FINAL EXECUTION COPY
AMENDED AND RESTATED CONTRIBUTION AND
MERGER AGREEMENT
Among
TCI COMMUNICATIONS, INC.,
CABLEVISION SYSTEMS CORPORATION,
CSC PARENT CORPORATION
and
CSC MERGER CORPORATION
Dated as of June 6, 1997
Table of Contents
Page
RECITALS
ARTICLE I
The Merger; Closings; Effective Time
1.1. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2. Closings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
Certificate of Incorporation and ByLaws
of the Surviving Corporation
2.1. The Certificate of Incorporation. . . . . . . . . . . . . . . . . . . 4
2.2. The ByLaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
Officers and Directors
of the Surviving Corporation;
Contribution; Adjustment;
ThirdParty Consents;
3.1. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3. Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4. Net Adjusted Working Capital Adjustment . . . . . . . . . . . . . . . 9
3.5. Antidilution Adjustments. . . . . . . . . . . . . . . . . . . . . . . 12
3.6. Failure to Receive Third Party Consents.. . . . . . . . . . . . . . . 13
ARTICLE IV
Effect of the Merger on Capital Stock
4.1. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Cancellation of Shares and Parent Common Stock. . . . . . . . . . . . 15
(c) Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3. Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4. Adjustments to Prevent Dilution . . . . . . . . . . . . . . . . . . . 16
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ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company . . . . . . . . . . . . 16
(a) Organization, Good Standing and Qualification . . . . . . . . . . . . 16
(b) Capital Structure; Acquired Assets; Indebtedness. . . . . . . . . . . 17
(c) Corporate Authority; Approval . . . . . . . . . . . . . . . . . . . . 19
(d) Governmental Filings; No Violations . . . . . . . . . . . . . . . . . 20
(e) Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 21
(g) Litigation and Liabilities. . . . . . . . . . . . . . . . . . . . . . 22
(h) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) Compliance with Laws; Permits . . . . . . . . . . . . . . . . . . . . 26
(j) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 26
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(l) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(m) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(n) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(o) No Liabilities as Guarantor . . . . . . . . . . . . . . . . . . . . . 31
(p) Notes and Accounts and Royalty Receivables. . . . . . . . . . . . . . 31
(q) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(r) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(s) Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 32
(t) Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(u) Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(v) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 34
(w) Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . 34
(x) Cable Television Franchises . . . . . . . . . . . . . . . . . . . . . 35
(y) Accredited Investor; Investment Intent. . . . . . . . . . . . . . . . 38
(z) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2 Representations and Warranties of CSC, Parent and Merger Sub. . . . . 38
(a) Capitalization of Merger Sub and Parent . . . . . . . . . . . . . . . 38
(b) Organization, Good Standing and Qualification . . . . . . . . . . . . 39
(c) Capital Structure of CSC. . . . . . . . . . . . . . . . . . . . . . . 40
(d) Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . 41
(e) Governmental Filings; No Violations . . . . . . . . . . . . . . . . . 41
(f) CSC Reports; Financial Statements . . . . . . . . . . . . . . . . . . 42
(g) Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 43
(h) Litigation and Liabilities. . . . . . . . . . . . . . . . . . . . . . 44
(i) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(j) Compliance with Laws; Permits . . . . . . . . . . . . . . . . . . . . 46
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(l) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(m) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(o) Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . 48
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(p) Accredited Investor; Investment Intent. . . . . . . . . . . . . . . . 48
(q) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 48
(r) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 49
(s) Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(t) Cable Television Franchises . . . . . . . . . . . . . . . . . . . . . 50
(u) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VI
Covenants
6.1. CSC Interim Operations. . . . . . . . . . . . . . . . . . . . . . . . 53
6.2. Contributed Systems Interim Operations. . . . . . . . . . . . . . . . 55
6.3. Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . . 58
6.4. Stockholders Meeting; Parent Vote on Reorganization; Recommendation . 59
6.5. Filings; Other Actions; Notification. . . . . . . . . . . . . . . . . 59
6.6. Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.7. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.8. Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.9. Stock Exchange Listing and Delisting. . . . . . . . . . . . . . . . . 62
6.10. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.11. Benefits; Board Representation; Employees . . . . . . . . . . . . . . 63
(a) Stock Options; Conjunctive Rights . . . . . . . . . . . . . . . . . . 63
(b) Election to Parent's Board of Directors . . . . . . . . . . . . . . . 64
(c) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.12. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.13. Indemnification; Directors' and Officers' Insurance . . . . . . . . . 66
6.14. Preferred Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.15. Other Actions by the Parties. . . . . . . . . . . . . . . . . . . . . 68
(a) Termination of Affiliated Agreements. . . . . . . . . . . . . . . . . 68
(b) Stockholders Agreement. . . . . . . . . . . . . . . . . . . . . . . . 68
(c) Other Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 68
(d) Certain Intellectual Property . . . . . . . . . . . . . . . . . . . . 68
(e) Certain Environmental Matters . . . . . . . . . . . . . . . . . . . . 69
(f) Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.16. Parent, CSC and the Company Votes . . . . . . . . . . . . . . . . . . 70
6.17. Released Indebtedness and Fibertech Cash; Company Restructuring; Tax
Sharing; Surety Liabilities; and Disclosure Updates . . . . . . . . . 70
(a) Released Indebtedness and Fibertech Cash. . . . . . . . . . . . . . . 70
(b) Company Restructuring.. . . . . . . . . . . . . . . . . . . . . . . . 71
(c) Tax Sharing Agreements. . . . . . . . . . . . . . . . . . . . . . . . 71
(d) Surety Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 72
(e) Disclosure Updates and Supplements. . . . . . . . . . . . . . . . . . 72
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ARTICLE VII
Conditions to Merger and Contribution
7.1. Conditions to Obligations to Effect the Merger. . . . . . . . . . . . 72
(a) Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . 72
(b) AMEX Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(c) Regulatory Consents . . . . . . . . . . . . . . . . . . . . . . . . . 73
(d) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(e) S4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(f) Blue Sky Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 74
(g) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . 74
(h) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
(i) Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.2. Conditions to Each Party's Obligations to Effect the Contribution . . 74
(a) Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . 74
(b) Regulatory Consents . . . . . . . . . . . . . . . . . . . . . . . . . 75
(c) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
(d) Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
(e) AMEX Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
(f) Stockholders Agreement. . . . . . . . . . . . . . . . . . . . . . . . 76
7.3. Conditions to Obligations of Parent to Effect Contribution. . . . . . 76
(a) Representations and Warranties. . . . . . . . . . . . . . . . . . . . 76
(b) Performance of Obligations of the Company . . . . . . . . . . . . . . 77
(c) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . 77
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
(e) Contributed Systems Deliveries. . . . . . . . . . . . . . . . . . . . 77
(f) Resignations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
(g) Company Restructuring.. . . . . . . . . . . . . . . . . . . . . . . . 79
7.4. Conditions to Obligations of the Company to Effect Contribution . . . 79
(a) Representations and Warranties. . . . . . . . . . . . . . . . . . . . 79
(b) Performance of Obligations of CSC, Parent and Merger Sub. . . . . . . 79
(c) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . 79
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
(e) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
(f) Cash Flow Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
(g) Assumption of Liabilities.. . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . 80
8.2. Termination by Either CSC or the Company. . . . . . . . . . . . . . . 80
8.3. Termination by the Company. . . . . . . . . . . . . . . . . . . . . . 81
8.4. Termination by CSC. . . . . . . . . . . . . . . . . . . . . . . . . . 81
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8.5. Effect of Termination and Abandonment . . . . . . . . . . . . . 82
ARTICLE IX
Miscellaneous and General
9.1. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.2. Modification or Amendment . . . . . . . . . . . . . . . . . . . 82
9.3. Waiver of Conditions. . . . . . . . . . . . . . . . . . . . . . 83
9.4. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL . . . . . . . . . 83
9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.7. Entire Agreement; No Other Representations. . . . . . . . . . . 85
9.8. No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . 85
9.9. Obligations of CSC, Parent, TCI and the Company . . . . . . . . 85
9.10. New York State and City Real Property Transfer
Tax; Other Transfer Taxes; HSR Fee. . . . . . . . . . . . . . . 85
9.11. Bulk Transfers; Further Assurances. . . . . . . . . . . . . . . 86
9.12. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 86
9.13. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . 86
9.14. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Index of Defined Terms: . . . . . . . . . . . . . . . . . . . . . . . . . .I-1
Exhibits:
Exhibit A - (Terms of Reorganization Agreement) . . . . . . . . . . . . . .A-1
Exhibit B - (Form of Stockholders Agreement). . . . . . . . . . . . . . . .B-1
Schedules:
Schedule 3.3(ii) (Asset Contributed Systems) . . . . . . . . . . . . . .S-1
Schedule 3.3(xii) (Contributed Subsidiaries). . . . . . . . . . . . . . .S-3
Schedule 3.5 (Issue Exceptions). . . . . . . . . . . . . . . . . . .S-4
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AMENDED AND RESTATED CONTRIBUTION AND MERGER AGREEMENT
AMENDED AND RESTATED CONTRIBUTION AND MERGER AGREEMENT (hereinafter
called this "AGREEMENT"), dated as of June 6, 1997, among TCI
Communications, Inc, a Delaware corporation (the "COMPANY"), Cablevision
Systems Corporation, a Delaware corporation ("CSC"), CSC Parent Corporation,
a newly formed Delaware corporation and a wholly owned subsidiary of CSC
("PARENT"), and CSC Merger Corporation, a Delaware corporation and a wholly
owned subsidiary of Parent ("MERGER SUB," and CSC and Merger Sub sometimes
being hereinafter collectively referred to as the "CONSTITUENT CORPORATIONS").
RECITALS
WHEREAS, the parties hereto entered into a Contribution and Merger
Agreement (the "ORIGINAL AGREEMENT") dated as of June 6, 1997 and now desire
to amend and restate the Original Agreement as provided herein.
WHEREAS, the respective boards of directors of each of CSC, Parent
and Merger Sub have approved the merger of Merger Sub with and into CSC (the
"MERGER") and approved the Merger upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, after the execution and delivery of this Agreement, Parent
and Xxxxxxx X. Xxxxx and/or certain other equity holders in Subsidiaries of
CSC may enter into the Partnership Contribution Agreement (the "PARTNERSHIP
CONTRIBUTION AGREEMENT") relating to the acquisition by Parent of the
partnership interests in Cablevision of New York City M.L.P. held by Xxxxxxx
X. Xxxxx and/or such other equity interest in Subsidiaries of CSC pursuant to
which, among other things, the Partnership Contribution (as defined therein)
would be consummated upon the terms and subject to the conditions set forth
therein;
WHEREAS, it is anticipated that CSC and Parent will enter into a
Reorganization Agreement containing substantially the terms described in
Exhibit A (the "REORGANIZATION AGREEMENT") pursuant to which, among other
things, the Reorganization (as defined therein) may be consummated upon the
terms and subject to the conditions set forth therein;
WHEREAS, the respective boards of directors of each of CSC, Parent,
and the Company have approved the
contribution of all of the outstanding shares of Contributed Subsidiary
Capital Stock and of certain assets to Parent and the acquisition of the
Contributed Subsidiary Capital Stock and such assets and the assumption of
certain liabilities by Parent upon the terms and subject to the conditions
set forth in this Agreement (the "CONTRIBUTION");
WHEREAS, the board of directors of Parent has approved the
Stockholders Agreement substantially in the form attached as Exhibit B hereto
(the "STOCKHOLDERS AGREEMENT") upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, contemporaneously with the execution and delivery of the
Original Agreement, as a condition and inducement to the Company's, CSC's,
Parent's and Merger Sub's willingness to enter into this Agreement, the Class
B Entities (as defined in the Voting Agreement), Tele-Communications, Inc., a
Delaware corporation ("TCI"), CSC and Parent are entering into a voting
agreement (the "VOTING AGREEMENT") pursuant to which, among other things, the
Class B Entities shall agree to vote all Shares and shares of Parent Common
Stock owned by them in favor of approval and adoption of this Agreement and
the Merger, the approval of the share issuance in connection with the
Contribution and the approval of the Charter Amendments (as defined therein)
and the Class B Entities and TCI shall agree to enter into the Stockholders
Agreement at the Contribution Closing;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger and the Contribution shall qualify as an exchange governed by Section
351 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "CODE"); and
WHEREAS, CSC, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection
with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
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ARTICLE I
The Merger; Closings; Effective Time
1.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3)
Merger Sub shall be merged with and into CSC and the separate corporate
existence of Merger Sub shall thereupon cease. CSC shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "SURVIVING
CORPORATION"), and the separate corporate existence of CSC with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger, except as set forth in Sections 3.1 and 3.2. The Merger shall have the
effects specified in the Delaware General Corporation Law, as amended (the
"DGCL").
1.2. CLOSINGS. The closings of each of the Merger (the "MERGER
CLOSING") and the Contribution (the "CONTRIBUTION CLOSING," and, together with
the Merger Closing, the "CLOSINGS") shall take place (i) at the offices of
Xxxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 A.M. on the
third business day on which the last to be fulfilled or waived of the conditions
for the Merger and the Contribution (together, the "TRANSACTIONS"), as the case
may be, set forth in Article VII (other than in each case those conditions that
by their nature are to be satisfied at their respective Closings, but subject to
the fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as CSC, the Company and Parent may agree in writing (the
"CLOSING DATE").
1.3. EFFECTIVE TIME. As of or as soon as practicable following the
Merger Closing, CSC and Parent will cause a Certificate of Merger (the
"CERTIFICATE OF MERGER") to be executed, acknowledged and filed with the
Secretary of State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective at the time when the Certificate of Merger has
been duly filed with the Secretary of State of Delaware (the "EFFECTIVE TIME").
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ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. THE CERTIFICATE OF INCORPORATION. The certificate of
incorporation of CSC as in effect immediately prior to the Effective Time
shall be the certificate of incorporation of the Surviving Corporation (the
"CHARTER"), until duly amended as provided therein or by applicable law,
except that: (a) Article Fourth of the Charter shall be amended to read in
its entirety as follows: "The aggregate number of shares that the
Corporation shall have the authority to issue is 10,001,000 shares: (a) 1,000
shares of Common Stock, par value $1.00 per share; (b) 10,000,000 shares of
Preferred Stock, par value $.01 per share ("PREFERRED STOCK"), 200,000 shares
of which shall be designated as Series A Cumulative Convertible Preferred
Stock ("SERIES A PREFERRED STOCK") and 200,000 shares of which shall be
designated as Series B Cumulative Convertible Preferred stock ("SERIES B
PREFERRED STOCK")."; and (b) Article First of the Charter shall be amended to
read in its entirety as follows: "The name of the Corporation is CSC
Holdings, Inc."
2.2. THE BY-LAWS. The by-laws of Merger Sub in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"BY-LAWS"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation;
Contribution; Adjustment;
Third-Party Consents;
3.1. DIRECTORS. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
3.2. OFFICERS. The officers of CSC at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
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3.3. CONTRIBUTION. On the terms and subject to the conditions set
forth herein, at the Contribution Closing:
(a) the Company agrees that it shall contribute, convey, transfer,
assign and deliver, or cause to be contributed, conveyed, transferred,
assigned and delivered, to Parent, free and clear of any Liens (other than
Contributed System Permitted Liens), and Parent agrees that it shall accept
and receive all of the Acquired Assets;
(b) the Company agrees that it will transfer or cause to be
transferred to Parent, and Parent agrees that it will acquire from the
Company or the Person the Company causes to transfer to Parent, all of the
Included Contributed Systems, including the franchises, assets and rights
necessary to provide cable television services related thereto, by Parent
acquiring all of the outstanding Contributed Subsidiary Capital Stock, free
and clear of any Lien; and
(c) Parent agrees that it (i) shall issue to the Company an
aggregate consideration (the "STOCK CONSIDERATION") of 12,235,543 shares of
Class A Common Stock, par value $.01 per share (the "PARENT CLASS A SHARES"),
of Parent, subject to adjustment as provided in Section 3.4 and Section 3.5,
and deliver to the transferors of the Acquired Assets and the Contributed
Subsidiary Capital Stock a certificate or certificates representing such
Parent Class A Shares as more specifically described on Schedules 3.3(ii) and
3.3(xii) and (ii) shall assume and agree to pay and shall discharge and
perform as and when due the Assumed Liabilities. Notwithstanding anything to
the contrary in this Agreement, Parent shall not assume or be liable for, and
the Company shall hold Parent harmless in respect of, any of the Excluded
Liabilities.
As used in this Agreement, the following terms shall have the
following meanings:
(i) "ACQUIRED ASSETS" means all of the properties, assets,
privileges, rights, interests, claims and goodwill, real and personal,
tangible and intangible, of every type and description, including leasehold
interests or rights to possession, whether owned or leased or otherwise
possessed, by the Contributed System Entities primarily relating to, used in
or held for use in connection with or otherwise required to carry on the
business of the Asset Contributed Systems as currently conducted and to be
conducted in accordance with this Agreement prior to the Closing Date,
whether now in existence or hereafter acquired
-5-
prior to the Contribution Closing, including the Contributed Accounts, the
Contributed Instruments, the Contributed Contracts, the Contributed
Equipment, the Contributed Intellectual Property, the Contributed Inventory
and the Contributed Real Property but excluding the Excluded Assets;
(ii) "ASSET CONTRIBUTED SYSTEMS" means those cable television
systems identified on Schedule 3.3(ii) as an "Asset Contributed System";
(iii) "ASSUMED LIABILITIES" means (i) all liabilities, obligations
and commitments of the Contributed System Entities to the extent relating to
or arising out of the business of the Asset Contributed Systems, whether
before or after the Contribution Closing, including all liabilities,
obligations and commitments arising before or after the Contribution Closing
under the Contributed Instruments, the Contributed Contracts and the
Contributed Intellectual Property; (ii) all of the Assumed Company Debt; and
(iii) all other liabilities, obligations and commitments to the extent they
are included as Liabilities, and an adjustment has been taken therefor, under
Section 3.4(a), PROVIDED that Assumed Liabilities shall exclude the Excluded
Liabilities;
(iv) "CONTRIBUTED ACCOUNTS" means all accounts receivable,
royalties receivable, marketable securities, deposits and prepaid expenses of
the Contributed System Entities arising out of or relating to the business of
the Asset Contributed Systems as currently conducted and to be conducted in
accordance with this Agreement prior to the Closing Date;
(v) "CONTRIBUTED CONTRACTS" means all Contracts of the Contributed
System Entities primarily relating to or made in connection with the business
of the Asset Contributed Systems, including, with respect to the Asset
Contributed Systems, the Contributed System Cable Franchise Agreements and
the Contributed System Leases;
(vi) "CONTRIBUTED ENTITIES" means the Contributed Subsidiaries and
their Subsidiaries;
(vii) "CONTRIBUTED EQUIPMENT" means all tangible personalty;
electronic devices; towers; trunk and distribution cable; decoders and spare
decoders for scrambled satellite signals; amplifiers; power supplies;
conduit; vaults and pedestals; grounding and pole hardware; installed
subscriber's devices (including drop lines, converters, encoders,
transformers behind television sets and fittings); "head-ends" and "Hubs"
(origination,
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transmission and distribution system) hardware; tools; inventory; spare
parts; maps and engineering data; vehicles; supplies, tests and closed
circuit devices; furniture and furnishings; and all other tangible personal
property and facilities owned or leased by the Contributed System Entities
and primarily relating to, used in or held for use in connection with or
otherwise required to carry on the business of the Asset Contributed Systems
as currently conducted and to be conducted in accordance with this Agreement
prior to the Closing Date;
(viii) "CONTRIBUTED INSTRUMENTS" means all permits, licenses,
franchises, variances, exceptions, orders, authorizations, consents,
ordinances or licenses granted to the Contributed System Entities by any
Governmental Entity and primarily in respect of or otherwise used in or held
for use in connection with or required to carry out, the business of the
Asset Contributed Systems as currently conducted and to be conducted in
accordance with this Agreement prior to the Closing Date, including permits
for wire crossings over or under highways, railroads, and other property;
construction permits and certificates of occupancy; business radio, "Earth
Station" and other FCC licenses; pole attachment and other Contracts with
utilities; Contracts for the purchase, sale, receipt or distribution of news,
data and microwave relay signals or for satellite services; and all other
approvals, consents and authorizations of the Contributed System Entities
relating to, used in or held for use in connection with or otherwise required
to carry on the business of the Asset Contributed Systems as currently
conducted and to be conducted in accordance with this Agreement prior to the
Closing Date;
(ix) "CONTRIBUTED INTELLECTUAL PROPERTY" means the Intellectual
Property Rights of the Contributed System Entities primarily relating to,
used in or held for use in connection with or otherwise required to carry on
the business of the Asset Contributed Systems as currently conducted and to
be conducted in accordance with this Agreement prior to the Closing Date, and
the value associated therewith;
(x) "CONTRIBUTED INVENTORY" means all inventory (as defined under
GAAP) plus, without limitation, all supplies, all equipment held as
maintenance inventory, all converters, all cables and all amplifiers owned or
leased by the Contributed System Entities relating to, used in or held for
use in connection with or otherwise required to carry on the business of the
Asset Contributed Systems as currently
-7-
conducted and to be conducted in accordance with this Agreement prior to the
Closing Date;
(xi) "CONTRIBUTED REAL PROPERTY" means all realty, fixtures,
easements, rights-of-way, leasehold and other interests in real property,
buildings and improvements of the Contributed System Entities relating to,
used in or held for use in connection with or otherwise required to carry on
the business of the Asset Contributed Systems as currently conducted and to
be conducted in accordance with this Agreement prior to the Closing Date,
including, with respect to the Asset Contributed Systems, the Contributed
Systems Real Property and the Contributed Systems Leased Real Property;
(xii) "CONTRIBUTED SUBSIDIARIES" means those Persons identified on
Schedule 3.3(xii) as a "Contributed Subsidiary" owning, collectively, all of
the Included Contributed Systems;
(xiii) "CONTRIBUTED SUBSIDIARY CAPITAL STOCK" means 100% of the
issued and outstanding equity interests (including capital stock and
partnership interests) in the Contributed Subsidiaries;
(xiv) "CONTRIBUTED SYSTEM ENTITIES" means those Persons listed on
Schedule 3.3(ii) as a "Contributed System Entity" and also, as of immediately
prior to the Contribution Closing, the Future Contributed System Entities;
(xv) "CONTRIBUTED SYSTEMS" means the Included Contributed Systems
and the Asset Contributed Systems;
(xvi) "EXCLUDED ASSETS" means, with respect to any Contributed
System, all: (A) programming Contracts (including cable guide Contracts) and
retransmission consent Contracts (other than those listed in Section 5.1(n)
of the Company Disclosure Letter); (B) insurance policies and rights and
claims thereunder up to the Company's self-insured retention or deductible;
(C) cash and cash equivalents subject to the adjustment for Net Adjusted
Working Capital; (D) Contracts relating to national advertising sales
representation, including Contracts with National Cable Communications or
Cable Networks, Inc.; (E) bonds, letters of credit, surety instruments and
other similar items; (F) trademarks, tradenames, service marks, service
names, logos and similar proprietary rights other than those that are used
exclusively with respect to the Acquired Assets; and (G) all commercial
accounts relating to
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the provision by direct broadcast satellite of cable music services.
(xvii) "EXCLUDED LIABILITIES" means all of the following
liabilities, obligations and commitments: (v) those to be terminated
pursuant to Section 6.15(a) (other than any liabilities, obligations or
commitments to the extent they are included as Liabilities, and an adjustment
has been taken therefor, under Section 3.4(a)); (w) those relating to the
officers, directors or employees of the Company or any of its Subsidiaries
that are not Hired Employees; (x) those arising as a result of a breach by
TCI or the Company of any of its representations, warranties, covenants,
agreements or obligations under this Agreement but only to the extent that
such representations, warranties, covenants, agreements or obligations
survive the consummation of the Transactions as provided in Section 9.1; (y)
any Indebtedness to be released pursuant to Section 6.17(a); and (z) those
relating to the Excluded Assets;
(xviii) "FUTURE CONTRIBUTED SYSTEM ENTITIES" means those
corporations to be formed to receive the Asset Contributed Systems pursuant
to and in accordance with the Company Restructuring prior to the Contribution
Closing;
(xix) "INCLUDED CONTRIBUTED SYSTEMS" means those cable television
systems identified on Schedule 3.3(xviii) as an "Included Contributed
Systems";
(xx) "LIEN" means any mortgage, pledge, lien, deed of trust,
hypothecation, claim, security interest, title defect, encumbrance, burden,
tax lien (as used in Section 6321 of the Code or similarly by any state,
local or foreign tax authority), charge or other similar restriction, title
retention agreement, option, easement, covenant, encroachment or other
adverse claim; and
(xxi) "PERSON" means any individual, corporation (including
not-for-profit), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, Governmental Entity
or other entity of any kind or nature.
3.4. NET ADJUSTED WORKING CAPITAL ADJUSTMENT.
(a) Within 90 days following the Contribution Closing, Parent shall
prepare, or cause to be prepared, and deliver to the Company a Closing Date
consolidated balance sheet relating to both the Asset Contributed Systems and
the Contributed Entities (the "CLOSING BALANCE SHEET"), which shall set forth
the consolidated assets and liabilities of the Contributed Entities and
Acquired Assets and Assumed
-9-
Liabilities and the Net Adjusted Working Capital as of the
Closing Date, shall be prepared in accordance with the principles and methods
applied to the Proxy Financial Statements and shall be accompanied by
reasonably detailed information supporting the numbers set forth therein.
For this purpose, in no event will purchase accounting adjustments relating
to the Contribution Closing be made to the Closing Balance Sheet. For the
purpose of this Agreement: (i) "CURRENT ASSETS" means the aggregate amount
of cash, marketable securities, deposits, active subscriber accounts
receivables that are no more than 90 days past due (based on date of invoice)
for those subscribers who have been subscribers and have paid for at least
one entire billing cycle and prepaid expenses and advertising sales accounts
receivables for all such receivables, net of reserves for doubtful accounts,
each as reflected as current assets on a balance sheet prepared in accordance
with generally accepted accounting principles ("GAAP") applied in a manner
consistent with that applied in the preparation of the Proxy Financial
Statements, except that the Fibertech Cash and any Excluded Assets shall not
be included; (ii) "LIABILITIES" means the aggregate amount of any and all
liabilities (current and long term and whether or not contingent) reflected
as liabilities on a balance sheet prepared in accordance with GAAP applied in
a manner consistent with that applied in preparation of the Proxy Financial
Statements, except that the Assumed Company Debt, the Surety Liabilities, any
Excluded Liabilities and any other liability or obligation terminated
pursuant to Section 6.15(a) without any liability or obligation to any
Contributed Entity or any Asset Contributed System after the Contribution
Closing shall not be included; and (iii) "NET ADJUSTED WORKING CAPITAL"
equals (x) the Current Assets minus (y) the sum of the Liabilities and the
amount by which the total of the Surety Liabilities exceeds $10,000,000.
(b) The Company and the Company's accountants shall, within 30
days after the delivery by Parent of the Closing Balance Sheet and the
information required to be delivered with the Closing Balance Sheet, complete
their review of the Net Adjusted Working Capital derived from the Closing
Balance Sheet. In the event that the Company determines that the Net
Adjusted Working Capital has not been determined on the basis set forth in
Section 3.4(a) and this Section 3.4(b), the Company shall inform Parent in
writing (the "COMPANY'S OBJECTION"), setting forth a specific description of
the basis of the Company's Objection and the adjustments to the Net Adjusted
Working Capital that the Company believes should be made, on or before the
last day of such 30-day period. Parent shall then have 20 days to review and
respond to the Company's Objection. If Parent
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and the Company are unable to resolve all of their disagreements with respect
to the determination of the foregoing items within 10 days following the
completion of Parent's review of the Company's Objection, they shall refer
their remaining differences to KPMG Peat Marwick (or its successor) or
another internationally recognized firm of independent public accountants as
to which the Company and Parent mutually agree (the "CPA FIRM"), who shall,
acting as experts and not as arbitrators, determine on the basis of the
standards set forth in Section 3.4(a) and this Section 3.4(b), and only with
respect to the remaining differences so submitted, whether and to what
extent, if any, the Net Adjusted Working Capital, as derived from the Closing
Balance Sheet, requires adjustment. The parties shall instruct the CPA Firm
to deliver its written determination to Parent and the Company no later than
the twentieth day after the remaining differences underlying the Company's
Objection are referred to the CPA Firm. The CPA Firm's determination shall
be conclusive and binding upon Parent and the Company and shall not be
subject to appeal. The fees and disbursements of the CPA Firm shall be paid
by the Person whose estimate of Net Adjusted Working Capital differs the most
from that ultimately determined by the CPA Firm. Parent and the Company
shall (and Parent shall cause the Contributed Entities to) make readily
available to the CPA Firm all relevant books and records and any work papers
(including those of the parties' respective accountants) relating to the
Financial Statements and Closing Balance Sheet and all other items reasonably
requested by the CPA Firm. The "ADJUSTED CLOSING BALANCE SHEET" shall be (i)
the Closing Balance Sheet in the event that (x) the Company's Objection is
not delivered to Parent during the 30-day period specified above or (y) the
Company and Parent so agree, (ii) the Closing Balance Sheet, adjusted in
accordance with the Company's Objection, in the event that Parent does not
respond to the Company's Objection within the 20-day period following receipt
by Parent of the Company's Objection, or (iii) the Closing Balance Sheet, as
adjusted by either (x) the agreement of the Company and Parent or (y) the CPA
Firm. In the event that the adjustment of the Closing Balance Sheet pursuant
to this Section 3.4(b) discloses that it is appropriate to include an item in
the calculation of Net Adjusted Working Capital that had been omitted from
the Closing Balance Sheet or to omit an item in the calculation of Net
Adjusted Working Capital that had been included in the Closing Balance Sheet,
Parent shall prepare a revised Closing Balance Sheet including or omitting
such item, as the case may be, as at the date thereof.
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(c) Within five business days following issuance of the Adjusted
Closing Balance Sheet, the payments payable pursuant to this Section 3.4(c)
shall be paid by wire transfer of immediately available funds to a bank
account designated by Parent or the Company, as the case may be, together
with interest thereon (at the prime rate of interest of Citibank N.A. in
effect on the Closing Date) from and including the Closing Date and up to but
not including the date of payment. If the Net Adjusted Working Capital is
more than zero, Parent will make a payment to the Company in the amount by
which the Net Adjusted Working Capital exceeds zero, as derived from the
Adjusted Closing Balance Sheet. If the Net Adjusted Working Capital is less
than zero, the Company will make a payment to Parent in the amount by which
the Net Adjusted Working Capital is less than zero, as derived from the
Adjusted Closing Balance Sheet. Any adjustment payment in respect of Net
Adjusted Working Capital required to be made by Parent to the Company will be
subject to set-off to the extent of any failure by the Company to comply with
Section 6.15(a), Section 6.17(a) or Section 6.17(d). In the event that the
aforementioned set-off is insufficient to fully compensate Parent due to any
failure by the Company to comply with Section 6.15(a), Section 6.17(a) or
Section 6.17(d), the Company shall make a payment to Parent in the amount
equal to such insufficient amount.
3.5. ANTIDILUTION ADJUSTMENTS. If, between the date of this
Agreement and the Contribution Closing, CSC or Parent issues from time to
time any Shares or shares of Parent Common Stock other than in full or
partial satisfaction of the obligations ("ISSUE EXCEPTIONS") that are
described on Schedule 3.5 then, upon any such issue, the number of Parent
Class A Shares comprising the Stock Consideration shall be adjusted (to be
either increased or decreased) in accordance with the following formula:
X' = 1,419,322,988
-------------
C'
where:
X' = the adjusted aggregate number of Parent Class A Shares comprising
the Stock Consideration immediately following such issue (rounded
to the nearest whole share);
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O = the number of Shares or shares of Parent Common Stock outstanding
immediately prior to such issue;
I = the aggregate number of Shares or shares of Parent Common Stock
to be issued in such issue;
C = initially $116, and following any antidilution adjustment the C'
from the immediately preceding antidilution calculation;
P = the price per Share of the Shares or shares of Parent Common
Stock to be issued in such issue calculated by reference, as the
case may be, to (i) the aggregate amount of the principal of,
interest on, fees and any other amount in respect of the
indebtedness that is paid, redeemed or satisfied in such issue or
(ii) the aggregate amount of the liquidation value of, dividends
on, and any other amount in respect of the Preferred Shares that
is paid, redeemed or satisfied in such issue; and
C' = V + V';
-----
O + I
V = C x O; and
V' = P x I.
3.6. FAILURE TO RECEIVE THIRD PARTY CONSENTS. Notwithstanding
anything to the contrary in this Agreement, this Agreement shall not
constitute an agreement to assign or transfer any approval, instrument or
Contract, or any claim, right or benefit arising thereunder or arising
therefrom, if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party would be void or
constitute a breach or violation thereof or affect adversely any of the
rights or obligations of Parent thereunder; and any transfer or assignment to
Parent of any interest under any such approval, instrument or Contract that
requires the consent of a third party shall be made subject to such consent
or approval being obtained. In the event that any such consent or approval
is not obtained on or prior to the Closing Date, the Company (i) shall use
its commercially reasonable efforts to obtain any such consent or approval
after the
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Closing Date until such time as such consent or approval has been obtained
and (ii) shall cooperate with Parent in any lawful arrangement designed to
provide Parent or its Subsidiaries, as the case may be, with the full
economic benefits under any such approval, instrument or Contract, including
performance by the Company or its Affiliates, as the case may be, as an
agent, or in a similar role, for Parent or its Subsidiaries, as the case may
be, PROVIDED that Parent shall undertake to pay or satisfy (or cause the
payment or satisfaction of) the corresponding liabilities for the enjoyment
or such benefit only to the extent Parent would have been responsible
therefor hereunder if such consent or approval had been obtained prior to the
Closing Date. No party hereto shall be required to pay any material
payments, agree to any material restrictions on its or any of its affiliates'
business or commence or pursue any litigation in order to comply with this
Section 3.6. Nothing in this Section 3.6 shall be deemed a waiver or
modification by Parent of its right to receive an effective assignment and
transfer of all of the Acquired Assets, nor shall this Section 3.6 be deemed
to constitute an agreement to exclude from the Acquired Assets any approvals,
instruments or Contributed Contracts described in this Section or to require
the obtaining of any consent or approval not otherwise required to be
obtained under the terms of this Agreement.
ARTICLE IV
Effect of the Merger on Capital Stock
4.1. EFFECT ON CAPITAL STOCK. At the Effective Time, as a result
of the Merger and without any action on the part of the holder of any capital
stock of CSC, Parent or Merger Sub:
(a) MERGER CONSIDERATION. Each share of the Class A Common Stock,
par value $.01 per share ("CSC CLASS A SHARES"), of CSC and each share of
Class B Common Stock, par value $.01 per share ("CSC CLASS B SHARES"), of CSC
(each, a "SHARE" and, collectively, the "SHARES") issued and outstanding
immediately prior to the Effective Time (other than Shares owned by CSC,
Parent, Merger Sub or any other direct or indirect subsidiary of CSC
(collectively, the "PARENT COMPANIES"), excluding in each case those Shares
held on behalf of third parties (collectively, the "EXCLUDED SHARES")) shall
be converted into and become exchangeable for (the "MERGER CONSIDERATION")
one Parent Class A Share (in the case of CSC Class A Shares) or one share of
Class B Common Stock, par value $.01 per share (a "PARENT CLASS B
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SHARE"), of Parent (in the case of CSC Class B Shares) (the Parent Class A
Shares and the Parent Class B Shares are together referred to herein as the
"PARENT COMMON STOCK"). At the Effective Time, all Shares shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and
each certificate (a "CERTIFICATE") formerly representing any of such Shares
(other than Excluded Shares) shall thereafter be deemed for all purposes to
represent the number of shares of Parent Common Stock into which such Shares
were converted pursuant to this Section 4.1.
(b) CANCELLATION OF SHARES AND PARENT COMMON STOCK. Each Share
issued and outstanding immediately prior to the Effective Time and owned by
any of the Parent Companies (other than Shares that are in each case owned on
behalf of third parties) and each share of Parent Common Stock owned by any
of the Parent Companies shall, by virtue of the Merger and without any action
on the part of the holder thereof, cease to be outstanding, shall be canceled
and retired without payment of any consideration therefor and shall cease to
exist.
(c) MERGER SUB. At the Effective Time, each share of Common
Stock, par value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
(d) PREFERRED STOCK. Each share of Series C Cumulative Preferred
Stock, par value $.01 per share, Series D Cumulative Preferred Stock, par value
$.01 per share, 113/4% Series H Redeemable Exchangeable Preferred Stock, par
value $.01 per share, 81/2% Series I Cumulative Convertible Exchangeable
Preferred Stock, par value $.01 per share, and 111/8% Series M Redeemable
Exchangeable Preferred Stock, par value $.01 per share, of CSC (collectively,
the "PREFERRED SHARES") issued and outstanding at the Effective Time shall
remain outstanding and shall be entitled to the same dividend and other relative
rights, preferences, limitations and restrictions as provided by the amended and
restated certificate of incorporation of CSC, as amended.
4.2. TRANSFERS. After the Effective Time, if Certificates are
presented to the Surviving Corporation or to Parent they shall be canceled and
exchanged for certificates representing the Merger Consideration into which the
Shares formerly represented by such Certificate were converted pursuant to
Section 4.1.
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4.3. DISSENTERS' RIGHTS. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of Shares or
Preferred Shares in connection with the Merger.
4.4. ADJUSTMENTS TO PREVENT DILUTION. In the event that CSC changes
the number of Shares or securities convertible or exchangeable into or
exercisable for Shares, or Parent changes the number of shares of Parent Common
Stock or securities convertible or exchangeable into or exercisable for shares
of Parent Common Stock, issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse split), stock
dividend or stock distribution, recapitalization, subdivision, issuer tender or
exchange offer, or other similar transaction, the Merger Consideration and the
Stock Consideration shall be equitably adjusted taking into account, in the case
of the Stock Consideration, any adjustment made pursuant to Section 3.5.
ARTICLE V
Representations and Warranties
5.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the corresponding sections or subsections of the disclosure letter
delivered to Parent by the Company on or prior to entering into this Agreement
(the "COMPANY DISCLOSURE LETTER"), the Company hereby represents and warrants to
CSC, Parent and Merger Sub that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Contributed Entities, the Contributed System Entities and the Company is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of organization and has all requisite corporate
power and authority to own and operate its properties and assets and to carry on
its business as presently conducted and is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership
or operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing,
when taken together with all other such failures, is not reasonably likely to
have a Contributed Systems Material Adverse Effect. The Company has made
available to Parent a complete and correct copy of the Company's and the
Contributed Entities' respective certificates of incorporation and by-laws or
comparable governing instruments, each as amended to date. The
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Company's and the Contributed Entities' respective certificates of
incorporation and by-laws or comparable governing instruments so delivered
are in full force and effect. TCI owns directly all of the outstanding Common
Stock of the Company, and the Company is TCI's principal cable property
holding company. Section 5.1(a) of the Company Disclosure Letter contains a
correct and complete list of each jurisdiction where each of the Contributed
Subsidiaries is and each of the Contributed System Entities is or, if Future
Contributed System Entities, will be as of the Contribution Closing organized
and qualified to do business.
As used in this Agreement, the term (i) "SUBSIDIARY" means, with
respect to the Company, any Contributed Entity, CSC, Parent or Merger Sub, as
the case may be, any entity, whether incorporated or unincorporated, of which
at least a majority of the securities or ownership interests having by their
terms ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective Subsidiaries or
by such party and any one or more of its respective Subsidiaries (it being
agreed that until the Effective Time, Parent shall be deemed a Subsidiary of
CSC for all purposes hereunder) and (ii) "CONTRIBUTED SYSTEMS MATERIAL
ADVERSE EFFECT" means a material adverse effect on the financial condition,
properties, business or results of operations of all of the Contributed
Systems, taken as a whole, excluding any such effects proximately caused by
CSC or Parent or any of their respective Subsidiaries.
(b) CAPITAL STRUCTURE; ACQUIRED ASSETS; INDEBTEDNESS. (i) The
authorized and outstanding capital stock of each Contributed Entity is set
forth in Section 5.1(b) of the Company Disclosure Letter. All of the
outstanding shares of capital stock in each of the Contributed Entities have
been duly authorized and are validly issued, fully paid and nonassessable and
are owned beneficially and of record by a direct or indirect Subsidiary of
the Company, free and clear of any Lien. Except as required to consummate
the Company Restructuring, there are no preemptive or other outstanding
rights, options, warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements, arrangements or commitments
to issue or sell any shares of capital stock or other securities of the
Contributed Entities or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any securities of the
-17-
Contributed Entities, and no securities or obligations evidencing such rights
are authorized, issued or outstanding. No Contributed Entity has any shares
of capital stock reserved for issuance. No Contributed Entity has
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or to convert into or be exercised or exchanged
for securities having the right to vote) ("VOTING DEBT") with the
stockholders of any Contributed Entity on any matter. There are no voting
trusts, proxies, or other commitments or understandings, restrictions or
arrangements of any kind in favor of any Person with respect to the voting
of, or the right to participate in dividends or other earnings on, any
securities or other ownership interests of any Contributed Entity. Each of
the Contributed System Entities is or, if a Future Contributed System Entity,
will be as of the Contribution Closing a Subsidiary of the Company. All of
the Asset Contributed Systems are owned and operated within, and all of the
Acquired Assets and Assumed Liabilities are contained within, the Contributed
System Entities.
(ii) The Acquired Assets, taken as a whole, constitute and will
constitute all the properties, assets, privileges, rights, and interests of
the Company and its Subsidiaries relating to, used in or held for use in
connection with or otherwise required to carry on the business of the Asset
Contributed Systems as of the date hereof and as of immediately after the
Contribution Closing, except to the extent that Excluded Assets may relate
to, be used in or held for use in connection with or otherwise be required to
carry on such business.
(iii) Section 5.1(b) of the Company Disclosure Letter, which shall
be supplemented on the third business day before the Closing Date in
accordance with Section 6.17(e), sets forth all of the outstanding
Indebtedness of each of the Contributed System Entities (including the Future
Contributed System Entities as of the Contribution Closing) and each of the
Contributed Entities, the maturity thereof and the interest rate thereon,
except for the Assumed Company Debt, which is set forth to the best
approximation by the Company as of the date hereof and shall be set forth in
exact amounts on the third business day prior to the Closing Date. As used
in this Agreement, the term "INDEBTEDNESS" means, without duplication, any
liability, whether or not contingent, (i) in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereto), but excluding
reimbursement obligations under any surety bond and reimbursement obligations
and letters of credit and other forms of surety
-18-
for cable franchises and other operating agreements, (ii) representing the
balance deferred and unpaid of the purchase price of any property, except any
such balance that constitutes a trade payable arising in the ordinary course
of business, (iii) any obligation of a Person to pay rent or other amounts
under a lease with respect to any property (whether real, personal or mixed)
acquired or leased by such Person and used in its business that is required
to be accounted for as a liability on the balance sheet of such Person in
accordance with GAAP, and the amount of such obligation constituting
Indebtedness shall be the amount so required to be accounted for as a
liability, (iv) under any other agreement related to the fixing or exchanging
of interest rates on any Indebtedness described above, such as an interest
swap, cap or collar agreement, or (v) guarantees of items of other Persons
which would be included within this definition of Indebtedness for such other
Persons (whether or not the guarantee would appear on a balance sheet of such
other Person). The aggregate amount of liabilities, whether or not
contingent, in respect of reimbursement obligations and letters of credit and
other forms of surety for cable franchises and other operating agreements,
excluding reimbursement obligations under any surety bonds (collectively, the
"SURETY LIABILITIES") does not exceed $10,000,000.
(c) CORPORATE AUTHORITY; APPROVAL. (i) Each of the Company and TCI
has (and as of the Contribution Closing each Contributed System Entity will
have) all requisite corporate power and authority and has taken (or, in the case
of the Contributed System Entities, as of the Contribution Closing will have
taken) all corporate action necessary in order to execute, deliver and perform
its obligations under this Agreement and to consummate the Contribution (it
being understood that, for the purposes of this Agreement, consummation of the
Contribution shall include consummation of the transactions contemplated by the
Company Restructuring). This Agreement is a valid and binding agreement of the
Company and TCI enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "BANKRUPTCY AND EQUITY
EXCEPTION").
(ii) The board of directors of each of the Company and TCI has
approved this Agreement and the Contribution. No approval of the stockholders
of the Company or of TCI is required for the effectiveness, validity or
enforceability of this Agreement or the transactions contemplated hereby.
-19-
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS. (i) Other than the
filings and/or notices under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), and except as set forth in Section
5.1(d) of the Company Disclosure Letter, no notices, reports or other filings
are required to be made by the Company or any of its Subsidiaries with, nor
are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company or any of its Subsidiaries from, any
governmental, regulatory or self-regulatory (including a sports league)
authority, agency, commission, body or other governmental entity
("GOVERNMENTAL ENTITY"), in connection with the execution and delivery of
this Agreement by the Company and the consummation by the Company of the
Contribution and the performance of its other obligations hereunder, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Contributed Systems Material Adverse
Effect or prevent, materially delay or materially impair the ability of the
Company to consummate the Contribution and the other transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
the Company do not, and the consummation by the Company of the Contribution
and the performance of its other obligations hereunder will not, constitute
or result in (A) a breach or violation of, or a default under, the respective
certificates of incorporation or by-laws of the Contributed System Entities,
the Contributed Entities or the Company or the comparable governing
instruments of any of the Contributed System Entities or any of the
Contributed Entities, (B) a breach of or violation of or a default under, or
the acceleration of any obligations of or the creation of a Lien on the
assets of the Contributed Entities, the Company or any of its Subsidiaries
(with or without notice, lapse of time or both) pursuant to, any agreement,
lease, license, franchise, permit, concession, contract, note, mortgage,
indenture, arrangement or other obligation ("CONTRACTS") binding upon the
Contributed Entities, the Company or any of its Subsidiaries or any Law or
governmental or non-governmental permit or license to which the Contributed
Entities, the Company or any of its Subsidiaries is subject or (C) any change
in the rights or obligations of any party under any of the Contracts, except,
in the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is
not reasonably likely to have a Contributed Systems Material Adverse Effect
or prevent, materially delay or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement. Section
5.1(d) of the Company Disclosure
-20-
Letter sets forth a correct and complete list of Contracts of the Contributed
Entities, the Company and its Subsidiaries pursuant to which consents or
waivers are or may be required prior to consummation of the Contribution and
the other transactions contemplated by this Agreement (whether or not subject
to the material adverse effect or materiality exception set forth with
respect to clauses (B) and (C) above), other than any such Contract (x) the
amount that could be paid or received thereunder after the Audit Date does
not exceed $100,000 per annum and $250,000 in the aggregate or (y) that is
terminable by any of the Contributed System Entities or by any of the
Contributed Entities without penalty on less than 60 days' notice.
(e) FINANCIAL STATEMENTS. The Company has delivered to Parent and
CSC complete and correct copies of each of the financial statements listed in
Section 5.1(e) of the Company Disclosure Letter (the "FINANCIAL STATEMENTS").
The Financial Statements fairly present, in all material respects, the
financial position of each of the Contributed Systems as of the respective
date indicated and the financial position and results of operations, as the
case may be, of each of the Contributed Systems for the periods set forth
therein, in each case in accordance with GAAP consistently applied during the
periods involved, except for the omission of statements of retained earnings,
changes in cash flows and financial positions and except for the omission of
notes and normal year-end adjustments. The Proxy Financial Statements
(including the related notes and schedules) to be delivered to CSC by the
Company will fairly present, in all material respects, the consolidated
financial position of the Contributed Systems as of the respective dates
indicated and the consolidated financial position and results of operations,
retained earnings, changes in financial position and cash flows, as the case
may be, of the Contributed Systems for the periods set forth therein
(subject, in the case of unaudited statements) to notes and normal year-end
audit adjustments that will not individually or in the aggregate be material
in amount or effect, in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein. The
financial positions and results of operations reflected in the Proxy
Financial Statements, when delivered, will not differ in any material respect
from that reflected in the Financial Statements for the same periods involved
(other than any purchase accounting adjustments and accruals for Taxes which
were not reflected in the Financial Statements).
(f) ABSENCE OF CERTAIN CHANGES. Since March 31, 1997 (the "AUDIT
DATE"): (i) the Company, the Contributed
-21-
System Entities and the Contributed Entities have conducted their respective
businesses relating to the Contributed Systems only in, and have not engaged
in any material transaction other than according to, the ordinary and usual
course of such businesses; and (ii) there has not been (I) any change in the
financial condition, properties, business or results of operations of any of
the Contributed Entities or the Contributed Systems or any event or
development or combination of events or developments that, individually or in
the aggregate, has had or is reasonably likely to have a Contributed Systems
Material Adverse Effect (it being acknowledged and agreed that, for the
purposes of this Agreement, knowledge or awareness of the Company shall
include the knowledge or awareness of the Company, of the Contributed
Entities and of any of the Contributed System Entities); PROVIDED, HOWEVER,
that any such effect resulting from any change (x) in law, rule, or
regulation or generally accepted accounting principles or interpretations
thereof that applies to both CSC and the Contributed Systems or (y) in
economic or business conditions generally or in the cable industry
specifically shall not be considered when determining if a Contributed
Systems Material Adverse Effect has occurred; (II) any material damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company or any of its
Subsidiaries with respect to the Contributed Systems, whether or not covered
by insurance; (III) except as required to consummate the Company
Restructuring, any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of any of the Contributed
System Entities or any of the Contributed Entities, except for cash dividends
(excluding any dividend of any Fibertech Cash) or other dividends or
distributions on its capital stock set forth in Section 5.1(f) of the Company
Disclosure Letter; or (IV) any change in accounting principles, practices or
methods used by the Contributed Entities or used with respect to the
Contributed Systems. Since the Audit Date, there has not been any material
increase in the compensation payable or that could become payable by the
Contributed Entities or the Contributed System Entities to officers or key
employees of the Contributed Systems other than periodic or merit increases
consistent with past practice or bonus payments that will not be the
responsibility of or require any payment by Parent or any of its Subsidiaries
(including, after the Contribution Closing, the Contributed Entities) or any
amendment of any of the Compensation and Benefit Plans or the adoption of any
new benefit plan or arrangement.
(g) LITIGATION AND LIABILITIES. Except as set forth in Section
5.1(g) of the Company Disclosure Letter,
-22-
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the knowledge of the
Company, threatened against any of the Contributed Entities or Contributed
System Entities or against any of their respective "AFFILIATES" (as defined
in Rule 12b-2 under the Exchange Act) relating directly or indirectly to any
of the Contributed Entities or the Contributed Systems or their respective
businesses or (ii) obligations or liabilities, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed,
including those relating to matters involving any Environmental Law, or any
other facts or circumstances of which the Company has knowledge that could
result in any claims against, or obligations or liabilities of any of the
Contributed Entities or Contributed Systems except, in the case of either
clause (i) or (ii) above, for those that are not, individually or in the
aggregate, reasonably likely to have a Contributed Systems Material Adverse
Effect or prevent or materially burden or materially impair the ability of
the Company to consummate the Contribution and the other transactions
contemplated by this Agreement.
(h) EMPLOYEE BENEFITS. (i) A copy of each bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, compensation, medical, health or other
plan, agreement, policy or arrangement that covers current or former
employees or directors of the Contributed Entities or of the Company or its
Subsidiaries relating to the Contributed Systems and is in effect on the date
hereof, other than "multiemployer plans" within the meaning of Section 3(37)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(such plans, agreements, policies and arrangements, the "COMPENSATION AND
BENEFIT PLANS"), and any trust agreement or insurance contract forming a part
of such Compensation and Benefit Plans has been made available to Parent
prior to the date hereof. The Compensation and Benefit Plans are listed in
Section 5.1(h) of the Company Disclosure Letter and any "change of control"
or similar provisions therein are specifically identified in Section 5.1(h)
of the Company Disclosure Letter to the extent that there would be any
liability to or payment required by Parent or any of its Subsidiaries
(including after the Contribution Closing, the Contributed Entities)
thereunder.
(ii) All Compensation and Benefit Plans are in substantial compliance
with all applicable Laws, including the Code and ERISA. Each Compensation and
Benefit Plan that
-23-
is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "PENSION PLAN") and that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service (the "IRS") with respect to "TRA" (as defined in
Section 1 of Rev. Proc. 93-39), and the Company is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the
Company, threatened material litigation relating to the Compensation and
Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged
in a transaction with respect to any Compensation and Benefit Plan that,
assuming the taxable period of such transaction expired as of the date
hereof, would subject any of the Contributed Entities to or otherwise cause
the Contributed Systems to incur a material tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA.
(iii) As of the date hereof, no liability under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by any of the
Contributed Entities or of the Contributed Systems with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA AFFILIATE"). The Contributed Entities and, with respect to
the Contributed Systems, the Contributed System Entities have not incurred
and do not expect to incur any withdrawal liability with respect to a
multiemployer plan under Subtitle E to Title IV of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be
filed for any Pension Plan or by any ERISA Affiliate of the Contributed
Entities or, with respect to the Contributed Systems, the Contributed System
Entities within the 12-month period ending on the date hereof or will be
required to be filed in connection with the transactions contemplated by this
Agreement.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent Financial Statements. Neither any
Pension Plan nor any single-employer plan of an ERISA Affiliate of the
Contributed Entities or, with respect to the Contributed Systems, the
Contributed System Entities or the Company or its Subsidiaries has an
"accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of
-24-
the Code or Section 302 of ERISA. None of the Contributed Entities or, with
respect to the Contributed Systems, the Contributed System Entities has
provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate of the Contributed Entities or,
with respect to the Contributed Systems, the Contributed System Entities
pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Pension Plan, and there has been no material change in the financial
condition of such Pension Plan since the last day of the most recent plan
year. The withdrawal liability of the Contributed Entities or, with respect
to the Contributed Systems, the Contributed System Entities under each
Compensation and Benefit Plan that is a multiemployer plan, determined as if
a "complete withdrawal" within the meaning of Section 4203 of ERISA had
occurred as of the date hereof, does not exceed $100,000.
(vi) None of the Contributed Entities or, with respect to the
Contributed Systems, the Contributed System Entities has any obligations for
retiree health and life benefits under any Compensation and Benefit Plan,
except as set forth in the Company Disclosure Letter. The Contributed
Entities and, with respect to the Contributed Systems, the Contributed System
Entities may amend or terminate any such plan under the terms of such plan at
any time without incurring any material liability thereunder.
(vii) Except as expressly contemplated by Section 6.11(c), the
consummation of the Contribution and the other transactions contemplated by
this Agreement will not (x) entitle any current or former employees or
directors ("EMPLOYEES") of the Contributed Entities or, with respect to the
Contributed Systems, the Contributed System Entities to severance pay, (y)
accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Compensation and Benefit
Plans or (z) result, in any material respect, in any breach or violation of,
or a default under, any of the Compensation and Benefit Plans.
-25-
(i) COMPLIANCE WITH LAWS; PERMITS. The businesses of each of the
Contributed Systems Entities and the Contributed Entities have not been, and
are not being, conducted in violation of any federal, state, local or foreign
law, statute, ordinance, rule, regulation, judgment, order, injunction,
decree, arbitration award, agency requirement, franchise, license or permit
of any Governmental Entity (collectively, "LAWS"), except for violations or
possible violations that, individually or in the aggregate, are not
reasonably likely to have a Contributed Systems Material Adverse Effect or
prevent or materially burden or materially impair the ability of the Company
to consummate the Contribution and the other transactions contemplated by
this Agreement. No investigation or review by any Governmental Entity with
respect to any of the Contributed Entities or the Contributed Systems is
pending or, to the knowledge of the Company, threatened, nor has any
Governmental Entity indicated an intention to conduct such investigation or
review except any investigations or reviews that are not, individually or in
the aggregate, reasonably likely to have a Contributed Systems Material
Adverse Effect or prevent or materially burden or materially impair the
ability of the Company to consummate the Contribution and the other
transactions contemplated by this Agreement. To the knowledge of the
Company, no material change is required in any of the Contributed Systems'
processes, properties or procedures in connection with any such Laws, and
none of the Company, the Contributed Entities or the Contributed Systems has
received any notice or communication of any noncompliance with any such Laws
that has not been cured as of the date hereof except for such noncompliance
that is not, individually or in the aggregate, reasonably likely to have a
Contributed Systems Material Adverse Effect or prevent or materially burden
or materially impair the ability of the Company to consummate the
Contribution and the other transactions contemplated by this Agreement. Each
of the Contributed Entities and the Contributed Systems has all permits,
licenses, franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct the businesses of
its respective Contributed Systems as presently conducted, except those the
absence of which are not, individually or in the aggregate, reasonably likely
to have a Contributed Systems Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to
consummate the Contribution and the other transactions contemplated by this
Agreement.
(j) ENVIRONMENTAL MATTERS. Except as set forth in Section 5.1(j)
of the Company Disclosure Letter, and for
-26-
such matters that, individually or in the aggregate, are not reasonably
likely to have a Contributed Systems Material Adverse Effect: (i) all of the
Contributed System Entities with respect to the Asset Contributed Systems and
the Contributed Entities have complied at all times with all applicable
Environmental Laws; (ii) the properties currently owned or operated by any of
the Contributed System Entities with respect to the Asset Contributed Systems
or the Contributed Entities (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by any of the
Contributed System Entities with respect to the Asset Contributed Systems or
the Contributed Entities were not contaminated with Hazardous Substances
during the period of ownership or operation by any of the Contributed System
Entities with respect to the Asset Contributed Systems or the Contributed
Entities; (iv) none of the Contributed System Entities with respect to the
Asset Contributed Systems or the Contributed Entities is or has been subject
to liability for any Hazardous Substance disposal or contamination on any
third party property; (v) none of the Contributed System Entities with
respect to the Asset Contributed Systems or the Contributed Entities has been
associated with any release or threat of release of any Hazardous Substance;
(vi) none of the Company or any of its Subsidiaries has received any notice,
demand, letter, claim or request for information indicating that any of the
Contributed System Entities with respect to the Asset Contributed Systems or
the Contributed Entities may be in violation of or liable under any
Environmental Law; (vii) none of the Contributed System Entities with respect
to the Asset Contributed Systems or the Contributed Entities is or has been
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity, or is subject to any indemnity or other agreement with
any third party, regarding compliance or liability under any Environmental
Law or relating to Hazardous Substances; (viii) there are no circumstances or
conditions involving any of the Contributed System Entities with respect to
the Asset Contributed Systems or the Contributed Entities that could
reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use, or transfer of any property of
any of the Contributed System Entities with respect to the Asset Contributed
Systems or the Contributed Entities pursuant to any Environmental Law; (ix)
none of the properties of any of the Contributed System Entities with respect
to the Asset Contributed Systems or the Contributed Entities contain or has
contained any underground storage tanks or any Hazardous Substances; (x) none
of the Contributed System Entities with respect to the Asset Contributed
Systems or the Contributed
-27-
Entities has engaged in any activities involving the generation, use,
handling or disposal of any Hazardous Substances; and (xi) the Company has
delivered to Parent copies of all environmental reports, studies, sampling
data, permits, government filings and other environmental information in its
possession or reasonably available to it relating to any of the Contributed
System Entities with respect to the Asset Contributed Systems or any of the
Contributed Entities current or former properties or operations; and (xii)
the indemnity with respect to environmental matters at the Mamaroneck, New
York site referred to in Section 5.1(j) of the Company Disclosure Letter is
in favor of a Contributed Entity and will not be affected by the Contribution
Closing.
As used herein: the term "ENVIRONMENTAL LAW" means the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water
Act and the Occupational Safety and Health Act, in each case, as amended, and
any other federal, state, local or foreign law, statute, ordinance,
regulation, judgment, common law, order, decree, arbitration award, agency
requirement, license, permit, authorization or opinion, relating to: (A) the
protection, investigation or restoration of the environment, health and
safety, or natural resources, (B) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, pollution, contamination or any injury or threat of injury to
persons or property; and the term "HAZARDOUS SUBSTANCE" means any substance
in any concentration that is: (A) listed, classified or regulated pursuant
to any Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any other
substance which may be the subject of regulatory action by any Government
Authority pursuant to any Environmental Law.
(k) TAX MATTERS. As of the date hereof, neither the Company nor
any of its Affiliates has taken or agreed to take any action, nor do the
officers of the Company have any knowledge of any fact or circumstance, that
would prevent the Merger or the Contribution from qualifying as an exchange
governed by Section 351 of the Code.
(l) TAXES. (i) (A) Except as set forth in Section 5.1(l) of the
Company Disclosure Letter, all Company Tax Returns that are required to be
filed by or with respect to the Company's Group, including the Contributed
Entities, have been duly and timely filed (taking into account an
-28-
extension of time within which to file) and all such filed Company Tax
Returns are accurate and complete in all material respects; and (B) all
Company Taxes (as defined below) shown to be due on the Company Tax Returns
referred to in clause (A) have been paid in full, and all Company Taxes
required to be withheld from amounts owing to any employee, creditor or third
party have been withheld, except in each case with respect to matters
contested in good faith.
(ii) None of the Contributed Entities, CSC, Parent or any
Affiliate of CSC will be required to make or fund any payment to an
individual that would be a "parachute payment" to a "disqualified individual"
(as those terms are defined in Section 280G of the Code without regard to
whether such payment is reasonable compensation for personal services
performed or to be performed in the future) as a result of the Contribution.
(iii) Except as set forth in Section 5.1(l) of the Company
Disclosure Letter, none of the Contributed Entities or the Asset Contributed
Systems is a party to or bound by, or has any obligation under, any tax
sharing or similar Contract.
(iv) As used in this Agreement: (A) "COMPANY'S GROUP" shall mean
any "affiliated group" (as defined in Section 1504(a) of the Code without
regard to the limitations contained in Section 1504(b) of the Code) that
includes the Company or any predecessor of or successor to the Company (or
another such predecessor or successor); (B) the term "TAX" (including, with
correlative meaning, the terms "TAXES", and "TAXABLE") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, severances, stamp, payroll,
sales, employment, unemployment, disability, use, property, withholding,
excise, production, value added, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties
and additions imposed with respect to such amounts and any interest in
respect of such penalties and additions; (C) the term "COMPANY TAX" means any
Tax imposed on the income, properties or operations of any Contributed Entity
or Contributed System Entity with respect to the Asset Contributed Systems
(or predecessor entity) or any other member of the Company's Group; and (D)
the term "COMPANY TAX RETURN" includes all returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Governmental Entity relating to Taxes.
-29-
(m) LABOR MATTERS. Except as set forth in Section 5.1(m) of the
Company Disclosure Letter: (i) The business of each of the Contributed
Systems and of each of the Contributed Entities is operating and has been
operated in compliance with all Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours (including,
without limitation, where applicable, the Immigration Reform and Control Act
("IRCA"), the Worker Adjustment and Retraining Notification Act of 1988
("WARN"), any such applicable Laws respecting employment discrimination,
equal opportunity, affirmative action, employee privacy, wrongful or unlawful
termination, workers' compensation, occupational safety and health
requirements, labor-management relations and unemployment insurance) of any
Governmental Entity, except where the same, individually or in the aggregate,
is not reasonably likely to have a Contributed Systems Material Adverse
Effect or prevent or materially burden or materially impair the ability of
the Company to consummate the Contribution and the other transactions
contemplated hereby, and none of the Contributed Systems or Contributed
Entities is engaging in any unfair labor practice.
(ii) There is no labor strike, dispute, walkout, work stoppage,
slow-down or lockout pending or, to the knowledge of the Company, threatened
with respect to any of the Contributed Entities or Contributed Systems, and
none of the Contributed Systems or Contributed Entities is experiencing any
work stoppage or, to the knowledge of the Company, any other labor difficulty
or dispute or any union organizing effort by or respecting the Employees.
(iii) None of the Contributed Systems or Contributed Entities is
materially delinquent in material payments to any Employees for any wages,
salaries, commissions, bonuses, workers' compensation or other compensation
for any services performed by them or amounts required to be reimbursed to
such Employees.
(iv) None of the Contributed Systems or Contributed Entities is a
party to or otherwise bound by any Contract with any labor union or
association representing any Employee, or is in negotiations with respect to
any such Contract.
(v) None of the Contributed Systems or Contributed Entities has
instituted any mass layoffs, as defined for the purposes of WARN, or given
any notice of any contemplated mass layoff.
-30-
(n) CONTRACTS. None of the Contributed Entities, or the
Contributed System Entities with respect to the Asset Contributed Systems
nor, to the knowledge of the Company, any other party to any Contributed
Contracts or Contracts to which any of the Contributed Entities is bound or
is a party is (or, with notice or lapse of time or both, could be) in
material breach or default thereof which breaches or defaults, individually
or in the aggregate, are reasonably likely to have a Contributed Systems
Material Adverse Effect or prevent or materially burden or materially impair
the ability of the Company to consummate the Contribution and the other
transactions contemplated by this Agreement. As of the Contribution Closing,
other than as specifically approved in writing by CSC prior to the
Contribution Closing or as disclosed in Section 5.1(n) of the Company
Disclosure Letter, there are no Contributed Contracts or Contracts of any
Contributed Entity with respect to programming or affiliation (or similar
matters) that would be binding upon or otherwise restrict the business or
operations of Parent or any of its Subsidiaries (including, after the
Contribution Closing, the Contributed Entities) after the Contribution
Closing.
(o) NO LIABILITIES AS GUARANTOR. Except as set forth in Section
5.1(o) of the Company Disclosure Letter, none of the Contributed Systems or
Contributed Entities is directly or indirectly liable upon or with respect to
or obligated in any other way to provide funds in respect of or to guarantee
or assume any debt, dividend or other obligation of any other Person other
than a Contributed Entity.
(p) NOTES AND ACCOUNTS AND ROYALTY RECEIVABLES. Except as
reserved against in the Financial Statements, all customer and trade notes
and accounts receivable owned by each of the Contributed Entities or the
Contributed System Entities that are reflected in their respective books as
of the date hereof and relate to the Contributed Systems are valid and
genuine, arise out of BONA FIDE sales and performances of services and, to
the knowledge of the Company, are subject to no valid defenses, set-offs or
counterclaims.
(q) INVESTMENTS. Excluding their interests in other Contributed
Entities, none of the Contributed Entities owns of record or beneficially any
equity interests in or other securities of any Person.
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(r) INSURANCE. All material fire, casualty, general liability,
business interruption, product liability, property, workers compensation,
sprinkler and water damage and other forms of insurance policies maintained
by the Contributed Entities and by the Company and its Subsidiaries relating
to, used in or held for use in connection with or otherwise required to carry
on the business of the Asset Contributed Systems are with reputable insurance
carriers, provide adequate coverage consistent with cable industry standards
for all normal risks incident to the business of the Contributed Entities and
the Asset Contributed Systems, as the case may be, and their respective
properties and assets, and are in character and amount at least equivalent to
that carried by Persons engaged in similar businesses and subject to the same
or similar perils or hazards, except for any such failures to maintain
insurance policies that, individually or in the aggregate, are not reasonably
likely to have a Contributed Systems Material Adverse Effect. The
Contributed System Entities with respect to the Asset Contributed Systems and
the Contributed Entities currently have and, to the knowledge of the Company,
always have carried or had the benefit of such insurance as is required by
Law.
(s) OWNED REAL PROPERTY. (i) Section 5.1(s) of the Company
Disclosure Letter sets forth a complete and correct list of all real property
(other than easements, rights-of-way and similar interests) owned by the
Contributed Entities or, with respect to the Asset Contributed Systems, the
Contributed System Entities (together with all improvements or fixtures owned
by the Contributed Entities or, with respect to the Asset Contributed
Systems, the Contributed System Entities and located thereon, the
"CONTRIBUTED SYSTEMS REAL PROPERTY").
(ii) The Contributed Entities and the Contributed Systems Entities
have good and marketable fee simple title to the Contributed Systems Real
Property of their respective Contributed Systems, free and clear of any Lien
except for Contributed Systems Permitted Liens.
(iii) Other than as set forth in Section 5.1(s) of the Company
Disclosure Letter, there are no outstanding options or rights of first
refusal or first offer to purchase the Contributed Systems Real Property, or
any portion thereof or interest therein.
(iv) The Contributed Systems Real Property and the real property
interests leased pursuant to the Contributed Systems Leases (the "CONTRIBUTED
SYSTEMS LEASED REAL PROPERTY") include all of the land, buildings, offices,
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structures and other improvements primarily used or held for use in
connection with or otherwise required to carry on the businesses of the
Contributed Systems as currently conducted.
(v) Other than as set forth in Section 5.1(s) of the Company
Disclosure Letter, there are no proceedings in eminent domain or other
similar proceedings pending, or to the knowledge of the officers of the
Company, threatened against any portion of the Contributed Systems Real
Property.
(vi) The current use and operation of the Contributed Systems Real
Property does not violate any applicable building, zoning, subdivision and
other land use or similar Laws or orders of Governmental Entities (the "REAL
PROPERTY LAWS") in any material respect and neither the Company nor any of
its Subsidiaries has received any notice of violation or claimed violation of
any Real Property Law that has not since been cured, which violations,
individually or in the aggregate, are reasonably likely to have a Contributed
Systems Material Adverse Effect or prevent or materially burden or materially
impair the ability of the Company to consummate the Contribution and the
other transactions contemplated hereby.
(t) LEASES. The Company has made available to Parent correct and
complete copies of all real property leases that relate to the Contributed
Systems (and any personal property leases that relate to the Contributed
Systems the amount that could be paid or received by the Contributed Entities
or Contributed System Entities thereunder exceeds $100,000 in the aggregate)
to which the Contributed Entities or Contributed System Entities is a party
or is bound (together, the "CONTRIBUTED SYSTEMS LEASES"), none of which has
been modified in any material respect except to the extent such modifications
have been disclosed and copies made available to Parent prior to the date
hereof. Each of the Contributed Systems Leases is in full force and effect.
None of the Contributed Entities or Contributed System Entities, and, to the
knowledge of the Company, no other party is, in default (with or without
notice or lapse of time or both) under any Contributed Systems Lease in any
material respect. To the knowledge of the Company, no event has occurred and
is continuing that constitutes (or with notice or the passage of time or
both, could constitute) a default under any Contributed Systems Lease in any
material respect.
(i) As to the Contributed Systems Leases relating to the
Contributed Systems Leased Real Property:
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(A) Neither the Company nor any of its Subsidiaries has received
notice of a proceeding in eminent domain or other similar proceeding
affecting the Contributed Systems Leased Real Property; and
(B) Neither the Company nor any of its Subsidiaries has received
notice that the current use and operation of the Contributed Systems Leased
Real Property violates, in any material respect, any instrument of record
or agreement affecting the Contributed Systems Leased Real Property or any
Real Property Laws.
(ii) The Contributed Entities and the Contributed System Entities
have a valid leasehold interest in their respective Contributed Systems
Leased Real Property, free and clear of any Lien other than Contributed
Systems Permitted Liens.
(u) PERSONAL PROPERTY. The Contributed Entities and the
Contributed System Entities have good title to, or a valid leasehold interest
in, or other good and sufficient right to use, all tangible personal
properties that are material to the business and operations of any of their
respective Contributed Systems.
(v) INTELLECTUAL PROPERTY. The Contributed Entities and the
Contributed System Entities own, or are licensed or otherwise possess legally
enforceable rights to use, all patents, registered or unregistered
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or materials (the
"INTELLECTUAL PROPERTY RIGHTS") that are used in the business of their
respective Contributed Systems as currently conducted, except for any such
failures to own, be licensed or possess that, individually or in the
aggregate, are not reasonably likely to have a Contributed Systems Material
Adverse Effect, and to the knowledge of the Company all such Intellectual
Property Rights held by the Contributed Entities and the Contributed System
Entities are valid and subsisting.
(w) BROKERS AND FINDERS. Neither the Company nor any of its
Subsidiaries or their officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees or
commissions or finders' fees in connection with the Transactions or the other
transactions contemplated in this Agreement.
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(x) CABLE TELEVISION FRANCHISES. (i) Section 5.1(x) of the Company
Disclosure Letter sets forth all of the Contributed Systems and the approximate
number, as of the date of this Agreement, equal to the sum of (x) the total
number of households (exclusive of "second outlets") that are paying for and
receiving any level of cable television service from the Contributed Systems in
individually billed residential units and (y) the quotient obtained by dividing
the total xxxxxxxx to all subscribers in commercial venues or bulk-billed
multiple residential units by the predominant cable service rate charged by each
such Contributed System for the lowest tier of service that includes ESPN, MTV
and CNN, as of March 31, 1997 served by each such Contributed System.
Section 5.1(x) of the Company Disclosure Letter sets forth the name of the legal
entity that owns or, if Future Contributed System Entities, will own each such
Contributed System and holds or will hold, as the case may be, the applicable
franchise and the identity and ownership interest and relationship to the
Contributed Entities or Contributed System Entities, if any, of each owner of
any interest in such legal entity. True, complete and correct copies of the
franchise agreements and similar governing agreements, statutes or ordinances,
including any material related Contracts with any Governmental Entity
(collectively, the "CABLE FRANCHISE AGREEMENTS") relating to such Contributed
Systems have been made available to Parent. The Contributed Entities and the
Contributed System Entities are in compliance with all such Cable Franchise
Agreements of their respective Contributed Systems (the "CONTRIBUTED SYSTEM
CABLE FRANCHISE AGREEMENTS") in all material respects.
(ii) Except as set forth in Section 5.1(x) of the Company Disclosure
Letter, there exists no fact or circumstance that makes it reasonably likely
that any Contributed System Cable Franchise Agreement scheduled to expire in the
next five years will not be timely renewed on commercially reasonable terms.
The Company has filed or caused to be filed with the appropriate Governmental
Entity all appropriate requests for renewal under the Communications Act of
1934, as amended, and the rules and regulations thereunder (the "COMMUNICATIONS
ACT") within 30 to 36 months prior to the expiration of each Contributed System
Cable Franchise Agreement. The operation of the Contributed Systems has been,
and is, in compliance in all material respects with the rules and regulations of
the Federal Communications Commission ("FCC") and none of the Company or any of
its Subsidiaries has received notice from the FCC of any violation of its rules
and regulations by any of the Contributed Entities or, with respect to the Asset
Contributed Systems, any of the Contributed System Entities.
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None of the applicable franchises for the Contributed Systems has been
suspended or revoked. Neither the Company nor any of its Subsidiaries has
received any notice of any such possible suspension or revocation, and no
such suspension or revocation is pending or, to the knowledge of the Company,
threatened.
(iii) The Contributed Systems and all related businesses of the
Contributed Entities or, with respect to the Asset Contributed Systems, the
Contributed System Entities are, and, while owned by the Company or any of its
Affiliates, have been, operated in compliance in all material respects with the
Communications Act and the Company has submitted or caused to be submitted to
the FCC all material filings, including but not limited to cable television
registration statements, annual reports and aeronautical frequency usage notices
that are required under the rules and regulations of the FCC.
(iv) The Contributed Entities or, with respect to the Asset
Contributed Systems, the Contributed System Entities have conducted all system
and microwave performance tests and all Cumulative Leakage Index ("CLI") related
tests applicable to the Contributed Systems and have maintained records which
accurately and completely reflect in all material respects all results required
to be shown thereon. The Contributed Entities or, with respect to the Asset
Contributed Systems, the Contributed System Entities have corrected any
radiation leakage of the Contributed Systems required to be corrected in
connection with the monitoring obligations and have otherwise complied in all
material respects with all applicable CLI rules and regulations. The
Contributed Systems are in compliance in all material respects with all signal
leakage criteria set forth in 47 CFR Section 76.611.
(v) For each relevant semi-annual reporting period, the Company has
timely filed or caused to be filed with the United States Copyright Office all
required Statements of Account in true and correct form, and has paid when due
all required copyright royalty fee payments in the correct amount, relating to
the Contributed Systems' carriage of television broadcast signals.
(vi) Other than requests of network non-duplication and syndicated
exclusivity protection, neither the Company nor any of the Contributed Entities
or any of the Company's Subsidiaries has received any requests, notices or
demands, whether written or oral, from the FCC or any other Governmental Entity,
challenging or questioning the rights of the Contributed Entities or Contributed
System
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Entities to operate the Contributed Systems or carry any signal or requesting
signal carriage. All of the broadcast television signals carried by the
Contributed Systems are carried either pursuant to the must-carry
requirements or pursuant to executed retransmission consent agreements,
accurate, complete and correct copies of which have been made available to
Parent.
(vii) The regulated rates for services and equipment charged by any
Contributed System, including the rates for any "MIGRATED PRODUCT TIERS" (as
such term is defined by the FCC as of the date of this Agreement), (I) comply in
all material respects with FCC's rules establishing maximum permitted rates for
regulated services and equipment, (II) have been approved by the FCC under a
rate settlement with the Company with respect to a Contributed System or (III)
are subject to an order by the FCC or other Governmental Entity requiring a
Contributed System to adjust such rates. The Company has made available to
Parent accurate, complete, and correct copies of all FCC rate justification
forms and materials (including Forms 393, 1200, 1205, 1210, and 1240) filed with
the FCC and any other Governmental Entity for each of the Contributed Systems
that are required to file such forms and materials, and such forms have been
filed with the appropriate regulatory body in compliance in all material
respects with all applicable requirements. The Company has also made available
to Parent an accurate, complete, and correct copy of any rate settlement
agreement entered into with the FCC affecting any Contributed System. Section
5.1(x) of the Company Disclosure Letter lists each Contributed System and
regulated rate that is the subject of a pending challenge before the FCC or any
other Governmental Entity and the Governmental Entity before which each such
challenge is pending. Section 5.1(x) of the Company Disclosure Letter lists
each Contributed System subject to an order described in subclause (III) above,
and the rate reduction required by each such order.
(viii) The Company has made available to Parent, to the extent it
possesses them, accurate, complete, and correct copies of each material inquiry,
request for information, report, directive, and similar communications received
by the Company or any of its Subsidiaries from the FCC or any other Governmental
Entity that relates to the obligations of the Contributed Entities with respect
to any of the Contributed Systems under the Communications Act. The Company has
also made available to Parent a copy of each written response by the Company or
any of its Subsidiaries to each such inquiry, request for information, report,
directive, or similar communication.
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(y) ACCREDITED INVESTOR; INVESTMENT INTENT. Each of the Company and
the transferors receiving shares of Parent Common Stock in the Contribution is
an "accredited investor" within the meaning of the Securities Act and is
acquiring such shares for its own account and for investment purposes only and
not with a view to, or for resale in connection with, any distribution thereof
in violation of the Securities Act. The Company acknowledges its understanding
that the offering and sale of the shares of Parent Common Stock in the
Contribution is intended to be exempt from the registration under the Securities
Act by virtue of Section 4(2) thereof.
(z) DISCLOSURE. No representation or warranty made by the Company in
this Agreement nor any document, written information, statement, financial
statement, certificate, Schedule or Exhibit prepared and furnished by the
Company or any of its Subsidiaries or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein, in light of the circumstances under which they were
furnished, not misleading. To the best knowledge of the Company, there is no
event, fact or condition that would have a Contributed Systems Material Adverse
Effect, or that reasonably could be expected to do so, that has not been set
forth in this Agreement, the Company Disclosure Letter or in the Schedules.
5.2 REPRESENTATIONS AND WARRANTIES OF CSC, PARENT AND MERGER SUB.
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to the Company or TCI by CSC on or prior to entering
into this Agreement (the "PARENT DISCLOSURE LETTER"), CSC, Parent and Merger Sub
each hereby represent and warrant to the Company that:
(a) CAPITALIZATION OF MERGER SUB AND PARENT. The authorized capital
stock (i) of Merger Sub consists of 1,000 shares of Common Stock, par value $.01
per share, all of the outstanding shares of which are validly issued, fully paid
and non-assessable, and (ii) of Parent consists of 200,000,000 Parent Class A
Shares, all of the outstanding shares of which are validly issued, fully paid
and non-assessable, 80,000,000 Parent Class B Shares, none of which are issued
or outstanding as of the date hereof, and 10,000,000 shares of Preferred Stock,
par value $.01 per share, none of which are issued or outstanding as of the date
hereof. All of the issued and outstanding capital
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stock of Merger Sub is, and as of immediately prior to the Effective Time
will be, owned by Parent, and all of the issued and outstanding capital stock
of Parent as of immediately prior to the Effective Time will be owned by CSC.
There are (i) no other shares of capital stock or voting securities of
Merger Sub or Parent, (ii) no securities of Merger Sub or Parent convertible
into or exchangeable for shares of capital stock or voting securities of
Merger Sub or Parent, respectively, and (iii) no options or other rights to
acquire from Merger Sub or Parent, and no obligations of Merger Sub or Parent
to issue, any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of Merger Sub or
Parent, except (A) in the case of Parent and Merger Sub, pursuant to the
Merger and (B) in the case of Parent, pursuant to the Partnership
Contribution, the Contribution, the Preferred Shares, the Parent Class B
Shares, the CSC Stock Plans and in respect of any such other obligations of
CSC outstanding as of immediately prior to the Effective Time. Neither of
Merger Sub nor Parent has conducted any business prior to the date hereof or
has any, and prior to the Effective Time will not have any, assets,
liabilities or obligations of any nature other than those incident to its
formation and pursuant to the Partnership Contribution, the Reorganization,
this Agreement and the Transactions and the other transactions contemplated
by this Agreement. CSC and Parent have delivered to the Company true and
complete copies of the certificates of incorporation and bylaws (or
comparable governing instruments) of CSC, Parent and each of CSC's
Significant Subsidiaries, in each case as in effect on the date hereof.
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of CSC and
its "SIGNIFICANT SUBSIDIARIES" (as defined in Rule 1.02(w) of Regulation S-X
promulgated pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT")) is a corporation or partnership duly organized, validly
existing and, in the case of corporate entities, in good standing under the laws
of its respective jurisdiction of organization and has all requisite corporate,
partnership or similar power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and is qualified to
do business and is in good standing as a foreign corporation or partnership in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified or in such good standing, when taken together with all other such
failures, is not reasonably likely to have a Parent Material Adverse Effect.
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As used in this Agreement, the term "PARENT MATERIAL ADVERSE EFFECT"
means a material adverse effect on the financial condition, properties, business
or results of operations of CSC and Parent and their Subsidiaries taken as a
whole, excluding such effects proximately caused by any of the Contributed
Entities, the Company or any of its Subsidiaries.
(c) CAPITAL STRUCTURE OF CSC. The authorized capital stock of CSC
consists of (i) 50,000,000 CSC Class A Shares, of which 13,722,151 shares were
outstanding as of the close of business on June 6, 1997, and 20,000,000 CSC
Class B Shares, of which 11,119,709 shares were outstanding as of the close of
business on June 6, 1997, and (ii) such number of Preferred Shares as set forth
in Section 5.2(c) of the Parent Disclosure Letter, of which such number of
shares were outstanding as of the close of business on March 31, 1997 as set
forth in Section 5.2(c) of the Parent Disclosure Letter. All of the outstanding
Shares and the Preferred Shares have been duly authorized and are validly
issued, fully paid and nonassessable. CSC has no Shares or Preferred Shares
reserved for or subject to issuance, except that, as of March 31, 1997, there
were approximately 648,211 CSC Class A Shares reserved for issuance pursuant to
the CSC Amended and Restated Employee Stock Plan, 1,500,000 CSC Class A Shares
reserved for issuance pursuant to the CSC First Amended and Restated 1996
Employee Stock Plan and 60,000 CSC Class A Shares reserved for issuance pursuant
to the CSC 1996 Non-Employee Director Stock Option Plan (collectively, the "CSC
STOCK PLANS"), the same number of CSC Class A Shares subject to issuance upon
conversion of the same number of CSC Class B Shares (including all such CSC
Class B Shares subject to issuance upon conversion of the Preferred Shares) and
5,115,600 CSC Class A Shares reserved for issuance upon conversion of the 8 1/2%
Series I Cumulative Convertible Exchangeable Preferred Stock of CSC. Each of
the outstanding shares of capital stock of each of CSC's Significant
Subsidiaries and, after the Effective Time, each of Parent's Significant
Subsidiaries is, with respect to such Significant Subsidiaries that are
corporations, duly authorized, validly issued, fully paid and nonassessable and,
except as disclosed in the CSC Reports filed prior to the date hereof or as set
forth in Section 5.2(c) of the Parent Disclosure Letter, is owned by a direct or
indirect wholly-owned subsidiary of CSC or, after the Effective Time, of Parent,
free and clear of any Lien. Except as disclosed in the CSC Reports filed prior
to the date hereof or as set forth above and in Section 5.2(c) of the Parent
Disclosure Letter, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
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repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of CSC or any of its Significant
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of CSC or any of its Significant Subsidiaries, and no securities
or obligation evidencing such rights are authorized, issued or outstanding. CSC
does not have outstanding any Voting Debt having the right to vote with the
stockholders of CSC on any matter.
(d) CORPORATE AUTHORITY. (i) Each of CSC, Parent and Merger Sub has
all requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Transactions, subject only to (A) any
stockholder approval necessary to permit the issuance of the shares of Parent
Common Stock required to be issued pursuant to the Contribution and (B) the vote
of a majority of the outstanding Shares voting together as a single class to
approve the Merger (together, the "PARENT REQUISITE VOTES"). This Agreement is
a valid and binding agreement of CSC, Parent and Merger Sub, enforceable against
each of them in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(ii) Prior to the Effective Time, Parent will have taken all necessary
action to permit it to issue the number of shares of Parent Common Stock
required to be issued pursuant to the Contribution and the Merger. The Parent
Common Stock, when issued in connection with the Contribution and the Merger,
will be validly issued, fully paid and nonassessable, and no stockholder of
Parent will have any preemptive right of subscription or purchase in respect
thereof.
(e) GOVERNMENTAL FILINGS; NO VIOLATIONS. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities or
"blue sky" laws, (D) required to be made with the American Stock Exchange, Inc.
(the "AMEX") and (E) as disclosed in Section 5.2(e) of the Parent Disclosure
Letter, no notices, reports or other filings are required to be made by CSC,
Parent or Merger Sub with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by CSC, Parent or Merger Sub
from, any Governmental Entity, in connection with the execution and delivery of
this Agreement by CSC, Parent and Merger Sub and the consummation by CSC, Parent
and Merger Sub of the
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Transactions and the other transactions contemplated hereby, except those
that the failure to make or obtain are not, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect or prevent or
materially delay or materially impair the ability of CSC, Parent or Merger
Sub to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by CSC,
Parent and Merger Sub do not, and the consummation by CSC, Parent and Merger Sub
of the Transactions and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default under, the
certificate of incorporation or by-laws of CSC, Parent and Merger Sub or the
comparable governing instruments of any of their Significant Subsidiaries, (B) a
breach of or violation of or a default under, or the acceleration of any
obligations of or the creation of a Lien on the assets of CSC or any of its
Significant Subsidiaries (with or without notice, lapse of time or both)
pursuant to, any Contracts binding upon CSC or any of its Significant
Subsidiaries or any Law or governmental or non-governmental permit or license to
which CSC or any of its Significant Subsidiaries is subject or (C) any change in
the rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to have a Parent Material Adverse Effect or prevent,
materially delay or materially impair the ability of CSC, Parent or Merger Sub
to consummate the transactions contemplated by this Agreement. Section 5.2(e)
of the Parent Disclosure Letter sets forth a correct and complete list of
Contracts of CSC and its Significant Subsidiaries pursuant to which consents or
waivers are or may be required prior to consummation of the transactions
contemplated by this Agreement (whether or not subject to the material adverse
effect or materiality exception set forth with respect to clauses (B) and (C)
above), other than any such Contract (x) the amount that could be paid or
received thereunder after the CSC Audit Date does not exceed $100,000 per annum
and $250,000 in the aggregate or (y) that is terminable by the CSC or any of its
Significant Subsidiaries, as the case may be, without penalty on less than 60
days' notice.
(f) CSC REPORTS; FINANCIAL STATEMENTS. CSC has delivered to the
Company each registration statement, report, proxy statement or information
statement prepared by it since December 31, 1996 (the "CSC AUDIT DATE"),
including (i) CSC's Annual Report on Form 10-K for the year ended
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December 31, 1996 and (ii) CSC's Quarterly Report on Form 10-Q for the period
ended March 31, 1997, each in the form (including exhibits, annexes and any
amendments thereto) filed with the SEC (collectively, including any such
reports filed subsequent to the date hereof, the "CSC REPORTS"). As of their
respective dates, the CSC Reports did not, and any CSC Reports filed with the
SEC subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into the
CSC Reports (including the related notes and schedules) fairly presents, or
will fairly present, in all material respects, the consolidated financial
position of CSC and its Subsidiaries as of its date and each of the
consolidated statements of income and of changes in financial position
included in or incorporated by reference into the CSC Reports (including any
related notes and schedules) fairly presents, or will fairly present, in all
material respects, the results of operations, retained earnings and changes
in financial position, as the case may be, of CSC and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements,
to notes and normal year-end audit adjustments that will not be material in
amount or effect), in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein.
(g) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the CSC
Reports filed prior to the date hereof, since the CSC Audit Date, there has not
been (i) any change in the financial condition, properties, business or results
of operations of CSC and its Subsidiaries or any event or development or
combination of events or developments that, individually or in the aggregate,
has had or is reasonably likely to have a Parent Material Adverse Effect;
PROVIDED, HOWEVER, that any such effect resulting from any change (x) in law,
rule, or regulation or generally accepted accounting principles or
interpretations thereof that applies to both CSC or such Subsidiary and the
Contributed Systems or (y) in economic or business conditions generally or in
the cable industry or programming industry specifically shall not be considered
when determining if a Parent Material Adverse Effect has occurred; (ii) any
material damage, destruction or other casualty loss with respect to any material
asset or property owned, leased or otherwise used by CSC or any of its
Significant Subsidiaries, whether or not covered by insurance; (iii) any change
by CSC in accounting principles, practices or
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methods; or (iv) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of CSC or Parent, except
for dividends or other distributions on its capital stock publicly announced
prior to the date hereof and regular dividends in respect of the Preferred
Shares.
(h) LITIGATION AND LIABILITIES. Except as disclosed in the CSC
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of CSC, threatened against CSC or any of its
Affiliates or (ii) obligations or liabilities, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed, including
those relating to environmental and occupational safety and health matters, or
any other facts or circumstances of which CSC has knowledge that could result in
any claims against, or obligations or liabilities of, CSC or any of its
Affiliates, except, in the case of either clause (i) or (ii) above, for those
that are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent or materially burden or materially
impair the ability of CSC, Parent or Merger Sub to consummate the transactions
contemplated by this Agreement.
(i) EMPLOYEE BENEFITS. (i) A copy of each bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, compensation, medical, health or other plan,
agreement, policy or arrangement that covers current or former employees or
directors of CSC and its Subsidiaries and is in effect on the date hereof, other
than multiemployer plans (the "CSC COMPENSATION AND BENEFIT PLANS"), and any
trust arrangement or insurance contract forming a part of such CSC Compensation
and Benefits Plans has been made available to the Company prior to the date
hereof. The CSC Compensation and Benefit Plans are listed in Section 5.2(i) of
the Parent Disclosure Letter and any "change of control" or similar provision
therein are specifically identified in Section 5.2.(i) of the Parent Disclosure
Letter.
(ii) All CSC Compensation and Benefit Plans are in substantial
compliance with all applicable Laws, including the Code and ERISA. Each CSC
Compensation and Benefit Plan that is an "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA (a "CSC PENSION PLAN") and that is intended
to be qualified under Section 401(a) of the Code has received a favorable
deter-
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mination letter from the IRS with respect to TRA, and CSC is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. As of the date hereof, there is no pending or, to the
knowledge of CSC, threatened material litigation relating to the CSC
Compensation and Benefit Plans. Neither CSC nor any of its Subsidiaries has
engaged in a transaction with respect to any CSC Compensation and Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would subject CSC or any of its Subsidiaries to a material tax
or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) As of the date hereof, no liability under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by CSC or any
Subsidiary with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan of any entity
which is considered an ERISA Affiliate of CSC. CSC and its Subsidiaries have
not incurred and do not expect to incur any withdrawal liability with respect
to a multiemployer plan under Subtitle E to Title IV of ERISA. No notice of
a "reportable event", within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any CSC Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof or will be required to be filed in
connection with the transactions contemplated by this Agreement.
(iv) All contributions required to be made under the terms of any
CSC Compensation and Benefit Plan or of the date hereof have been timely made
or have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the CSC Reports prior to the date hereof.
Neither any CSC Pension Plan nor any single-employer plan of an ERISA
Affiliate of CSC has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither CSC nor its Subsidiaries has provided, or is required to
provide, security to any CSC Pension Plan or to any single-employer plan of
an ERISA Affiliate of CSC pursuant to Section 401(a)(29) of the Code.
(v) Under each CSC Pension Plan which is a single-employer plan, as
of the last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions
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contained in the CSC Pension Plan's most recent actuarial valuation), did not
exceed the then current value of the assets of such CSC Pension Plan, and
there has been no material change in the financial condition of such CSC
Pension Plan since the last day of the most recent plan year. The withdrawal
liability of CSC and its Subsidiaries under each CSC Compensation and Benefit
Plan which is a multiemployer plan, determined as if a complete withdrawal
has occurred as of the date hereof, does not exceed $100,000.
(vi) Neither CSC nor its Subsidiaries have any obligations for retiree
health and life benefits under any CSC Compensation and Benefit Plan, except as
set forth in the Parent Disclosure Letter. CSC or its Subsidiaries may amend or
terminate any such plan under the terms of such plan at any time without
incurring any material liability thereunder.
(vii) The consummation of the Transactions and the other transactions
contemplated by this Agreement will not (x) entitle any employees of CSC or its
Subsidiaries to severance pay, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the CSC
Compensation and Benefit Plans or (z) result, in any material respect, in any
breach or violation of, or default under, any of the CSC Compensation and
Benefit Plans.
(j) COMPLIANCE WITH LAWS; PERMITS. Except as set forth in the CSC
Reports filed prior to the date hereof, the businesses of each of CSC and its
Subsidiaries have not been, and are not being, conducted in violation of any
Laws, except for violations or possible violations that, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse Effect or
prevent or materially burden or materially impair the ability of CSC, Parent or
Merger Sub to consummate the transactions contemplated by this Agreement.
Except as set forth in the CSC Reports filed prior to the date hereof, no
investigation or review by any Governmental Entity with respect to CSC or any of
its Subsidiaries is pending or, to the knowledge of CSC, threatened, nor has
any Governmental Entity indicated an intention to conduct the same, except for
those the outcome of which are not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect or prevent or materially burden
or materially impair the ability of CSC, Parent or Merger Sub to consummate the
transactions contemplated by this Agreement. To the knowledge of CSC, no
material change is required in CSC's or
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any of its Subsidiaries' processes, properties or procedures in connection
with any such Laws, and CSC has not received any notice or communication of
any noncompliance with any such Laws that has not been cured as of the date
hereof except for noncompliance that is not, individually or in the
aggregate, reasonably likely to have a Parent Material Adverse Effect or
prevent or materially burden or materially impair the ability of CSC, Parent
or Merger Sub to consummate the transactions contemplated by this Agreement.
CSC and its Subsidiaries each has all permits, licenses, trademarks, patents,
trade names, copyrights, service marks, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals
necessary to conduct its business as presently conducted except those the
absence of which are not, individually or in the aggregate, reasonably likely
to have a Parent Material Adverse Effect or prevent or materially burden or
materially impair the ability of CSC, Parent or Merger Sub to consummate the
Transactions and the other transactions contemplated by this Agreement.
(k) TAX MATTERS. As of the date hereof, neither CSC nor any of its
Affiliates has taken or agreed to take any action, nor does CSC have any
knowledge of any fact or circumstance, that would prevent the Merger, the
Contribution or the Partnership Contribution from qualifying as an exchange
governed by Section 351 of the Code.
(l) TAXES. (i) (A) All CSC Tax Returns that are required to be
filed by or with respect to the CSC Group have been duly and timely filed
(taking into account an extension of time within which to file) and all such
filed CSC Tax Returns are accurate and complete in all material respects; and
(B) all CSC Taxes shown to be due on the CSC Tax Returns referred to in clause
(A) have been paid in full, and all CSC Taxes required to be withheld from
amounts owing to any employee, creditor or third party have been withheld,
except in each case with respect to matters contested in good faith.
(ii) As used in this Agreement: (A) the term "CSC GROUP" means any
"affiliated group" (as defined in Section 1504(a) of the Code without regard to
the limitations contained in Section 1504(b) of the Code) that includes CSC or
any predecessor of or successor to CSC (or another such predecessor or
successor); (B) the term "CSC TAX" means any Tax imposed on the income,
properties or operations of any member of the Company's Group; and (C) the term
"CSC TAX RETURN" means any Tax Return of any member of the CSC Group including,
without limitation, consolidated federal income tax returns of the CSC Group.
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(m) LABOR MATTERS. Neither CSC nor any of its Significant
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement with a labor union or labor
organization, nor, as of the date hereof, is CSC or any of its Significant
Subsidiaries the subject of any material proceeding asserting that CSC or any
of its Significant Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization
nor is there pending or, to the knowledge of CSC, threatened, any labor
strike, dispute, walk-out, work stoppage, slow-down or lockout involving CSC
or any of its Significant Subsidiaries.
(n) INSURANCE. All material fire and casualty, general liability,
business interruption, product liability, property, workers compensation,
sprinkler and water damage and other forms of insurance policies maintained
by CSC or any of its Subsidiaries are with reputable insurance carriers,
provide adequate coverage consistent with cable industry standards for all
normal risks incident to the business of CSC and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such
failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse Effect.
(o) BROKERS AND FINDERS. Neither CSC or its Subsidiaries nor any
of their officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees or commissions or finders'
fees in connection with the Transactions or the other transactions
contemplated by this Agreement.
(p) ACCREDITED INVESTOR; INVESTMENT INTENT. Parent is an
"accredited investor" within the meaning of the Securities Act and is
acquiring the Contributed Subsidiary Capital Stock for its own account and
for investment purposes only and not with a view to, or for resale in
connection with, any distribution thereof in violation of the Securities Act.
Parent acknowledge its understanding that the offering and sale of the
Contributed Subsidiary Capital Stock is intended to be exempt from the
registration under the Securities Act by virtue of Section 4(2) thereof.
(q) ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not
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reasonably likely to have a Parent Material Adverse Effect: (i) CSC and
Parent and their Significant Subsidiaries have complied at all times with all
applicable Environmental Laws; (ii) the properties currently owned or
operated by any of CSC and Parent and their Significant Subsidiaries
(including soils, groundwater, surface water, buildings or other structures)
are not contaminated with any Hazardous Substances; (iii) the properties
formerly owned or operated by any of CSC and Parent and their Significant
Subsidiaries were not contaminated with Hazardous Substances during the
period of ownership or operation by any of CSC and Parent and their
Significant Subsidiaries; (iv) none of CSC and Parent and their Significant
Subsidiaries is or has been subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) none of CSC and
Parent and their Significant Subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (vi) none of CSC or
any of its Subsidiaries has received any notice, demand, letter, claim or
request for information indicating that any of CSC and Parent and their
Significant Subsidiaries may be in violation of or liable under any
Environmental Law; (vii) none of CSC and Parent and their Significant
Subsidiaries is or has been subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity, or is subject to any
indemnity or other agreement with any third party, regarding compliance or
liability under any Environmental Law or relating to Hazardous Substances;
(viii) there are no circumstances or conditions involving any of and CSC and
Parent and their Significant Subsidiaries that could reasonably be expected
to result in any claims, liability, investigations, costs or restrictions on
the ownership, use, or transfer of any property of any of CSC and Parent and
their Significant Subsidiaries pursuant to any Environmental Law; (ix) none
of the properties of any of CSC and Parent and their Significant Subsidiaries
contain or has contained any underground storage tanks or any Hazardous
Substances; (x) none of CSC and Parent and their Significant Subsidiaries has
engaged in any activities involving the generation, use, handling or disposal
of any Hazardous Substances; and (xi) CSC has delivered to the Company copies
of all environmental reports, studies, sampling data, permits, government
filings and other environmental information in its possession or reasonably
available to it relating to any of CSC and Parent and their Significant
Subsidiaries or any of their current or former properties or operations.
(r) INTELLECTUAL PROPERTY. Each of CSC and Parent and their
Significant Subsidiaries owns, or is licensed or otherwise possesses legally
enforceable rights
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to use, all Intellectual Property Rights that are used in the business of
CSC, Parent or such Significant Subsidiary as currently conducted, except for
any such failures to own, be licensed or possess that, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse
Effect, and to the knowledge of CSC all Intellectual Property Rights held by
CSC and Parent and their Significant Subsidiaries are valid and subsisting.
(s) PROPERTY. Each of CSC, Parent and their Significant
Subsidiaries has good title to, or a valid leasehold interest in, or other
good and sufficient right to use, all tangible personal properties and real
property interests that are material to the business and operations of CSC,
Parent or such Significant Subsidiary.
(t) CABLE TELEVISION FRANCHISES. (i) Section 5.2(t) of the Parent
Disclosure Letter sets forth all of the cable television systems operated by
CSC, Parent and their Subsidiaries (the "PARENT SYSTEMS"), the name of the
legal entity that owns each such Parent System and holds the applicable
franchise, the identity and ownership interest and relationship to CSC,
Parent and their Subsidiaries, if any, of each owner of any interest in such
legal entity, and the approximate number of subscribers in each of the Parent
Systems' groups (as specified in such Section of the Parent Disclosure
Letter), as of the date of this Agreement, to be calculated as follows:(x)
the total number of households (exclusive of "second outlets") that are
paying for and receiving any level of cable television service from the
Parent Systems in individually billed residential units and (y) the quotient
obtained by dividing the total xxxxxxxx to all subscribers in commercial
venues or bulk-billed multiple residential units by the average cable service
rate charged by the Parent Systems for the lowest tier of service that
includes ESPN, MTV and CNN, as of March 31, 1997 served by each such Parent
System. True, complete and correct copies of the Cable Franchise Agreements
relating to the Parent Systems of CSC, Parent and their Significant
Subsidiaries (the "PARENT CABLE FRANCHISE AGREEMENTS") have been made
available to the Company. CSC, Parent and their Significant Subsidiaries are
in compliance with the Parent Cable Franchise Agreements in all material
respects.
(ii) There exists no fact or circumstance that makes it reasonably
likely that any Parent Cable Franchise Agreement scheduled to expire in the next
five years will not be timely renewed on commercially reasonable terms. CSC and
Parent have filed or caused to be filed with the appropriate Governmental Entity
all appropriate requests for renewal under the Communications Act within 30 to
36 months
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prior to the expiration of each Parent Cable Franchise Agreement. The
operation of the Parent Systems of CSC, Parent and their Significant
Subsidiaries has been, and is, in compliance in all material respects with
the rules and regulations of the FCC and none of CSC or Parent or their
Subsidiaries has received notice from the FCC of any violation of its rules
and regulations by any of CSC or Parent or their Subsidiaries. None of the
applicable franchises for the Parent Systems of CSC, Parent and their
Significant Subsidiaries has been suspended or revoked. Neither CSC nor
Parent nor any of their Subsidiaries has received any notice of any such
possible suspension or revocation, and no such suspension or revocation is
pending or, to the knowledge of CSC, threatened.
(iii) The Parent Systems of CSC, Parent and their Significant
Subsidiaries and all related businesses of CSC, Parent and their Significant
Subsidiaries are, and, while owned by CSC, Parent, their Significant
Subsidiaries or any of their Affiliates, have been, operated in compliance in
all material respects with the Communications Act and CSC and Parent have
submitted or caused to be submitted to the FCC all material filings,
including but not limited to cable television registration statements, annual
reports and aeronautical frequency usage notices that are required under the
rules and regulations of the FCC.
(iv) CSC, Parent and their Significant Subsidiaries have conducted
all system and microwave performance tests and all CLI related tests
applicable to the Parent Systems of CSC, Parent and their Significant
Subsidiaries, and have maintained records which accurately and completely
reflect in all material respects all results required to be shown thereon.
CSC, Parent and their Significant Subsidiaries have corrected any radiation
leakage of the Parent Systems of CSC, Parent and their Significant
Subsidiaries required to be corrected in connection with the monitoring
obligations and have otherwise complied in all material respects with all
applicable CLI rules and regulations. The Parent Systems are in compliance in
all material respects with all signal leakage criteria set forth in 47 CFR
Section 76.611.
(v) For each relevant semi-annual reporting period, CSC and Parent
have timely filed or caused to be filed with the United States Copyright
Office all required Statements of Account in true and correct form, and has
paid when due all required copyright royalty fee payments in the correct
amount, relating to the carriage of television broadcast signals by the
Parent Systems of CSC, Parent and their Significant Subsidiaries.
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(vi) Other than requests of network non-duplication and syndicated
exclusivity protection, neither CSC nor Parent nor any of their Significant
Subsidiaries has received any requests, notices or demands, whether written
or oral, from the FCC or any other Governmental Entity, challenging or
questioning the rights of CSC, Parent and their Significant Subsidiaries to
operate the Parent Systems of CSC, Parent and their Significant Subsidiaries
or carry any signal or requesting signal carriage. All of the broadcast
television signals carried by the Parent Systems of CSC, Parent and their
Significant Subsidiaries are carried either pursuant to the must-carry
requirements or pursuant to executed retransmission consent agreements,
accurate, complete and correct copies of which have been made available to
the Company.
(vii) The regulated rates for services and equipment charged by any
Parent System of CSC, Parent and their Significant Subsidiaries, including
the rates for any Migrated Product Tiers, (I) comply in all material respects
with FCC's rules establishing maximum permitted rates for regulated services
and equipment, (II) have been approved by the FCC under a rate settlement
with CSC or Parent or their Significant Subsidiaries with respect to a Parent
System of CSC, Parent and their Significant Subsidiaries or (III) are subject
to an order by the FCC or other Governmental Entity requiring a Parent System
of CSC, Parent and their Significant Subsidiaries to adjust such rates. CSC
or Parent has made available to the Company accurate, complete, and correct
copies of all FCC rate justification forms and materials (including Forms
393, 1200, 1205, 1210, and 1240) filed with the FCC and any other
Governmental Entity for each of the Parent Systems of CSC, Parent and their
Significant Subsidiaries that are required to file such forms and materials,
and such forms have been filed with the appropriate regulatory body in
compliance in all material respects with all applicable requirements. CSC or
Parent has also made available to the Company an accurate, complete, and
correct copy of any rate settlement agreement entered into with the FCC
affecting any Parent System. Section 5.2(t) of the Parent Disclosure Letter
lists each Parent System of CSC, Parent and their Significant Subsidiaries
and regulated rate that is the subject of a pending challenge before the FCC
or any other Governmental Entity and the Governmental Entity before which
each such challenge is pending. Section 5.2(t) of the Parent Disclosure
Letter lists each Parent System subject to an order described in subclause
(III) above, and the rate reduction required by each such order.
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(viii) CSC or Parent has made available to the Company, to the
extent it possesses them, accurate, complete, and correct copies of each
material inquiry, request for information, report, directive, and similar
communications received by CSC or Parent or any of their Subsidiaries from
the FCC or any other Governmental Entity with respect to any of CSC or Parent
or their Significant Subsidiaries that relates to the obligations of CSC or
Parent or any of their Significant Subsidiaries with respect to any of the
Parent Systems of CSC, Parent and their Significant Subsidiaries under the
Communications Act. CSC or Parent has also made available to the Company a
copy of each written response by CSC or Parent or any of their Subsidiaries
to each such inquiry, request for information, report, directive, or similar
communication.
(u) CONTRACTS. None of CSC or Parent or their Significant
Subsidiaries, nor, to the knowledge of CSC, any other party to any Contracts
to which any of CSC or Parent or their Significant Subsidiaries is bound or
is a party, is (or, with notice or lapse of time or both, could be) in
material breach or default thereof which breaches or defaults individually or
in the aggregate, are reasonably likely to have a Parent Material Adverse
Effect or prevent or materially burden or materially impair the ability of
CSC or Parent or Merger Sub to consummate the transactions contemplated by
this Agreement.
ARTICLE VI
Covenants
6.1. CSC INTERIM OPERATIONS. Each of CSC and Parent covenants and
agrees that, after the date hereof and until the consummation of the
Contribution Closing (unless the Company shall otherwise approve, which
approval shall not be unreasonably withheld or delayed), and except as
otherwise expressly contemplated by this Agreement or the Partnership
Contribution Agreement:
(a) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Significant Subsidiaries to an Affiliate
of CSC or of Parent, except (x) to CSC or any wholly owned Subsidiaries of
Parent or CSC or (y) pursuant to possible issuances disclosed in Section 5.2(a)
or Section 5.2(c) or in Section 5.2(c) of the Parent Disclosure Letter;
(ii) amend its certificate of incorporation or by-laws, except for the Charter
Amendments and for amendments to Parent's
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certificate of incorporation that conform to the certificate of incorporation
of CSC and amendments to Parent's by-laws that conform to the by-laws of CSC
and the Stockholders Agreement; (iii) split, combine or reclassify its
outstanding shares of capital stock; (iv) declare, set aside or pay any
dividend or make any distribution payable in cash, stock or property in
respect of any capital stock, except for dividends (x) payable by any
Subsidiary of CSC to its direct or indirect Subsidiaries or (y) on the
Preferred Shares; or (v) repurchase, redeem or otherwise acquire or permit
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of its capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock, except pursuant to (x)
cancellations in connection with possible issuances disclosed in Section
5.2(a) or Section 5.2(c) or in Section 5.2(c) of the Parent Disclosure Letter
or (y) any mandatory sinking funds relating to outstanding debt securities of
CSC;
(b) (i) it shall not sell any property or assets of it to an
Affiliate of it and shall not issue or sell any shares of or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire any shares of, its
capital stock of any class or any Voting Debt and (ii) none of its
Subsidiaries shall issue, sell, pledge, dispose of or encumber any shares of,
or securities convertible into or exchangeable or exercisable for, or
options, warrants, calls, commitments or rights of any kind to acquire any
shares of, its capital stock of any class or any Voting Debt or any other
property or assets to an Affiliate of CSC or Parent, except, in either of the
cases set forth in (i) and (ii) above, (x) to any wholly owned Subsidiaries
of Parent or CSC or (y) pursuant to possible issuances disclosed in Section
5.2(a) or Section 5.2(c) or in Section 5.2(c) of the Parent Disclosure
Letter;
(c) it shall not engage in an Acquisition Transaction (as defined
in the Stockholders Agreement) that would cause the condition set forth in
Section 7.4(f) not to be satisfied; and
(d) neither it nor any of its Subsidiaries will authorize or enter
into any binding agreement or make any binding commitment (whether oral or
written) to take any of the types of action described in the foregoing
paragraphs (a), (b) and (c).
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6.2. CONTRIBUTED SYSTEMS INTERIM OPERATIONS. The Company covenants and
agrees that, from and after the execution and delivery of this Agreement until
the consummation of the Contribution Closing, except as otherwise expressly
contemplated in this Agreement: (i) the business of each of the Contributed
Entities and Contributed System Entities with respect to the Contributed Systems
shall be conducted in the ordinary and usual course of business, and, to the
extent consistent therewith, the Company shall use all reasonable best efforts
to preserve each of the Contributed Entities' and each of the Contributed
Systems Entities' business organization intact and maintain the Contributed
Systems' existing relations and goodwill with customers, suppliers,
distributors, subscribers, creditors, lessors, employees and business
associates; and (ii) the Company shall, and shall cause each of the Contributed
Entities and, with respect to the Asset Contributed Systems, the Contributed
System Entities to, operate in all material respects in accordance with the 1997
operating and capital budget plan relating to the Contributed Systems (the "1997
BUDGET") and, in calendar year 1998, the 1998 operating and capital budget plan
relating to the Contributed Systems (which shall be the same in all material
respects as the 1997 Budget, unless Parent shall otherwise approve in writing),
a copy of which has been or will be, as the case may be, provided to CSC,
including by making or causing to be made all capital expenditures as set forth
therein. The Company shall, and shall cause each of the Contributed Entities
and, with respect to the Asset Contributed Systems, the Contributed System
Entities to, keep in effect all of the Contributed System Cable Franchise
Agreements and shall not, and shall cause each of the Contributed Entities and,
with respect to the Asset Contributed Systems, the Contributed System Entities
not to, abandon, avoid, dispose, surrender or amend the terms of any such
agreements except for causing assignments thereof as required to effect the
Company Restructuring. The Company further covenants and agrees that it shall
procure that each of the Contributed Entities and, with respect to the Asset
Contributed Systems, the Contributed System Entities shall not, after the date
hereof and prior to the Contribution Closing (unless Parent shall otherwise
approve in writing, which approval shall not be unreasonably withheld or
delayed), except as otherwise expressly contemplated in this Agreement:
(a) sell, lease, transfer or otherwise dispose of any material assets
or property (tangible or intangible) of any of the Contributed Entities or of
any of the Contributed Entities and, with respect to the Asset Contributed
Systems,
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the Contributed System Entities other than assets or property disposed
of in the ordinary course of business that are obsolete and no longer used in
the operation of the Contributed Systems or that are replaced by similar assets
or property of equal or greater value and utility; waive or release any rights
of material value relating to the business of any of the Contributed Entities or
of the Asset Contributed Systems; or cancel, compromise, release or assign any
material debt or claim related to the business of any of the Contributed
Entities or relating to the business of any of the Asset Contributed Systems, in
each case except in the ordinary and usual course of business;
(b) subject to or suffer to exist any Lien on any of the assets of
any of the Contributed Entities or on any of the assets of the Asset Contributed
Systems outside of the ordinary and usual course of business, other than those
(i) Liens reflected or reserved for in the Financial Statements or in the
Closing Balance Sheet to the extent so reflected or reserved, (ii) Liens for
Taxes, assessments and other governmental charges not yet due and payable or due
but not delinquent or being contested in good faith by appropriate proceedings
and (iii) Liens that would not be material to the business of any of the
Contributed Systems or restrict in any material way the conduct of such business
(collectively, "CONTRIBUTED SYSTEMS PERMITTED LIENS");
(c) institute, settle or agree to settle any litigation, action or
proceeding before any court or Governmental Entity that could impose any
material obligations or restrictions on any of the Contributed Entities or on
any of the Asset Contributed Systems following the Contribution Closing or
prevent or materially burden or materially impair the ability of the Company to
consummate the Contribution and the other transactions contemplated hereby;
(d) except in the ordinary and usual course of business, make any
material change in the overall selling, pricing, advertising, distribution,
marketing, programming, affiliation, warranty or personnel practices relating to
any Contributed System;
(e) other than bonuses that will not be the responsibility of or
require any payment by Parent or any of its Subsidiaries (including, after the
Contribution Closing, the Contributed Entities), grant any increase in
compensation or fringe benefits (other than compensation increases made in the
ordinary and usual course of business, and related changes in fringe benefits of
any Employees or
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other Person) or pay or agree to pay any pension or retirement allowance,
life insurance premiums or other benefit payments not required by any
existing employment agreement or Compensation and Benefit Plan to any such
Employees or other Person, commit itself to make variations in or waivers
with respect to, or amend in any respect, any employment agreement or
Compensation and Benefit Plan with or for the benefit of any Employee or
other Person, or institute or adopt any compensation or benefit program, plan
or arrangement for Employees or other Persons;
(f) (i) issue, sell, pledge, dispose of or encumber any capital stock
owned by it in any of the Contributed Entities, except to the Company or any of
its Subsidiaries; (ii) amend any of the Contributed Entities' respective
certificates of incorporation, by-laws or similar organizational documents;
(iii) split, combine or reclassify its outstanding shares of capital stock; or
(iv) repurchase, redeem or otherwise acquire any shares of the Contributed
Entities' capital stock or any securities convertible into or exchangeable or
exercisable for any shares of any Contributed Entities' capital stock (other
than capital stock or securities owned by a Contributed Entity);
(g) (i) issue, sell, dispose of or otherwise subject to a Lien, or
authorize or propose the issuance, sale, disposition or subjection to a Lien of,
any shares of, or securities convertible into or exchangeable or exercisable
for, or options, warrants, conversion rights, calls, commitments or rights of
any kind to acquire, any shares of any of the Contributed Entities' capital
stock of any class or any other property or assets of any of the Contributed
Entities or the Asset Contributed Systems or give any Person a right to
subscribe for or acquire any shares of capital stock or other equity interest of
any of the Contributed Entities; or (ii) by any means, make any acquisition of,
or investment in, stock or equity of any other Person or, other than in the
ordinary course of business, acquire or invest in any assets of any Person other
than a Contributed System Entity or Contributed Entity;
(h) terminate, establish, adopt, enter into, make any new grants or
awards under, amend or otherwise modify, any Compensation and Benefit Plan;
(i) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated or any of the coverage thereunder to
lapse, unless simultaneously with such termination or cancellation
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replacement policies providing substantially the same coverage are in full
force and effect;
(j) in any material respect, amend or modify the 1997 Budget or, when
applicable, the operating and capital budget plan for 1998;
(k) enter into any Contracts that would be binding upon or otherwise
restrict the business or operations of any of the Contributed Entities or any of
the Asset Contributed Systems after the Contribution Closing (other than
Contracts that are fair to and on commercially reasonable terms for such
Contributed Entity or such Asset Contributed System);
(l) declare or distribute any cash dividend or other distribution of
the Fibertech Cash other than to a Contributed Entity; or
(m) authorize or enter into any binding agreement or make any binding
commitment (whether oral or written) to take any of the types of action
described in the foregoing paragraphs (a) through (l).
6.3. INFORMATION SUPPLIED. TCI and CSC each agrees, as to itself and
its Subsidiaries, that none of the information supplied or to be supplied by it
or its Subsidiaries for inclusion or incorporation by reference in (i) the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(including the proxy statement and prospectus (the "PROSPECTUS/PROXY STATEMENT")
constituting a part thereof) (the "S-4 REGISTRATION STATEMENT") will, at the
time the S-4 Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any 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, and
(ii) the Prospectus/Proxy Statement and any amendment or supplement thereto
will, at the date of mailing to stockholders and at the times of the meetings of
stockholders of CSC to be held in connection with the Merger and the other
transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact required to
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be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.4. STOCKHOLDERS MEETING; PARENT VOTE ON REORGANIZATION;
RECOMMENDATION. CSC will take, in accordance with applicable law and its
certificate of incorporation and by-laws, all action necessary to convene a
meeting of holders of Shares (the "STOCKHOLDERS MEETING") as promptly as
practicable after the S-4 Registration Statement is declared effective to
consider and vote upon the approval and adoption of this Agreement and, if
applicable, the issuance of Parent Common Stock pursuant to the Contribution.
Subject to fiduciary obligations under applicable law, each of CSC's and the
Parent's board of directors shall recommend such approval and shall take all
lawful action to solicit such approval.
6.5. FILINGS; OTHER ACTIONS; NOTIFICATION. (a) CSC and Parent shall
promptly prepare and file with the SEC the Prospectus/Proxy Statement and shall
prepare and file with the SEC the S-4 Registration Statement as promptly as
practicable. CSC and TCI shall use all reasonable efforts to have the S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the stockholders of CSC. CSC shall also use its
reasonable efforts to obtain prior to the effective date of the S-4 Registration
Statement all necessary state securities law or "blue sky" permits and approvals
required in connection with the Merger and will pay all expenses incident
thereto.
(b) TCI on the one hand and CSC and Parent on the other hand shall
cooperate with each other and use (and shall cause their respective Subsidiaries
to use) all reasonable best efforts to take or cause to be taken all actions,
and do or cause to be done all things, necessary, proper or advisable on its
part under this Agreement and applicable Laws to cause to be satisfied all of
the conditions set forth in Article VII and to consummate and make effective
each of the Transactions and the other transactions contemplated by this
Agreement as soon as practicable, including preparing and filing as promptly as
practicable all documentation to effect all necessary notices, reports and other
filings and to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in order to consummate each of
the Transactions or any of
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the other transactions contemplated by this Agreement and responding as
promptly as practicable to any inquiries received from any Governmental
Entity in connection therewith. TCI and CSC and Parent shall use their
respective reasonable best efforts to overcome any objections that may be
raised by any Governmental Entity to the consummation of the Contribution and
the other transactions contemplated by this Agreement. In this regard, TCI
agrees that it shall agree to such modifications to or relinquishments of its
governance rights (including voting, consent and board representation rights)
as may be required to overcome any such objections; PROVIDED, that if TCI
agrees to modify or relinquish any governance right, CSC and Parent shall
provide contractual rights that approximate as nearly as reasonably
practicable the governance rights modified or relinquished. Neither TCI nor
CSC or Parent shall be required to make any change in the operations or
activities of its or its Subsidiaries' business (or material assets employed
therein) if such change would be materially adverse to TCI and its
Subsidiaries, taken as an entirety, or to CSC or Parent and its Subsidiaries,
taken as an entirety, as the case may be, or to their respective cable
television businesses, taken as an entirety, or their respective programming
businesses, taken as an entirety, or to any of their respective Significant
Subsidiaries or any business (within the meaning of Rule 11-01(d) of
Regulation S-X promulgated under the Exchange Act) that, if it were a
Subsidiary, would be a Significant Subsidiary (it being agreed and understood
that any change that would prevent, modify or terminate any contractual
relationships among any of the parties hereto or any of their respective
Affiliates entered into after May 1, 1997 (excluding the agreements
contemplated in this Agreement) shall not be deemed to be materially
adverse). Subject to applicable laws relating to the exchange of information,
CSC, Parent and TCI each shall have the right to review in advance, and to
the extent practicable each will consult the other on, all the information
relating to CSC, Parent or TCI, as the case may be, and any of their
respective Subsidiaries, that may appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with each of the Transactions and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of
TCI, CSC and Parent shall act reasonably and as promptly as practicable.
(c) TCI, CSC and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
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necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or
application made by or on behalf of CSC, Parent, TCI or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with each of the Transactions and the other transactions
contemplated by this Agreement.
(d) TCI and CSC and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notice or other
communications received by CSC or Parent or TCI, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Transactions and the other transactions contemplated by this
Agreement. The Company and CSC each shall give prompt notice to the other of
any change that is reasonably likely to result in a Contributed Systems Material
Adverse Effect or Parent Material Adverse Effect, respectively.
(e) As soon as practicable after the date hereof but in no event
later than 75 days after the date of the Original Agreement, the Company shall
prepare and deliver or cause to be prepared and delivered to CSC audited
financial statements and unaudited financial statements (collectively, the
"PROXY FINANCIAL STATEMENTS") for the combined operations of the Contributed
Systems in form and substance as is required in connection with the
Prospectus/Proxy Statement and the S-4 Registration Statement. The Proxy
Financial Statements shall be prepared under the supervision of the audit
partner of KPMG Peat Marwick who is in charge of the CSC audit and in
cooperation and consultation with CSC and its Representatives. CSC and the
Company shall each be responsible for one-half of the costs and reasonable
expenses associated with the audit and preparation required under this
paragraph; PROVIDED, that if the Contribution Closing is not consummated other
than as a result of a breach or default by CSC, Parent or Merger Sub, the
Company shall be responsible and pay or reimburse all of such costs and
expenses.
6.6. TAXATION. Neither CSC, Parent or Merger Sub nor TCI shall take
or cause to be taken any action, whether before or after the Effective Time,
that would cause the Merger, the Contribution or, if applicable, the Partnership
Contribution not to qualify as an exchange governed by Section 351 of the Code.
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6.7. ACCESS. Upon reasonable notice, and except as may otherwise be
required by applicable law, TCI and CSC and Parent each shall (and shall cause
its Subsidiaries to) afford the other's officers, employees, counsel,
accountants and other authorized representatives ("REPRESENTATIVES") access,
during normal business hours throughout the period prior to the consummation of
the Contribution Closing, to its properties, books, contracts and records and,
during such period, each shall (and shall cause its Subsidiaries to) furnish
promptly to the other all information concerning its business, properties and
personnel as may reasonably be requested, PROVIDED that no investigation
pursuant to this Section shall affect or be deemed to modify any representation
or warranty made by the Company, CSC, Parent or Merger Sub, and PROVIDED,
FURTHER, that the foregoing shall not require TCI or CSC or Parent to permit any
inspection, or to disclose any information, that in the reasonable judgment of
TCI or CSC or Parent, as the case may be, would result in the disclosure of any
trade secrets of third parties or violate any of its obligations with respect to
confidentiality if TCI or CSC or Parent, as the case may be, shall have used
reasonable best efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or CSC or
Parent, as the case may be, or such Person as may be designated by any of its
officers, as the case may be. All such information shall be governed by the
terms of the Confidentiality Agreement.
6.8. CERTAIN CONTRACTS. The Company agrees to take such action as
necessary so that at the Contribution Closing none of the Contributed Entities
is a party or Contributed Systems is subject to or bound by any programming,
affiliation or similar Contracts except as CSC may approve in writing prior to
the Contribution Closing Date or as set forth on Section 5.1(n) of the Company
Disclosure Letter.
6.9. STOCK EXCHANGE LISTING AND DE-LISTING. CSC and Parent shall use
their respective best reasonable efforts to cause the shares of Parent Common
Stock to be issued in the Merger and pursuant to the Contribution (including any
shares of Parent Common Stock issuable upon conversion, exercise or exchange of
securities of Parent) to be approved for listing on the AMEX subject to official
notice of issuance, prior to the Closing Date. The Surviving Corporation shall
use its best efforts to cause the CSC Class A Shares to be de-listed from the
AMEX and
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de-registered under the Exchange Act as soon as practicable following the
Effective Time.
6.10. PUBLICITY. The initial press release regarding the
Contribution shall be a joint press release by CSC and TCI, and the initial
press release(s) regarding the Partnership Contribution, the Reorganization
and/or the Merger shall be a press release by CSC, and thereafter TCI and CSC
and Parent each shall consult with each other prior to issuing any press
releases or otherwise making public announcements with respect to the
Contribution and prior to making any filings with any third party and/or any
Governmental Entity (including any national securities exchange) with respect
thereto, except as may be required by law or by obligations pursuant to any
listing agreement with or rules of any national securities exchange.
6.11. BENEFITS; BOARD REPRESENTATION; EMPLOYEES.
(a) STOCK OPTIONS; CONJUNCTIVE RIGHTS.
(i) At the Effective Time, each outstanding option to purchase Shares
(a "CSC OPTION") under the CSC Stock Plans, whether vested or unvested, shall be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such CSC Option, the same number of shares of Parent
Common Stock subject to the CSC Option and at the same exercise price in effect
immediately prior to the Effective Time. In addition, each of the outstanding
"conjunctive stock appreciation rights" and "bonus award shares" of CSC (as
described in the CSC Reports), whether vested or unvested, shall, at the
Effective Time be deemed to constitute a conjunctive stock appreciation right or
bonus award share of Parent, as the case may be, on the same terms and
conditions as were applicable under such conjunctive stock appreciation right or
bonus award share of CSC, as the case may be, as in effect immediately prior to
the Effective Time.
(ii) Effective at the Effective Time, Parent shall assume each CSC
Option and conjunctive stock appreciation right or bonus award share of CSC in
accordance with the terms of the CSC Stock Plans and other arrangements, as the
case may be, under which it was issued and the stock option agreement or other
agreement, as the case may be, by which it is evidenced. At or prior to the
Effective Time, Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of CSC Options assumed by it in accordance with this Section.
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As soon as practicable after the Effective Time, Parent shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form with
respect to the Parent Common Stock subject to such CSC Options, and shall use
its best efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such CSC Options remain outstanding.
(b) ELECTION TO PARENT'S BOARD OF DIRECTORS. Effective as of the
Effective Time, CSC shall cause two persons to be designated by TCI as soon as
reasonably practicable after the date hereof and no later than prior to the
substantial completion of the Proxy Statement/Prospectus to be appointed to
Parent's board of directors as designees of the Parent Class B Shares as
contemplated by the Stockholders Agreement.
(c) EMPLOYEES. (i) Parent or CSC may, but shall have no obligation
to, employ or offer employment to any employee engaged in the business of a
Contributed System, including employees engaged in advertising sales for a
Contributed System. Not less than 120 days (or such later date as the Company
and CSC may mutually agree) after the date of this Agreement, CSC shall provide
the Company a list, which may be updated by CSC from time to time to reflect
changes in employees or staffing after such date (provided such updates are not
material overall), of employees who will be offered employment after the Closing
Date (the "HIRED EMPLOYEES"). CSC shall coordinate the hiring procedures
relating to such Hired Employees with the Company.
(ii) The Company will pay or cause to be paid to all employees
employed in the Contributed Systems all compensation, including salaries,
commissions, bonuses, deferred compensation, severance, insurance, pensions,
profit sharing, vacation (other than vacation and sick leave which is allowed to
be carried over pursuant to Section 6.11(c)(iii)), sick pay and other
compensation or benefits to which they are entitled for periods prior to the
Contribution Closing, including, without limitation, all amounts, if any,
payable on account of the termination of their employment. The Company agrees
to cooperate in all reasonable respects with CSC to allow CSC to evaluate and
interview employees of the Contributed Systems to make hiring decisions.
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(iii) The Company will remain solely responsible for, and will
indemnify and hold harmless Parent and CSC from and against all losses
arising from or with respect to, all salaries and all severance, vacation,
medical, sick, holiday, continuation coverage and other compensation or
benefits to which its employees may be entitled, whether or not such
employees may be hired by CSC, as a result of their employment by it prior to
the Contribution Closing, the termination of their employment prior to the
Contribution Closing, the obligation, if any, to notify and/or bargain with
any labor organization, the consummation of the transactions contemplated
hereby or pursuant to any applicable legal requirement (including without
limitation WARN) or otherwise relating to their employment prior to the
Closing Time. All Hired Employees shall be entitled to carry forward all
accrued vacation and sick leave limited to the maximum amount to be carried
forward under Parent's standard policies.
(iv) Parent shall after the Contribution Closing provide employee
benefit plans, programs and policies to Hired Employees that, in the
aggregate, will provide benefits to such employees that are no less favorable
in the aggregate than those provided to similarly situated employees of
Parent and its Subsidiaries. Hired Employees of the Contributed System
Entities and the Contributed Entities shall be given credit for all service
with the Company, the Contributed System Entities and the Contributed
Entities, or with any prior owner or operator of a Contributed System to the
extent that such employee received time and grade credit from the Company,
the Contributed System Entities and the Contributed Entities, under all
employee benefit plans, programs and policies (including any bonus program)
of Parent and its Subsidiaries in which they become participants for purposes
of eligibility and vesting but not for purposes of benefit accrual.
Notwithstanding the foregoing, the requirements of this subsection (c)(iv)
shall not apply to employees who are covered by a collective bargaining
agreement.
(v) Effective as of the Contribution Closing, all Hired Employees
shall cease to be covered by the Company's employee welfare benefit plans,
including plans, programs, policies and arrangements which provide medical
and dental coverage, life and accident insurance, disability coverage, and
vacation and severance pay (collectively, "WELFARE PLANS") and all other
employee benefit plans of the Company.
(vi) All claims and obligations under, pursuant to, or in
connection with, any Welfare Plan or other
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employee benefit plan of the Company affecting employees of the Company or
any of its Subsidiaries, including any Hired Employee, incurred on or before
the Contribution Closing or resulting or arising from events or occurrences
commencing or occurring on or before the Contribution Closing will remain the
responsibility of the Company. The Company shall retain all obligations for
payment of long- or short-term disability claims arising from disabilities
that occurred prior to the Contribution Closing and up until such time as the
employee returns to work with one of the Contributed Systems. Parent shall be
responsible for payment of long and short-term disability claims that arise
from disabilities that occur after the Contribution Closing, or any claims of
a Hired Employee after such employee has returned to work with one of the
Contributed Systems, on a full-time, unrestricted basis for at least 30 days.
(vii) If Parent or any of its Subsidiaries discharges any Hired
Employee prior to 60 days following the Contribution Closing, Parent shall
pay such discharged Hired Employee the severance benefits that would have
been payable by the Company if such discharge had occurred prior to the
Contribution Closing and the Company shall reimburse Parent and its
Subsidiaries for all claims and obligations for any and all such benefits.
Any claims or obligations arising in connection with any discharges of any
Hired Employees after such date shall be the responsibility and obligation of
the Parent and its Subsidiaries and not of the Company or its Subsidiaries.
6.12. EXPENSES. The Surviving Corporation shall pay all charges
and expenses in connection with the transactions contemplated in Article IV,
and Parent shall reimburse the Surviving Corporation for such charges and
expenses. Except as otherwise provided in Section 6.5(e) and Section 9.10,
whether or not any of the Transactions are consummated, all costs and
expenses incurred in connection with this Agreement and the Transactions and
the other transactions contemplated by this Agreement shall be paid by the
party incurring such expense.
6.13. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a)
From and after the Effective Time, Parent shall indemnify and hold harmless,
to the fullest extent permitted under applicable law (and Parent shall also
advance expenses as incurred to the fullest extent permitted under applicable
law; PROVIDED the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification), each present and former
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director and officer of CSC and its Subsidiaries (collectively, the "D&O
INDEMNIFIED PARTIES") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "COSTS") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at
or after the Effective Time to the fullest extent that CSC or such Subsidiary
would have been permitted as of the date hereof to indemnify such person.
(b) Any D&O Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 6.13, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent
thereof, but the failure to so notify shall not relieve Parent of any
liability it may have to such D&O Indemnified Party except to the extent that
such failure materially prejudices the indemnifying party. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), any D&O Indemnified Party may retain
counsel satisfactory to him or her, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the D&O
Indemnified Party promptly as statements therefor are received. Parent and
the Surviving Corporation will cooperate and assist in the defense of any
such matter. If such indemnity is not available with respect to any D&O
Indemnified Party, then the Surviving Corporation and the D&O Indemnified
Party shall contribute to the amount payable in such proportion as is
appropriate to reflect relative faults and benefits.
(c) The Surviving Corporation or Parent shall maintain CSC's
officers' and directors' liability insurance ("D&O INSURANCE") on
substantially the same terms as in existence on the date hereof for a period
of six years after the Effective Time so long as such insurance can be
obtained on commercially reasonable terms. Prior to the Effective Time,
Parent shall enter into indemnification agreements with its officers and
directors on the same terms and conditions as those contained in the
indemnification agreements of the officers and directors of CSC as of the
date hereof.
(d) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the D&O Indemnified Parties,
their heirs and their representatives.
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6.14. PREFERRED SHARES. Prior to the Effective Time, CSC and
Parent shall enter into such agreements or other documents as required under
the respective certificates of designation of the Preferred Shares, as may be
amended, to give effect to the consummation of the Merger and, if applicable,
the Charter Amendments.
6.15. OTHER ACTIONS BY THE PARTIES. (a) TERMINATION OF AFFILIATED
AGREEMENTS. Prior to the Contribution Closing, the Company shall take all
actions necessary or appropriate so that the Contributed Entities and the
Asset Contributed Systems, without any payment or transfer of value to any of
the Company or any of its Subsidiaries, shall not be subject to and shall
have no debt, liability, commitment or other obligation of any kind
whatsoever, whether known or unknown, xxxxxx or inchoate, secured or
unsecured, accrued, fixed, absolute, contingent or otherwise, and whether due
or to become due, to the Company or any of its Affiliates after the
Contribution Closing (including (i) all borrowing and Contracts between (x)
the Contributed Entities or any of the Asset Contributed Systems and (y) the
Company or its Affiliates and (ii) any obligations to pay dividends or other
distributions to the Company or any of its Affiliates), in all cases other
than as expressly set forth on Section 6.15(a) of the Company Disclosure
Letter and other than solely among the Contributed Entities.
(b) STOCKHOLDERS AGREEMENT. At or prior to the Contribution
Closing, Parent and TCI shall execute and deliver the Stockholders Agreement.
(c) OTHER TRANSACTIONS. In addition, CSC, Parent and the
Surviving Corporation shall consummate and cause to be consummated the
following transactions:
(i) At the Merger Closing and effective immediately after the
Effective Time, Parent shall amend its certificate of incorporation to change
its name to "Cablevision Systems Corporation".
(ii) Following the Contribution Closing, the Reorganization may be
consummated in accordance with the terms and conditions of the Reorganization
Agreement.
(d) CERTAIN INTELLECTUAL PROPERTY. The Company and TCI agree that
Parent shall have (A) the right, for a period of 120 days following the date
of the Contribution Closing, to the reasonable use of any Intellectual
Property Rights of the Company and TCI relating to the businesses of
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the Contributed Entities and the Asset Contributed Systems including signs,
purchase orders, invoices, brochures, labels, letterheads or billing
documents and (B) the right (I) for a period of 120 days following the date
of the Contribution Closing, to the extent reasonably required in connection
with the conduct of their businesses after such date, to include a statement
indicating that, prior to being acquired by Parent, the businesses of the
Contributed Entities and the Asset Contributed Systems were conducted under
their respective corporate names prior to the Contribution Closing and (II)
to the extent required by applicable law, to indicate by footnote or other
similar device that information concerning prior financial or operating
performance results or other similar historical information about the
Contributed Systems arose when they conducted their respective businesses
under their respective corporate or business names prior to the Contribution
Closing.
(e) CERTAIN ENVIRONMENTAL MATTERS. Notwithstanding anything to the
contrary in this Agreement, the Company shall protect, defend, indemnify and
hold harmless Parent, CSC and their principals, shareholders, directors,
officers, affiliates, agents, and employees ("INDEMNIFIED PARTIES"), from and
against any and all claims, demands, losses, expenses, damages, liabilities,
fines, penalties, charges, administrative and judicial proceedings, orders,
judgments, remedial action requirements, investigations, property or personal
injury claims, natural resource damage claims, enforcement actions and all
costs and expenses incurred in connection therewith (including reasonable
attorneys' fees and expenses) arising under or relating to any Environmental
Laws and asserted by any Person other than any of the Indemnified Parties in
connection with any release or contamination ("PRE-EXISTING CONTAMINATION")
involving Hazardous Substances (whether in soil, water, air or structures)
that at or prior to the Contribution Closing existed at or emanated from
property owned by UA-Columbia Cablevision of Westchester, Inc. generally
known as 000-000 Xxxxxxx Xxxxxx and 000-000 Xxxxxx Xxxxxx xx Xxxxxxxxxx, Xxx
Xxxx excluding only environmental liabilities (i) for which a Contributed
Subsidiary is able to recover under the September 1, 1988 agreement between
Xxxxxx and Xxxxxx Xxxx, UA-Columbia Cablevision of Westchester, Inc.,
Electro-Materials Corp. of America and Rohm and Xxxx Company or (ii) that are
not attributable to Pre-Existing Contamination. This indemnity shall survive
indefinitely and shall be binding upon the successors and assigns of the
Company, Parent and CSC. To the extent that the Company shall have
indemnified any of the Indemnified Parties pursuant to this
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Section 6.15(e), the Company shall have a right of subrogation as to claims
that the Indemnified Parties may have against any other Person, and the
Indemnified Parties shall assign to the Company their rights against such
other Person.
(f) FURTHER ACTIONS. The Company, Parent and the Surviving
Corporation shall enter into, file and perform all such agreements,
indentures, charter amendments, certificates of designation, documents,
certificates, stockholder and director consents and such other instruments as
are required, advisable or desirable in order to give full effect to this
Section 6.15 and to the Partnership Contribution in accordance with the
Partnership Contribution Agreement.
6.16. PARENT, CSC AND THE COMPANY VOTES. Parent, CSC and the
Company shall vote (or consent with respect to) or cause to be voted (or a
consent to be given with respect to) any shares of capital stock of Merger
Sub, the Surviving Corporation and Parent, respectively, beneficially owned
by it or any of its Affiliates or with respect to which it or any of its
Affiliates has the power (by agreement, proxy or otherwise) to cause to be
voted (or to provide a consent), in favor of the adoption and approval of
this Agreement and any and all of the Transactions at any meeting of
stockholders of CSC, Parent, Merger Sub or the Surviving Corporation at which
this Agreement and/or any or all of the Transactions shall be submitted for
adoption and approval and at all adjournments or postponements thereof (or,
if applicable, by any action of stockholders of CSC, Parent, Merger Sub or
the Surviving Corporation by consent in lieu of a meeting).
6.17. RELEASED INDEBTEDNESS AND FIBERTECH CASH; COMPANY
RESTRUCTURING; TAX SHARING; SURETY LIABILITIES; AND DISCLOSURE UPDATES: (a)
RELEASED INDEBTEDNESS AND FIBERTECH CASH. Without limiting the generality of
any other provisions of this Agreement, prior to the Contribution Closing the
Company shall take any and all actions necessary or appropriate so that the
Contributed Entities shall have no, and the Asset Contributed Systems shall
not be subject to or encumbered by any, outstanding Indebtedness as of the
Contribution Closing, in both cases other than (I) an aggregate amount of
debt for borrowed money, including in such amount the principal of such debt
and any interest accrued thereon and fees and other amounts payable in
respect thereof, not to exceed (assuming payment in full at the Contribution
Closing) $669,000,000 (the "ASSUMED COMPANY DEBT") at the consummation of the
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Contribution Closing, (II) Liabilities not material in amount and accounted
for in Section 3.4. and (III) any debt obligations or other liabilities
solely among the Contributed Entities. The Assumed Company Debt will be due
and payable in full as of the Contribution Closing and the parties agree
that, notwithstanding any other provision of this Agreement to the contrary:
(i) the existence of the Assumed Company Debt, or the occurrence of a default
thereunder as a result of the Contribution, shall not cause the Company to be
in breach or default of any of its representations, warranties, covenants or
agreements in this Agreement; and (ii) CSC or Parent, as of the Contribution
Closing, shall pay or cause to be paid the Assumed Company Debt in full, or
shall cause the Company and any of its Affiliates (other than Parent and its
Subsidiaries, including, after the Contribution Closing, the Contributed
Entities) that are liable (directly or contingently) for payment of the
Assumed Company Debt to be unconditionally released from any liability with
respect to the Assumed Company Debt. In the event that the Company or any of
its Subsidiaries receive any cash ("Fibertech Cash") in respect of any
prepayments of the Facilities Lease Agreement dated June 1, 1995 between TKR
Cable Company (Owner) and New Jersey Fiber Technologies (Operator), the
Company shall cause all such cash to remain as and be included as an asset of
the Contributed Entities and Asset Contributed Systems up to and through the
Contribution Closing.
(b) COMPANY RESTRUCTURING. Prior to the Contribution Closing, the
Company shall take or cause to be taken the actions described in Section
6.17(b) of the Company Disclosure Letter (the "COMPANY RESTRUCTURING"), so
that, immediately prior to the Contribution Closing, all of the Asset
Contributed Systems will be owned by the Contributed System Entities, all of
the Included Contributed Systems will be owned by the Contributed Entities
and all of the outstanding capital stock of the Contributed Entities will be
owned by the Company or one or more of its Subsidiaries. The Company
covenants and agrees that none of the actions taken by it or any of its
Affiliates in connection with the Company Restructuring shall cause a breach
or default by the Company of any of its representations, warranties,
covenants or agreements in this Agreement.
(c) TAX SHARING AGREEMENTS. Any obligations and Contracts
disclosed on Section 5.1(l) of the Company Disclosure Letter shall be
terminated as of immediately prior to the Contribution Closing without
subjecting any
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Contributed Entity or any Asset Contributed System to any liability.
(d) SURETY LIABILITIES. Prior to the Contribution Closing, the
Company shall take any and all actions necessary or appropriate so that the
Contributed Entities shall have no outstanding Surety Liabilities (or
obligations to incur Surety Liabilities) and so that the Asset Contributed
Systems shall not be encumbered by or subject to any outstanding Surety
Liabilities (or obligations to incur Surety Liabilities), in both cases,
other than an aggregate amount not to exceed $10,000,000 and other than
Liabilities accounted for in Section 3.4. CSC or Parent shall cause the
Company and any of its Affiliates including the Contributed System Entities
(other than Parent and its Subsidiaries, including, after the Contribution
Closing, the Contributed Entities) that are liable (directly or contingently)
under the Surety Liabilities to be unconditionally released from any
liability with respect to the Surety Liabilities.
(e) DISCLOSURE UPDATES AND SUPPLEMENTS. On the third business day
before the Closing Date, the Company shall deliver to Parent a supplement to
the Company Disclosure Letter as of such date, which supplement shall reflect
the consummation of the Company Restructuring but shall not, except as
otherwise expressly noted in this Agreement, be deemed to modify in any
respect the Company Disclosure Letter.
ARTICLE VII
Conditions to Merger and Contribution
7.1. CONDITIONS TO OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of CSC, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver by CSC at or prior to the Effective
Time of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been duly
approved and adopted by holders of Shares constituting the relevant one of
the Parent Requisite Votes and shall have been duly approved by the sole
stockholder of Merger Sub in accordance with applicable law and the
certificate of incorporation and by-laws of each such corporation.
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(b) AMEX LISTING. The shares of Parent Common Stock issuable to
the CSC stockholders pursuant to the Merger shall have been authorized for
listing on the AMEX upon official notice of issuance.
(c) REGULATORY CONSENTS. (i) All notices, reports and filings
required to be made prior to the Effective Time by CSC or any of its
Subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by CSC or
any of its Subsidiaries from, any Governmental Entity, which reports,
filings, consents, registrations, approvals, permits and authorizations are
noted with a single asterisk in Section 5.2(e) of the Parent Disclosure
Letter, in connection with the execution and delivery of this Agreement and
the consummation of the Merger shall have been made or obtained, as the case
may be.
(ii) Other than the filing provided for in Section 1.3 or as
described in Section 7.1(c)(i), all notices, reports and other filings
required to be made prior to the Effective Time by CSC or Parent or any of
their respective Subsidiaries with, and all other consents, registrations,
approvals, permits and authorizations required to be obtained prior to the
Effective Time by CSC or any of its Subsidiaries from, any Governmental
Entity in connection with the execution and delivery of this Agreement and
the consummation of the Merger shall have been made or obtained (as the case
may be), except those that the failure to make or to obtain are not,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect or to provide a reasonable basis to conclude that the parties
hereto or any of their affiliates or respective directors, officers, agents,
advisors or other representatives would be subject to the risk of criminal
liability.
(d) LITIGATION. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgment, decree, injunction or
other order (whether temporary, preliminary or permanent) that is in effect
(collectively, an "ORDER") and that restrains, enjoins or otherwise prohibits
consummation of the Merger, and no Governmental Entity shall have instituted
any proceeding or threatened to institute any proceeding seeking any such
Order.
(e) S-4. The S-4 Registration Statement shall have become
effective under the Securities Act. No stop
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order suspending the effectiveness of the S-4 Registration Statement shall
have been issued, and no proceedings for that purpose shall have been
initiated or be threatened, by the SEC.
(f) BLUE SKY APPROVALS. Parent shall have received all state
securities and "blue sky" permits and approvals necessary to consummate the
Merger.
(g) CONSENTS UNDER AGREEMENTS. (i) CSC shall have obtained the
consent or approval of each Person whose consent or approval shall be
required in order to consummate the Merger under any Contract that is noted
with a triple asterisk in Section 5.2(e) of the Parent Disclosure Letter.
(ii) Other than as described in Section 7.1(g)(i), CSC shall have
obtained the consent or approval of each Person whose consent or approval
shall be required under any Contract to which CSC or any of its Subsidiaries
is a party, except those for which the failure to obtain such consent or
approval, individually or in the aggregate, is not reasonably likely to have
a Parent Material Adverse Effect or is not reasonably likely to prevent or to
materially burden or materially impair the ability of CSC, Parent or Merger
Sub to consummate the Merger.
(h) TAX OPINION. Parent shall have received the opinion of
Xxxxxxxx & Xxxxxxxx, counsel to Parent, dated the date of the Merger Closing,
to the effect that the Merger will be treated for Federal income tax purposes
as an exchange governed by Section 351 of the Code.
(i) CONTRIBUTION. All of the conditions precedent to the
obligations of Parent and the Company to effect the Contribution shall have
been fulfilled or irrevocably waived or shall be capable of being fulfilled
promptly following the Effective Time or at the Contribution Closing.
7.2. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
CONTRIBUTION. The respective obligations of Parent and the Company to effect
the Contribution are subject to the satisfaction or waiver at or prior to the
Contribution Closing of each of the following conditions:
(a) STOCKHOLDER APPROVAL. The issuance of the Parent Common Stock
in connection with the Contribution shall have been approved by the relevant
one of the Parent Requisite Votes.
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(b) REGULATORY CONSENTS. (i) All required filings under the HSR Act
shall have been made and any applicable waiting period under the HSR Act shall
have expired or been terminated.
(ii) All notices, reports and other filings required to be made prior
to the Contribution Closing by CSC, Parent or the Company or any of their
respective Subsidiaries with, and all consents, registrations, approvals,
permits and authorizations required to be obtained prior to the Contribution
Closing by CSC, Parent or the Company or any of their respective Subsidiaries
from, (i) the franchise authorities with respect to 100% of the total
subscribers in the Contributed Systems and the Parent Systems in connection with
the execution and delivery of this Agreement and the consummation of the
Contribution shall have been made or obtained, as the case may be, and (ii) any
Governmental Entity, which non-franchise authority reports, filings, consents,
registrations, approvals, permits and authorizations are noted with a double
asterisk in Section 5.1(d) of the Company Disclosure Letter, or with a double
asterisk in Section 5.2(e) of the Parent Disclosure Letter in connection with
the execution and delivery of this Agreement and the consummation of the
Contribution shall have been made or obtained, as the case may be.
Notwithstanding the condition precedent in the foregoing clause (i), in the
event that consents, approvals and authorizations are obtained with respect to
at least 90% of the total subscribers in the Contributed Systems and the Parent
Systems, Parent may, in its sole discretion, waive such condition, which shall
then be deemed satisfied and fulfilled, and CSC, Parent and the Company shall
cooperate with each other and use all reasonable best efforts to minimize any
adverse effects that may result from consummating the Contribution Closing
without obtaining all consents, approvals and authorizations from franchise
authorities and in furtherance thereof negotiate in good faith to implement, if
necessary, a transaction structure so that after the Contribution Closing the
aggregate net economic benefit of all of the Contributed Systems shall inure to
the benefit of and accrue to Parent with requisite control of necessary
Contributed Systems remaining with the Company or its Subsidiaries.
(iii) Other than as described in Section 7.2(b)(ii), all notices,
reports and filings required to be made prior to the Contribution Closing by
CSC, Parent or the Company or any of their respective Subsidiaries with, and all
other consents, registrations, approvals, permits and authorizations required to
be
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obtained prior to the Contribution Closing by CSC, Parent or the Company or
any of their respective Subsidiaries from, any Governmental Entity in connection
with the execution and delivery of this Agreement and the consummation of the
Contribution shall have been made or obtained (as the case may be), except those
that the failure to make or to obtain are not, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect or a Contributed
Systems Material Adverse Effect or to provide a reasonable basis to conclude
that the parties hereto or any of their affiliates or respective directors,
officers, agents, advisors or other representatives would be subject to the risk
of criminal liability.
(c) LITIGATION. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Order that restrains, enjoins or otherwise prohibits consummation of the
Contribution, and no Governmental Entity shall have instituted any proceeding
seeking any such Order.
(d) MERGER. The Merger Closing shall be consummated
contemporaneously with the Contribution Closing.
(e) AMEX LISTING. The Parent Class A Shares issuable to the Company
or the relevant transferor(s) pursuant to the Contribution shall have been
authorized for listing on the AMEX upon official notice of issuance.
(f) STOCKHOLDERS AGREEMENT. The Stockholders Agreement shall have
been executed and delivered by the parties thereto.
7.3. CONDITIONS TO OBLIGATIONS OF PARENT TO EFFECT CONTRIBUTION. The
obligations of Parent to effect the Contribution are subject to the satisfaction
or waiver by Parent at or prior to the Contribution Closing of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the date of the Contribution Closing
as though made on and as of the date of the Contribution Closing (except to the
extent any such representation or warranty expressly speaks as of an earlier
date), and Parent shall have received a certificate signed on behalf of the
Company by the President or any Vice President of the Company to such effect;
PROVIDED, HOWEVER, that notwithstanding anything herein to the contrary, this
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Section 7.3(a) shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct unless the failure of
such representations or warranties to be so true and correct, individually or in
the aggregate, has had, or is reasonably likely to have, a Contributed Systems
Material Adverse Effect or is reasonably likely to prevent or to materially
burden or materially impair the ability of the Company to consummate the
Contribution.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the date of the Contribution Closing,
and Parent shall have received a certificate signed on behalf of the Company by
the President or any Vice President of the Company to such effect.
(c) CONSENTS UNDER AGREEMENTS. (i) The Company shall have obtained
the consent or approval of each Person whose consent or approval shall be
required in order to consummate the Contribution under any Contract that is
noted with a triple asterisk in Section 5.1(d) of the Company Disclosure Letter.
(ii) Other than as described in Section 7.3(c)(i), the Company shall
have obtained the consent or approval of each Person whose consent or approval
shall be required in order to consummate the Contribution under any other
Contract to which the Contributed Entities, the Company or any of its
Subsidiaries is a party, except those for which the failure to obtain such
consent or approval, individually or in the aggregate, is not reasonably likely
to have a Contributed Systems Material Adverse Effect or is not reasonably
likely to prevent or to materially burden or materially impair the ability of
the Company to consummate the Contribution.
(d) LEGAL OPINION. Parent shall have received an opinion of Xxxxxxx
& Xxxxxx L.L.C., counsel to the Company, dated the date of the Contribution
Closing, in a form reasonably satisfactory to Parent.
(e) CONTRIBUTED SYSTEMS DELIVERIES. Parent shall have received:
(i) certificates (or, if partnership interests, such other documents)
representing all of the Contributed Subsidiary Capital Stock, duly endorsed in
blank for transfer or accompanied by stock powers duly executed in
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blank, with signatures properly guaranteed and with any requisite stock
transfer and other documentary stamps attached, and any other documents that
are necessary to transfer to Parent good title to all of the Contributed
Subsidiary Capital Stock;
(ii) certificates representing all of shares of capital stock for any
Subsidiaries of the Contributed Subsidiaries; such special warranty deeds,
assignments of leasehold interests, bills of sale, and other good and sufficient
instruments of conveyance, transfer and assignment as are necessary to vest in
Parent in accordance herewith the Acquired Assets in a form reasonably
satisfactory to Parent;
(iii) all of the minute books and any corporate seals of the
Contributed Entities, true and complete up to the date of the Contribution
Closing;
(iv) copies of any consents or notices obtained or given in connection
with the consummation of the transactions contemplated by this Agreement;
(v) such other instruments, filings or documents as may be required
by this Agreement to carry out the transfers of the Acquired Assets as
contemplated by this Agreement (other than transfers not to occur pursuant to
Section 3.6);
(vi) a certificate signed on behalf of the Company by the President
or any Vice President of the Company certifying the matters described in Section
6.15(a), Section 6.17(a) and Section 6.17(d) in a form reasonably satisfactory
to Parent;
(vii) the supplements to the Company Disclosure Letter in accordance
with Section 6.17(e); and
(viii) a "long form good standing" or similar certificate or telegram
for each of the Contributed Subsidiaries (which shall include the certificate of
incorporation or similar document), certified by the Secretary of State or
similar authority of the jurisdiction of organization for each such Person, each
dated as of a date that is not more than 10 business days prior to the date of
the Contribution Closing.
(f) RESIGNATIONS. Parent shall have received the resignations of each
director and officer of the Contributed
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Entities designated in writing by Parent within one business day of the date
of the Contribution Closing.
(g) COMPANY RESTRUCTURING. All of the transactions contemplated by
the Company Restructuring shall have been consummated in all material respects
in accordance with Section 6.17(b).
7.4. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT CONTRIBUTION.
The obligation of the Company to effect the Contribution is subject to the
satisfaction or waiver by the Company at or prior to Contribution Closing of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CSC, Parent and Merger Sub set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the date of the
Stock Closing as though made on and as of the date of the Contribution Closing
(except to the extent any such representation and warranty expressly speaks as
of an earlier date) and the Company shall have received a certificate signed on
behalf of CSC, Parent and Merger Sub by the President or any Vice-President of
Parent to such effect; PROVIDED, HOWEVER, that notwithstanding anything herein
to the contrary, this Section 7.4(a) shall be deemed to have been satisfied even
if such representations or warranties are not so true and correct unless the
failure of such representations or warranties to be so true and correct,
individually or in the aggregate, has had, or is reasonably likely to have, a
Parent Material Adverse Effect or is reasonably likely to prevent or to
materially burden or materially impair the ability of Parent to consummate the
Contribution.
(b) PERFORMANCE OF OBLIGATIONS OF CSC, PARENT AND MERGER SUB. Each
of CSC, Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the date of the Contribution Closing, and the Company shall have received a
certificate signed on behalf of CSC, Parent and Merger Sub by the President or
any Vice President of Parent to such effect.
(c) CONSENTS UNDER AGREEMENTS. (i) Parent and CSC shall have
obtained the consent or approval of each Person whose consent or approval shall
be required in order to consummate the Contribution under any Contract that is
noted with a double asterisk in Section 5.2(e) of the Company Disclosure Letter.
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(ii) Other than as described in Section 7.4(c)(i), Parent and CSC
shall have obtained the consent or approval of each Person whose consent or
approval shall be required in order to consummate the Contribution under any
other Contract to which CSC or Parent or any of its Subsidiaries is a party,
except those for which failure to obtain such consents and approvals,
individually or in the aggregate, is not reasonably likely to have a Parent
Material Adverse Effect or is not reasonably likely to prevent or to materially
burden or materially impair the ability of CSC or Parent to consummate the
Contribution.
(d) LEGAL OPINION. The Company shall have received an opinion of
Xxxxxxxx & Xxxxxxxx, counsel to Parent, dated the date of the Contribution
Closing, in a form reasonably satisfactory to the Company.
(e) TAX OPINION. The Company shall have received the opinion of
Xxxxxxx & Xxxxxx L.L.C., counsel to the Company, dated the date of the
Contribution Closing, to the effect that the Contribution will be treated for
Federal income tax purposes as an exchange governed by Section 351 of the Code.
(f) CASH FLOW RATIO. The Cash Flow Ratio (as defined in the
Stockholders Agreement) of Parent, on a pro forma basis after giving effect to
the Contribution, shall not be in excess of the Cash Flow Ratio Threshold (as
defined in the Stockholders Agreement).
(g) ASSUMPTION OF LIABILITIES. The Company shall have received the
Assumption Agreement executed by Parent giving effect to Parent's assumption of
the Assumed Liabilities.
ARTICLE VIII
Termination
8.1. TERMINATION BY MUTUAL CONSENT. All or any portion of this
Agreement may be terminated and any or all of the Transactions may be abandoned
at any time prior to their respective Closings, whether before or after the
approval by stockholders referred to in Section 7.1(a) and in Section 7.2(a), by
mutual written consent of the Company and CSC by action of their respective
Boards of Directors.
8.2. TERMINATION BY EITHER CSC OR THE COMPANY. CSC may by action of
its Board of Directors terminate this Agreement and the Company may by action of
its Board of
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Directors terminate its and TCI's obligations and rights under this Agreement
and the Transactions in the case of a termination by CSC and the Contribution
in the case of a termination by the Company may be abandoned at any time
prior to their respective Closings if (a) the Transactions in the case of CSC
or the Contribution in the case of the Company shall not have been
consummated by December 31, 1998 whether such date is before or after the
date of approval by the stockholders referred to in Section 7.1(a) and in
Section 7.1(b)(the "TERMINATION DATE"), (b) the approval of the stockholders
required by Section 7.1(a) and by Section 7.2(a) shall not have been obtained
at a meeting(s) duly convened therefor or at any adjournment or postponement
thereof or,(c) any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Contribution in the case of the Company or
any of the Transactions in the case of CSC shall become final and
non-appealable whether before or after the approval by the stockholders set
forth in Section 7.1(a) and Section 7.2(a) or; PROVIDED, that the right to
terminate any or all of this Agreement pursuant to this Section 8.2 shall not
be available to any party that has breached (or to the Company in the event
of TCI's breach) in any material respect its obligations under this Agreement
in any manner which breach shall have proximately contributed to the
occurrence of the failure of the Transactions to be consummated.
8.3. TERMINATION BY THE COMPANY. The Company may by action of its
Board of Directors terminate its and TCI's obligations and rights under this
Agreement and the Contribution may be abandoned at any time prior to the Stock
Closing, whether before or after the approval by stockholders referred to in
Section 7.1(a) and in Section 7.2(a), if there has been a material breach by
CSC, Parent or Merger Sub of any representation, warranty, covenant or agreement
contained in this Agreement that is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by the Company to
the party committing such breach or if any Class B Entity shall not execute and
deliver to the Company a signature page to the Voting Agreement within 20 days
after the date hereof.
8.4. TERMINATION BY CSC. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to their respective Closings,
whether before or after the approval by the stockholders referred to in
Section 7.1(a) and in Section 7.2(a), by action of the Board of Directors of CSC
if there has been a material breach by the Company of any representation,
warranty, covenant or agreement or by TCI of any covenant or agreement contained
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in this Agreement that is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by Parent to the party
committing such breach.
8.5. EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Contribution pursuant
to this Article VIII, this Agreement (other than as set forth in Section 9.1)
shall become void and of no effect with no liability on the part of any party
hereto (or of any of its directors, officers, employees, agents, legal and
financial advisors or other representatives); PROVIDED, HOWEVER, no such
termination shall relieve any party hereto of any liability or damages resulting
from any breach of this Agreement.
ARTICLE IX
Miscellaneous and General
9.1. SURVIVAL. This Article IX, the agreements of the Company, TCI,
CSC, Parent and Merger Sub contained in Section 3.3 (Contribution), Section 3.4
(Net Adjusted Working Capital Adjustment), Section 3.5 (Antidilution
Adjustments), Section 3.6 (Failure to Receive Third Party Consents), Section 6.1
(CSC Interim Operations), Section 6.2 (Contributed Systems Interim Operations),
Section 6.6 (Taxation), Section 6.8 (Certain Contracts), Section 6.9 (Stock
Exchange Listing and De-listing), Section 6.11 (Benefits; Board Representation;
Employees), Section 6.12 (Expenses), Section 6.13 (Indemnification; Directors
and Officers' Insurance) and Section 6.15 (Other Actions by the Parties) shall
survive consummation of any or all of the Transactions. This Article IX, the
agreements of the Company, TCI, CSC, Parent and Merger Sub contained in Section
6.12 (Expenses), Section 8.5 (Effect of Termination and Abandonment) and the
Confidentiality Agreement shall survive the termination of this Agreement in
accordance with its terms. All other representations, warranties, covenants and
agreements in this Agreement shall not survive the consummation of all of the
Transactions or the termination of this Agreement in accordance with its terms.
9.2. MODIFICATION OR AMENDMENT. Subject to the provisions of the
applicable law, at any time prior to the Effective Time with respect to the
Merger or the consummation of the Contribution Closing with respect to the
Contribution, the parties hereto may modify or amend any portion of this
Agreement, by written agreement executed and
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delivered by duly authorized officers of the respective parties.
9.3. WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger and the Contribution are for the sole
benefit of such party and may be waived by such party in whole or in part to the
extent permitted by applicable law.
9.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS
AGREEMENT SHALL BE DEEMED TO BE MADE UNDER, AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH, THE LAW OF THE
STATE OF DELAWARE. The parties hereby irrevocably submit to the jurisdiction of
the courts of the State of Delaware and the Federal courts of the United States
of America located in the State of Delaware solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.6 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS
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CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES
THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION 9.5.
9.6. NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
IF TO CSC, PARENT OR MERGER SUB
Xxx Xxxxx Xxxxxxxxx,
Xxxxxxxx, XX 00000.
Attention: General Counsel
fax: (000) 000-0000
(with a copy to Xxxxxx X. Xxxxxxx, Esq.,
Xxxxxxxx & Xxxxxxxx,
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
fax: (000) 000-0000)
IF TO TCI OR THE COMPANY
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: President
fax: (000) 000-0000
with a copy similarly addressed,
Attention: Legal Department
fax: (000) 000-0000
(with a copy to Xxxxxxx X. Xxxxxx, Esq.,
Xxxxxxx & Xxxxxx L.L.C.
Suite 3000
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
fax: (000) 000-0000)
-84-
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. ENTIRE AGREEMENT; NO OTHER REPRESENTATIONS. This Agreement
(including any exhibits and schedules hereto), the Partnership Contribution
Agreement, the Voting Agreement, the Company Disclosure Letter, the Parent
Disclosure Letter and the Confidentiality Agreement, dated March 26, 1997,
between CSC and the Company (as amended, the "CONFIDENTIALITY AGREEMENT")
constitute the entire agreement, and supersede all other prior agreements,
understandings, indemnities, representations and warranties both written and
oral, among the parties, with respect to the subject matter hereof. EACH
PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, NEITHER PARENT AND MERGER SUB NOR THE COMPANY
MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY
OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION
OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8. NO THIRD PARTY BENEFICIARIES. Except as provided in Section
6.13 (Indemnification; Directors' and Officers' Insurance), this Agreement is
not intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
9.9. OBLIGATIONS OF CSC, PARENT, TCI AND THE COMPANY. Whenever
this Agreement requires a Subsidiary of CSC or Parent to take any action,
such requirement shall be deemed to include an undertaking on the part of CSC
or Parent to cause such Subsidiary (including, after the Effective Time, the
Surviving Corporation) to take such action. Whenever this Agreement requires
a Subsidiary of the Company or TCI to take any action, such requirement shall
be deemed to include an undertaking on the part of the Company and TCI to
cause such Subsidiary to take such action.
9.10. NEW YORK STATE AND CITY REAL PROPERTY TRANSFER TAX; OTHER
TRANSFER TAXES; HSR FEE. Any liability arising out of the New York State or
City Real Property Transfer Tax, in connection with the filing fees under the
85
HSR Act relating to the Contribution and in respect of any transfer or other
similar taxes relating to the transfer of the Contributed Subsidiary Capital
Stock, the Acquired Assets or Assumed Liabilities, if applicable and due,
shall be borne by Company, on the one hand, and CSC or Parent, on the other
hand, in equal one-half shares.
9.11. BULK TRANSFERS; FURTHER ASSURANCES. The parties hereto waive
compliance with the requirements of the Bulk Sales Law of any jurisdiction in
connection with the Contribution. The Company shall indemnify and hold
harmless Parent and its Subsidiaries against all liabilities which may be
asserted by third parties against Parent or any of its Subsidiaries, as a
result of noncompliance with the Bulk Sales Law of any jurisdiction. From
time to time after the Closing Date, upon the reasonable request of Parent or
the Company, the Company or Parent (as the case may be) shall execute and
deliver or cause to be executed and delivered such further instruments of
conveyance, assignment and transfer and take such further action in order to
contribute, assign, convey, transfer, assign and deliver and record title
effectively to the Acquired Assets and to evidence the assumption of the
Assumed Liabilities.
9.12. SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability or the other provisions
hereof. If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable
and equitable provision shall be substituted therefor in order to carry out,
so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision and (b) the remainder of this Agreement
and the application of such provision to other Persons or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
9.13. INTERPRETATION. The table of contents, index and headings
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Agreement is made to a Section,
Schedule or Exhibit, such reference shall be to a Section of or Schedule or
Exhibit to this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they
86
shall be deemed to be followed by the words "without limitation."
9.14. ASSIGNMENT. This Agreement shall not be assignable by
operation of law or otherwise; PROVIDED, HOWEVER, that (i) CSC may assign
this Agreement in connection with the Merger to the Surviving Corporation, in
which event all references herein to CSC shall be deemed references to the
Surviving Corporation except that all representations, warranties, covenants
and agreements made herein with respect to CSC shall be deemed to be made
either by Parent or the Surviving Corporation (each as a successor to CSC as
the context may require), (ii) Parent may designate, by written notice to the
Company, another wholly owned direct or indirect Subsidiary to be a
Constituent Corporation in lieu of Merger Sub, in which event all references
herein to Merger Sub shall be deemed references to such other Subsidiary
except that all representations, warranties, covenants and agreements made
herein with respect to Merger Sub as of the date of this Agreement shall be
deemed to be made with respect to such other Subsidiary as of the date of
such designation and (iii) the Company may designate, by written notice to
CSC, one or more direct or indirect wholly owned subsidiaries of the Company
to make a contribution of all or part of the stock of any Contributed
Subsidiary to Parent, but such designation shall not affect the liabilities
or obligations of the Company under this Agreement.
87
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first written above.
TCI COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Senior Vice President
CABLEVISION SYSTEMS CORPORATION
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice Chairman
CSC PARENT CORPORATION
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice Chairman
CSC MERGER CORPORATION
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice Chairman
AGREED WITH RESPECT TO THE
PARTICULAR SECTIONS
EXPRESSLY NOTED IN
ARTICLE VI AND ARTICLE IX:
TELE-COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Senior Vice President
88
INDEX OF DEFINED TERMS
Term Section
---- -------
1997 Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2
Acquired Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Adjusted Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . 3.4(b)
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
AMEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(e)
Asset Contributed Systems. . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Assumed Company Debt . . . . . . . . . . . . . . . . . . . . . . . . . .6.17(a)
Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Audit Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(f)
Bankruptcy and Equity Exception. . . . . . . . . . . . . . . . . . . . . 5.1(c)
By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2
Cable Franchise Agreements . . . . . . . . . . . . . . . . . . . . . . . 5.1(x)
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Certificate of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3
Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1
CLI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(x)
Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(x)
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Disclosure Letter. . . . . . . . . . . . . . . . . . . . . . . . . .5.1
Company Restructuring. . . . . . . . . . . . . . . . . . . . . . . . . .6.17(b)
Company's Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(l)
Company's Objection. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(b)
Company Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(l)
Company Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(l)
Compensation and Benefit Plans . . . . . . . . . . . . . . . . . . . . . 5.1(h)
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . . . . . .9.7
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . Preamble
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(d)
Contributed Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Entities . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(C)
Contributed Instruments. . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Intellectual Property. . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Real Property. . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Subsidiary Capital Stock . . . . . . . . . . . . . . . . . . 3.3(c)
I-1
Term Section
---- -------
Contributed System Entity; Contributed System
Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Contributed Systems Cable Franchise Agreements . . . . . . . . . . . . . 5.1(x)
Contributed Systems Leased Real Property . . . . . . . . . . . . . . . . 5.1(s)
Contributed Systems Leases . . . . . . . . . . . . . . . . . . . . . . . 5.1(t)
Contributed Systems Material Adverse Effect. . . . . . . . . . . . . . . 5.1(a)
Contributed Systems Permitted Liens. . . . . . . . . . . . . . . . . . . 6.2(b)
Contributed Systems Real Property. . . . . . . . . . . . . . . . . . . . 5.1(s)
Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Contribution Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.13(a)
CPA Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(b)
CSC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
CSC Audit Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(f)
CSC Class A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
CSC Class B Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
CSC Compensation and Benefit Plans . . . . . . . . . . . . . . . . . . . 5.2(i)
CSC Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(l)
CSC Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11(a)
CSC Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(i)
CSC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(f)
CSC Stock Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(c)
CSC Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(l)
CSC Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(l)
Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
D&O Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . .6.13(a)
D&O Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.13(c)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(h)
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(j)
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(h)
ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(h)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(b)
Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Excluded Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
FCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(x)
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(e)
Future Contributed Systems Entities. . . . . . . . . . . . . . . . . . . 3.3(c)
Future Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Governmental Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(d)
Hazardous Substance. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(j)
Hired Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11(c)
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(d)
Included Contributed Systems . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
I-2
Term Section
---- -------
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . .6.15(e)
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . 5.1(v)
IRCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(m)
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(h)
Issue Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(i)
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.3
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Merger Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Migrated Product Tiers . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(x)
Net Adjusted Working Capital . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(d)
Original Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Parent Cable Franchise Agreements. . . . . . . . . . . . . . . . . . . . 5.2(t)
Parent Class A Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Parent Class B Share . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Parent Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Parent Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Parent Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . .5.2
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 5.2(b)
Parent Requisite Votes . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(d)
Parent Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2(t)
Partnership Contribution Agreement . . . . . . . . . . . . . . . . . . Recitals
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(h)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Pre-Existing Contamination . . . . . . . . . . . . . . . . . . . . . . .6.15(e)
Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(d)
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1
Prospectus/Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . .6.3
Proxy Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6.5(e)
Real Property Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(s)
Reorganization Agreement . . . . . . . . . . . . . . . . . . . . . . . Recitals
Representatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.7
S-4 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . .6.3
Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . .2.1
Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . .2.1
Share; Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
Significant Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 5.2(b)
Stock Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(c)
Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.4
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
Surety Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
I-3
Term Section
---- -------
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1
Tax; Taxes; Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(l)
TCI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.2
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
WARN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(m)
Welfare Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11(c)
I-4
EXHIBIT A
---------
(Terms of Reorganization Agreement)
TERMS:
1. Simultaneously with the Contribution Closing and/or the Partnership
Contribution, or thereafter, Parent may transfer or cause to be transferred
all or part of the Acquired Assets, the Assumed Liabilities and the
Contributed Subsidiary Capital Stock to one or more direct Subsidiaries of
Parent (each a "First-Tier Transferee Subsidiary") or to one or more direct
Subsidiaries of a First-Tier Transferee Subsidiary.
2. The stock of one or more of the First-Tier Transferee Subsidiaries may be
transferred to an entity that is a member of the CSC Group and that holds
directly or indirectly the other cable properties of the CSC Group.
3. Notwithstanding anything to the contrary in the foregoing paragraphs,
(a) the stock of each First-Tier Transferee Subsidiary shall continue to be
held directly by Parent for a period of at least one year after the Closing
Date and (b) CSC will not transfer or distribute to Parent substantially
all of its assets outside the ordinary course of business and will not be
merged into Parent or liquidated or wound-up for a period of at least one
year after the Closing Date, unless in the case of (a) or (b) either
(i) the Company has consented to the stock of such First-Tier Transferee
Subsidiaries ceasing to be held directly by Parent, or to such transfer,
distribution, merger, liquidation or winding-up of CSC, as applicable, or
(ii) CSC or Parent has obtained a ruling from the Internal Revenue Service
to the effect that a transaction pursuant to which the stock of such
First-Tier Transferee Subsidiaries ceases to be held directly by Parent
prior to the expiration of such one-year period, or pursuant to which CSC
transfers or distributes substantially of its assets to Parent or is
merged, liquidated or wound-up, as applicable, will not cause the
Contribution and the Merger not to qualify as an exchange governed by
Section 351
A-1
of the Code. As of the date of this Agreement, there is no
plan or intention to undertake any transaction that would cause the
Contribution and the Merger not to qualify as an exchange governed by
Section 351 of the Code.
A-2
EXHIBIT B
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(Form of Stockholders Agreement)
[Final version as executed filed as Exhibit 99.1]
B-1
SCHEDULE 3.3(ii)
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Asset Contributed Systems
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CONTRIBUTED
SYSTEM
ASSET CONTRIBUTED SYSTEM ENTITIES AS OF PARENT CLASS A
CONTRIBUTED ENTITIES AS OF THE THE CLOSING SHARES TO BE
SYSTEM DATE HEREOF DATE PAID (*)
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Oakland, NJ TCI of Northern TCI CSC II,
system New Jersey, Inc. Inc.
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Franklin XX-Xxxxxxxx XXX XXX XX,
Xxxxx, XX Cablevision of New Inc.
system Jersey, Inc.
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Brookhaven, NY Brookhaven Cable TCI CSC II,
system TV, Inc. Inc.
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Interest in TCI American Cable TCI CSC III,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC IV,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC V,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC VI,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC VII,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC VIII,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC IX,
Paterson, NJ Holdings, L.P. Inc.
system
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(*) To be provided three business days before the Contribution Closing.
S-1
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Interest in TCI American Cable TCI CSC X,
Paterson, NJ Holdings, L.P. Inc.
system
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Interest in TCI American Cable TCI CSC XI,
Paterson, NJ Holdings, L.P. Inc.
system
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S-2
SCHEDULE 3.3(xii)
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INCLUDED PARENT CLASS A
CONTRIBUTED CONTRIBUTED SHARES TO BE PAID
TRANSFEROR SUBSIDIARY SYSTEM (*)
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Country Cable .1% partnership Elizabeth, NJ
III, Inc. interest in TKR Xxxxxxxx (Del Xxx
Cable Company N), NJ
Tri-System, NJ
Xxxxxx, NJ
Ramapo, NJ
Rockland, NY
Warwick, NY
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Country Cable 99.9% partnership Elizabeth, NJ
III, Inc. interest in TKR Xxxxxxxx (Del Xxx
Cable Company N), NJ
Tri-System, NJ
Xxxxxx, NJ
Ramapo, NJ
Rockland, NY
Warwick, NY
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Country Cable 52.05% partnership None (Ad Sales
III, Inc. interest in KRC/CCC Entity)
Investment
Partnership
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CCC Sub, Inc. 47.95% partnership None (Ad Sales
interest in KRC/CCC Entity)
Investment
Partnership
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TCI CSC II, Inc. 100% of the capital Westchester, NY
stock UA-Columbia
Cablevision of
Westchester, Inc.
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---------------------------
(*) To be provided three business days before the Contribution
Closing.
S-3
SCHEDULE 3.5
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(Issue Exceptions)
1. Series C Cumulative Preferred Stock, par value $.01 per share, of CSC or
Parent, as outstanding as of the date hereof.
2. Any grant or exercise under or pursuant to the CSC Stock Plans or under or
pursuant to other grants made under employee, management or director plans
adopted after the date hereof that, when aggregated with those grants made
under the CSC Stock Plans, are consistent with CSC's past practices.
3. Conversion of CSC or Parent Class B Shares into CSC or Parent Class A
Shares.
S-4
