (vi) in the case of assets leased or
licensed to the Company, the rights of, and any Lien encumbering the interest
of, the owner, lessor or licensor of such assets, provided such Lien does not
materially interfere with the use of such asset as presently used in
<PAGE> 20
14
the Business; and (vii) Liens arising under the Loan Documentation or otherwise
securing New Borrowing Obligations.
"Person" shall mean and include an individual, a corporation,
a partnership (general, limited or limited liability), a joint venture, a
limited liability company, an association, a trust or any other organization or
entity, including a Governmental Authority.
"Pre-Closing Specified Liabilities" shall mean liabilities and
obligations of Old VII and the Cable Division Subsidiaries arising out of the
operation of or with respect to the Business on or prior to the Exchange Date,
including without limitation any obligations accruing prior to the Exchange Date
under retransmission consent agreements with respect to the Systems for carriage
of fX, ESPN2, Bay TV, or America's Talking, but excluding Accounts Payable,
Other Current Liabilities or New Borrowing Obligations.
"Preferred Stock" shall have the meaning specified in the
Parents Agreement.
"Prepaid Expenses" shall mean the book value of prepaid
expenses and miscellaneous prepaids (in each case, only to the extent
constituting a current asset) of the Company as of the Exchange Date after
giving effect to the Conveyance of Assets calculated in accordance with GAAP,
applied on a basis consistent with the application of such principles in the
preparation of the Financial Statements, to the extent that such prepaid
expenses will accrue to the benefit of the Company immediately following the
Exchange Time.
"Prime Rate" shall mean the per annum rate of interest
published as such from time to time in the Money Rates column of The Wall Street
Journal (Eastern Edition). For all purposes of this Agreement, interest at the
Prime Rate shall be calculated on the basis of the actual number of days elapsed
in the relevant period over a year of 365 or 366 days, as applicable.
"PVIT" shall mean PVI Transmission Inc., a Delaware
corporation.
"PVIT Assets" shall mean the assets set forth on Exhibit F.
"PVIT Bill of Sale" shall mean a bill of sale in the form of
Exhibit G.
"RCS" shall mean RCS Pacific, L.P., a California limited
partnership.
"Real Property" shall mean Owned Real Property or Leased Real
Property.
"Replacement Welfare Plans" shall have the meaning specified
in Section 8.1(h).
"Required Treatment" shall have the meaning specified in
Section 9.3.
"Right of First Refusal" shall mean any right of first refusal
of a Local Authority in regard to or arising as a result of the Transaction.
<PAGE> 21
15
"Right of First Refusal Franchise Area" shall have the meaning
specified in Section 2.4.
"Right of First Refusal Franchise Area Consideration" shall
have the meaning specified in Section 2.4.
"Right of First Refusal Local Authorization" shall have the
meaning specified in Section 2.4.
"Rules and Regulations" shall have the meaning specified in
the definition of Communications Act.
"Section 2.17 Secured Obligations" shall have the meaning
specified in Section 2.17.
"Share Purchase Closing" shall mean the "Closing", as such
term is defined in the Subscription Agreement.
"Shares" shall have the meaning specified in the Subscription
Agreement.
"Shortfall Number" shall have the meaning specified in Section
3.4.
"626 Letters" shall mean written notices pursuant to Section
626(a)(1)(B) of the Communications Act.
"Specified Capital Expenditure Amount" shall mean, with
respect to a System (or portion thereof), all capital expenditures made by the
Company with respect to such System (or portion thereof) after the Exchange Date
(and not reflected in Accounts Payable or Other Current Liabilities), calculated
in accordance with the accounting principles employed by Old VII on the date
hereof.
"Specified Party" shall have the meaning specified in Section
5.1.
"Straddle Period" shall have the meaning specified in Section
9.1(c).
"Subsidiary" shall mean, with respect to any Person, any
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are directly or indirectly owned by such Person.
"System" shall mean each of the cable television systems
listed on Exhibit H.
"Tax Indemnified Party" shall have the meaning specified in
Section 9.4(e).
"Tax Indemnifying Party" shall have the meaning specified in
Section 9.4(e).
"Tax Return" shall mean any return, report, information return
or other document (including any related or supporting information) filed or
required to be filed with any taxing
<PAGE> 22
16
authority in connection with the determination, assessment, collection,
administration or imposition of any Taxes.
"Taxes" shall mean all taxes, fees, duties, imposts, levies,
withholdings, tax deficiencies, assessments, and charges, including, without
limitation, all net income, gross income, gross receipts, sales, use,
value-added, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, estimated, severance, stamp, occupation, property
or other taxes and customs duties of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts relating
thereto, imposed by any Governmental Authority (domestic or foreign). For
purposes of determining any Tax cost or Tax benefit to any Person, such amount
shall be the actual cost or benefit recognized by such Person at the time of
actual payment of the additional Tax or actual recognition of the Tax benefit.
In the event that any payment or other amount is required to be determined on an
after-Tax basis, such payment or other amount shall initially be determined
without regard to any Tax cost or Tax benefit not actually recognized currently,
and appropriate adjustments shall be made when and to the extent that such Tax
cost or Tax benefit is actually recognized.
"TCI" shall have the meaning specified in the preamble of this
Agreement.
"TCI Sub" shall have the meaning specified in the preamble of
this Agreement.
"Telecom Agreements" shall mean all agreements of the Company
relating to the Telecom Partnerships, including, without limitation, the Telecom
Partnership Agreements.
"Telecom Amount" shall mean the sum of the Telecom Capital
Account Amount and the Telecom Capital Expenditure Amount.
"Telecom Assets" shall mean all right, title and interest of
Old VII and each Cable Division Subsidiary in and to (i) the Telecom
Partnerships, including, without limitation, under the Telecom Partnership
Agreements, and (ii) all interests in real property, all equipment and all other
property of Old VII and each Cable Division Subsidiary leased or licensed to, or
held for, or built for lease, license or use by, any Telecom Partnership.
"Telecom Capital Account Amount" shall mean the aggregate
amount of all Capital Contributions (as defined in the relevant Telecom
Partnership Agreement) by Old VII and its Affiliates to the Telecom Partnerships
under the Telecom Partnership Agreements as of the Exchange Date, minus the
aggregate amount of all distributions of capital made to Old VII or its
Affiliates under the Telecom Partnership Agreements.
"Telecom Capital Expenditure Amount" shall mean, without
duplication of the Telecom Capital Account Amount, (i) the aggregate amount of
all capital expenditures (including allocated overhead) made by the Company on
or prior to the Exchange Date on behalf of or for the benefit of any Telecom
Partnership in accordance with the allocation methods provided pursuant to the
relevant Telecom Partnership Agreement, less (ii) the principal portion of any
payments received from the Telecom Partnerships, provided that if the Exchange
Date occurs on or before December 31, 1995, the Telecom Capital Expenditure
Amount shall not in
<PAGE> 23
17
any event exceed $20,800,000, and if the Exchange Date occurs after December 31,
1995, such maximum amount shall be increased by the amount of additional capital
expenditures and capital contributions made by the Company after December 31,
1995 in accordance with the terms of the Telecom Partnership Agreements.
"Telecom Partnership Agreements" shall mean (i) the
Partnership Agreement creating TCG San Francisco (the "TCG San Francisco
Partnership") dated as of January 1, 1994, by and among Teleport Communications
of San Francisco, Inc., a Delaware corporation and the other parties listed on
the signature pages thereof, (ii) the Partnership Agreement creating TCG Seattle
(the "TCG Seattle Partnership") dated as of January 1, 1994, by and among
Teleport Communications of Seattle, Inc., a Delaware corporation and the other
parties listed on the signature pages thereof and (iii) the Limited Partnership
Agreement of AVR of Tennessee, L.P., a California limited partnership, dated as
of November 15, 1993, by and among Viacom Telecom Inc., a Delaware corporation,
and the other parties signatories thereto (the "AVR Partnership").
"Telecom Partnerships" shall mean the TCG San Francisco
Partnership, the TCG Seattle Partnership and the AVR Partnership.
"Tele-Vue" shall mean Tele-Vue Systems, Inc., a Washington
corporation.
"Terminated Unapproved Franchise Areas" shall have the meaning
specified in Section 2.3(d).
"Territory" shall have the meaning specified in Section 5.1.
"Transaction" shall have the meaning specified in the Parents
Agreement.
"Transaction Documents" shall have the meaning specified in
the Parents Agreement.
"Transferred Assets" shall mean the following:
(a) Cash. Cash and cash equivalents (other than the
Cable Cash Balances).
(b) Loan Proceeds. The Loan Proceeds in an aggregate
amount equal to $1,700,000,000 (one billion, seven hundred
million dollars).
(c) Viacom Name. All rights in and to the names
"Viacom," "Viacom International" and "Viacom Cable" and
derivations thereof (subject to Section 2.9).
(d) Other Assets. The patent and other rights and
assets listed on Exhibit I.
(e) Tax Refunds. All rights of Old VII to any refunds
or credits of any Taxes (including any interest relating
thereto) with respect to taxable years or
<PAGE> 24
18
portions thereof ending on or prior to the Exchange Date that
are for the account of New VII pursuant to Section 9.2.
"Unapproved Franchise Areas" shall mean Franchise Areas
covered by Unapproved Local Authorizations.
"Unapproved Franchise Assets" shall mean, with respect to all
Unapproved Franchise Areas, all Unapproved Local Authorizations and all related
Real Property and Equipment.
"Unapproved Local Authorizations" shall mean a Local
Authorization (other than Right of First Refusal Local Authorizations) as to
which all Local Authority Consents have not been obtained or do not remain in
full force and effect immediately prior to the Exchange Time.
"Untransferable Asset" shall have the meaning specified in the
Bill of Sale.
"VI" shall have the meaning specified in the preamble of this
Agreement.
"Viacom Pension Plan" shall have the meaning specified in
Section 8.1(c).
"Viacom Plans" shall have the meaning specified in Section
8.1(b).
"VI Common Stock" shall have the meaning specified in the
Parents Agreement.
"VI Group" means VI and its subsidiaries, including any
predecessor of any such corporation.
"Working Capital" shall mean an amount equal to (a) Accounts
Receivable, Net, plus the amount of Prepaid Expenses, plus the amount of Cable
Cash Balances, plus the amount of deposits (as of the Exchange Date after giving
effect to the Conveyance of Assets) of the Company held by others to secure
performance of a Cable Liability by the Company, minus (b) the amount of
Accounts Payable, plus the amount of Other Current Liabilities.
ARTICLE II
CONVEYANCE; LACK OF CONSENTS OR REGULATORY
APPROVALS; RIGHT OF FIRST REFUSAL; DISASTERS
Section 2.1 Conveyance of Assets and Assumption of
Liabilities: Transfers to New VII, Recapitalization. (a) Prior to the Exchange
Time, Old VII shall (and shall cause the Cable Division Subsidiaries to) execute
and deliver to New VII the Bill of Sale (and such other documentation as Old VII
and the Cable Division Subsidiaries shall be required to execute pursuant
thereto), pursuant to which Old VII (and the Cable Division Subsidiaries) shall
convey to New VII all of their right, title and interest in and to all Non-Cable
Assets (the "Conveyance of Assets") and New VII shall execute and deliver the
Bill of Sale and thereby assume and agree to
<PAGE> 25
19
perform when due in accordance with their terms the Non-Cable Liabilities of Old
VII and the Cable Division Subsidiaries (the "Assumption of Liabilities").
(b) Prior to the Exchange Time, but after the occurrence of
the Conveyance of Assets and the Assumption of Liabilities, Old VII shall
distribute to VI all of the outstanding capital stock of New VII so that after
such distribution New VII will be a direct wholly-owned Subsidiary of VI.
(c) Prior to the Exchange Time, Old VII shall take all action
necessary under its certificate of incorporation and the Delaware Corporation
Law to amend and restate its certificate of incorporation so that it reads in
full substantially as set forth in Exhibit J, except that (i) the terms and
conditions of the Preferred Stock of Old VII shall be as specified by Old VII
with the consent of TCI Sub and consistent with the term sheet attached as
Exhibit K, (ii) the number of shares of Class A Common Stock and Preferred Stock
that are authorized shall in each case be a number equal to the Number of Shares
to be Exchanged and (iii) such changes as are necessary in order to ensure that
the Amended and Restated Certificate of Incorporation shall be accepted for
filing by the Secretary of State of Delaware, shall be made with the consent of
TCI Sub and New VII (such consents not to be unreasonably withheld) (the
"Amended and Restated Certificate of Incorporation").
(d) The obligations of Old VII contained in Sections 2.1(a),
(b) and (c) are subject to the fulfillment of each of the following conditions,
each of which may be waived by Old VII: (w) the conditions described in Section
6.1 of the Parents Agreement (as if such conditions were set forth in full
herein) shall have been satisfied, (x) Old VII shall have received, to its
satisfaction, Loan Proceeds, in an aggregate principal amount at least equal to
the Aggregate Loan Amount, and such Loan Proceeds shall be available for
transfer as a contribution to New VII in the Conveyance of Assets without
condition (but without limiting VI's obligation to provide the notice required
for the release of funds from the Cash Collateral Account as specified in the
definition of Cash Collateral Account) and (y) VI shall have accepted shares of
VI Common Stock for exchange in the Exchange Offer in accordance with Section
2.1(d) of the Parents Agreement.
(e) The parties acknowledge that the portion of the Old VII
Debt that is equal to the Loan Proceeds transferred to New VII in the Conveyance
of Assets is being assumed by New VII in consideration of the transfer to New
VII of such Loan Proceeds pursuant to the Conveyance of Assets.
Section 2.2 Lack of Consents. If the Transaction requires the
consent of another Person under any Cable Group Contract and such consent has
not been obtained prior to the Exchange Time or does not remain in full force
and effect at the Exchange Time, such failure to obtain such consent or failure
of such consent to be in full force and effect shall not itself constitute a
breach of any provision hereof. Prior to the Exchange Time, Old VII shall use
its best efforts to assign any such Cable Group Contract to New VII and New VII
shall at the Exchange Time assume all obligations of Old VII under any such
assigned Cable Group Contract with respect to periods from and after the
Exchange Time. New VII shall, with respect to each
<PAGE> 26
20
such Cable Group Contract, use its reasonable commercial efforts (at the expense
of New VII and at no out-of-pocket expense to Old VII, but without New VII being
required to provide any consideration therefor) to: (i) keep each such Cable
Group Contract in effect and obtain such consent; (ii) provide to Old VII the
benefits of each such Cable Group Contract through subcontract or otherwise;
(iii) cooperate in any reasonable arrangement designed to provide such benefits
to Old VII; and (iv) enforce, at the request and sole expense of Old VII, any
rights of New VII included in the Cable Assets under or with respect to any such
Cable Group Contract against all other Persons (including termination of the
foregoing in accordance with the terms thereof upon the election of Old VII), in
each case of clauses (i)-(iv) to the extent that Old VII performs all
obligations of New VII under such Cable Group Contract. If all such consents
under any such Cable Group Contract are obtained after the Exchange Time, New
VII shall promptly assign such Cable Group Contract to Old VII and Old VII shall
assume all obligations under such Cable Group Contract with respect to periods
following such assignment, in each case without the payment of additional
consideration by New VII or Old VII.
Section 2.3 Lack of Regulatory Approvals. (a) If immediately
prior to the Exchange Time any Local Authority Consent has not been obtained or
does not remain in full force and effect immediately prior to the Exchange Time,
such failure to obtain such Local Authority Consent or such failure of such
Local Authority Consents to be in full force and effect shall not itself
constitute a breach of any provision hereof. Prior to the Exchange Time, all
Unapproved Local Authorizations and the related Unapproved Franchise Assets
shall be transferred to New VII.
(b) Old VII and New VII shall take such steps and enter into
such agreements, including management agreements (with Old VII as manager, but
at no cost to New VII), as may be reasonably necessary or appropriate so that
Old VII shall have the exclusive (as between Old VII and New VII) use and
benefit of (including, without limitation, cash flow), and burdens (including,
without limitation, payments, liabilities, Taxes, risk of loss and
responsibility for making capital expenditures) with respect to, the Unapproved
Franchise Assets as if the Unapproved Franchise Assets had not been transferred
to New VII (and remained with Old VII at and after the Exchange Time), until,
with respect to any Unapproved Local Authorization and the related Unapproved
Franchise Assets, the Deferred Closing Date or the termination of such
agreements as contemplated below in this Section 2.3. Such management agreements
will provide that Old VII will have all rights to manage and receive cash flow
of the relevant Unapproved Franchise Assets and to pledge such cash flow to the
Lenders, including but not limited to management of marketing, pricing, capital
expenditures and programming, provided that, with respect to any Unapproved
Franchise Area, Old VII will not take or omit to take any action, that could
reasonably be expected to delay the Deferred Closing Date with respect to such
Unapproved Franchise Area or make the occurrence thereof less likely, provided,
however, that Old VII shall be entitled to change subscriber rates in its sole
discretion. Such management agreements will also provide that Old VII will
continue to make capital expenditures with respect to each Unapproved Franchise
Area as if all Local Authority Consents had been obtained and such Unapproved
Local Authorizations and the related Unapproved Franchise Assets had not been
transferred to New VII as provided above. If and to the extent that New VII
receives cash flow with respect to the Unapproved Franchise Assets to which Old
VII is entitled pursuant to
<PAGE> 27
21
this Section 2.3(b), New VII shall be obligated to pay to Old VII or, if
requested by Old VII, to the Lenders, an amount equal to the amount of such cash
flow. The out-of-pocket costs and expenses of all such arrangements shall be
shared equally by Old VII and New VII (except that each party shall be
responsible for the fees and expenses of its own legal advisors).
(c) If following the Exchange Time, New VII is able to
transfer to Old VII (or a designee of Old VII) an Unapproved Local
Authorization, New VII shall promptly so notify Old VII (or, in the case of
transfer to such a designee, Old VII shall notify New VII) and, on the fifth
Business Day after the date of such notice (a "Deferred Closing Date"), New VII
shall transfer to Old VII (or such designee of Old VII), as the case may be,
such Unapproved Local Authorization and all related Unapproved Franchise Assets
held on such Deferred Closing Date. Old VII (or such designee of Old VII), as
the case may be, shall assume, pay, perform and discharge the liabilities and
obligations arising after the Exchange Date under or in respect of such related
Unapproved Franchise Assets.
(d) With respect to any Unapproved Local Authorization, upon
the earlier of the second anniversary of the Exchange Date or the date on which
a Local Authority Consent has been denied in a final, unappealable order or
ruling, if New VII and Old VII have been unable, after good faith negotiations,
to enter into agreements providing in all material respects the economic
equivalent to Old VII of ownership of the related Unapproved Franchise Assets,
then thereafter either Old VII or New VII may, by written notice to the other,
elect to terminate all the agreements referred to in this Section 2.3 on a
termination date specified in such notice for such Unapproved Franchise Areas
("Terminated Unapproved Franchise Areas"), which termination date may not be
earlier than 90 days following the other's receipt of such notice. If New VII so
requests, prior to such termination Old VII and New VII shall enter into such
agreements, including without limitation service and management agreements for
such Terminated Unapproved Franchise Areas, on reasonable and customary
commercial terms, including reasonable and customary management fees (provided
that such service and management agreements shall be cancelable by Old VII
without penalty or other payment on not more than 180 days prior notice and
shall be cancelable by New VII without penalty or other payment on not more than
thirty (30) days' prior written notice to Old VII) as may be reasonably
necessary so that New VII shall have the use and benefit of, and burdens with
respect to, and be able to operate the related Unapproved Franchise Assets as
if, from and after such termination, the Transaction had not occurred. Upon such
termination, New VII shall pay to Old VII an amount equal to the Appraised Value
at the time of such termination of the Systems covered by such Terminated
Unapproved Franchise Areas and Old VII shall convey or cause to be conveyed to
New VII for no additional consideration all Permits, Cable Group Contracts and
Intangible Assets related to such Terminated Unapproved Franchise Areas.
Notwithstanding the preceding sentence, to the extent any Permit, Cable Group
Contract or Intangible Asset is used in the operation of Systems covered by
Local Authorizations that are not Unapproved Local Authorizations or Terminated
Unapproved Local Authorizations, Old VII shall not convey (or cause to be
conveyed) such Permit, Cable Group Contract or Intangible Asset to New VII and
Old VII shall use its reasonable commercial efforts or cause its Subsidiaries to
use their reasonable efforts (at the expense of New VII and at no out-of-pocket
expense to Old VII) to: (i) provide to New VII the benefits thereof through
subcontract or otherwise; (ii) cooperate in any
<PAGE> 28
22
reasonable arrangement to provide such benefits to New VII; and (iii) enforce,
at the request and sole expense of New VII, any rights of the Company included
therein (to the extent they relate to such Permit, Cable Group Contract or
Intangible Asset).
Section 2.4 Right of First Refusal. If a Local Authority
consummates its exercise of a right of first refusal arising as a result of the
Transaction in respect of a Local Authorization (a "Right of First Refusal Local
Authorization" (the Franchise Areas covered by Right of First Refusal Local
Authorizations being referred to herein as "Right of First Refusal Franchise
Areas")) on the tenth Business Day after receipt by New VII of written notice
from Old VII of the consummation of the exercise by such Local Authority of its
right of first refusal with respect to such Right of First Refusal Local
Authorization, together with evidence reasonably satisfactory to New VII of the
consideration given by the Local Authority in exercising such right, New VII
shall pay to Old VII, an amount (which shall not be less than zero), if any,
equal to (1) the Appraised Value at the time of such consummation of that
portion of the Systems included in such Right of First Refusal Franchise Areas,
minus (2) the Right of First Refusal Franchise Area Consideration for such Right
of First Refusal Franchise Areas received by Old VII or any Affiliate thereof
(or any transferee or subsequent transferee thereof), less any out-of-pocket
expenses (but in any event excluding Taxes) incurred by Old VII (or such
Affiliate thereof (or any transferee or subsequent transferee thereof)) in
connection with such consummation of a right of first refusal. "Right of First
Refusal Franchise Area Consideration" shall mean, with respect to a Right of
First Refusal Franchise Area, an amount equal to the total consideration given
by the Local Authority and actually received by Old VII and any of its
Affiliates (or any transferee or subsequent transferee thereof) after the
Exchange Time in connection with the exercise of its right of first refusal.
Section 2.5 Lost Service Subscribers. (a) In the event that on
or before the Exchange Time any natural disaster has occurred that has damaged
the tangible assets of any one or more Systems sufficiently to cause more than
11,340 Basic Subscribers to be unable to receive cable television service at the
Exchange Time as a result of such damage (a "Disaster"; the aggregate number of
Exchange Date Basic Subscribers not receiving such service at the Exchange Date
as a result of such Disaster being referred to herein as "Lost Service
Subscribers"), New VII shall reimburse Old VII for Old VII's reasonable
out-of-pocket expenses (provided that such expenses shall be presumed to be
reasonable unless New VII establishes otherwise), computed on an after-Tax
basis, incurred in causing the damage caused by the Disaster to be repaired as
soon as reasonably practicable to the extent necessary to reconnect cable
television service (at a level not substantially more or less than the level of
service provided immediately prior to the Disaster) to the Lost Service
Subscribers.
(b) With respect to Lost Service Subscribers, within ten (10)
Business Days of the end of each month, New VII shall promptly reimburse Old VII
for the amount of Lost Service Subscriber Cumulative Deemed Net Cash Flow,
computed on an after-Tax basis, for each Lost Service Subscriber (but only for
periods during which such Lost Service Subscribers are not receiving, or not
obligated to pay the Basic Subscriber Rate (or a higher rate) for, cable
television service at a level not substantially less than the level of service
provided immediately prior to the Disaster) for periods prior to the date of the
relevant Disaster, provided that aggregate
<PAGE> 29
23
payments pursuant to this paragraph (b) for any such Lost Service Subscriber
shall not exceed the Per Subscriber Amount applicable to such Lost Service
Subscriber, plus interest at the LIBOR Rate on the unreimbursed portion of the
Per Subscriber Amount attributable to such Lost Service Subscriber (calculated
by deducting payments made by New VII from time to time of Lost Service
Subscriber Cumulative Deemed Net Cash Flow (but not including interest) on
account of such Lost Service Subscriber). Upon such reimbursement with respect
to a Lost Service Subscriber, Lost Service Subscriber Cumulative Deemed Net Cash
Flow for such Lost Service Subscriber shall be reduced by the amount of such
payment on account of Lost Service Subscriber Cumulative Deemed Net Cash Flow
(but not including interest).
Section 2.6 Release of Old VII. New VII will obtain the
release of Old VII from, or the substitution of New VII as obligor under (so
that Old VII will have no obligation under), all of Old VII's obligations to
repay the Old VII Debt, or shall cause the indenture pursuant to which such debt
was issued to be amended or supplemented so that Old VII will no longer be an
obligor (so that Old VII will have no obligation) thereunder, in each case
effective concurrently with the release of all funds from the Cash Collateral
Account. New VII shall deliver to Old VII copies of all documentation provided
to the trustees under the indentures governing Old VII's public debt in
connection with its substitution as obligor in place of Old VII thereunder, and
Old VII and the Lenders shall be entitled to rely on all legal opinions
delivered to such indenture trustees in connection with such substitution.
Section 2.7 Receipt of Consents. It is the intent of the
parties that the arrangements described in Sections 2.2 and 2.3 continue for the
shortest possible time, and to this end they agree to use reasonable commercial
efforts to obtain all consents (including Local Authority Consents) to the
Transaction referred to in said Sections as promptly as practicable following
the Exchange Time.
Section 2.8 Execution of Other Instruments. If, immediately
prior to the Exchange Time, PVIT has not transferred the PVIT Assets to Old VII
or a Cable Division Subsidiary, New VII shall cause PVIT to execute and deliver
to Old VII immediately prior to the Exchange Time the PVIT Bill of Sale.
Section 2.9 Use of Viacom Name. Old VII may continue to use
the names "Viacom," "Viacom International" and "Viacom Cable" and derivations
thereof on trucks and buildings to the extent so used immediately prior to the
Exchange Time for a reasonable period after the Exchange Time, not to exceed
ninety (90) days in the case of trucks and thirty (30) days in the case of
buildings; provided, however, that Old VII will provide replacements for channel
cards, remote control stickers and other items containing any such name in the
ordinary course of business. Old VII acknowledges that following the Exchange
Time, it will have no rights in any such name (except the right of use set forth
in this Section 2.9), and Old VII agrees to use such names only in accordance
with this Section 2.9.
Section 2.10 Name Change. Prior to the Exchange Time, Old VII
will change its name to TCI Pacific Communications, Inc. (provided that such
name is available) in its state of incorporation and, to the extent practicable,
in all states where it is qualified to do business,
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and New VII will change its name to Viacom International Inc. Prior to and
following the Exchange Time, the parties will take all actions necessary to
enable New VII to qualify to do business under the name of Viacom International
Inc. in those states in which it determines to so qualify and to change the name
of Old VII to TCI Pacific Communications, Inc. (provided that such name is
available) in all states where it is qualified to do business. Old VII will from
time to time and for no additional consideration execute such instruments and
consents as New VII shall reasonably request to enable New VII to use such name.
If the Exchange Time does not occur, Old VII and New VII will reverse such name
changes.
Section 2.11 Bank Accounts. Prior to the Anticipated
Commencement Date, New VII will identify each bank account of Old VII that it
anticipates will be active immediately following the Exchange Time.
Section 2.12 Intercompany Debt. At the Exchange Time, neither
Old VII nor any Cable Division Subsidiary will have any indebtedness for
borrowed money to VI and its Subsidiaries (other than to Cable Division
Subsidiaries or Old VII).
Section 2.13 Consents. Each of Old VII and New VII agrees to
use its reasonable commercial efforts to obtain all consents necessary to
consummate the Conveyance of Assets and Assumption of Liabilities. New VII shall
coordinate the efforts to obtain such consents, and New VII shall be responsible
for all costs, expenses, liabilities, obligations and burdens with respect to
such consents.
Section 2.14 Books and Records. After the Exchange Date, each
of New VII and Old VII shall, upon the other's reasonable request, in connection
with the preparation of tax returns, tax or accounting audits or for such other
purpose as such other party shall reasonably request, afford such other party
and its Agents who agree to be bound by the provisions of Section 2.15, access
to the books and records of it and its Affiliates (x) where the requesting party
is Old VII, to the extent such books and records relate to the operation of the
Business prior to the Exchange Date (including payment of any Taxes with respect
to the periods prior to the Exchange Date) and (y) where the requesting party is
New VII, to the extent such books and records relate to the operation of the
business of Old VII and its Subsidiaries prior to the Exchange Date.
Section 2.15 Confidentiality. Following the Exchange Time,
each of Old VII and New VII (the "Disclosing Party") shall, and shall cause its
Affiliates, and its and their respective Agents, to keep secret and retain in
strictest confidence any and all confidential information relating to the
business of the other party and its Affiliates or otherwise not available to the
general public in their possession or within their knowledge at the Exchange
Time (provided that such confidential information shall not include any
information that (i) has become generally available to the public other than as
a result of a disclosure by the Disclosing Party, its Affiliates or its Agents,
(ii) has been independently developed by the Disclosing Party or such Affiliate
or Agent of the Disclosing Party or (iii) was available to the Disclosing Party
or an Affiliate or Agent of the Disclosing Party on a nonconfidential basis from
a third party having no obligation of confidentiality to the other party or any
Affiliate of the other party and which
<PAGE> 31
25
has not itself received such information directly or indirectly in breach of any
such obligation of confidentiality), and shall not disclose such confidential
information, and shall cause its Affiliates and Agents not to disclose such
confidential information, to any Person, except (x) as may be required by law or
legal process (in which event the Disclosing Party shall so notify the other
party as promptly as practicable (and if possible, prior to making such
disclosure) and, if requested by the other party, shall seek confidential
treatment of such information) or (y) as counsel to such party reasonably
determines is required by the 1933 Act or the 1934 Act.
Section 2.16 Control of Litigation. Old VII shall have the
sole right and obligation to defend and direct the defense of, and to settle or
compromise, any demand, claim, litigation or proceeding arising in respect of
(x) any Cable Group Contract during the period from the Exchange Date until such
Cable Group Contract is assigned to Old VII as provided in Section 2.2 or (y)
any Unapproved Franchise Assets and Unapproved Local Authorizations, during the
period from the Exchange Date until the transfer thereof to Old VII pursuant to
Section 2.3(c) or the payment of the Appraised Value with respect thereto
pursuant to Section 2.3(d). Old VII shall be responsible for all costs,
expenses, obligations, judgments and liabilities arising therefrom. New VII will
cooperate with Old VII in the exercise by Old VII of its rights under this
Section 2.16.
Section 2.17 Security Interest. If the Lenders so request, New
VII shall at the request of Old VII execute such security agreements and
financing statements in form and substance reasonably satisfactory to Old VII,
pursuant to which Old VII or the Lenders shall be granted a perfected first
priority lien and security interest in all of New VII's right, title and
interest in and to any Cable Group Contract held by New VII pursuant to Section
2.2 and any Unapproved Franchise Assets and (to the extent permitted by
applicable law) Unapproved Local Authorizations, in each case together with the
proceeds thereof, securing New VII's obligations under Sections 2.2 and 2.3 (the
"Section 2.17 Secured Obligations") and New VII shall make all filings and shall
take all other actions necessary or desirable to perfect and protect such
security interest. Such security interests in Unapproved Franchise Assets and
Unapproved Local Authorizations will terminate and be released upon the payment
of the Appraised Value with respect thereto pursuant to Section 2.3(d). Without
limitation of the foregoing, at the request of Old VII from time to time, New
VII shall enter into such other arrangements as Old VII shall reasonably request
to secure performance of the Section 2.17 Secured Obligations and to otherwise
provide to Old VII the rights and benefits to be provided to it pursuant to this
Section 2.17. Old VII shall be responsible for all out-of-pocket costs incurred
by New VII in complying with New VII's obligations under this Section 2.17.
Notwithstanding any provisions of this Section 2.17 or the Transaction
Documents, New VII shall not be required to grant or maintain any lien or
security interest to or for the benefit of Old VII or the Lenders to the extent
such grant or maintenance would constitute a breach or default (including any
event that, with the passage of time or the giving of notice, or both, would
become a breach or default) under, or give rise to a right of acceleration
under, any loan agreement or indenture or other instrument governing
indebtedness to which VI or any Affiliate of VI is a party or by which VI or any
Affiliate of VI or their properties may be bound.
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ARTICLE III
ADJUSTMENTS
Section 3.1 Determination of Estimated Asset Value. Prior to
the Anticipated Commencement Date, Old VII shall determine in good faith its
estimates of the Capital Expenditure Amount (the "Estimated Capital Expenditure
Amount"), the Inventory Amount (the "Estimated Inventory Amount"), the Telecom
Amount (the "Estimated Telecom Amount"), Working Capital ("Estimated Working
Capital"), the Asset Value (the "Estimated Asset Value"), and the Fixed Amount
(the "Estimated Fixed Amount") based on information available to it at the time
it makes such estimates. The Estimated Capital Expenditure Amount, the Estimated
Inventory Amount, the Estimated Telecom Amount, Estimated Working Capital and
Estimated Fixed Amount are referred to herein as the "Estimated Adjustment
Amounts". At least forty-five (45) days prior to the Anticipated Commencement
Date of the Exchange Offer, Old VII shall deliver to New VII a statement setting
forth its preliminary estimates of the Adjustment Amounts and the Estimated
Asset Value as of the anticipated Exchange Date set forth in such statement.
Prior to the Anticipated Commencement Date, Old VII will deliver to New VII a
statement setting forth the Estimated Adjustment Amounts and the Estimated Asset
Value as of the anticipated Exchange Date (an "Estimate Statement"), which
statement shall: (i) contain the information in reasonable detail required to
calculate the Estimated Adjustment Amounts and the Estimated Asset Value; (ii)
be prepared in accordance with the requirements of this Agreement; and (iii) be
certified by an authorized officer of Old VII to be Old VII's good faith
estimate. In the event that the anticipated commencement date of the Exchange
Offer is postponed, Old VII shall if practicable and consistent with the timing
of the Exchange Offer and the provisions of Section 2.3 of the Parents
Agreement, re-estimate the Estimated Adjustment Amounts and deliver to New VII
an updated Estimate Statement. For purposes of this Agreement, the Estimated
Adjustment Amounts and the Estimated Asset Value shall be the amounts set forth
on the last Estimate Statement delivered by Old VII to New VII. Old VII shall
not be deemed to have made any representations or warranties as to the
statements delivered pursuant to this Section, except that they were prepared in
good faith. For purposes of determining "Covered Capital Expenditures" and "Line
Extension and Other Capital Expenditures", a capital expenditure shall be deemed
made at the time that a capital expenditure is recorded on the books of the
Company as such in the ordinary course in accordance with past practices and
consistent with GAAP.
Section 3.2 Calculation of Adjustment Amounts. (a) The Capital
Expenditure Amount, the Inventory Amount, Working Capital, the Telecom Amount,
the Fixed Amount and the amount of Loan Proceeds actually transferred to New VII
in the Conveyance of Assets are referred to herein collectively as the
"Adjustment Amounts."
(b) Not later than sixty (60) days after the Exchange Date,
Old VII shall deliver to New VII a statement showing Old VII's calculation of
the actual Adjustment Amounts and the Asset Value (the "Final Certificate"). Old
VII shall make available to New VII its accountants' work papers and such other
information relating to the calculation of the Adjustment Amounts and the Asset
Value as New VII shall reasonably request.
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(c) In the event that New VII disputes Old VII's calculation
of the Adjustment Amounts and the Asset Value, New VII shall give written notice
thereof to Old VII within 30 days after the Final Certificate was delivered to
New VII which notice shall set forth the basis for such dispute in reasonable
detail (the "Dispute Notice"). The parties shall use all reasonable efforts to
resolve any such dispute, but if any such dispute cannot be resolved by the
parties within thirty (30) days after the date the Dispute Notice is given, all
unresolved disputes shall be referred to an Arbitrating Firm for resolution. The
parties shall seek to cause the Arbitrating Firm to make its determination
within sixty (60) days after referral of a dispute to it. The determination of
the Arbitrating Firm shall be conclusive and binding on each party. The fees of
the Arbitrating Firm shall be allocated and paid by New VII or Old VII, or
divided between them, on a basis determined by the Arbitrating Firm to be fair
taking into account the correctness of the positions asserted by each of them
with respect to the disputed matters resolved by the Arbitrating Firm.
(d) The Adjustment Amounts shall be the amounts set forth in
the Final Certificate unless a Dispute Notice is given with respect to the
calculation thereof, in which case only those Adjustment Amounts not in dispute
shall be as set forth in the Final Certificate. If a Dispute Notice is given,
any Adjustment Amount in dispute shall be deemed finally determined on the date
that the Arbitrating Firm gives written notice to Old VII and New VII of its
determination with respect to all disputes regarding the calculation thereof,
or, if earlier, the date on which New VII and Old VII agree in writing on the
amounts thereof, in which case any Adjustment Amount in dispute shall be
calculated in accordance with such determination or agreement.
Section 3.3 Adjustment Payment. If the Net Asset Value as
finally determined in accordance with Section 3.2 is greater than the amount of
the Estimated Net Asset Value, Old VII shall pay to New VII on the third
Business Day after such determination an amount in cash equal to such excess,
plus an amount equal to interest thereon from the Exchange Date to the date of
payment at the Prime Rate, compounded quarterly. If the Net Asset Value as
finally determined is less than the Estimated Net Asset Value, New VII shall pay
to Old VII on the third Business Day after such determination an amount in cash
equal to such deficiency plus an amount equal to interest thereon from the
Exchange Date to the date of payment at the Prime Rate, compounded quarterly.
Payments of cash pursuant to this Section 3.3 shall be made by wire transfer of
immediately available funds to an account in the United States designated by the
party entitled to payment to the party required to make the payment at least two
(2) Business Days prior to the date such payment is due.
Section 3.4 Fixed Amount. In the event that on the Exchange
Date there are less than 1,122,660 Basic Subscribers (the shortfall of Basic
Subscribers below 1,122,660 is referred to herein as the "Shortfall Number"),
for this purpose, calculated without giving effect to the loss, if any, of Basic
Subscribers as a result of a Disaster (defined for these purposes without regard
to the number of Basic Subscribers affected), the Fixed Amount shall be reduced
by an amount equal to the product of (x) the Shortfall Number, multiplied by
$1,763.67.
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Section 3.5 Proration. Property taxes and assessments, payroll
taxes, utility charges, association dues, rents, pole rentals, applicable
franchise, copyright or other fees, sales and service charges and wages of
Employees of the Company who are Continuing Employees, and other operating
income and expenses of the Company shall be prorated as of 11:59 p.m. on the
Exchange Date, with New VII being responsible for periods prior to such time and
Old VII being responsible for periods from and after such time, but only to the
extent such items were not taken into account in calculating Working Capital.
For purposes of the foregoing, any settlement with BMI or ASCAP for payment of
copyright or royalty fees with respect to music performance rights in connection
with the Systems, to the extent relating to the period ended on or prior to the
Exchange Date, shall be reimbursed to Old VII by New VII on an after-Tax basis
whether such settlement is entered into before or after the Exchange Date and
whether such payments are paid or payable before or after the Exchange Date, but
only to the extent such items were not taken into account in calculating Working
Capital, provided that New VII shall have no responsibility for any settlement
after the Share Purchase Closing that is not consistent with settlement terms
reached by the cable television industry generally unless such settlement is
approved in advance by New VII, such approval not to be unreasonably withheld.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEW VII
New VII represents and warrants to Old VII (which
representations and warranties may be relied upon by Old VII regardless of any
knowledge Old VII may have as to such matters) that:
Section 4.1 Corporate Existence and Power. Each of Old VII,
New VII and the Cable Division Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, (ii) is authorized to transact business and is in good standing in
each state in which its ownership of assets or conduct of business requires such
qualification, and (iii) has all corporate powers required to carry on its
business as conducted on the date hereof, with such exceptions to clauses (i),
(ii) and (iii) as would not have a Material Adverse Effect or materially and
adversely affect the ability of the Company to consummate the Transaction.
Section 4.2 Corporate Authorization. Each of Old VII, New VII
and the Cable Division Subsidiaries has the corporate power to own its assets
and to operate the Systems operated by it. Old VII and New VII each have the
corporate power to enter into this Agreement and to consummate the Transactions
contemplated to be consummated by each of them. The execution and delivery by
each of Old VII and New VII of this Agreement and the consummation by each of
them of the Transactions contemplated to be consummated by each of them
hereunder have been duly authorized by all necessary corporate action on each of
their parts.
Section 4.3 Capitalization; Subsidiaries; Certificates of
Incorporation and By-Laws. (a) As of the date hereof, the authorized capital
stock of Old VII consists of
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100 shares of Common Stock, par value $0.10, of which 100 shares are issued and
outstanding. Immediately prior to the Exchange Time and the Share Purchase
Closing, the authorized capital stock of Old VII will consist of a number of
shares of Class A Common Stock equal to the Number of Shares to be Exchanged, of
which a number equal to the Number of Shares to be Exchanged shall be issued and
outstanding (and shall be owned of record (x) by VI immediately prior to the
Exchange Time and (y) by Persons who have exchanged shares of VI Common Stock
for such shares in the Exchange Offer (and their transferees and further
transferees) immediately prior to the Share Purchase Closing), 100 shares of
Class B Common Stock, none of which will be issued and outstanding, and a number
of shares of Preferred Stock equal to the Number of Shares to be Exchanged, none
of which will be issued and outstanding. Except for the Exchange Offer and any
arrangement concerning the issuance by Old VII to VI of shares of Class A Common
Stock to be exchanged in the Exchange Offer as contemplated by the Transaction
Documents, there is no outstanding option, warrant, right (including conversion
or preemptive rights or rights of first refusal), call, subscription or other
agreement pending for the issuance of, or the granting of rights to acquire from
Old VII or VI, any capital stock of Old VII or securities convertible into or
exercisable for capital stock of Old VII.
(b) Exhibit D sets forth a true and correct list of the Cable
Division Subsidiaries as of the date of this Agreement. Old VII has good and,
subject to Permitted Liens, marketable title to all of the outstanding shares of
capital stock of Tele-Vue and Tele-Vue (either directly or through another Cable
Division Subsidiary) has good and, subject to Permitted Liens, marketable title
to all of the outstanding shares of capital stock of each Cable Division
Subsidiary (other than Tele-Vue), free and clear of all Liens. There is no
outstanding option, warrant, right, call, subscription or other agreement
providing for the issuance of, or the granting of rights to acquire from any
Cable Division Subsidiary, any capital stock of any Cable Division Subsidiary or
securities convertible into or exercisable for capital stock of any Cable
Division Subsidiary.
(c) At the Exchange Time, all issued and outstanding shares of
Class A Common Stock shall have been issued in accordance with the registration
or qualification provisions of the 1933 Act and any relevant state securities
laws, or pursuant to valid exemptions therefrom.
Section 4.4 Governmental Authorization. The execution and
delivery of this Agreement by Old VII and New VII, and the performance by Old
VII and New VII of this Agreement, and the consummation by Old VII and New VII
of the Transactions contemplated to be consummated by it pursuant hereto,
require no material action by or in respect of, or material filing with, any
Governmental Authority other than (x) compliance with any applicable
requirements of the HSR Act, the FCC Authorizations, the Non-Cable FCC
Authorizations and the Local Authorizations and (y) those that may be applicable
as a result of the regulatory status of TCI, TCI Sub or their Affiliates.
Section 4.5 Consents. Except as set out in Schedule 4.14, no
material consent by any Person under any Material Contract is required or
necessary for the execution and delivery of this Agreement by Old VII, or the
performance by Old VII of this Agreement, or the
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consummation of the Transactions contemplated to be consummated by it pursuant
hereto. Except as indicated in Schedules 4.5, 4.9, 4.14 and 4.16, no consent by
any Person (other than a Governmental Authority) is required or necessary for
the execution and delivery of this Agreement by Old VII or New VII, or the
performance by Old VII or New VII of this Agreement, or the consummation by Old
VII or New VII of the Transaction, with such exceptions as would not have a
Material Adverse Effect.
Section 4.6 Non-Contravention. (a) The execution, delivery and
performance of this Agreement by Old VII and New VII, and the consummation by
Old VII and New VII of the Transactions contemplated to be consummated by each
of them pursuant hereto, do not or on or before the Exchange Date will not, (x)
contravene the certificate of incorporation or bylaws of Old VII or New VII or
(y) subject to obtaining the consents described in Schedules 4.5, 4.9, 4.14 and
4.16 and subject to obtaining, taking or making the actions and filings
described in clauses (x) and (y) of Section 4.4, result in the imposition of any
Lien (other than a Permitted Lien) upon any assets of the Company pursuant to,
or constitute a breach or default (including any event that, with the passage of
time or giving of notice, or both, would become a breach or default) under or
give rise to a right of termination, cancellation, first refusal or acceleration
(other than, a Right of First Refusal) under any applicable Legal Requirement or
any judgment, injunction, order, decree, contract, license, lease, indenture,
mortgage, loan agreement, note or other agreement or instrument as to which the
Company is a party or by which any of its properties may be bound, the effect of
which would be to materially impair the ability of Old VII to perform its
obligations under this Agreement.
(b) The Company is not in breach or default (including any
event that, with the passage of time or giving of notice, or both, would become
a breach or default) under any Material Contract or contract by which any of its
assets may be bound, the effect of which would be to impair the ability of the
Company in any material respect to operate any System as presently operated.
Section 4.7 Binding Effect. This Agreement has been duly
executed and delivered by Old VII and New VII, and this Agreement constitutes a
valid and binding obligation of Old VII and New VII, enforceable against Old VII
and New VII in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies.
Section 4.8 Financial Statements; Undisclosed Liabilities. (a)
The unaudited consolidated balance sheets of the Company at December 31, 1994
and March 31, 1995 and the unaudited consolidated income statements of the
Company for the year ended December 31, 1994 and the three-month period ended
March 31, 1995 set forth on Schedule 4.8 hereto (the "Financial Statements"),
fairly present in all material respects in conformity with GAAP, the financial
position of the Company as of the dates thereof and the results of operations of
the Company for the periods then ended, except that such Financial Statements
omit footnotes (and the disclosure contained therein) and are subject to normal,
quarter-end and/or year-end adjustments, and the financial information set forth
in such unaudited consolidated balance sheet
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at December 31, 1994 and such unaudited consolidated income statement for the
year ended December 31, 1994 was incorporated in the audited consolidated
financial statements of Viacom Inc. at and for the year ended December 31, 1994.
(b) Except for obligations and liabilities (w) set forth on
the unaudited consolidated balance sheet of the Company at March 31, 1995, (x)
arising in the ordinary course of the Business since March 31, 1995, (y)
described on Schedule 4.8 or (z) for which New VII must indemnify Old VII
pursuant to Section 7.2(b), the Company has no obligations or liabilities of any
kind, absolute or contingent, that would be required under GAAP to be reflected
on the consolidated balance sheet of the Company.
Section 4.9 Systems; Local Authorizations and FCC
Authorizations. (a) (i) Schedule 4.9 sets forth a complete list for each System
of the Local Authorizations (other than any such authorization, approval,
certification, franchise, license or permit which is not material to the
ownership or operation of a System) in effect as of the date hereof and
indicates for each System those Local Authorizations requiring the consent of
the Local Authority for consummation of the Transaction.
(ii) Each Local Authorization (x) is in all material respects
validly held by Old VII or a Cable Division Subsidiary in accordance with and as
required by the terms thereof and according to all applicable Legal Requirements
and (y) is in all material respects in full force and effect and has not been
revoked or canceled and Old VII or the applicable Cable Division Subsidiary is
in material compliance therewith. To the knowledge of New VII and except as set
forth on Schedule 4.9, no proceeding to revoke, cancel or modify in any manner
any such Local Authorization has been initiated or threatened in writing. All
626 Letters for the Systems required to be filed in connection with renewal of
Local Authorizations have been timely filed.
(iii) Except as otherwise indicated on Schedule 4.9, (aa)
Schedule 4.9 sets forth a list, for each Franchise Area, of the date (or, if
applicable, the range of possible expiration dates) of expiration of each
material Local Authorization with respect thereto; (bb) no other material Local
Authorization is required by law in connection with the operation and
maintenance of the Systems; and (cc) to the knowledge of New VII, (x) there are
no operating cable television systems (other than the Systems) providing cable
television programming to a material number of households in the Franchise Area
and (y) no entity has been awarded a valid cable television franchise which
enables such entity to provide cable television service to a material number of
households in the Franchise Area.
(b) Schedule 4.9 contains a complete list as of the Company's
accounting cutoff date ending immediately prior to May 31, 1995 (except that
clause (ii) is reported as of March 31, 1995), with respect to each System, of
(i) the number of Basic Subscribers as shown on the System's monthly subscriber
report, (ii) the number of pay customers by each pay service as shown in the
Company's records, (iii) the approximate length of installed plant, and (iv) the
approximate number of Homes Passed.
(c) Schedule 4.9 contains a complete list of all FCC
Authorizations in effect as of the date hereof and all consents of the FCC
necessary in connection with the Transaction.
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(d) (i) No System is in material violation of and the Company
has not received written notice of any claimed violation of, any FCC
Authorization; (ii) Each such FCC Authorization is validly existing and in full
force and effect in all material respects; and (iii) Each System has all
material FCC Authorizations required for its operation of the Systems. To the
knowledge of New VII, no proceeding to revoke, cancel or modify in any manner
any such FCC Authorization has been initiated or threatened in writing and the
applicable member of the Company is in material compliance with all such FCC
Authorizations.
(e) Schedule 4.9 sets forth the Basic Subscriber Rate for each
Franchise Area as of the date indicated therein.
Section 4.10 Absence of Changes. Except as described in
Schedule 4.10 or as contemplated or permitted by the Transaction Documents,
since the Balance Sheet Date, (i) the Company has operated the Business in the
ordinary course, consistent with past practices, (ii) there have been no changes
in the Business which, individually or in the aggregate, have resulted in a
Material Adverse Effect and (iii) there has been no issuance or sale of any
shares of Old VII's capital stock.
Section 4.11 Subsidiaries. At the date of this Agreement, Old
VII is a wholly-owned Subsidiary of VI.
Section 4.12 Assets. The Company has good and, subject to the
matters referred to in item 4 of Schedule 4.19 and Permitted Liens, marketable
title to, or a valid leasehold or license interest in, all tangible assets
purported to be owned, leased or licensed by the Company, including, without
limitation, all Inventory, Real Property and Equipment but excluding the
Transferred Assets and the PVIT Assets (the "Cable Division Assets"), free and
clear of all Liens other than Permitted Liens. The PVIT Bill of Sale is
sufficient to transfer to Old VII good and, subject to Permitted Liens,
marketable title to the PVIT Assets. The Cable Division Assets, the Transferred
Assets and the PVIT Assets are in all material respects sufficient to operate
the Business as currently conducted. Except for the Transferred Assets and the
PVIT Assets, the Cable Division Assets constitute all material operating assets
owned, leased or licensed by VI or any of its Subsidiaries and used primarily in
the Cable Television Business of VI and its Subsidiaries. Any asset owned by VI
or any Subsidiary of VI which is primarily used in the Business but is not held
by the Company on the date of this Agreement will be transferred to the Company
on or before the Exchange Time.
Section 4.13 Intellectual Property. To the knowledge of New
VII, the conduct of the Business does not infringe upon the patents, trademarks,
trade names or other intellectual property rights of any Person, with such
exceptions as would not result in a Material Adverse Effect.
Section 4.14 Material Contracts. (a) Schedule 4.14 lists all
Material Contracts in effect on the date hereof.
(b) Except as disclosed in Schedule 4.14, the Company is not
in material default or breach of any Material Contract and, to the knowledge of
New VII, (i) there exists no
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state of facts which after notice or lapse of time or both would constitute such
a material default or breach and (ii) no other party to such Material Contract
is in default or breach thereunder.
(c) Except as set forth on Schedule 4.14, the real property
and personal property which are the subject of leases that constitute Cable
Group Contracts are currently used in the construction, operation or maintenance
of the Business or constitute Telecom Agreements.
Section 4.15 Litigation. Except as set out in Schedule 4.15,
there are no actions, suits or proceedings pending and, to the knowledge of New
VII, there are no claims, grievances, governmental investigations, actions,
suits or proceedings threatened, against or affecting the Company with respect
to the Business at law or in equity or before or by any Governmental Authority,
or before or by an arbitrator or arbitration board which would have a Material
Adverse Effect. Except as set out in Schedule 4.15, there are no judgments,
decrees or orders outstanding against the Company with respect to the Business
or any System.
. Except as set forth on Schedule 4.16, (i) the Company is in
compliance with all applicable Legal Requirements and (ii) the Business is being
conducted in compliance with all applicable Legal Requirements, with such
exceptions to clauses (i) and (ii) as would not have a Material Adverse Effect.
Section 4.17 Employees. (a) Employment Agreements. Schedule
4.17 contains a list of all written employment agreements between the Company
and Employees. The consummation of the Transaction will not result in Old VII or
any Affiliate of Old VII becoming obligated to make any severance payments, to
accrue any severance costs with respect to or to pay any stay-on bonuses to any
Continuing Employee or Non-Continuing Employee. Except as set forth in Schedule
4.17, neither Old VII nor any Cable Division Subsidiary has made any commitment
or representation to any Continuing Employee with respect to continuing
employment nor will it make any such representation.
(b) Collective Agreements. Except as set out in Schedule 4.17,
neither the Company nor any Affiliate of the Company is a party to any material
labor or employment dispute or is bound by or a party to any collective
bargaining agreement relating to Employees and no trade union, council of trade
unions, employee bargaining agent or affiliated bargaining agent for any of the
Employees (i) holds bargaining rights with respect to any Employees by way of
certification, interim certification, voluntary recognition, designation or
successor rights; or (ii) has, to the knowledge of New VII, applied or indicated
an intention to apply to be certified as the bargaining agent of any of the
Employees.
(c) Employee Benefit Plans/ERISA. (i) Schedule 4.17 lists each
stock option, stock purchase, disability, vacation pay, incentive, bonus,
severance pay, deferred compensation, supplemental income or other employee
benefit plan, policy or arrangement or agreement and each other "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained by or contributed
to by VI, the Company or any ERISA Affiliate of the Company, including all
amendments thereto (collectively referred to as "Benefit Plans"), covering
current or former employees of the Company or dependents or survivors of
employees or former employees of the Company.
<PAGE> 40
34
(ii) Except as set forth on Schedule 4.17, each Benefit Plan
is in substantial compliance with all applicable laws and regulatory
requirements, and has been administered substantially in accordance with its
terms. To the knowledge of New VII, there are no circumstances relating to any
Benefit Plan intended to be tax-qualified under Section 401(a) of the Code that
would likely be treated by the IRS as a disqualifying event. No material
liabilities, other than for payment of benefits in the ordinary course, have
been incurred nor, to the knowledge of New VII, do any facts exist which are
reasonably likely to result in any material liability (whether or not asserted
as of the date hereof) of the Company arising by virtue of any event, act or
omission occurring prior to the Exchange Date with respect to any Benefit Plan.
To the knowledge of New VII, no liens under Code Section 412(n) or ERISA Section
4068(a) exists, no accumulated funding deficiency under Code Section 412(a)
exists and no liabilities under ERISA Section 4069(a) or Section 4201(a) have
been incurred with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA) of the Company or any member of an ERISA affiliated group
(as defined under Section 414(b), (c) and (m) of the Code) which would have a
Material Adverse Effect, nor do any facts exist which are reasonably likely to
result in the assertion of such liens or liabilities.
(iii) None of VI, Old VII, New VII or any ERISA Affiliate
thereof has any present or future obligation to make any payment to or with
respect to any present or former employee of the Company pursuant to any retiree
medical benefit plan or other retiree welfare benefit plan (in each case except
as required by law), and no condition exists that would prevent the Company from
amending or terminating any Benefit Plan providing retiree welfare benefits to
employees of the Company.
(d) Immigration. The Company has in all material respects
properly verified the identity and authorization to work in the United States
and has completed and retained INS forms I-9 for all Continuing Employees where
required by the Immigration Reform and Control Act of 1986 and related statutes.
Section 4.18 Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Old VII, any Cable Division Subsidiary or any of their
Affiliates who might be entitled to any fee or commission from Old VII or any of
its Affiliates in connection with the execution, delivery or performance of this
Agreement or the Transactions.
Section 4.19 Real Property. (a) Schedule 4.19 lists the
address of each parcel of Owned Real Property.
(b) Except as set forth in Schedule 4.19, all Owned Real
Property is used or useful in the Business.
(c) The Company has possession and the right to occupy the
real property which is the subject of each lease of Leased Real Property that
constitutes a Material Contract.
(d) The Company has not received written notice from any party
to any instrument affecting any material parcel of Real Property that such party
intends to terminate or
<PAGE> 41
35
cancel the same, with such exceptions as would not be reasonably expected to
have a Material Adverse Effect.
Section 4.20 Environmental Matters. There is no past or
present event, condition or circumstance (i) which constitutes a material
violation by the Company of any Legal Requirements now in effect relating to
pollution or protection of the environment from contamination (other than
violations as to which Old VII will be indemnified by New VII pursuant to
Section 7.2(b)), including any material Legal Requirements relating to the use,
treatment, storage, disposal, transport or handling of, or the spill, deposit,
emission, discharge, migration, release or threatened release of, contaminants,
substances, wastes or pollutants, including petroleum and "hazardous substances"
as that term is defined under the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA") (collectively, "Hazardous
Materials"), into the environment or (ii) which has or will give rise to any
material liability of the Company (other than liabilities as to which Old VII
will be indemnified by New VII pursuant to Section 7.2(b)), including any
material liability under CERCLA or other similar state law, based on, arising
out of or related to the use, treatment, storage, disposal, transport of, or
handling or the spill, deposit, emission, discharge, migration, release or
threatened release of, any Hazardous Material into the environment; provided
that the representations in this Section 4.20, insofar as they apply to the
underground storage tanks listed on Schedule 4.20, shall apply without any
limitation as to materiality. Attached hereto as Schedule 4.20 is a true and
correct list of all underground storage tanks located on the Real Property.
Section 4.21 FCC and Copyright. (a) The Company is in
compliance with the Rules and Regulations concerning Cumulative Leakage Index,
as defined by the Rules and Regulations.
(b) The Company has made all material submissions (including,
without limitation, registration statements) required under the Communications
Act applicable to the conduct and operation of the Business and the Systems. The
Company and the Systems are in compliance in all material respects with the
Communications Act. The Company has provided all material notices to subscribers
and maintained in all material respects all public files required under the
Communications Act. Except as set forth in Schedule 4.21, the Company is
certified as in compliance with the FCC's equal employment opportunity rules to
the extent required to be so certified under such rules. Each System is in
material compliance with all "must carry" requirements and has received all
retransmission consents, except such as are being contested.
(c) The Company has deposited with the United States Copyright
Office all statements of account and other documents and instruments, and paid
all royalties, supplemental royalties, fees and other sums to the United States
Copyright Office required under the Copyright Act with respect to the business
and operations of each System as are sufficient to obtain, hold and maintain the
compulsory copyright license for cable television systems prescribed in section
111 of the Copyright Act.
<PAGE> 42
36
(d) The Company and each System are in compliance in all
material respects with the Copyright Act, except as to potential copyright
liability arising from the performance, exhibition or carriage of any music on
each System. The Company and each System are entitled to hold and do now hold
the compulsory copyright license described in section 111 of the Copyright Act.
Section 4.22 Covenants not to Compete. Except as set forth on
Schedule 4.22, the Company is not bound by covenants not to compete which will
apply to the Company after the Effective Time. Schedule 4.22 lists all material
covenants not to compete which will be enforceable by the Company after the
Exchange Time.
Section 4.23 Telecom Capital Expenditures. As of June 30,
1995, the portion of Telecom Capital Expenditure Amount expended prior thereto
did not exceed $11,500,000.
Section 4.24 Accounts Receivable, Net. The Company's allowance
for customer doubtful accounts as of the Exchange Time will be in an amount not
less than the total of all disconnected subscriber account balances, all amounts
billed to subscribers for unrecovered converters and all accounts receivable
aged over 120 days from the invoice or billing date, determined on a basis
consistent with the Financial Statements.
Section 4.25 Number of Basic Subscribers. At the date of this
Agreement, there are, and as of February 23, 1995, there were at least 1,134,000
Basic Subscribers (for this purpose, calculated without giving effect to the
loss, if any, of Basic Subscribers as a result of a Disaster (defined for these
purposes without regard to the number of Basic Subscribers affected)).
Section 4.26 Adjustment Amounts. As of June 30, 1995, Covered
Capital Expenditures were $38,709,000, Covered Line Extension and Other Capital
Expenditures were $9,091,000, capital expenditures made for which TCI Sub would
be required to reimburse Old VII pursuant to Section 7.18 of the Subscription
Agreement were $368,000, and access/exclusivity fees incurred in accordance with
Exhibit E were $320,188.
Section 4.27 Ranking of Payment Obligations. On the Exchange
Date, New VII's obligations to make payments to Old VII pursuant to Sections
2.3, 2.4, 2.5(b), 7.2, 9.1 and 9.2 shall rank no lower than pari passu in right
of payment with New VII's obligations to repay its senior unsecured bank debt.
ARTICLE V
NONCOMPETITION
Section 5.1 Noncompetition. If the Share Purchase Closing
occurs, so long as Old VII, TCI, TCI Sub or any Person to whom the Company
initially transfers the Nashville System or Dayton System following the Share
Purchase Closing in accordance with Section 7.19 of the Subscription Agreement
(a "Specified Party") owns and operates a cable television system
<PAGE> 43
37
in a Franchise Area (determined as of the Exchange Date but not including any
Unapproved Franchise Area unless and until the Deferred Closing Date, if any,
with respect to such Unapproved Franchise Area), New VII agrees that, with
respect to each such Franchise Area, from and after the Share Purchase Closing
until the earlier of (i) the third anniversary of the Exchange Date or (ii) the
date such Specified Party no longer owns and operates such Franchise Area, New
VII shall not, and New VII shall not permit any of its Subsidiaries or any
Subsidiaries of VI to, (x) directly engage in Cable Television Business in such
Franchise Area or (y) indirectly engage in Cable Television Business in such
Franchise Area through ownership of an equity interest in any Disqualified
Person. For purposes of the preceding sentence (i) New VII and Subsidiaries of
VI shall not be deemed to be engaged in Cable Television Business as a result of
the ownership of 10% or less of the equity interests of any Person and (ii) no
Person shall be deemed to be a Disqualified Person until the first anniversary
of the later of (a) the date New VII and Subsidiaries of VI own in excess of 10%
of the equity interests of such Person and (b) the date such Person becomes a
Disqualified Person. The "Territory" shall consist, at any time, of all
Franchise Areas (determined as of the Exchange Date) in which a Specified Party
owns and operates a cable television system at such time, provided that any
Unapproved Franchise Area shall not in any event be deemed to be part of the
Territory unless and until the Deferred Closing Date, if any, with respect to
such Unapproved Franchise Area. A "Disqualified Person" shall mean a Person, (i)
25% or more of whose revenues are derived from Cable Television Business within
the Territory or (ii) whose Cable Television Business has active plant passing
100,000 or more of the homes in the Franchise Areas in the Territory, taken as a
whole.
ARTICLE VI
TERMINATION
Section 6.1 Termination. This Agreement shall automatically
terminate upon any termination of the Parents Agreement pursuant to Section 7.1
thereof.
Section 6.2 Effect of Termination. Upon termination of this
Agreement pursuant to Section 6.1 hereof: (i) this Agreement will forthwith
become null and void, (ii) such termination will be the sole remedy with respect
to any breach of any representation, warranty, covenant or agreement contained
in or made pursuant to this Agreement and (iii) no party hereto or any of their
respective officers, directors, employees, agents, consultants, shareholders or
principals will have any liability or obligation hereunder or with respect
hereto, provided, however, that no party to this Agreement shall be entitled to
recover consequential damages in respect to any breach of this Agreement or any
other Transaction Document.
<PAGE> 44
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ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.1 Survival. The representations, warranties,
covenants and agreements contained in or made pursuant to this Agreement shall
survive the Exchange Time, but the representations and warranties contained or
made pursuant to this Agreement shall terminate and be of no further force on
and as of April 30, 1997 except that the representations and warranties made by
New VII in Sections 4.3, 4.12, 4.17(c), 4.20 and 4.22 shall survive
indefinitely.
Section 7.2 Indemnification. (a) The party seeking
indemnification pursuant to this Section 7.2 is referred to as the "Indemnified
Party" and the party from whom indemnification is sought under this Section 7.2
is referred to as the "Indemnifying Party."
(b) If the Exchange Time occurs, notwithstanding any
negligence or misconduct on the part of Old VII prior to the Exchange Time, New
VII shall indemnify and hold harmless Old VII against and in respect of any and
all Losses (w) constituting or arising out of any Lien attaching after the
Exchange Date on (i) any Unapproved Franchise Assets prior to the date the
Appraised Value with respect thereto is paid to Old VII pursuant to Section
2.3(d), or (ii) any Cable Group Contract assigned to New VII pursuant to Section
2.2, in each case of clauses (i) and (ii) while title to such Unapproved
Franchise Asset or Cable Group Contract is held by New VII (other than Liens
constituting, securing or arising out of Cable Liabilities or arising as a
result of actions of Old VII or its Affiliates after the Exchange Date), (x)
which may be incurred by Old VII by reason of (i) the breach of any
representation and warranty of New VII contained in Article IV of this Agreement
as if such representations and warranties were made as of the Exchange Date
(except to the extent a different date is specified therein in which case such
representation and warranty shall be deemed to be made as of such date), or (ii)
the breach of any covenant or agreement of New VII contained in this Agreement
(other than in Article IX) or the Bill of Sale, or (iii) the breach at or prior
to the Exchange Date of any covenant or agreement of Old VII contained in this
Agreement (other than in Article IX) or (y) constituting Non-Cable Liabilities.
(c) If the Exchange Time occurs, Old VII shall indemnify and
hold harmless New VII against any and all Losses (w) constituting or arising out
of any Lien attaching after the Exchange Date on any Non-Cable Asset while it is
an Untransferable Asset (other than Liens constituting, securing or arising out
of Non-Cable Liabilities or arising as a result of actions of New VII or its
Affiliates after the Exchange Date), (x) which may be incurred by New VII by
reason of a breach after the Exchange Date of a covenant or agreement of Old VII
contained in this Agreement (other than in Article IX) or the Bill of Sale, (y)
constituting Cable Liabilities or (z) constituting Accounts Payable, Other
Current Liabilities or New Borrowing Obligations.
(d) Notwithstanding anything to the contrary in this Agreement
(i) the aggregate liability of an Indemnifying Party pursuant to this Article
VII in respect of all Losses (together with any liability of such Indemnifying
Party and its Affiliates for breaches of other Transaction Documents, other than
Section 3.1(d)(ii) of the Subscription Agreement and Sections 2.1(f) and 2.1(g)
of the Parents Agreement) shall not exceed the Asset Value (provided
<PAGE> 45
39
that this clause (i) shall not limit the liability of New VII pursuant to
Sections 7.2(b)(y), and (ii) no party shall be entitled to recover consequential
damages pursuant to this Section 7.2 or otherwise in respect of any breach of
this Agreement or any other Transaction Document.
(e) No claim for indemnification shall be made by any party
pursuant to Section 7.2(b) or 7.2(c) with respect to a breach of a
representation or warranty contained herein or made pursuant hereto or contained
in the Subscription Agreement and constituting a Non-Cable Liability (i) unless
notice of such claim (describing the basic facts or events, the existence or
occurrence of which constitute or have resulted in the alleged breach of a
representation or warranty made in this Agreement) has been given to the
Indemnifying Party during the survival period set forth in Section 11.14 of the
Subscription Agreement or Section 7.1, as the case may be; and (ii) except as to
liability for breach of a representation or warranty set forth in Sections 6.7
and 6.8 of the Subscription Agreement and Sections 4.3, 4.12, 4.17(c), 4.18
,4.20, 4.22, 4.25 and 4.26 only, until the Losses that would be recoverable
under such claims aggregate in excess of 1/2 of 1% of the Asset Value, after
which event the Indemnified Party shall be entitled to be indemnified for only
such Losses as are in excess of 1/2 of 1% of the Asset Value.
(f) The Indemnified Party shall give prompt written notice to
the Indemnifying Party of any claim for indemnification under Section 7.2(b) or
(c) relating to a claim or demand of a third party with respect to which it is
seeking indemnification hereunder. The failure to give such prompt notice shall
not relieve the Indemnifying Party of its indemnity obligations hereunder with
respect thereto, except to the extent (and only to the extent) that the
Indemnifying Party is materially prejudiced by such failure. The Indemnifying
Party shall have the right to defend and to direct the defense against any such
claim or demand, in its name or in the name of the Indemnified Party, as the
case may be, at the expense of the Indemnifying Party, and with the counsel
selected by the Indemnifying Party, provided that (x) the Indemnifying Party may
not settle or compromise any such claim or demand without the consent of the
Indemnified Party (which consent may not be unreasonably withheld) if injunctive
or other equitable relief would be imposed against the Indemnified Party as a
result thereof and (y) if the Indemnifying Party fails to defend against any
claim or demand as to which the Indemnifying Party is required to indemnify the
Indemnified Party pursuant to this Article VII, the Indemnified Party may defend
against such claim or demand at the expense of the Indemnifying Party.
Notwithstanding anything in this Agreement, to the contrary, the Indemnified
Party shall cooperate with the Indemnifying Party, and keep the Indemnifying
Party fully informed in the defense of such claim or demand. The Indemnified
Party shall have the right to participate in the defense of any claim or demand
with counsel employed by it at the expense of the Indemnified Party. The
Indemnifying Party shall have no indemnification obligations with respect to any
such claim or demand which shall be settled by the Indemnified Party without the
prior written consent of the Indemnifying Party.
(g) If the Exchange Time occurs, the rights of the parties
under Sections 7.2 and 10.13 shall be the exclusive remedies of the parties with
respect to breaches of representations, warranties, covenants and agreements
contained in this Agreement (other than in Article IX hereof). Old VII, on
behalf of itself and its Affiliates from time to time, hereby irrevocably waives
and releases New VII and its Affiliates, effective as of and immediately after
<PAGE> 46
40
the Exchange Time, from any statutory or other right of contribution or
indemnity (except as set forth in this Section 7.2 or in Article IX) with
respect to the Company's ownership of the Cable Assets or operation of, or
otherwise relating to, the Systems.
(h) In the event that an Indemnifying Party shall be obligated
to indemnify an Indemnified Party pursuant to Section 7.2(b) or (c), the
Indemnifying Party shall, upon payment of such indemnity, be subrogated to all
rights of the Indemnified Party with respect to claims to which such
indemnification relates.
(i) Any payment made by Old VII to New VII pursuant to
Sections 3.3, 3.5 or 7.2 hereof or pursuant to Article IX shall be treated as an
increase in the assets contributed by Old VII to New VII pursuant to Section
2.1. Any payment by New VII to Old VII pursuant to Sections 2.5, 3.3, 3.4, 3.5
or 7.2 hereof or pursuant to Article IX shall be treated as a reduction in the
assets contributed by Old VII to New VII pursuant to Section 2.1.
(j) New VII shall not consummate any transaction in which all
or a majority in value (as determined in good faith by the management of New
VII) of its assets are distributed without fair consideration to its direct or
indirect stockholders unless (x) the transferee of such assets or, if such
assets represent principally an equity interest in an entity, such entity,
assumes, by instrument reasonably satisfactory to Old VII, New VII's obligations
under this Article VII and (y) the equity of such transferee or entity has a
fair market value immediately following such transaction of at least
$1,500,000,000 (one billion five hundred million dollars).
ARTICLE VIII
EMPLOYEE MATTERS
Section 8.1 Employment. (a) Old VII shall take such action as
may be necessary to terminate the employment of each Non-Continuing Employee
prior to the Exchange Time provided, however, that the Company will not be
required to violate the terms of a Cable Group Bargaining Agreement or any
employment discrimination laws. All Continuing Employees who are actively
employed, whether or not actively at work, at the Exchange Time, and who
continue employment with the Company or a transferee of assets of the Company or
with the manager of the Systems shall be paid at rates of compensation which are
the same or substantially similar to their compensation prior to the Exchange
Time and other terms and conditions substantially similar to those of other
similarly situated employees of TCI, a transferee of assets of the Company or
the manager of the Systems or in accordance with applicable Cable Group
Bargaining Agreements, as applicable, and no interruption in employment shall be
deemed to have occurred by virtue of the Transaction.
(b) Employee Benefits - Generally. Effective as of the
Exchange Time, Continuing Employees shall cease active participation in any
Benefit Plan or program or executive plan or arrangement sponsored and/or
maintained by New VII (the "Viacom Plans"), and, except as specifically set
forth herein, Old VII will have no obligations with respect to Viacom Plans and
VI shall have no obligations with respect to any benefits plan established or
<PAGE> 47
41
maintained by Old VII or the Cable Group for Continuing Employees after the
Exchange Time. Subject to the provisions of this Section 8.1 as to any
particular benefit, as of the Exchange Time and for at least one year thereafter
employee benefits shall be provided to Continuing Employees which are
substantially similar to those provided to similarly situated employees of TCI
Sub or a transferee of assets of the Company or of the manager of the Systems
and, with respect to collective bargaining unit employees are consistent with
Cable Group Bargaining Agreements. All prior service of Continuing Employees
with the Company and any member of a controlled group of corporations or trades
or businesses or an affiliated service group with the Company prior to the
Exchange Time, within the meaning of Code Sections 414(b), (c), or (m),
respectively ("ERISA Affiliates"), shall be recognized by the Company for all
benefit plan purposes (other than benefit accrual under a defined benefit plan),
to the extent recognized under the comparable Viacom Plan as in effect on the
date of this Agreement. On or before the Exchange Time, Old VII shall provide
New VII with a list setting forth the service accrued by each Continuing
Employee. Old VII maintains a vacation and sick pay plan for employees; all
other Benefit Plans are or will prior to the Exchange Date be Viacom Plans.
(c) Defined Benefit Pension Plan. As soon as practicable after
the Exchange Time, New VII shall prepare and deliver to Old VII a schedule
listing the Continuing Employees who were participants in the Viacom Pension
Plan (formerly the Pension Plan for Divisional Employees of Viacom International
Inc.) or any successor thereto (the "Viacom Pension Plan") as of the Exchange
Time.
New VII shall cause all Continuing Employees to become 100%
vested in their accrued benefits under the Viacom Pension Plan, and to be paid
such benefits in accordance with the terms of the Viacom Pension Plan, as
amended from time to time, and Old VII shall not have any responsibility with
respect thereto. Old VII shall cooperate with New VII and VI to provide such
current information regarding Continuing Employees on an ongoing basis as may be
necessary to facilitate payment of pension benefits to such employees from the
Viacom Pension Plan.
(d) 401(k) Plan. New VII shall cause all Continuing Employees
to be 100% vested in their Viacom Investment Plan accounts as of the Exchange
Time. After the Exchange Time, such reasonable actions necessary to cooperate
with New VII shall be taken by Old VII to facilitate ongoing administration by
New VII of the Viacom Investment Plan with respect to Continuing Employees'
accounts, including, without limitation, providing current information to New
VII with respect to Continuing Employees, including notifying New VII of the
termination of employment or retirement of such employees and of any change of
address or marital status of which Old VII has received notice; administering
Investment Savings Plan loan repayments through payroll deductions for employees
with outstanding Viacom Investment Plan loan balances as of the Exchange Time
and remitting such payments to the plan trustee; distributing information
provided by VI regarding the Viacom Investment Plan to Continuing Employees; and
taking any other action as may be reasonably requested by New VII.
(e) Severance Obligations. Old VII shall not be responsible
for any severance obligations to Non-Continuing Employees. Except as may be
provided pursuant to the terms of
<PAGE> 48
42
any severance plan for the Company's employees as in effect immediately prior to
the Exchange Time, Old VII agrees that New VII shall not be responsible for any
obligations of the Company, including severance obligations, arising by virtue
of termination of employment after the Exchange Time of any Continuing Employee.
(f) Sick Leave. Each Continuing Employee shall continue to be
eligible for sick leave, including accrued and unused sick leave days to which
such employee was entitled under the applicable personal sick leave policy
applicable to the Company's employees ("Banked Sick Leave Days") as of the
Exchange Time; provided, however, that any Continuing Employee who participates
in a Short-Term Disability Plan maintained by Old VII, TCI Sub or a transferee
of assets of the Company or the manager of the Systems shall be eligible to
retain no more than ten (10) Banked Sick Leave Days as of the Exchange Date.
(g) Vacation. With respect to the computation year that
includes the Exchange Date, Continuing Employees shall be eligible for paid
vacation (as next described) as follows: The amount of a Continuing Employee's
vacation for the remainder of the computation year shall be not less than the
maximum number of days (up to a maximum of twenty-eight (28) but in any event
not less than zero) accrued for the computation year under the applicable
vacation policy adopted by Old VII for Continuing Employees after the Exchange
Time (based on the employee's service and subject to Section 8.1(b)) less the
vacation days used for the same period as an employee of the Company prior to
the Exchange Time. In addition, each Continuing Employee shall receive the
additional vacation, if any, that such employee would have been entitled to as
of the Exchange Time under the applicable vacation policy applicable to the
Company's employees in effect immediately prior to the Exchange Time.
(h) Welfare Plans. Subject to relevant provisions of
applicable Cable Group Bargaining Agreements, each Continuing Employee shall be
covered as of the Exchange Time under the terms of any medical, dental, vision,
prescription drug, life insurance plans or other welfare benefit plans (within
the meaning of Section 3(1) of ERISA), which are either, at the option of TCI
Sub, a transferee of assets of the Company or the manager of the Systems, as
applicable, (i) the same or substantially similar to the coverage of such
employees prior to the Exchange Time or (ii) maintained by TCI Sub, a transferee
of assets of the Company (only as to the employees of such transferees) or the
manager of the Systems for its similarly situated employees ("Replacement
Welfare Plans"). Notwithstanding the preceding sentence, any waiting periods or
pre-existing condition limitations in such Replacement Welfare Plans shall be
waived unless coverage would have been denied on a similar basis under welfare
plans applicable to employees of the Company immediately prior to the Exchange
Time (the "Cable Group Welfare Plans") and deductibles, maximum benefit
restrictions and "out-of-pocket" maximums shall be coordinated so that (i)
Continuing Employees receive credit towards any deductibles under Replacement
Welfare Plans for deductibles paid under the Cable Group's Welfare Plans during
the relevant plan year in which the Exchange Date occurs, and (ii) Continuing
Employees receive credit for eligible claims incurred under the Cable Group's
Welfare Plans during the plan year in which the Exchange Time occurs toward any
"out-of-pocket" maximums under Replacement Welfare Plans. As soon as practicable
after the Exchange Time, New VII shall prepare and deliver to Old VII the
information needed for
<PAGE> 49
43
Old VII to comply with the preceding sentence. New VII will be responsible for
all eligible unpaid claims incurred by Continuing Employees prior to the
Exchange Time and timely submitted for reimbursement in accordance with the
Cable Group Welfare Plan. Continuation health care coverage shall be provided by
the Company to all Continuing Employees and their qualified beneficiaries, who
incur a qualifying event after the Exchange Time in accordance with the
continuation health care coverage requirements of Section 4980B of the Code and
Sections 601 through 608 of ERISA ("COBRA"). New VII shall be responsible for
providing continuation coverage to the extent required by law to any employee
who is a Non-Continuing Employee and the qualified beneficiary of any such
employee who incurs a qualifying event under COBRA on or prior to the Exchange
Date.
(i) Employment Taxes. New VII and Old VII agree to follow the
procedures set forth in Section 5 of Rev. Proc. 84-77 with respect to any
Continuing Employee.
(j) WARN. Prior to the Exchange Time, Old VII shall comply
with the Worker Adjustment and Retraining Notification Act and any comparable
state law and New VII shall be responsible for any failure of Old VII to comply
with such laws provided that TCI Sub has provided the list of Continuing
Employees to VI as required by Section 7.20 of the Subscription Agreement.
(k) No Third Party Beneficiaries. Nothing in this Section 8.1
or elsewhere in this Agreement shall be deemed to make any employee of the
Company a third party beneficiary of this Agreement.
ARTICLE IX
TAX MATTERS
Section 9.1 Obligation of New VII to Indemnify. (a) Except as
may otherwise be agreed by the parties, New VII has assumed and shall be liable
for, and shall indemnify and hold the Old VII Subgroup harmless from and
against, all liability for Taxes of any member of the VI Group (including the
members of the Old VII Subgroup) for taxable years or portions thereof ending on
or prior to the Exchange Date on an after-Tax basis including without limitation
any Tax arising as a result of the failure of the Transaction to qualify for the
Tax treatment that satisfied the condition set forth in Section 6.1(iv) of the
Parents Agreement.
(b) All Taxes of any member of the Old VII Subgroup
for which New VII is not required to indemnify the Old VII Subgroup pursuant to
Section 9.1(a) shall be the obligation of the Old VII Subgroup, and Old VII
shall be liable for, and shall indemnify and hold the members of the VI Group
harmless from and against, all such liabilities on an after-Tax basis.
(c) For purposes of this Agreement, each Tax
liability for a taxable year that includes, but does not end on, the Exchange
Date (a "Straddle Period") shall be
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allocated between the period ending on the Exchange Date and the period
beginning the day after the Exchange Date by allocating Tax liability as if each
such period were a taxable year.
Section 9.2 Refunds. Any refunds of Taxes or any credit
against Taxes (when and to the extent applied by any member of the Old VII
Subgroup against any tax liability that New VII has not assumed pursuant to
Section 9.1(a) resulting in a tax benefit to any member of the Old VII Subgroup
that it otherwise would not have realized in the absence of such credit), to the
extent actually used, (in each case, including any interest relating thereto) of
any member of the Old VII Subgroup with respect to taxable years or portions
thereof ending on or prior to the Exchange Date shall be for the account of New
VII (and in the case of refunds or credits of Old VII, have been or shall be
assigned to New VII), and any other refunds of Taxes or credits against Taxes to
the extent actually used of any member of the Old VII Subgroup shall be for the
account of Old VII. Any refunds or credits with respect to Straddle Periods
shall be allocated under the principles set forth in Section 9.1(c). Old VII
shall promptly forward to, or reimburse New VII for, any such refunds or credits
and interest due New VII after receipt thereof, and New VII shall promptly
forward to, or reimburse Old VII for, any such refunds or credits and interest
due Old VII after receipt thereof. In either case, the party entitled to such
refund or credit shall reimburse the other party to the extent of any net Tax
cost imposed on such other party in connection with the receipt of such refund
or credit. Each party hereto shall cooperate with the other party as reasonably
requested in making such filings as may be necessary and appropriate to seek any
such refunds or credits.
Section 9.3 Final Returns. New VII shall prepare any Tax
Returns to be filed which relate to any period ending on or prior to the
Exchange Date. All such Tax Returns shall be prepared in a manner consistent
with prior years and (to the extent applicable) shall report the Transaction in
accordance with the treatment of the Transaction that satisfied the condition
set forth in Section 6.1(iv) of the Parents Agreement (the "Required
Treatment"). New VII and Old VII shall jointly prepare and control any Tax
Return of any member of the Old VII Subgroup for Straddle Periods in a manner
consistent with prior years and reporting the Transaction in accordance with the
Required Treatment. Each party shall promptly respond to all reasonable requests
by the other party for information necessary to prepare and file any such Tax
Returns.
Section 9.4 Conduct of Audits and Disputes. (a) Contest
Rights. A party who has "contest rights" with respect to an asserted Tax
liability or a refund claim shall have the right (but not the obligation), at
its own expense, to negotiate, settle or contest such asserted Tax liability or
refund claim, in its own name or in the name of the other party or its
affiliates, as appropriate, all in accordance with the terms of this Section
9.4. Such contest rights shall include, but not be limited to, the determination
(x) whether any action shall initially be by way of judicial or administrative
proceedings, or both, (y) whether any such asserted Tax liability shall be
contested by resisting payment thereof or by paying the same and seeking a
refund thereof and (z) if judicial action is undertaken, the court or other
judicial body before which such action shall be commenced.
(b) Claims Controlled by New VII. Subject to
paragraphs (d), (e) and (f) hereof, New VII (and not Old VII) shall have the
right to control the contest with respect to
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45
any asserted Tax liability or refund claim of any member of the Old VII Subgroup
to the extent that New VII is required to indemnify against such asserted Tax
liability pursuant to Section 9.1(a) or is entitled to such refund or credit
pursuant to Section 9.2. Old VII and its affiliates shall have no right to
participate in any such contest undertaken by New VII.
(c) Claims Controlled by Old VII. Subject to
paragraphs (d), (e) and (f) hereof, Old VII (and not New VII) shall have the
right to control the contest with respect to any asserted Tax liability or
refund claim of any member of the Old VII Subgroup to the extent that Old VII is
required to indemnify against such asserted Tax liability pursuant to Section
9.1(b) or is entitled to such refund or credit pursuant to Section 9.2. New VII
and its affiliates shall have no right to participate in any such contest
undertaken by Old VII.
(d) Contests Involving Multiple Issues. If any
contest shall involve issues with respect to which both New VII and Old VII have
contest rights hereunder, the parties will cooperate in any such contest, and
will endeavor to permit each party to control the contest of issues for which it
has such contest rights. In the event there is a disagreement among the parties
over matters (such as choice of forum) relating to issues the contest of which
are controlled by more than one party, such disagreement shall be resolved in
favor of the party who controls the contest of the issues therein which, in the
aggregate, would result in the largest Tax liability if resolved unfavorably or
the largest Tax refund if resolved favorably.
(e) Notice; Cooperation. If any member of the Old VII
Subgroup or the VI Group (in either case the "Tax Indemnified Party") receives
any written communication from a taxing authority regarding any actual or
proposed assessment, official inquiry or proceeding that could give rise to an
official determination with respect to any Tax liability or Tax refund claim for
any period for which New VII or Old VII, respectively (the "Tax Indemnifying
Party"), may be liable (in the case of a liability) or may be entitled (in the
case of a refund claim) pursuant to this Agreement, such Tax Indemnified Party
(i) shall within 30 days of receipt of such written communication so notify such
Tax Indemnifying Party in writing, (ii) shall request in such notice that such
Tax Indemnifying Party notify it in writing if it intends to exercise its
contest rights hereunder, and (iii) shall, prior to and for at least 30 days
after so notifying such Tax Indemnifying Party (or, if less, within a period
ending 5 days, including extensions, prior to the date on which the Tax
Indemnified Party is required to take action pursuant to such written
communication), refrain from making any payment of any Tax claimed and forebear
from any settlement negotiations or compromises with respect to such proposed
adjustment. The Tax Indemnifying Party agrees to notify the Tax Indemnified
Party in writing within such 30 days period if it intends to exercise its
contest rights hereunder with respect to the asserted Tax liabilities or the Tax
refund claim. The parties hereto agree to cooperate with each other in
connection with any examination process with respect to any asserted Tax
liability or Tax refund claim and shall make available on a reasonable basis to
each other any personnel, books, records or other documents necessary or
appropriate for participation in such process.
(f) Payment After Final Determination. If any contest is
undertaken pursuant to this Section 9.4, then the Tax Indemnifying Party shall
have no indemnification obligation with respect to the subject matter of such
contest until there occurs a Final Determination.
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Section 9.5 Carrybacks. No losses or credits of any member of
the Old VII Subgroup arising in taxable years beginning after the Exchange Date
may be carried back to taxable years ending on or prior to the Exchange Date.
Section 9.6 Designation of Agent for PCI Group. Old VII and
New VII hereby (i) acknowledge that certain direct and indirect subsidiaries of
Old VII (the "PCI Subsidiaries") which were formerly includible in the
consolidated federal income tax returns of the affiliated group of which
Paramount Communications Inc. was the common parent (the "PCI Group") intend to
apply to the Internal Revenue Service for permission to designate Paramount
Pictures Corporation or another PCI Subsidiary as the agent for the PCI Group
pursuant to Treas. Reg. ss. 1.1502-77(d) and (ii) agree to cooperate in
attempting to have such permission granted.
ARTICLE X
MISCELLANEOUS
Section 10.1 Expenses. Except as expressly set forth herein,
the fees and expenses (including the fees of any lawyers, accountants,
investment bankers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby whether or not the
Transaction is consummated will be paid by the party incurring the same.
Section 10.2 Headings. The section headings herein are for
convenience of reference only, do not constitute part of this Agreement and will
not be deemed to limit or otherwise affect any of the provisions hereof.
References to Sections, Schedules and Exhibits, unless otherwise indicated, are
references to Sections, Schedules and Exhibits hereof.
Section 10.3 Notices. Any notice or other communication
required or permitted to be given hereunder will be in writing and will be
mailed by prepaid registered or certified mail, timely deposited with an
overnight courier such as Federal Express, or delivered against receipt, as
follows:
to:
Viacom Inc.
1515 Broadway
New York, NY 10036
Attention: General Counsel
with a copy to:
Hughes Hubbard & Reed
One Battery Park Plaza
New York, NY 10004
Attention: Ed Kaufmann, Esq.
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47
and
TCI Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: Chief Executive Officer
with a copy to:
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: General Counsel
or to such other address as the party may have furnished in writing in
accordance with the provisions of this Section 10.3. Any notice or other
communication shall be deemed to have been given, made and received upon
receipt. Either party may change the address to which notices are to be
addressed by giving the other party notice in the manner herein set forth.
Section 10.4 Assignment. This Agreement and all provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors, however, neither this Agreement nor any right,
interest, or obligation hereunder may be assigned by any party hereto (other
than by operation of law) without the prior written consent of the other
parties, and any such assignment or purported assignment without such consent
shall be void, provided, however, that Old VII may pledge its rights hereunder
effective on or after the Exchange Date to the Lenders pursuant to the Loan
Documentation to secure the New Borrowing Obligations (and no exercise by the
Lenders of their rights as such pledgees shall violate this Section 10.4).
Section 10.5 Entire Agreement. This Agreement and the other
Transaction Documents embody the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior written or oral commitments, arrangements or understandings with respect
thereto.
Section 10.6 Amendment; Waiver. (a) This Agreement may only be
amended or modified in writing signed by the party against whom enforcement of
any such amendment or modification is sought.
(b) Any party hereto may, by an instrument in writing, waive
compliance with any term or provision of this Agreement on the part of such
other party hereto. The waiver by any party hereto of a breach of any term or
provision of this Agreement will not be construed as a waiver of any subsequent
breach.
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48
Section 10.7 Counterparts. This Agreement may be executed in
two or more counterparts, all of which will be considered one and the same
agreement and each of which will be deemed an original. All signatures need not
be on one counterpart.
Section 10.8 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (REGARDLESS OF THE LAWS THAT MIGHT BE
APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING
BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE.
Section 10.9 Severability. If any one or more of the
provisions of this Agreement is held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining provisions of this
Agreement will not be affected thereby, and New VII and Old VII will use their
reasonable efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
Section 10.10 Consent to Jurisdiction. Each party hereby
submits to the non-exclusive jurisdiction of the courts of general jurisdiction
of the States of New York and Colorado and the federal courts of the United
States of America, located in the City of New York, New York, and Denver,
Colorado solely in respect of the interpretation and enforcement of the
provisions of this Agreement and hereby waives, and agrees not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
of this Agreement that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in such courts or that this
Agreement may not be enforced in or by such courts or that its property is
exempt or immune from execution, that the suit, action or proceeding is brought
in an inconvenient forum, or that the venue of the suit, action or proceeding is
improper. Service of process with respect thereto may be made upon any party by
mailing a copy thereof by registered or certified mail, postage prepaid, to such
party at its address as provided in Section 10.3 hereof, provided that service
of process may be accomplished in any other manner permitted by applicable law.
Section 10.11 Third Person Beneficiaries. This Agreement is
not intended and shall not be construed to confer upon any Person (other than
Old VII and New VII) any rights or remedies hereunder.
Section 10.12 Representations and Warranties; Schedules.
Neither the specification of any dollar amount in the representations and
warranties set forth in Article IV or elsewhere herein nor the indemnification
provisions of Article VII nor the inclusion of any items in any Schedule will be
deemed to constitute an admission by New VII, or otherwise imply, that any such
amounts or the items so included are material for the purposes of this
Agreement. All documents or information disclosed in the Schedules are intended
to be disclosed for all purposes under this Agreement and will also be deemed to
be incorporated by reference in each Schedule to which they may be relevant
without further disclosure.
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49
Section 10.13 Specific Performance. New VII and Old VII
recognize that any breach of any covenant or agreement contained in this
Agreement may give rise to irreparable harm for which money damages would not be
an adequate remedy, and accordingly agree that, in addition to other remedies,
any non-breaching party will be entitled to enforce the agreements and covenants
contained herein of New VII and Old VII, as the case may be, by a decree of
specific performance without the necessity of proving the inadequacy as a remedy
of money damages.
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50
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed in New York, New York, as of the day and year
first above written.
VIACOM INTERNATIONAL INC.
By:
---------------------------
Name:
Title:
VIACOM INTERNATIONAL SERVICES INC.
By:
---------------------------
Name:
Title:
