Exhibit 99.3
CONTRIBUTION AND ASSUMPTION AGREEMENT
DATED AS OF ______________, 199__
BY AND BETWEEN
THE CHRONICLE PUBLISHING COMPANY
AND
[SPINCO]
TABLE OF CONTENTS
Page
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ARTICLE I
CONTRIBUTION AND ASSUMPTION
1.1 Contribution of Assets........................................................................ 1
(a) Contribution................................................................... 1
(b) Retained Assets................................................................ 2
(c) Cash Contribution.............................................................. 3
1.2 Assumption of Liabilities..................................................................... 4
(a) Liabilities Assumed............................................................ 4
(b) Retained Liabilities........................................................... 5
1.3 Issuance of Spinco Stock...................................................................... 6
1.4 Tax Matters................................................................................... 6
1.5 Further Assurances............................................................................ 6
1.6 Cooperation................................................................................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
2.1 Organization and Authority.................................................................... 7
2.2 No Breach..................................................................................... 7
2.3 Consents and Approvals........................................................................ 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPINCO
3.1 Organization and Authority.................................................................... 8
3.2 No Breach..................................................................................... 8
3.3 Consents and Approvals........................................................................ 8
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by Chronicle.................................................................. 9
4.2 Indemnification by Spinco..................................................................... 9
4.3 Indemnification Procedures.................................................................... 9
4.4 Limitations on Indemnification by Spinco......................................................11
4.5 Liability for Post-Closing Rate Regulation Matters............................................12
4.6 Liability for Consents........................................................................12
4.7 Spinco's Financial Viability; Reporting Obligations to Surviving Corporation..................13
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ARTICLE V
MISCELLANEOUS
5.1 Entire Agreement..............................................................................14
5.2 Notices.......................................................................................14
5.3 GOVERNING LAW.................................................................................15
5.4 Rules of Construction.........................................................................16
5.5 Parties in Interest...........................................................................16
5.6 Counterparts..................................................................................16
5.7 No Personal Liability.........................................................................16
5.8 Assignment....................................................................................16
5.9 Amendment.....................................................................................16
5.10 Extension; Waiver.............................................................................16
5.11 Legal Fees; Costs.............................................................................16
5.12 Time..........................................................................................16
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CONTRIBUTION AND ASSUMPTION AGREEMENT
This Contribution and Assumption Agreement (this "Agreement"), dated
as of _______________ is made by and between The Chronicle Publishing Company, a
Nevada corporation ("Chronicle"), and _________________, a Nevada corporation
("Spinco").
PRELIMINARY STATEMENTS
Chronicle and Tele-Communications, Inc., a Delaware corporation
("Acquiror"), have entered into an Agreement and Plan of Merger and
Reorganization, dated as of June ___, 1995 (the "Merger Agreement"), providing
for the merger of Chronicle with and into Acquiror pursuant to the terms and
conditions of the Merger Agreement.
Pursuant to the Merger Agreement, Chronicle has agreed to contribute
and transfer to Spinco certain assets of Chronicle, excluding assets used or
held for use in the conduct of the cable television operations of Chronicle's
Western Communications division ("Western") and an undivided 49% interest in
certain assets relating to the operation of the local cable television network
distributed in the San Francisco Bay area under the name "Bay TV," in exchange
for all the issued and outstanding stock of Spinco, the assumption by Spinco of
certain liabilities of Chronicle, and the other undertakings of Spinco set forth
in this Agreement. Following the contribution, Spinco will conduct the
businesses previously conducted by Chronicle (other than the cable television
operations of Western and the operation of Bay TV).
Capitalized terms used in this Agreement and not otherwise defined in
this Agreement have the meanings assigned to them in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency, and adequacy of which are hereby acknowledged, the parties to this
Agreement agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
1.1 Contribution of Assets.
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(a) Contribution. Subject to Section 1.1(b), Chronicle hereby
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contributes, grants, conveys, assigns, transfers, and delivers to Spinco all of
Chronicle's right, title, and interest in and to any and all assets of
Chronicle, whether tangible or intangible and whether fixed, contingent, or
otherwise, including:
(i) any and all real property, wherever located;
(ii) any and all furniture, fixtures, equipment, tools,
vehicles, supplies, buildings, and improvements, wherever located;
(iii) any and all accounts receivable, other receivables and
amounts payable to Chronicle (including tax refunds), notes, prepaid expenses,
securities, copyrights, trademarks, trade names, leases, and contract rights;
(iv) all cash of Chronicle, on hand or in banks, other than
cash required to be retained by Chronicle pursuant to Section 1.1(b)(iii), as
determined in accordance with Section 1.1(c);
(v) the assets described on Schedule 3.1(a) to the Merger
Agreement, except to the extent such assets have been disposed of prior to the
Contribution;
(vi) all Chronicle Employee Benefit Plans;
(vii) all assets of Chronicle related to the Chronicle
Employee Benefit Plans;
(viii) all rights of Chronicle to any payment of costs
assessed against any holder of Dissenting Shares pursuant to Section 78.502 of
the Nevada Corporati on Law;
(ix) an undivided 51% interest in those assets to be
contributed to the joint venture to be formed by Acquiror and Spinco pursuant to
Section 7.15 of the Merger Agreement ;
(x) all rights in and to the name "Chronicle" and
derivations thereof, subject to the provisions of Section 7.12(b) of the Merger
Agreement; and
(xi) all receivables from shareholders, directors, officers,
and employees of Chronicle.
The contribution and transfer by Chronicle to Spinco of the assets contributed
and transferred to Spinco pursuant to this Section 1.1(a) are referred to in
this Agreement as the "Contribution," and the assets so contributed and
transferred are referred to in this Agreement collectively as the "Contributed
Assets."
(b)Retained Assets.
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Notwithstanding Section 1.1(a), Chronicle hereby retains and does not contribute
to Spinco:
(i) except for those assets specifically described in
Section 1.1(a)(v), Section 1.1(a)(vi), Section 1.1(a)(vii), Section
1.1(a)(viii), Section 1.1(a)(ix), Section 1.1(a)(x), and Section 1.1(a)(xi),
those assets that are used or held for use in the conduct of the cable
television business operations of Western, including (to the extent not disposed
of prior to the Contribution in
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accordance with the terms of the Merger Agreement) all assets (other than cash)
reflected on the balance sheet of Western as at December 31, 1994 included in
Schedule 4.6(b) to the Merger Agreement;
(ii) an undivided 49% interest in those assets that are to
be contributed to the joint venture to be formed by Acquiror and Spinco pursuant
to Section 7.15 of the Merger Agreement;
(iii) that amount of cash necessary to cause the Working
Capital Deficit of Western immediately prior to the Effective Time to be zero;
and
(iv) any rights of Chronicle created by the Merger Agreement
or this Agreement.
The assets retained by Chronicle are referred to in this Agreement collectively
as the "Retained Assets"; the Working Capital Deficit of Western immediately
prior to the Effective Time is referred to in this Agreement as the "Closing
Date Working Capital Deficit."
(c) Cash Contribution. The amount of cash to be contributed by
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Chronicle to Spinco pursuant to Section 1.1(a)(iv), taking into account that
amount of cash to be retained by Chronicle pursuant to Section 1.1(b)(iii),
shall be determined in accordance with the following procedures:
(i) Prior to the date of this Agreement, Chronicle has
prepared and delivered to Acquiror a balance sheet of Western as at the
Effective Time (the "Closing Date Balance Sheet"), which was prepared in
accordance with GAAP, consistently applied with the preparation of the balance
sheet of Western as at December 31, 1994 included in Schedule 4.6(b) to the
Merger Agreement. The Closing Date Balance Sheet represents Chronicle's good
faith estimate of those items constituting the Closing Date Working Capital
Deficit, calculated in accordance with Section 3.1(b) of the Merger Agreement.
(ii) On the date of this Agreement, Chronicle shall transfer
to Spinco cash in the amount of $__________________, which amount represents
Chronicle's good faith estimate of the amount by which Chronicle's cash on hand
or in banks as of the Effective Time will exceed the amount necessary to cause
the Closing Date Working Capital Deficit to be zero. Chronicle's good faith
estimate of the Closing Date Working Capital Deficit for purposes of this
calculation shall reflect the estimate of assets and liabilities used in the
preparation by Chronicle of the Closing Date Balance Sheet.
(iii) Within 60 days after the Closing Date, Spinco will
deliver to the Surviving Corporation a statement setting forth Spinco's
determination of the Closing Date Working Capital Deficit. If the Surviving
Corporation disputes the amount of the Closing Date Working Capital Deficit as
determined by Spinco, it shall deliver to Spinco within 30 days after its
receipt of
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Spinco's statement a notice setting forth the basis of the dispute regarding the
determination of the Closing Date Working Capital Deficit. If the Surviving
Corporation notifies Spinco of its acceptance of Spinco's statement, or if the
Surviving Corporation fails to deliver a notice of a dispute within the 30-day
period specified in the preceding sentence, Spinco's determination of the
Closing Date Working Capital Deficit shall be conclusive and binding on the
parties as of the last day of the 30-day period.
(iv) The Surviving Corporation and Spinco shall use good
faith efforts to resolve any dispute involving the determination of the Closing
Date Working Capital Deficit. If the parties are unable to resolve the dispute
within 30 days following the delivery of the Surviving Corporation's notice of
the dispute, the Surviving Corporation and Spinco shall jointly designate an
independent certified public accounting firm to resolve the dispute described in
the Surviving Corporation's notice. If the parties are unable to agree on the
designation of an independent certified public accounting firm, the selection of
such firm shall be determined by agreement of KPMG Peat Marwick and Xxxxxx
Xxxxxxxx & Co. The accounting firm's resolution of the dispute shall be final
and binding on the parties, and a judgment may be entered thereon in any court
of competent jurisdiction. Any fees of the accounting firm shall be split
equally between the Surviving Corporation and Spinco.
(v) If the amount of cash to be contributed by Chronicle to
Spinco pursuant to Section 1.1(a)(iv) exceeds the amount of cash transferred to
Spinco by Chronicle on the date of this Agreement, the Surviving Corporation
shall transfer to Spinco, in immediately available funds within five business
days after the date on which the Closing Date Working Capital Deficit is finally
determined pursuant to this Section 1.1(c), the amount of such excess. If the
amount of cash transferred to Spinco by Chronicle on the date of this Agreement
exceeds the amount of cash to be contributed by Chronicle to Spinco pursuant to
Section 1.1(a)(iv), Spinco shall refund to the Surviving Corporation, in
immediately available funds within five business days after the date on which
the Closing Date Working Capital Deficit is finally determined pursuant to this
Section 1.1(c), the amount of such excess.
1.2 Assumption of Liabilities.
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(a) Liabilities Assumed. In consideration for the Contribution,
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but subject to Section 1.2(b), Spinco hereby assumes and undertakes to
discharge, satisfy, and perform:
(i) any and all liabilities and obligations (including
contractual obligations to be performed after the Effective Time) of Chronicle
as of the Effective Time, whether fixed, contingent, or otherwise, including
obligations and liability for withholding and payroll taxes accrued prior to the
Effective Time;
(ii) all liabilities of all Chronicle Employee Benefit Plans
and all liabilities with respect to employee claims arising or relating to the
period prior to the Effective Time under
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any employee medical or dental plans of Chronicle, including employee bonuses,
executive deferred compensation of current or former executives of Chronicle,
and any COBRA liability;
(iii) all liabilities with respect to any employee of
Western terminated prior to the Effective Time and all liabilities for severance
pursuant to the severance plans described on Schedule 3.1(c)(iii) of the Merger
Agreement;
(iv) all liabilities of Chronicle to indemnify any officer
or director of Chronicle against liabilities based on or arising out of any
action or omission of such officer or director as an officer or director at or
relating to the period prior to the Effective Time;
(v) all liabilities of Chronicle with respect to worker's
compensation claims arising or relating to the period prior to the Effective
Time;
(vi) all liabilities of Chronicle with respect to any claims
arising or relating to the period prior to the Effective Time for which
Chronicle is self insured;
(vii) all obligations and liabilities specified in the
Merger Agreement as obligations and liabilities of Spinco, including the
obligation to make payments on behalf of Chronicle in respect of Dissenting
Shares, obligations of Chronicle under the AAA Notes, obligations of Chronicle
under the Guaranty dated as of November 29, 1988, between Chronicle and Bank of
America National Trust and Savings Association, and obligations of Chronicle to
Salomon Brothers Inc and Xxxxxx Capital Corporation in connection with the
transactions contemplated by the Merger Agreement; and
(viii) all liabilities associated with any business
activities of Western other than Western's cable television business, including
any businesses previously operated by Western directly or through any Person in
which Chronicle held an ownership interest and accounted for as part of the
Western division, including Wescom Productions, Chronicle Videocassettes, and
International Video Network Partnership.
The liabilities assumed by Spinco are referred to in this Agreement collectively
as the "Assumed Liabilities."
(b) Retained Liabilities. Notwithstanding Section 1.2(a),
--------------------
Chronicle hereby retains, and Spinco does not assume and shall have no liability
with respect to:
(i) the Retained Chronicle Debt and any interest accrued but
unpaid on the Retained Chronicle Debt immediately prior to the Effective Time;
(ii) liabilities and obligations associated with the
business operations of Western which were included in determining the Closing
Date Working Capital Deficit;
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(iii) obligations for the delivery of cable television
service to subscribers of Western's Systems after the Effective Time;
(iv) all obligations (A) under the Franchises and related to
the FCC licenses set forth on Schedule 4.15 to the Merger Agreement, (B) under
the Material Contracts set forth on Schedule 4.14 to the Merger Agreement, (C)
under agreements with developers set forth on Schedule 3.1(c) to the Merger
Agreement, and (D) under any contract or agreement (other than any agreement
with a developer) entered into in the ordinary course of the operation of
Western's Systems or in compliance with Chronicle's covenants under Section 6.1
of the Merger Agreement, in each case to the extent required to be performed
after the Effective Time; and
(v) Chronicle's obligations created pursuant to the Merger
Agreement.
The liabilities retained by Chronicle are referred to in this Agreement
collectively as the "Retained Liabilities."
1.3 Issuance of Spinco Stock. In consideration for the Contribution,
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Spinco hereby issues and delivers to Chronicle, and Chronicle hereby
acknowledges receipt of, _________* validly issued, fully paid, and
nonassessable shares of Spinco Common Stock, $0.01 par value per share, which
shares shall represent all the issued and outstanding shares of capital stock of
Spinco immediately after the Contribution.
1.4 Tax Matters. Notwithstanding anything to the contrary in this
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Agreement, liabilities of the parties for Taxes that are associated with the
business operations of Western are subject to Section 7.13 of the Merger
Agreement, and all obligations of Spinco under Section 7.13 of the Merger
Agreement shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement. The transactions contemplated by the Merger
Agreement are intended to qualify as tax-free reorganizations within the meaning
of Section 355 and Section 368(a) of the Code.
1.5 Further Assurances. If after the Effective Time, either party
------------------
holds assets that by the terms of this Agreement were intended to be assigned
and transferred to, or retained by, the other party, the party holding such
assets shall promptly assign and transfer or cause to be assigned or transferred
such assets to the other party. Each of the parties to this Agreement promptly
shall execute such documents and other instruments and take such further actions
as may be reasonably required or desirable to carry out the provisions of this
Agreement and to consummate the transactions contemplated by this Agreement.
-------------------------
*insert number of shares of stock of The Chronicle Publishing Company
outstanding at Closing
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1.6 Cooperation. The parties shall cooperate with each other in all
-----------
reasonable respects regarding the transfer of the Contributed Assets, the
Assumed Liabilities, and the business related thereto, including entering into
any service or other sharing agreements that may be necessary.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
Chronicle represents and warrants to Spinco as follows:
2.1 Organization and Authority. Chronicle is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the State of
Nevada. Chronicle has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated by
this Agreement. All necessary corporate action required to have been taken by
or on behalf of Chronicle by applicable law, its Restated Articles of
Incorporation and Bylaws, or otherwise to authorize (a) the approval, execution,
and delivery on behalf of Chronicle of this Agreement, and (b) the performance
by Chronicle of its obligations under this Agreement and the consummation of the
transactions contemplated by this Agreement has been taken. This Agreement
constitutes a valid and binding agreement of Chronicle, enforceable against it
in accordance with its terms, except (x) as enforcement of this Agreement may be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws of
general application relating to or affecting creditors' rights, including the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers, (y) as the availability of indemnification and other
remedies may be limited by federal and state securities laws, and (z) for the
limitations imposed by general principles of equity.
2.2 No Breach. The execution and delivery of this Agreement by
---------
Chronicle do not, and the consummation of the transactions contemplated by this
Agreement by Chronicle will not, (a) violate or conflict with the Restated
Articles of Incorporation or Bylaws of Chronicle, or (b) constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third-party right of termination,
cancellation, modification, or acceleration under any agreement or undertaking
to which Chronicle is a party or by which it is bound, except where such breach,
default, lien, third-party right of termination, cancellation, modification, or
acceleration would not prevent Chronicle from performing its obligations under
this Agreement, or (c) constitute a violation of any statute, law, ordinance,
rule, or regulation, except where such violation would not prevent Chronicle
from performing its obligations under this Agreement.
2.3 Consents and Approvals. Neither the execution and delivery of this
----------------------
Agreement by Chronicle nor the consummation of the transactions contemplated by
this Agreement will require any consent, approval, authorization, or permit of,
or filing with or notification to, any governmental or regulatory authority,
except for such consents, approvals, authorizations, permits, filings, or
notifications that have been obtained or made, as applicable, or where the
failure to obtain such
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consents, approvals, authorizations, or permits, or to make such filings or
notifications, would not prevent Chronicle from performing its obligations
under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SPINCO
Spinco represents and warrants to Chronicle as follows:
3.1 Organization and Authority. Spinco is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the State of
Nevada. Spinco has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. All necessary corporate action required to have been taken by or on
behalf of Spinco by applicable law, its Articles of Incorporation and Bylaws, or
otherwise to authorize (a) the approval, execution, and delivery on behalf of
Spinco of this Agreement, and (b) the performance by Spinco of its obligations
under this Agreement and the consummation of the transactions contemplated by
this Agreement has been taken. This Agreement constitutes a valid and binding
agreement of Spinco, enforceable against it in accordance with its terms, except
(x) as enforcement of this Agreement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws of general application relating to or
affecting creditors' rights, including the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, (y) as the
availability of indemnification and other remedies may be limited by federal and
state securities laws, and (z) for the limitations imposed by general principles
of equity.
3.2 No Breach. The execution and delivery of this Agreement by Spinco
---------
do not, and the consummation of the transactions contemplated by this Agreement
by Spinco will not, (a) violate or conflict with the Articles of Incorporation
or Bylaws of Spinco, or (b) constitute a breach or default (or an event that
with notice or lapse of time or both would become a breach or default) or give
rise to any lien, third-party right of termination, cancellation, modification,
or acceleration under any agreement or undertaking to which Spinco is a party or
by which it is bound, or (c) constitute a violation of any statute, law,
ordinance, rule, or regulation.
3.3 Consents and Approvals. Neither the execution and delivery of this
----------------------
Agreement by Spinco nor the consummation of the transactions contemplated by
this Agreement will require any consent, approval, authorization, or permit of,
or filing with or notification to, any governmental or regulatory authority,
except for such consents, approvals, authorizations, permits, filings, or
notifications that have been obtained or made, as applicable, or where the
failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications, would not prevent Spinco from performing its
obligations under this Agreement.
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ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by Chronicle. Chronicle and, after the Effective
----------------------------
Time, the Surviving Corporation, shall indemnify, defend, and hold harmless
Spinco and each of its successors-in-interest against any losses, claims,
damages, or liabilities, joint or several, arising out of the Retained
Liabilities, the Retained Assets, the Surviving Corporation Refund Liability (as
defined in Section 4.2(b)), or the operations of Chronicle after the Effective
Time, and Chronicle shall reimburse Spinco and each such successor-in-interest
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such indemnified loss, claim,
damage, or liability.
4.2 Indemnification by Spinco.
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(a) Spinco shall indemnify, defend, and hold harmless Chronicle
and each of its successors-in-interest, against any losses, claims, damages, or
liabilities, joint or several, arising out of the Assumed Liabilities, the
Contributed Assets, or the operations of Spinco after the Effective Time, and
Spinco shall reimburse Chronicle and each such successor-in-interest for any
legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such indemnified loss, claim, damage, or
liability.
(b) Following consummation of the Merger, Spinco shall indemnify,
defend, and hold harmless the Surviving Corporation against any losses, claims,
damages, or liabilities, joint or several, arising from the operations of
Western prior to the Effective Time, including any fine or penalty or refund to
subscribers of Western's Systems ordered by any franchise authority or the FCC
to the extent relating to the period prior to the Effective Time (collectively,
"Refund Liability"), whether such order is issued prior to, on, or after the
Closing Date, except to the extent that any Refund Liability results from any
proceeding that was commenced after any change by the Surviving Corporation of
any regulated rates charged by the Western System to which such Refund Liability
relates ("Surviving Corporation Refund Liability"), and Spinco shall reimburse
the Surviving Corporation and each such successor-in-interest for any legal or
any other expenses reasonably incurred by any of them in connection with
investigating or defending any such indemnified loss, claim, damage, or
liability.
4.3 Indemnification Procedures.
--------------------------
(a) For the purpose of this Article IV, the term "Indemnifying
Party" shall mean the party having an obligation hereunder to indemnify any
Person pursuant to this Article IV and the term "Indemnified Party" shall mean
any Person having the right to be indemnified pursuant to this Article IV.
Whenever any claim shall arise for indemnification under this Article IV, the
Indemnified Party shall promptly notify the Indemnifying Party in writing of
such claim and, when known, the facts constituting the basis for such claim (in
reasonable detail). Failure by the
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Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder except to the extent that such
failure prejudices the Indemnifying Party.
(b) If, after receipt of a claim notice pursuant to Section
4.3(a), the Indemnifying Party undertakes to defend any such claim, the
Indemnifying Party shall be entitled, if it so elects, to take control of the
defense and investigation with respect to such claim and to employ and engage
attorneys of its own choice to handle and defend such claim, at the Indemnifying
Party's cost, risk, and expense, upon written notice to the Indemnified Party of
such election, which notice acknowledges the Indemnifying Party's obligation to
provide indemnification under this Agreement. The Indemnifying Party shall not
settle any third-party claim that is the subject of indemnification without the
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided, however, that the Indemnifying Party may settle
a claim without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party,
and (iii) does not require the Indemnified Party to make any payment or forego
or take any action. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial, and defense of any lawsuit or action with respect to such claim and any
appeal arising therefrom (including the filing in the Indemnified Party's name
of appropriate cross claims and counterclaims). The Indemnified Party may, at
its own cost, participate in any investigation, trial, and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal arising
therefrom.
(c) If, after receipt of a claim notice pursuant to Section
4.3(a), the Indemnifying Party does not undertake to defend any such claim, the
Indemnified Party may, but shall have no obligation to, contest any lawsuit or
action with respect to such claim, and the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party (including the
settlement thereof without the consent of the Indemnifying Party). If there are
one or more legal defenses available to the Indemnified Party that conflict with
those available to the Indemnifying Party, the Indemnified Party shall have the
right, at the expense of the Indemnifying Party, to assume the defense of the
lawsuit or action; provided, however, that the Indemnified Party may not settle
such lawsuit or action without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(d) At any time after the commencement of defense of any lawsuit
or action, the Indemnifying Party may request the Indemnified Party to agree in
writing to the abandonment of such contest or to the payment or compromise by
the Indemnifying Party of such claim, whereupon such action shall be taken
unless the Indemnified Party determines that the contest should be continued and
so notifies the Indemnifying Party in writing within fifteen days of such
request from the Indemnifying Party. Any request from the Indemnifying Party
that any contest be abandoned shall specify the amount that the other party or
parties to the contested claim have agreed to accept in payment or compromise of
the claim. If the Indemnified Party determines that the contest should be
continued, the Indemnifying Party shall be liable hereunder only to the extent
of the lesser of (i) the amount that the other party or parties to the contested
claim had agreed to accept in payment or
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compromise as of the time the Indemnifying Party made its request therefor to
the Indemnified Party, as specified in the Indemnifying Party's request, or (ii)
the amount for which the Indemnifying Party may be liable with respect to such
claim by reason of the provisions of this Agreement.
4.4 Limitations on Indemnification by Spinco.
----------------------------------------
Notwithstanding anything in this Agreement to the contrary:
(a) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim described in
Section 4.2(b) unless the Surviving Corporation gives notice of the claim to
Spinco pursuant to Section 4.3(a) within three years after the Closing Date,
except for claims related to Refund Liability (other than Surviving Corporation
Refund Liability) or Employee Benefit Plans as to which the Surviving
Corporation may give notice of a claim related thereto without limitation.
(b) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim made under Section
4.2(b) related to liabilities for environmental matters that arise after the
Effective Time but result from hazardous substances present prior to the
Effective Time on any real property owned or leased by Western, including claims
related to hazardous substances the presence of which constituted a violation of
Chronicle's representations and warranties contained in Section 4.20 of the
Merger Agreement, (i) unless, and then only to the extent that, the losses,
liabilities, and damages of the Surviving Corporation arising from all such
claims exceed in the aggregate $100,000 or (ii) to the extent that the losses,
liabilities, and damages of the Surviving Corporation arising from all such
claims exceed in the aggregate $50,000,000; provided, however, that the
limitation on Spinco's indemnification obligations contained in this Section
4.4(b) shall not apply to claims related to liabilities in existence at the
Effective Time or to any liabilities with respect to environmental matters that
are Assumed Liabilities.
(c) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim described in
Section 4.2(b) to the extent (i) that the Surviving Corporation is compensated
for any loss, liability, or damage arising from such claim under the Surviving
Corporation's insurance policies in the absence of any indemnity hereunder if
the insurers under such policy waive their rights of subrogation with respect
thereto; or (ii) of any realized tax benefits of the Surviving Corporation
arising from any loss, liability, or damage arising from such claim. For purpose
of this Section 4.4(c), "realized tax benefits" of the Surviving Corporation
arising from any loss, liability, or damage arising from any such claim shall
mean the positive difference (if any) between (i) income Taxes that would be
shown as due and payable on the consolidated federal Tax Return filed by the
Surviving Corporation and its Affiliates on which any item of deduction, loss,
or credit attributable to any loss, liability, or damage arising from such claim
is reported without regard to such item, but otherwise taking into account all
other information in such Tax Return as filed (either originally or as amended)
and otherwise making such calculations in conformity with applicable Tax laws
and regulations (including the carryback of losses or credits)
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and (ii) the income Taxes actually shown as due and payable on such Tax Return
as filed (either originally or as amended); provided, however, that realized tax
benefits in no event shall include any realized tax benefits with respect to an
Acquiror Deduction Item or an Amended Deduction Item to be paid to Spinco
pursuant to Section 7.13(b)(iii) of the Merger Agreement.
(d) Spinco shall not be obligated to indemnify or otherwise be
liable to the Surviving Corporation with respect to any claim described in
Section 4.2(b) that relates to any liability or obligation that was taken into
account in calculating the Closing Date Working Capital Deficit.
(e) Spinco shall not be obligated or otherwise be liable to the
Surviving Corporation with respect to any claim for Taxes under Section 7.13 of
the Merger Agreement unless the Surviving Corporation gives notice of the claim
to Spinco prior to the expiration of the applicable statute of limitations with
respect to such claim.
4.5 Liability for Post-Closing Rate Regulation Matters.
--------------------------------------------------
Notwithstanding any provision of this Agreement or the Merger Agreement to the
contrary, Spinco shall not be obligated to indemnify or otherwise be liable to
the Surviving Corporation with respect to any claim to the extent relating to
the period after the Effective Time arising from or relating to:
(a) the rate regulation provisions of the Cable Television
Consumer Protection and Competition Act of 1992, and any rules and regulations
of the FCC, or any state or local governmental authority promulgated thereunder
or in connection therewith, or any Federal, state, or local consumer protection,
trade practice, or other similar law, statute, rule, regulation, or ordinance
relating to the rates of cable television systems;
(b) any investigation, certification, proceeding, inquiry, or
similar matter by or before any governmental authority or other Person arising
from, relating to, or in connection with any law, statute, rule, regulation, or
ordinance described in Section 4.5(a);
(c) any rate reductions, refunds, penalties, or similar actions
(or investigations, certifications, proceedings, or inquiries relating thereto)
instituted against or imposed on Chronicle by any governmental authority or
other Person; or
(d) any changes to programming, billing, or marketing practices
instituted or implemented by Chronicle in accordance with, and as permitted by,
the Merger Agreement.
4.6 Liability for Consents. Notwithstanding any provision of this
----------------------
Agreement or the Merger Agreement to the contrary, Spinco shall not be obligated
to indemnify or otherwise be liable to the Surviving Corporation with respect to
any claim arising from the failure of Chronicle to obtain any consent, approval,
authorization, or permit of, or make any filing with or notification to, any
governmental or regulatory authority or any other third party in connection with
the consummation of the transactions contemplated by the Merger Agreement;
provided, however, that Spinco shall
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indemnify the Surviving Corporation with respect to any claim arising from the
failure of Chronicle to obtain any consent, approval, authorization, or permit
of, or make any filing with or notification to, any governmental or regulatory
authority or any other third party in connection with the Contribution or the
Distribution.
4.7 Spinco's Financial Viability; Reporting Obligations to Surviving
----------------------------------------------------------------
Corporation.
----------
(a) Subject to Section 4.7(c), Spinco covenants that it will
maintain a minimum net worth in the amount of the greater of (i)(A) $100,000,000
at all times during the period beginning on the Closing Date and ending on the
fifth anniversary of the Closing Date, or (B) $50,000,000 all times during the
period beginning on the day after the fifth anniversary of the Closing Date and
ending on the seventh anniversary of the Closing Date, and (ii) the aggregate
amount of claims for indemnification then pending against Spinco pursuant to
Article IV of this Agreement. In calculating the net worth of Spinco for
purposes of this Section 4.7(a), all assets of Spinco, both tangible and
intangible, shall be valued at their fair market value, as reasonably determined
in good faith from time to time by the board of directors of Spinco, whether or
not such value is the same as such assets' "book value" or any other value used
in the preparation of any balance sheet of Spinco, and Spinco's liabilities
shall not include the amount of claims for indemnification then pending against
Spinco pursuant to Article IV of this Agreement.
(b) Subject to Section 4.7(c), Spinco shall provide the Surviving
Corporation:
(i) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, financial statements consisting of balance
sheets and statements of income and cash flows for such quarter and for the
period from the beginning of the current fiscal year through the end of such
quarter;
(ii) within 90 days after the end of each fiscal year,
financial statements consisting of balance sheets and statements of income,
shareholders' equity, and cash flows for such fiscal year;
(iii) with each set of financial statements delivered
pursuant to this Section 4.7(b), a certificate, executed on behalf of Spinco by
its chief financial officer, that such financial statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and present fairly the financial position and the results of operations
of Spinco as of the relevant dates thereof and for the periods covered thereby;
(iv) with each set of financial statements delivered
pursuant to this Section 4.7(b) that are audited, a copy of the auditor's report
with respect thereto; and
(v) with each set of financial statements delivered pursuant
to this Section 4.7(b), a certificate executed on behalf of Spinco by an
authorized officer, setting forth
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the fair market value of all assets of Spinco, as most recently determined by
the board of directors of Spinco in accordance with Section 4.7(a).
(c) The obligations of Spinco pursuant to this Section 4.7 shall
terminate automatically on the later of (i) the seventh anniversary of the
Closing Date, and (ii) the fi rst date on which no claims for indemnification
are pending against Spinco pursuant to Article IV of this Agreement.
(d) The Surviving Corporation's remedies in the event of any
breach by Spinco of its covenant in Section 4.7(a) shall be limited to money
damages in an amount equal to the actual damages (excluding any special,
incidental, consequential, exemplary, or punitive damages) suffered by the
Surviving Corporation as a result of such breach, except that the Surviving
Corporation shall have the right to seek equitable remedies prohibiting or
rescinding any distribution by Spinco to its shareholders to the extent such
distribution would cause Spinco to be in violation of its covenant in Section
4.7(a). The provisions of this Section 4.7(d) are not intended to limit the
amount of any claim for indemnification by the Surviving Corporation against
Spinco under this Agreement or the Merger Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter of this Agreement.
5.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when delivered in person,
by telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to Chronicle (prior to the The Chronicle Publishing Company
Merger) or Spinco: 000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: W. Xxxxxx Xxxxxx, Esq.
With a copy to: Dow, Xxxxxx & Xxxxxxxxx
000 Xxxxxx-Xxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq
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and
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to Chronicle (after the Merger): Tele-Communications, Inc.
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx and
Xxxxxx X. Xxxxx
With copies to: Tele-Communications, Inc.
Legal Department
Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
and
Xxxxxxx & Xxxxxx L.L.C.
0000 Xxxxx Xxxxxxxxxx Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed
effective when confirmed. Any notice or communication sent by registered or
certified mail, return receipt requested, shall be deemed effective when
received, as evidenced by the return receipt. This Section 5.2 shall not
preclude delivery of any notice or communication by means other than those
specified in this Section 5.2.
5.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
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REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF CONFLICTS
OF LAWS APPLICABLE THERETO.
5.4 Rules of Construction. The descriptive headings in this Agreement
---------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement. Words used in
this Agreement, regardless of the gender and number specifically used, shall be
deemed and construed to include any other gender, masculine, feminine, or
neuter, and any other number, singular or plural, as the context requires. As
used in this Agreement, the word "including" is not limiting, and the word "or"
is not exclusive.
5.5 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of the parties to this Agreement and their legal
successors-in-interest, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement except for Article IV and
Section 5.7 (which are intended to be for the benefit of the persons provided
for therein, and may be enforced by such persons).
5.6 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
5.7 No Personal Liability. This Agreement shall not create or be
---------------------
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of either party to this Agreement (other
than, with respect to Spinco, Chronicle) or any officer, director, employee,
agent, representative, or investor of either party to this Agreement.
5.8 Assignment. This Agreement may not be assigned by either party to
----------
this Agreement.
5.9 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of both the parties.
5.10 Extension; Waiver. Either party to this Agreement may (a) extend
-----------------
the time for the performance of any of the obligations or other acts of the
other party to this Agreement, (b) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document,
certificate, or writing delivered pursuant to this Agreement by the other party,
or (c) waive compliance by the other party with any of the agreements or
conditions contained herein or any breach thereof. Any agreement on the part of
either party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
5.11 Legal Fees; Costs. If either party to this Agreement institutes
-----------------
any action or proceeding, whether before a court or arbitrator, to enforce any
provision of this Agreement, the prevailing party therein shall be entitled to
receive from the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
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5.12 Time. Time is of the essence under this Agreement. If the last
----
day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
business day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in Denver, Colorado or San
Francisco, California are required or authorized to be closed.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized on the day
and year first above written.
THE CHRONICLE PUBLISHING COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[SPINCO]
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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