EXECUTION COPY
SSSI AGREEMENT
This SSSI Agreement (the "Agreement") is
dated as of October 10, 1996, and is entered into
between TW Inc. (which will be renamed Time Warner
Inc.), a Delaware corporation ("Holdco"), Liberty
Media Corporation, a Delaware corporation ("LMC"),
and Southern Satellite Systems, Inc., a Georgia
corporation ("SpinCo"), and, with respect to Section
11(d), Section 11(f) and Section 11(g) only,
Satellite Services, Inc., a Delaware corporation
("Satellite"). For purposes of this Agreement, LMC,
SpinCo and, with respect to the above referenced
Sections, Satellite, on the one hand are,
collectively, a "Party" and Holdco on the other hand,
individually, is a "Party". References to "Parties"
is a collective reference to LMC, SpinCo and with
respect to the above referenced Sections, Satellite,
on the one hand, and Holdco, on the other.
WHEREAS Holdco, LMC and certain subsidiaries of LMC have
entered into a Second Amended and Restated LMC Agreement dated as of September
22, 1995 (the "LMC Agreement"), which contemplates the Parties entering into
this Agreement;
WHEREAS Holdco desires to acquire (a) from SpinCo the Contract
Option (as defined in Section 2) and (b) from LMC and its Affiliates (as defined
in Section 24) the non-competition agreement contemplated in Section 11(b)(ix);
WHEREAS Tele-Communications, Inc., a Delaware corporation
("TCI"), is required pursuant to the FTC Consent Decree (including the FTC
Agreement in Principle) (each, as
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defined in Section 24) to seek from the Internal Revenue Service the Letter
Ruling (as defined in Section 24) with respect to the Spin-off (as defined in
Section 24) of 100% of the shares of SpinCo;
WHEREAS as of the date hereof LMC directly owns all the
outstanding common stock, par value $1.00 per share (the "Shares"), of SpinCo,
which is engaged primarily in the Business;
WHEREAS, in connection with the Spin-off, LMC shall contribute
all the capital stock of TCI ▇▇▇▇▇▇ Preferred, Inc., a Colorado corporation
("TCITP"), to SpinCo, so that, as of immediately prior to the effectiveness of
the Spin-off, TCITP will be a wholly owned subsidiary of SpinCo;
WHEREAS immediately prior to the Spin-off, TCITP will own,
directly or indirectly, all voting securities of Holdco then owned beneficially
or of record by LMC or any of its Controlled Affiliates (as defined in the LMC
Agreement) and, if LMC is then a Controlled Affiliate of TCI, all voting
securities of Holdco then owned beneficially or of record by TCI or any of its
Controlled Affiliates, other than the Excluded Shares (as defined in the LMC
Agreement);
WHEREAS this Agreement is being executed on the date of the
closing of Holdco's acquisition of ▇▇▇▇▇▇ Broadcasting System, Inc., but the
Contract Option provided for in Section 2 will not be granted until the Grant
Date (as defined in Section 2); and
WHEREAS capitalized terms used but not defined in any of the
other Sections of this Agreement are defined in Section 24.
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NOW, THEREFORE, it is agreed as follows:
1. Execution Date. (a) Holdco shall deliver to LMC (or its
designee pursuant to Section 15) and SpinCo upon the execution of this Agreement
(the "Execution Date"):
(i) An opinion of counsel to Holdco (which counsel may be an
employee of Holdco), reasonably acceptable to LMC and SpinCo, addressed
to LMC and SpinCo and dated the Execution Date, to the effect that:
(A) Holdco is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation and in good standing to do
business as a foreign corporation in each jurisdiction in
which the conduct or nature of its business or the ownership,
leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be
so qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect. Holdco
has all requisite corporate power and authority to execute and
deliver this Agreement, the Distribution Contract and the
Registration Rights Agreement (as defined in the LMC
Agreement) (collectively, the "Relevant Agreements"), to
perform its obligations thereunder and to consummate the
transactions contemplated hereby and thereby.
(B) The execution and delivery by Holdco of the
Relevant Agreements, the performance by Holdco of its
obligations thereunder and the consummation by Holdco of the
transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action on the part of
Holdco. Each of the Relevant Agreements has been duly executed
and delivered by a duly authorized
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officer of Holdco and constitutes the legal, valid and binding
obligation of Holdco enforceable against Holdco in accordance
with its terms (subject to all applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of
equity, and except that the indemnification obligations set
forth in Section 8 of the Registration Rights Agreement may be
subject to considerations of public policy).
(C) The execution, delivery and performance by Holdco
of the Relevant Agreements do not conflict with or result in a
violation of the General Corporation Law of the State of
Delaware, or the certificate of incorporation or by-laws of
Holdco.
(ii) The duly executed Registration Rights
Agreement.
(b) On the Execution Date, Holdco shall execute and deliver to
SpinCo, and SpinCo shall execute and deliver to Holdco, the Distribution
Contract (the "Distribution Contract") in substantially the form of Exhibit 1
hereto. The Distribution Contract shall not become effective until the Contract
Option provided for in Section 2 is exercised and closed.
2. Contract Option; Non-Competition Agreement. (a) Subject to
and on the terms and conditions set forth in this Agreement (including Section
15(b)), SpinCo hereby agrees to grant to Holdco on the Grant Date the right and
option (the "Contract Option"), which may be exercised at any time during the
Exercise Period (as defined in Section 2(d)), to cause the effectiveness of the
Distribution Contract. The "Grant Date" shall be five business days after the
earliest of (i) receipt of the
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Letter Ruling, (ii) the date on which TCI shall have been advised by the
Internal Revenue Service, or TCI shall have notified Holdco in writing that it
has determined, that it will not obtain the Letter Ruling and (iii) May 31,
1997, subject however, in the case of clauses (ii) and (iii) to the provisions
of Section 15(b).
(b) On the Grant Date, Holdco shall deliver:
(i) to SpinCo, in respect of the Contract Option,
4,166,667 fully paid and nonassessable shares of Series LMCN-V
Common Stock of Holdco, having the terms set forth on Exhibit
A to the LMC Agreement ("LMCN-V Common Stock");
(ii) to LMC (or its designee pursuant to Section 15),
in respect of LMC's noncompetition agreement with respect to
itself and its Affiliates set forth in Section 11(b)(ix), (A)
833,333 fully paid and nonassessable shares of the LMCN-V
Common Stock, and (B) $66,666,700 payable, at Holdco's option,
in cash or fully paid and nonassessable shares of LMCN-V
Common Stock (if the $66,666,700 is paid in LMCN-V Common
Stock, the number of shares to be delivered in respect of such
amount shall be equal to the quotient obtained by dividing (x)
$66,666,700 by (y) the product of the Formula Number (as
defined in the terms of the LMCN-V Common Stock) and the
Current Market Price of the common stock, par value $0.01 per
share, of Holdco (the "Holdco Common Stock") on the Grant
Date); and
(iii) to LMC and SpinCo an opinion of counsel to
Holdco (which counsel may be an employee of Holdco),
reasonably acceptable to LMC and SpinCo, addressed to LMC and
SpinCo to the effect that the shares of LMCN-V Common Stock
delivered by Holdco to LMC and SpinCo on such date have been
duly
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authorized and are validly issued, fully paid, nonassessable
and are not subject to any preemptive rights.
(c) Notwithstanding any other provision of this Agreement, the
obligation of Holdco to deliver the consideration provided for in this Section 2
on the Grant Date is absolute, and not subject to any right of setoff or
counterclaim that Holdco may have or claim, and no consideration paid or
delivered in respect of the Contract Option pursuant to this Section 2 shall be
refunded or refundable, nor may any claim be made for the return thereof, in
whole or in part, unless Holdco proves in a court of law that LMC and SpinCo did
not at the Execution Date have all requisite corporate power to execute, deliver
and perform its obligations, as applicable, under this Agreement and the
Distribution Contract and such lack of power has not been cured.
(d) Holdco may exercise the Contract Option at any time during
the period (the "Exercise Period") commencing on and including the Grant Date
and ending on and including the Termination Date (as defined in Section 10(a)),
by giving written notice of exercise (the "Exercise Notice") to SpinCo pursuant
to Section 16.
(e) If the Contract Option is exercised, the consideration
therefor shall be the amounts payable pursuant to Section 2 of the Distribution
Contract.
(f) Each Party agrees to be bound by and act in accordance
with the payment allocation set forth in Section 2(b) in the preparation and
filing of all tax returns and in any proceeding before any tax authority. In the
event that such payment allocation is disputed by a taxing authority, the Party
receiving notice of the dispute shall promptly notify the other Party hereto of
such dispute and keep such other Party informed with respect to all matters
concerning such dispute.
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3. Closing. The closing (the "Closing") of the exercise of the
Contract Option shall occur as soon as practicable after such exercise, but in
no event more than five business days following the satisfaction or waiver (to
the extent waived by the Party entitled to do so) of the conditions to the
Closing described in Sections 5, 6, 7, 8 and 9 (such date for the Closing being
referred to as the "Closing Date"). On the Closing Date, the Distribution
Contract shall become effective.
4. Representations and Warranties as of Execution
Date.
(a) Each of LMC and SpinCo represents and warrants to Holdco,
and Holdco represents to LMC and SpinCo, as of the Execution Date that:
(i) Such party has all requisite corporate power to execute,
deliver and perform its obligations under each of the Relevant
Agreements to which it is a party and such execution, delivery and
performance have been duly authorized by all corporate action on its
part required to be taken.
(ii) Each of the Relevant Agreements to which it is a party is
such party's legal, valid and binding obligation, enforceable in
accordance with its terms, except as may be affected by bankruptcy,
insolvency or similar laws affecting the rights of creditors generally
and by equitable principles of general applicability.
(iii) Neither the execution and delivery by such party of any
of the Relevant Agreements to which it is a party, nor the performance
of its obligations thereunder: (A) will violate or conflict with, or
constitute a breach or default under, (1) the certificate of
incorporation or by-laws of such Party, (2) any law, statute,
regulation, rule, order or other
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enactment of any Governmental Entity (as defined in Section 24)
applicable to such party, or (3) any agreement or instrument to which
such party is a party or by which it is bound or affected, except for
any violations, conflicts, breaches or defaults as would not,
individually or in the aggregate, have a material adverse effect on the
legality, validity, binding effect or enforceability of any of the
Relevant Agreements or on the material rights or ability of the other
Party to realize the material benefits intended to be created by the
Relevant Agreements, and except for any violations, conflicts, breaches
or defaults as may be the result of actions taken by Holdco subsequent
to effective date of the Distribution Contract, or (B) result in the
creation or imposition of any lien or other encumbrance on any of its
assets, except for liens or encumbrances as would not, individually or
in the aggregate, have a material adverse effect on the legality,
validity, binding effect or enforceability of any of the Relevant
Agreements or on the material rights or ability of the other party to
realize the material benefits intended to be created hereby and
thereby. No authorization, consent, approval or other action by, and no
notice to or filing with, any Governmental Entity or other third party
is required to be obtained or made in connection with, as applicable,
such party's execution, delivery and performance of the Relevant
Agreements to which it is a party, except any thereof the failure of
which to be obtained, given or made would not, individually or in the
aggregate, have a material adverse effect on the legality, validity,
binding effect or enforceability of any of the Relevant Agreements or
on the material rights or ability of the other Party to realize the
material benefits intended to be created hereby and thereby.
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(b) LMC and SpinCo represent and warrant to Holdco as of the
Execution Date that:
(i) Consolidated Return. As of the Execution Date, (A) each of
LMC and SpinCo (and, if LMC shall have designated another person to
receive the Section 2 payment pursuant to Section 15, such designated
person) is a member of the same group of corporations filing a
consolidated return for federal income tax purposes as the Liberty
Subsidiaries (the "LMC affiliated group") and (B) except in connection
with the Spin-off, none of LMC, TCITP, SpinCo or their respective
affiliates (other than the holders of the Excluded Shares, as such term
is defined in the LMC Agreement) has any current plan or intention (1)
to transfer any Holdco equity securities held directly or indirectly by
it immediately following the Execution Date (or to be acquired by it
pursuant to this Agreement) (any such holder or acquirer, a "Holder")
to any person that is not a member of the LMC affiliated group or (2)
to cause any Holder to cease to be a member of the LMC affiliated
group.
(ii) Investment Intent. The shares of LMCN-V Common Stock to
be acquired by each of LMC and SpinCo pursuant to Section 2 will be
acquired for its own account, for investment and not with a view to the
distribution or resale thereof other than as contemplated in connection
with the Spin-off or as contemplated by the Registration Rights
Agreement (and except that LMC currently intends to transfer the shares
of LMCN-V Common Stock that it so acquires to TCITP or a wholly-owned
subsidiary of TCITP). Each of LMC and SpinCo understands that such
shares have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities or blue sky
laws, by reason of their issuance in a transaction exempt from the
registration requirements thereunder and may not be resold unless the
subsequent
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disposition thereof is registered thereunder or is exempt from
registration thereunder.
(c) Holdco represents and warrants to LMC and
SpinCo as of the Execution Date that:
(i) The shares of LMCN-V Common Stock to be delivered as
payment for the Contract Option and the non-competition agreement in
Section 11(b)(ix) will as of their date of issuance be duly authorized
and validly issued, fully paid, nonassessable and free of preemptive
rights.
(ii) Neither the execution and delivery by Holdco of this
Agreement, the Distribution Contract and the Registration Rights
Agreement nor the performance of its obligations hereunder and
thereunder will result in the creation or imposition of any lien or
other encumbrance on the shares of LMCN-V Common Stock to delivered as
payment for the Contract Option and the non-competition agreement in
Section 11(b)(ix).
(d) In addition to the representations and warranties of
Holdco set forth in Section 4(c), the following representations and warranties
of Time Warner Inc., a Delaware corporation ("Old TW"), are hereby incorporated
by reference, with the same effect as if made in this Agreement by Holdco to LMC
and SpinCo on and as of the Execution Date:
(i) the representations and warranties of Old TW contained in
Section 3.02(a) of the Amended and Restated Agreement and Plan of
Merger, dated as of September 22, 1995, as amended as of August , 1996
(the "Merger Agreement"), among Old TW, Holdco, Time Warner Acquisition
Corp., TW Acquisition Corp. and ▇▇▇▇▇▇ Broadcasting System, Inc., under
the heading entitled "Organization, Standing and Corporate Power";
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(ii) the representations and warranties of Old TW contained in
Section 3.02(c) of the Merger Agreement under the heading entitled
"Capital Structure";
(iii) the representations and warranties of Old TW contained
in Section 3.02(e) of the Merger Agreement under the heading entitled
"SEC Documents; Undisclosed Liabilities";
(iv) the representations and warranties of Old TW contained in
Section 3.02(g) of the Merger Agreement under the heading entitled
"Absence of Certain Changes or Events";
(v) the representations and warranties of Old TW contained in
Section 3.02(h) of the Merger Agreement under the heading entitled
"Litigation";
(vi) the representations and warranties of Old TW contained in
Section 3.02(j) of the Merger Agreement under the heading entitled
"Brokers"; and
(vii) the representations and warranties of Old TW contained
in Section 3.02(k) of the Merger Agreement under the heading entitled
"Taxes".
5. Representations and Warranties of Both Parties as of the
Closing Date. If the Contract Option is exercised, it shall be a condition to
the Closing (for the benefit of SpinCo) that, on and as of the Closing Date,
each of the following representations and warranties, if qualified by
materiality, shall be true and complete, or, if not so qualified, shall be true
and complete in all material respects, with respect to Holdco, and it shall be a
condition to the Closing (for the benefit of Holdco) that, on and as of the
Closing Date, each of the following representations and warranties, if qualified
by materiality,
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shall be true and complete, or, if not so qualified, shall be true and complete
in all material respects, with respect to LMC and SpinCo:
(a) Such party is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation and
is duly qualified and in good standing to do business as a foreign corporation
in each jurisdiction in which the conduct or nature of its business or the
ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not have a Material
Adverse Effect.
(b) Such party has all requisite corporate power to execute,
deliver and perform its obligations under each of the Relevant Agreements to
which it is a party, and such execution, delivery and performance have been duly
authorized by all corporate action on its part required to be taken.
(c) Each of the Relevant Agreements to which it is a party is
such party's legal, valid and binding obligation, enforceable in accordance with
its terms, except as may be affected by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally and by equitable principles of
general applicability.
(d) Neither the execution and delivery by such party of each
of the Relevant Agreements to which it is a party nor, except as set forth below
the applicable party's name on Schedule 5(d) hereto, the performance of its
obligations thereunder: (i) will violate or conflict with, or constitute a
breach or default under, (A) the certificate of incorporation or by-laws of such
party, (B) any law, statute, regulation, rule, order or other enactment of any
Governmental Entity applicable to such party, or (C) any agreement or instrument
to which such party is a party or by
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which it is bound or affected, except for any violations, conflicts, breaches or
defaults as would not, individually or in the aggregate, have a material adverse
effect on the legality, validity, binding effect or enforceability of any of the
Relevant Agreements or on the material rights or ability of the other Party to
realize the material benefits intended to be created by the Relevant Agreements
or (ii) result in the creation or imposition of any lien or other encumbrance on
any of its assets, except for liens or encumbrances as would not, individually
or in the aggregate, have a material adverse effect on the legality, validity,
binding effect or enforceability of the Relevant Agreements or on the material
rights or ability of the other Party to realize the material benefits intended
to be created hereby and thereby. No authorization, consent, approval or other
action by, and no notice to or filing with, any Governmental Entity or other
third party is required to be obtained or made in connection with, as
applicable, such party's execution, delivery and any of the Relevant Agreements
to which it is a party, except as set forth below the applicable party's name on
Schedule 5(d) hereto, performance of each of the Relevant Agreements to which it
is a party, or on the material rights or ability of the other Party to realize
the material benefits intended to be created hereby and thereby.
Without limiting the rights or obligations of either Party
under any provision of this Agreement: (1) if the Contract Option is exercised,
each Party shall promptly notify the other Party of any information that should
be set forth below such Party's name on Schedule 5(c); (2) upon receipt of any
such notice, Schedule 5(c) shall automatically be amended to incorporate such
information under the name of such Party; and (3) it shall be a condition to the
obligations of each Party to be performed hereunder on the Closing Date that
such Party shall be reasonably satisfied with the contents of Schedule 5(c) (as
so amended) set forth under the name of the other Party, to the extent such
matters are materially different from the
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matters set forth under the name of such other Party on Schedule 4(a)(iii).
6. (a) Representations and Warranties of SpinCo as of the
Closing Date. If the Contract Option is exercised, it shall be a condition to
Closing (for the benefit of Holdco) that, on and as of the Closing Date, each of
the following representations and warranties of SpinCo, if qualified by
materiality, shall be true and complete or, if not so qualified, shall be true
and complete in all material respects, except in each case as shall be set forth
in a letter (the "Disclosure Letter") from SpinCo to Holdco dated as of a date
after the exercise of the Contract Option and not later than the date 10 days
prior to the Closing Date:
(i) Consents. Except as set forth in Schedule 6(a)(i) to the
Disclosure Letter, no consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any
governmental entity is required to be obtained or made by or with
respect to SpinCo in connection with (A) the execution, delivery and
performance of this Agreement or the Distribution Contract by SpinCo or
performance by SpinCo of its obligations hereunder or thereunder or (B)
the conduct of the business of SpinCo following the Closing hereof,
other than (1) compliance with and filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended ("HSR Act"), if
applicable, (2) those that may be required solely by reason of Holdco's
(as opposed to any other third party's) participation in the
transactions contemplated hereby, (3) those that will be obtained by
the Closing and (4) those the failure of which to be obtained or made
by the Closing would not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) Financial Statements. (A) Attached to the Disclosure
Letter as Schedule 6(a)(ii) are (1) the
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unaudited consolidated balance sheet of the Business (or, if prior to
the Spin-off, of SpinCo) as of the end of the most recent fiscal period
or calendar month prior to the date of the Disclosure Letter (the
"Balance Sheet"), and (2) the unaudited consolidated statements of
operating results and cash flows of the Business (or, if prior to the
Spin-off, of SpinCo) for the period ended as of the end of the most
recent fiscal period or calendar month prior to the date of the
Disclosure Letter (the financial statements described above, the
"Financial Statements").
(B) The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently
applied and on that basis fairly present (subject to normal, recurring
year-end adjustments) the consolidated financial condition and results
of operations of the Business (or of SpinCo) as of the date thereof and
for the periods indicated.
(C) To the knowledge of SpinCo and, if prior to the
Spin-off, LMC, as of the Closing Date, the Business (or, if prior to
the Spin-off, SpinCo) does not have any material liabilities or
obligations of any nature (whether accrued, absolute, contingent,
unasserted or otherwise), that are required by generally accepted
accounting principles to be reflected on a consolidated balance sheet,
except (1) as disclosed, reflected or reserved against in the Balance
Sheet, (2) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of the
Balance Sheet and not in violation of this Agreement and (3) for Taxes.
(iii) Assets. Except as set forth in Schedule 6(a)(iii) to the
Disclosure Letter, SpinCo owns or has sufficient rights to use under
existing
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leases and license agreements all material properties, rights and
assets reasonably necessary for the conduct of the Business as then
conducted.
(iv) Contracts. Except as set forth in Schedule 6(a)(iv) to
the Disclosure Letter:
(A) all material agreements, contracts, leases,
licenses, commitments or instruments of SpinCo, as of the
Closing Date that are reasonably necessary for the conduct of
the Business as then conducted (collectively, the
"Contracts"), are valid, binding and in full force and effect
and, as of the Closing Date, are enforceable by SpinCo in
accordance with their terms, except as may be affected by
bankruptcy, insolvency or similar laws affecting the rights of
creditors generally and by equitable principles of general
applicability; and
(B) SpinCo has, as of the Closing Date, performed in
all material respects all material obligations required to be
performed by it under the Contracts and, as of the Closing
Date, is not (with or without the lapse of time or the giving
of notice, or both) in breach or default in any material
respect thereunder and no other party to any of the Contracts
is to the knowledge of SpinCo, as of the Closing Date (with or
without the lapse of time or the giving of notice, or both),
in breach or default in any material respect thereunder,
except in either such case for any such breach or default
resulting from any action or omission by Holdco, ▇▇▇▇▇▇
Broadcasting System, Inc. ("TBS") or any of their respective
Affiliates, including without limitation any change in the
programming service known as WTBS on the date of execution of
this Agreement.
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(v) Litigation. Except as set forth in Schedule 6(a)(v) to the
Disclosure Letter:
(A) there are not, as of the Closing Date, any
pending lawsuits or claims with respect to the Business to
which SpinCo or, if prior to the Spin- off, LMC has been
contacted in writing by counsel for the plaintiff or claimant,
against or affecting SpinCo or any of its properties, assets,
operations or businesses as to which there is at least a
reasonable possibility of adverse determination, that would
have, if so determined, individually or in the aggregate, a
Material Adverse Effect;
(B) to the knowledge of SpinCo and, if prior to the
Spin-off, LMC, as of the Closing Date, SpinCo is not a party
or subject to or in default under any material judgment,
order, injunction or decree of any Governmental Entity
applicable to it or any of its material properties or assets,
which relates to the Business or could result in a Material
Adverse Effect;
(C) there is not pending against any other person, as
of the Closing Date, any material lawsuit or claim by SpinCo,
which relates to the Business or which, if adversely
determined, could result in a Material Adverse Effect; and
(D) as of the Closing Date, to the knowledge of
SpinCo and, if prior to the Spin-off, LMC, there is not any
pending investigation of or proceeding by any Governmental
Entity which relates to the Business and which if determined
adversely could result in a Material Adverse Effect with
respect to the Business or SpinCo.
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(vi) Insurance. SpinCo, through one or more Affiliates,
maintains or has the benefit (through TCI, LMC or otherwise) of
policies of fire and casualty, liability and other forms of insurance
(including self-insurance) in such amounts, with such deductibles and
against such risks and losses as are, in its judgment, reasonable for
the Business under the circumstances in which it is being conducted.
Except as set forth in Schedule 6(a)(vi) to the Disclosure Letter:
(A) all such policies are in full force and effect,
all premiums due and payable thereon as of the Closing Date
have been paid (other than retroactive or retrospective
premium adjustments that may be required to be paid with
respect to any period ending prior to the Closing Date under
comprehensive general liability and workmen's compensation
insurance policies), and no notice of cancelation or
termination as of the Closing Date has been received with
respect to any such policy which has not been replaced prior
to the date of such cancelation; and
(B) to the knowledge of SpinCo and, if prior to the
Spin-off, LMC, its activities and operations with respect to
the Business, as of the Closing Date, have been conducted in a
manner so as to conform in all material respects to all
applicable provisions of such insurance policies, except for
any failures so to conform that could not, individually or in
the aggregate, have a Material Adverse Effect.
(vii) Compliance with Applicable Laws. Except as set forth in
Schedule 6(a)(vii), as of the Closing Date, SpinCo has not received any
written communication during the past two years from a Governmental
Entity that alleges that it or the Business is not in compliance in any
material respect with any applicable
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statutes, laws, ordinances, rules, orders and regulations of any
Government Entity, other than any such communications, alleging any
failures to be in compliance that, if true, would not, individually or
in the aggregate, have a Material Adverse Effect.
(viii) Licenses; Permits. Except as set forth in Schedule
6(a)(viii) to the Disclosure Letter, SpinCo possesses all governmental
franchises, licenses, permits, authorizations and approvals necessary
to enable it to own, lease or otherwise hold its properties and assets
with respect to the Business and to carry on the Business as presently
conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect.
(ix) Absence of Changes or Events. Except as set forth in
Schedule 6(a)(ix) to the Disclosure Letter:
(A) since the date of the Balance Sheet, there has
not been any material adverse change in the business, assets,
condition (financial or otherwise) or results of operations of
the Business (or, if prior to the Spin-off, SpinCo); and
(B) since the date of the Balance Sheet, the Business
has been conducted in the ordinary course (in accordance with
the Ordinary Course Guidelines) and in substantially the same
manner as previously conducted except for such changes (in
accordance with the Ordinary Course Guidelines) in the
day-to-day operations of the Business as the management of
SpinCo (or, if prior to the Spin-off, LMC and SpinCo), in the
good faith exercise of their business judgment, shall from
time to time determine to be in the best interests of the
Business) and has made
20
commercially reasonable efforts consistent with past practices
to preserve the Business' relationships with customers,
suppliers and others with whom SpinCo deals in connection with
the Business.
(b) Certain Representations and Warranties of Holdco as of
Closing Date. If the Contract Option is exercised, it shall be a condition to
the Closing (for the benefit of SpinCo) that, on and as of the Closing Date,
each of the following representations and warranties of Holdco, if qualified by
materiality, shall be true and complete, or, if not so qualified, shall be true
and complete in all material respects:
(i) Neither the execution and delivery by Holdco of this
Agreement, the Distribution Contract and the Registration Rights
Agreement nor the performance of its obligations hereunder and
thereunder resulted in the creation or imposition of any lien or other
encumbrance on the shares of LMCN-V Common Stock delivered by Holdco
pursuant to Section 2 as payment for the Contract Option and the
non-competition agreement in Section 11(b)(ix).
(ii) Old TW and Holdco have, collectively, filed all required
reports, schedules, forms, statements and other documents with the
Securities and Exchange Commission ("SEC") since December 31, 1993 (as
such documents have been amended prior to the Closing Date, the "TW SEC
Documents"). As of their respective dates, the TW SEC Documents
complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended, as
the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such TW SEC Documents, and none of the TW SEC
Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
21
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the
extent such statements have been modified or superseded by a later TW
SEC Document. Except to the extent that information contained in any TW
SEC Document has been revised or superseded by a later TW SEC Document,
neither Old TW's Annual Report on Form 10-K for the year ended December
31, 1995, nor any TW SEC Document filed after December 31, 1995,
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements
of Old TW and Holdco included in TW SEC Documents comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Old TW or Holdco,
as applicable, and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth
in the TW SEC Documents, neither Holdco nor any subsidiary of Holdco
has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet
of Holdco and its consolidated subsidiaries or in the notes thereto and
which, individually or in the aggregate,
22
could reasonably be expected to have a Parent Material Adverse Effect
(as defined in the Merger Agreement).
(iii) Except as disclosed in any TW SEC Document, since the
date of the most recent audited financial statements included in TW SEC
Documents, Holdco has (or, if Holdco shall have not yet filed audited
financial statements as part of the TW SEC Documents, each of Old TW
and Holdco has) conducted its business only in the ordinary course, and
there has not been:
(A) any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in
a change or effect) which, individually or in the aggregate,
has had or is likely to have, a Parent Material Adverse
Effect;
(B) except for regular quarterly dividends not in
excess of $0.09 per share of Holdco Common Stock and the
stated or required amount of dividends on any series of Parent
Preferred Stock (as defined in the Merger Agreement), in each
case with customary record and payment dates, any declaration,
setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to Holdco
Common Stock or any series of Parent Preferred Stock;
(C) any split, combination or reclassification of
Holdco Common Stock or any issuance or the authorization of
any issuance of any other securities in exchange or in
substitution for shares of Holdco Common Stock;
(D) any damage, destruction or loss, whether or not
covered by insurance that has had or is likely to have a
Parent Material Adverse Effect; or
23
(E) any change in accounting methods, principles or
practices by Holdco or any Material Parent Subsidiary (as
defined in the Merger Agreement) materially affecting its
assets, liabilities or business, except insofar as may have
been required by a change in generally accepted accounting
principles.
(c) Representations and Warranties of Holdco Incorporated by
Reference as of the Closing Date. In addition to the representations and
warranties of Holdco set forth in Section 6(b), the following representations
and warranties of Old TW are hereby incorporated by reference, with the same
effect as if made in this Agreement by Holdco to SpinCo on and as of the Closing
Date:
(i) the representations and warranties of Old TW contained in
Section 3.02(a) of the Merger Agreement under the heading entitled
"Organization, Standing and Corporate Power"; and
(ii) the representations and warranties of Old TW contained in
Section 3.02(j) of the Merger Agreement under the heading entitled
"Brokers".
and it shall be a condition to the Closing (for the benefit of SpinCo) that each
of the representations and warranties so incorporated by reference, if qualified
by materiality, shall be true and complete, or if not so qualified, shall be
true and complete in all material respects, on and as of the Closing Date.
7. Conditions to the Obligations of Each Party. The
obligations of SpinCo and Holdco to consummate the
24
Closing are conditioned upon the satisfaction, prior to or on the Closing Date,
of the following conditions:
(a) on the Closing Date, no action, proceeding or
investigation commenced or brought by any U.S. Federal Government Entity shall
be pending, the purpose of which is to set aside or modify in any material
respect the authorizations of any of the transactions provided for in this
Agreement and the Distribution Contract or to enjoin or prevent consummation of
any of such transactions, nor shall any restraining order or preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or any other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby be in effect; and
(b) the receipt of any required regulatory approvals and
authorizations and the making of all filings and the termination of all waiting
periods required in connection with the Closing, with the understanding that, if
the Contract Option is exercised, SpinCo will use its (or, if prior to the
Spin-off, LMC and SpinCo will use their) commercially reasonable efforts to
secure any required regulatory approvals and authorizations prior to the
Closing; provided, however, that nothing in this Agreement shall require, Holdco
or SpinCo (or any of their respective Affiliates) (i) to agree to, approve or
otherwise be bound by or satisfy any condition of any kind referred to in the
second or third sentences of Section 2.1(d) of the LMC Agreement or (ii) to
agree to or enter into or be bound by any settlement or judgment.
8. Conditions to Obligation of Holdco. The obligation of
Holdco to consummate the Closing is also subject to the satisfaction, prior to
or on the Closing
25
Date, of each of the following additional conditions (unless waived by Holdco):
(a) Each of the Parties (other than Holdco) shall have
performed in all material respects all its obligations hereunder which are
required to be performed prior to the Closing Date.
(b) If prior to the Spin-off, Holdco shall have received a
certificate from an officer of LMC (i) to the effect that LMC has complied, in
all material respects, with all its obligations under this Agreement to be
performed on or before the Closing Date, (ii) as to the incumbency of certain
officers of LMC, (iii) as to the satisfaction of the conditions to Closing set
forth in Section 5 (with respect to the representations and warranties of LMC
contained therein) and Section 6(a) and (iv) attaching certified copies of
SpinCo's certificate of incorporation and by-laws, as amended through and in
effect on the Closing Date, together with all resolutions of LMC's board
authorizing the transactions contemplated by this Agreement and the Distribution
Contract.
(c) If prior to the Spin-off, Holdco shall have received an
opinion of counsel to LMC (which counsel may be an employee of LMC and which
counsel may be counsel to SpinCo), reasonably acceptable to Holdco, addressed to
Holdco and dated the Closing Date, to the effect that:
(i) LMC is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation.
LMC has all requisite corporate power and authority to execute and
deliver the Agreement, to perform its obligations thereunder and to
consummate the transactions contemplated thereby.
(ii) The execution and delivery by LMC of the Agreement, the
performance by LMC of its obligations
26
thereunder and the consummation by LMC of the transactions contemplated
thereby have been duly and validly authorized by all necessary
corporate action on the part of LMC. The Agreement has been duly
executed and delivered by a duly authorized officer of LMC and
constitutes the legal, valid and binding obligation of LMC enforceable
against LMC in accordance with its terms (subject to all applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws affecting creditors' rights generally and subject, as
to enforceability, to general principles of equity).
(iii) The execution, delivery and performance of the Agreement
by LMC in accordance therewith does not conflict with or result in a
violation of the Delaware Corporation Law or the Certificate of
Incorporation or By-laws of LMC.
(d) Holdco shall have received a certificate from an officer
of SpinCo (i) to the effect that SpinCo has complied, in all material respects,
with all its obligations under this Agreement to be performed on or before the
Closing Date, (ii) as to the incumbency of certain officers of SpinCo, (iii) as
to the satisfaction of the conditions to Closing set forth in Section 5 (with
respect to the representations and warranties of SpinCo contained therein) and
Section 6(a), and (iv) attaching certified copies of SpinCo's certificate of
incorporation and by-laws as amended through and in effect on the Closing Date,
together with all resolutions of SpinCo's board of directors authorizing the
transactions contemplated by this Agreement and the Distribution Contract.
(e) Holdco shall have received an opinion of counsel to SpinCo
(which counsel may be an employee of
27
SpinCo and may also be counsel to LMC and/or an employee of LMC), reasonably
acceptable to Holdco, addressed to Holdco and dated the Closing Date, to the
effect that:
(i) SpinCo is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation. SpinCo has all requisite corporate power and authority
to execute and deliver this Agreement and the Distribution Contract and
to perform its obligations hereunder and thereunder.
(ii) The execution and delivery by SpinCo of this Agreement
and the Distribution Contract and the performance by SpinCo of its
obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action on the part of SpinCo.
Each of this Agreement and the Distribution Contract has been duly
executed and delivered by a duly authorized officer of SpinCo and
constitutes the legal, valid and binding obligation of SpinCo
enforceable against SpinCo in accordance with its terms (subject to all
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting creditors' rights generally and
subject, as to enforceability, to general principles of equity).
(iii) The execution and delivery of this Agreement and the
Distribution Contract by SpinCo, and the performance by SpinCo of its
obligations hereunder and thereunder, does not conflict with or result
in a violation of the corporate laws of the State of Georgia, or the
Certificate of Incorporation or by-laws of SpinCo.
(f) The Program and Digitization Agreement attached hereto as
Exhibit 2 (the "Program and Digitization Agreement") shall be in full force and
effect, subject to satisfaction of the conditions set forth therein.
28
(g) SpinCo shall have received any material third party
consents, approvals and authorizations necessary to cause the effectiveness of
the Distribution Contract.
(h) Subject to Section 15(b), if an Exercise Notice shall have
been delivered on or prior to June 1, 1997, Holdco shall have received the
Disclosure Letter from SpinCo at least 10 days prior to the scheduled Closing
Date and shall be reasonably satisfied with the contents thereof and of all
attachments thereto.
If an Exercise Notice shall have been delivered by Holdco
after June 1, 1997, (i) Holdco shall have received, as contemplated by Section
11(b)(vii), the revised Disclosure Letter from SpinCo at least 10 days prior to
the scheduled Closing Date and (ii) Holdco shall be reasonably satisfied with
the contents of the revised Disclosure Letter and of all attachments thereto, to
the extent (and only to the extent) that such contents and attachments differ in
any material respect from the initial Disclosure Letter delivered to Holdco
pursuant to Section 11(b)(vii), and provided that the incurrence by SpinCo,
TCITP and/or any of their respective subsidiaries of indebtedness for borrowed
money, whether or not secured (unless secured in contravention of Section
11(b)(vi)(C)), shall not be a reasonable basis for Holdco's dissatisfaction
under this Section 8(h).
(i) Subject to Section 15(b), if an Exercise Notice shall have
been delivered on or prior to June 1, 1997, Holdco shall be reasonably satisfied
with the results of its due diligence investigation provided for in Section
11(b)(ii).
9. Conditions to Obligation of SpinCo. The obligation of
SpinCo to consummate the Closing is also
29
subject to the satisfaction, prior to or on the Closing Date, of each of the
following conditions (unless waived by SpinCo):
(a) Holdco shall have performed in all material respects all
its obligations hereunder which are required to be performed prior to the
Closing Date.
(b) No petition or similar document shall have been filed by
or with respect to Holdco under any bankruptcy, insolvency or similar law.
(c) SpinCo shall have received an opinion of counsel to Holdco
(which counsel may be an employee of Holdco), reasonably acceptable to SpinCo,
addressed to SpinCo and dated the Closing Date, to the effect that:
(i) Holdco is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation. Holdco has all requisite corporate power and authority
to perform its obligations under this Agreement, the Distribution
Contract and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby.
(ii) The performance by Holdco of its obligations under this
Agreement, the Distribution Contract and the Registration Rights
Agreement, and the consummation by Holdco of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary corporate action on the part of Holdco. Each of this
Agreement, the Distribution Contract and the Registration Rights
Agreement constitutes the legal, valid and binding obligation of Holdco
enforceable against Holdco in accordance with its terms (subject to all
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting creditors' rights generally and
subject, as
30
to enforceability, to general principles of equity, and except that the
indemnification obligations set forth in Section 8 of the Registration
Rights Agreement may be subject to considerations of public policy).
(iii) The performance by Holdco of this Agreement, the
Distribution Contract and the Registration Rights Agreement does not
conflict with or result in a violation of the General Corporation Law
of the State of Delaware, or the certificate of incorporation or
by-laws of Holdco.
(d) SpinCo shall have received a certificate from an officer
of Holdco (i) to the effect that Holdco has complied, in all material respects,
with all its obligations under this Agreement, the Distribution Contract and the
Registration Rights Agreement, (ii) as to the incumbency of certain officers of
Holdco, (iii) as to the satisfaction of the conditions to Closing set forth in
Section 5 (with respect to the representations and warranties of Holdco
contained therein), Section 6(b) and Section 6(c), (iv) attaching all
resolutions of Holdco's board of directors authorizing the transactions
contemplated by this Agreement, and (v) any other customary matters as may be
reasonably requested by SpinCo.
10. Termination. (a) Subject to the last two sentences of
Section 14 with respect to the survival of certain provisions, each of LMC's,
SpinCo's and Holdco's rights and obligations under this Agreement (including
with respect to the option granted hereunder, whether or not exercised) will
terminate on the earliest to occur of the following:
(i) if Holdco shall deliver an Exercise Notice on or before
June 1, 1997 (subject to extension as provided in Section 15(b)), the
earlier of (A) the sixth anniversary of the Execution Date and (B) the
31
conversion of WTBS to a copyright-paid programming service;
(ii) if Holdco shall deliver an Exercise Notice after June 1,
1997 (subject to extension as provided in Section 15(b)), but before
the sixth anniversary of the Execution Date, 60 days after the date of
such Exercise Notice; and
(iii) if Holdco shall not theretofore have delivered an
Exercise Notice, the earlier of (A) the sixth anniversary of the
Execution Date and (B) the conversion of WTBS to a copyright-paid
programming service;
provided in each case that the Closing has not occurred on or prior to such
earliest date (the "Termination Date"). Notwithstanding the foregoing, if
(following the delivery of a timely Exercise Notice) as a result of any action
or failure to act by any unrelated third party, including any Governmental
Entity, the conditions to the Closing have not been satisfied in full on or
prior to the Termination Date, the "Termination Date" shall be extended to the
earlier of (i) five business days after the date as of which all such conditions
have been satisfied in full and (y) the first anniversary of the date of such
Exercise Notice.
(b) The termination of this Agreement will in no way limit any
obligation or liability of any Party based on or arising from a breach or
default by such Party prior to such termination with respect to any of its
representations, warranties or agreements contained in this Agreement, the
Distribution Contract or the Registration Rights Agreement.
11. Covenants. (a) Covenants of Each Party. If the Contract
Option is exercised each of SpinCo (or, if prior to the Spin-off, LMC and
SpinCo) and Holdco agree to use its commercially reasonable efforts to cause the
conditions to the Closing described in Sections 7, 8 and 9
32
to be satisfied as promptly as practicable following such exercise.
(b) Covenants of LMC and SpinCo.
(i) Disposition of Shares. During the period from the
Execution Date through the earlier to occur of the Grant Date or the
Termination Date, LMC shall not transfer or otherwise dispose of any of
the Shares (other than a transfer of all, but not less than all, the
Shares to any member of the affiliated group (within the meaning of
Section 1504(a) of the Code) of which LMC is (at the time of such
transfer or disposition) a member; provided that (A) such transferee
is, at the time of such transfer or disposition, a Liberty Party (as
defined in the LMC Agreement) and (B) the transferee agrees to be bound
by this Agreement and the provisions of the Distribution Contract to
the same effect as LMC); provided further that LMC shall be entitled to
pledge or otherwise hypothecate the Shares in connection with the
incurrence of bona fide indebtedness to the extent that the applicable
pledgee of the Shares agrees to be bound by the terms of this
Agreement.
(ii) Access. Subject to Section 15(b), (A) during the period
from the Execution Date until and including June 1, 1997, and (B)
during the sixty-day period following the delivery of any Exercise
Notice (including an Exercise Notice delivered on or prior to June 1,
1997), LMC and SpinCo shall give Holdco and its representatives,
employees, counsel and accountants reasonable access, during normal
business hours and upon reasonable notice, and subject to, as
applicable, LMC's and SpinCo's obligations under any then existing
confidentiality or non-disclosure agreements, to the personnel,
properties, books and records of the Business to the extent in their
possession or control, so that Holdco may confirm the satisfaction of
all
33
conditions precedent to its obligations to be performed hereunder on
the Closing Date; provided, however, that such access does not
unreasonably disrupt the normal operations of LMC or SpinCo. As against
Holdco and its representatives, employees, counsel and accountants,
each of LMC and SpinCo hereby waives any confidentiality or
non-disclosure covenants contained for its benefit in any agreement
concerning the Business (including any WTBS service agreements or
arrangements) and it agrees to execute any acknowledgements with
respect to such waiver as Holdco may reasonably request. Each of LMC
and SpinCo agree to use commercially reasonable efforts in good faith
to obtain all waivers and consents necessary under any existing
confidentiality or non-disclosure agreement to afford full access to
Holdco with respect to the Business; provided, however, that nothing in
this Agreement shall require LMC or SpinCo (or any of their respective
Affiliates) (x) to agree to any material modification or amendment to
any agreement between any of them or any such Affiliate and any third
party, or any other onerous or burdensome condition or requirement or
(y) to make any payment of money or deliver any other consideration to
any third party, as a condition to the receipt of any waiver or consent
hereunder. On the Execution Date and upon Holdco's delivery of the
Exercise Notice, SpinCo shall also give Holdco a list of the WTBS
Distributors (as defined in Section 24). During the period from the
Execution Date through the earlier to occur of the Closing Date or the
Termination Date, if SpinCo proposes to enter into any agreement with a
WTBS Distributor or other third party, which agreement will contain a
confidentiality or non- disclosure covenant relating to the existence,
terms and/or conditions of any material agreement to which it is or
will be a party, or any other material matter relating to the Business,
SpinCo shall use commercially reasonable efforts in good faith to
negotiate a provision in such agreement or covenant to permit it to
34
disclose the matters subject to such confidentiality or non-disclosure
agreement to Holdco and its representatives, employees, counsel and
accountants; provided, however, that nothing in this Agreement shall
require LMC or SpinCo (or any of their respective Affiliates) (x) to
agree to any material concession, condition or other provision in any
agreement that, in their good faith business judgment, is in any
respect materially less favorable to it or the Business than the
comparable provision that could have been negotiated by it if this
sentence did not apply or (y) to make any payment of money or deliver
any other consideration to any third party, as a condition to receipt
of any provision permitting any disclosure to Holdco or any such other
person.
(iii) Ordinary Conduct. During the period from the Execution
Date through the earlier to occur of the Closing Date or the
Termination Date, SpinCo shall operate the Business in the ordinary
course in substantially the same manner as currently conducted except
for such changes in the day-to-day operations of the Business as the
management of SpinCo (or, if prior to the Spin-off, the management of
LMC and SpinCo), in the good faith exercise of their business judgment,
shall from time to time determine to be in the best interests of the
Business. In that connection, SpinCo shall use its commercially
reasonable efforts to preserve the Business' relationships with
customers, suppliers and others with whom SpinCo deals with respect to
the Business. In addition, SpinCo shall not take any action that could
reasonably be expected to materially impair the business, assets and
financial condition of the Business at the time of the effectiveness of
the Distribution Contract (provided that SpinCo shall be permitted to
discontinue the operations of the Business if because of an act of God,
significant change in law or other occurrence, it would not be
commercially reasonable to continue such
35
operations). In connection, with its obligation to operate in the
ordinary course, SpinCo shall not cease to be a private carrier with
respect to the Business, as conducted domestically in the U.S., without
the prior written consent of Holdco, which shall not unreasonably be
withheld or delayed; provided, however, that such consent may be
withheld by Holdco in its sole discretion if it determines that such
action impairs the availability of the exception under 17 U.S.C.
ss.111(a)(3). Holdco agrees that it and its Affiliates will not assist
any third party in competing against SpinCo in uplinking the WTBS
broadcast signal.
(iv) [Reserved.]
(v) Insurance. At all times during the period from the
Execution Date through the earlier of the Closing Date and the
Termination Date, SpinCo shall maintain in full force and effect
(through one or more Affiliates or otherwise), insurance policies
meeting the requirements of Section 6(a)(vi).
(vi) Mergers; Business Transfer; Security Arrangements. (A)
SpinCo shall not merge with another corporation or other entity unless
SpinCo is the surviving entity in such merger or the surviving entity
delivers to Holdco prior to such merger an agreement (in form and
substance reasonably satisfactory to Holdco and its counsel) pursuant
to which it agrees to be bound by the terms of this Agreement and the
Distribution Contract.
(B) SpinCo shall not sell, transfer or otherwise
dispose of the Business (other than any security interest
granted in connection with a SpinCo financing covered by
clause (C) below) unless (1) Spinco sells, transfers or
otherwise disposes of the Business in its entirety and (2) the
entity or person so acquiring the Business
36
prior to such acquisition delivers to Holdco an agreement (in
form and substance reasonably satisfactory to Holdco and its
counsel) pursuant to which it agrees to be bound by the terms
of this Agreement and the Distribution Contract.
(C) SpinCo shall not grant or permit to exist any
lien or other security interest on the assets of the Business
(including the Distribution Contract and its WTBS service
agreements) in connection with any SpinCo financing unless the
secured party or parties prior to any such grant agree in
writing, for the benefit of Holdco, that (1) any foreclosure
or sale of the Business shall involve the foreclosure or sale
of the Business in its entirety and (2) as a condition to such
foreclosure or sale, the entity or person so acquiring the
Business shall be required to deliver to Holdco, prior to such
acquisition, an agreement (in form and substance reasonably
satisfactory to Holdco and its counsel) pursuant to which it
agrees to be bound by the terms of this Agreement and the
Distribution Contract.
(D) In the event that SpinCo or, prior to the
Spin-off, LMC receives any proposal with respect to, or
determines to enter into any transaction involving, any of the
events described in this paragraph (vi), SpinCo and LMC shall
promptly notify Holdco thereof.
(vii) Disclosure Letter and Closing Schedules. If, subject to
Section 15(b), Holdco delivers an Exercise Notice on or prior to June
1, 1997, SpinCo shall as soon as practicable after such delivery (and
in any event not later than 10 days prior to the Closing Date) prepare
and deliver to Holdco the Disclosure Letter and all required schedules
to this Agreement that have not previously been delivered. If Holdco
shall have not
37
delivered an Exercise Notice on or prior to June 1, 1997, SpinCo shall
as soon as practicable after such date (but in any event not later than
June 16, 1997) deliver to Holdco the Disclosure Letter and all required
schedules to this Agreement as of such date. If thereafter Holdco
delivers an Exercise Notice, Spinco shall as soon as practicable after
such delivery (and in any event not later than ten days prior to the
Closing Date) prepare and deliver to Holdco a revised Disclosure Letter
and all required schedules to this Agreement that have not previously
been delivered.
(viii) Supplemental Disclosure. SpinCo shall promptly notify
Holdco of, and furnish Holdco any information it may reasonably request
with respect to, the occurrence to its knowledge of any event or
condition or the existence to its knowledge of any fact that causes any
of the conditions to Holdco's obligation to cause the effectiveness of
the Distribution Contract not to occur; provided, however, that no such
notification shall be required with respect to any representation or
warranty of LMC or SpinCo hereunder prior to delivery of the Disclosure
Letter.
(ix) Restricted Activities; SpinCo Obligations. Each of LMC
and SpinCo covenants and agrees with Holdco as follows:
(A) During the period from the Execution Date through the
earlier of the Closing Date and the Termination Date, each of LMC and
SpinCo shall not (and each shall cause its Affiliates not to) engage in
the Business, other than through SpinCo.
(B) If the Closing Date occurs, during the period from the
Closing Date through the fifth anniversary of the termination of the
last service agreement between SpinCo and any MVPD (as defined in
Section 24), LMC
38
shall not, and shall cause its Affiliates not to, engage in the
Business (other than through SpinCo). If the Closing Date occurs,
during the period from the Closing Date through the Termination Date
(as defined in the Distribution Contract) LMC shall not, directly or
indirectly (including through any Affiliate), solicit any MVPD to
terminate carriage of the WTBS programming service (including the
programming of the broadcast television SuperStation known on the
Execution Date as WTBS and any cable programming network established as
the successor thereto) or, except as contemplated by the Distribution
Contract, to terminate any service agreement with SpinCo with respect
to such programming service; provided, however, that the provisions of
this sentence shall not apply with respect to any MVPD that enters into
a WTBS programming agreement with Holdco. By way of example, and
without limiting the generality of the foregoing, it is understood that
the offering of WTBS as a distant broadcast signal (other than through
SpinCo) violates the restrictions of this subparagraph (B).
Anything contained herein to the contrary notwithstanding,
Holdco acknowledges (I) that LMC and its Affiliates represent numerous
programming services that are marketed, distributed and sold to MVPDs
on a continuous basis, in competition with WTBS and other programming
services, (II) that due to limited channel capacity, an MVPD must often
terminate an existing programming service carried by such MVPD in order
to carry a new programming service, and (III) that activities conducted
by LMC and its Affiliates in connection with the marketing of
programming services that compete with WTBS shall not be construed to
violate LMC's covenant in this Section, even if an MVPD terminates
carriage of WTBS to carry a programming service marketed by LMC or any
of its Affiliates, unless LMC or such Affiliate shall have urged or
induced such MVPD to drop WTBS.
39
(C) If the Closing Date occurs prior to the consummation of
the Spin-off, then, so long as SpinCo is LMC's Controlled Affiliate (as
defined in the LMC Agreement), LMC shall cause SpinCo to comply with
its obligations under this Agreement and the Distribution Contract,
including the provisions of Section 3 thereof.
(D) If the Closing Date occurs, then prior to and after
consummation of the Spin-off, LMC shall provide Holdco and its
representatives reasonable access, on a basis comparable to the access
provided by SpinCo pursuant to Section 2(d) of the Distribution
Contract, to any records of LMC relating to the Business prior to the
Spin-off to confirm amounts payable to SpinCo after the Closing Date
pursuant to the Distribution Contract.
(c) Confidentiality. Until the Closing Date (or if the Closing
does not occur, until the second anniversary of the Termination Date) Holdco
agrees to use the same efforts that it uses with respect to its own confidential
and proprietary information to retain in strict confidence all proprietary and
confidential information concerning the Business or SpinCo which is conveyed to
it by LMC, SpinCo or any of their Affiliates, or any representative of LMC,
SpinCo or any of their Affiliates ("Confidential Information"). Notwithstanding
the foregoing, the term "Confidential Information" does not include: (i)
information which is, at the time of its disclosure to Holdco or any Affiliate
of Holdco or their respective representatives, already in Holdco's, its
Affiliates' or their representatives' possession (without violation, to Holdco's
knowledge, of any legally enforceable confidentiality agreement with LMC, SpinCo
or any of their Affiliates relating to such information), (ii) information which
is or becomes available to the public other than as a result of a disclosure by
Holdco or any Affiliate of Holdco or their respective representatives, (iii)
information which was or becomes available to Holdco or any Affiliate of
40
Holdco or their respective representatives on a non-confidential basis from a
source other than LMC, SpinCo, any of their Affiliates or their respective
representatives (provided that information contained in any agreement with
respect to the Business obtained solely as a result of the confidentiality
waiver in Section 11(b)(ii) shall not be considered to be obtained on a
non-confidential basis); provided that such source was not known by Holdco to be
bound by the terms of a legally enforceable confidentiality agreement with LMC,
SpinCo or any of their Affiliates relating to such information, (iv) information
which is information that is independently developed by Holdco or its Affiliates
or their respective representatives or (v) any oral information, unless such
information is stated to be proprietary and confidential at the time of
disclosure and such statement and information is summarized in writing within 30
days after such disclosure. In the event that Holdco, any of its Affiliates or
any of their respective representatives is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or other process) to disclose any Confidential
Information, it is agreed that Holdco will provide SpinCo and, prior to the
Spin-off, LMC with prompt notice of any such request or requirement (written if
practical) so that LMC and/or SpinCo may seek at its own expense an appropriate
protective order or waive Holdco's compliance with the provisions of this
Section 11(c). If, failing the entry of a protective order or the receipt of a
waiver hereunder, Holdco, any of its Affiliates or any of their respective
representatives is, in the opinion of its counsel, compelled to disclose any
Confidential Information, Holdco or such Affiliate or representative may
disclose that portion of any Confidential Information which its counsel advises
that it is compelled to disclose and will upon written request and at the
expense of LMC and/or SpinCo use reasonable efforts to cooperate in LMC's and/or
SpinCo's efforts to obtain a protective order or other reasonable assurance that
confidential treatment will be accorded to that portion of such Confidential
41
Information which is being disclosed. Holdco will use the Confidential
Information only in connection with its due diligence review of the Business and
SpinCo, as contemplated by this Agreement and will not otherwise use it in its
business or disclose it to others, except to its employees, representatives and
Affiliates (and their employees and representatives) who require such
Confidential Information to perform their duties in connection with, or exercise
Holdco's rights under, this Agreement and agree not to disclose or use such
Confidential Information except as provided herein. Holdco agrees that it shall
be responsible for any breach of this Section 11(c) by such persons. In the
event that the Closing does not occur under this Agreement, Holdco shall, at its
option, either (i) return all Confidential Information provided or made
available to it hereunder relating to the Business and SpinCo, whether in
written, computer-readable or other form, together with all copies thereof in
the possession of Holdco or (ii) destroy all such Confidential Information and
certify such destruction to LMC and SpinCo; provided, however, that Holdco's
sole obligation with respect to the disposition of any internal notes, memoranda
or other materials prepared by it that incorporate any Confidential Information
shall be to redact or otherwise expunge all such Confidential Information from
such materials.
(d) Covenant by Satellite Relating to Carriage of WTBS. During
the period from the Execution Date through the earlier of the Closing Date and
the Termination Date, provided that Holdco or any Managed Subsidiary of Holdco
then owns the programming service currently known as "WTBS" (as it may be
renamed in the future) ("WTBS"), Satellite shall cause each of its affiliates
(as such term is defined in Section 1(a) of Satellite's existing affiliation
agreement, dated as of July 15, 1992, with The Cartoon Network, Inc., a copy of
the pertinent provisions of which was attached to a letter dated as of October
2, 1995, from ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel to LMC, to ▇▇▇▇▇ ▇. ▇▇▇▇, the
general counsel of Holdco) (and each affiliate of any other
42
intermediary (as contemplated by the second sentence of the definition of
"Business" in Section 24(b))) that carries WTBS, and each other entity to which
Satellite (or such other intermediary) provides (or arranges for the provision
of) the WTBS signal, to carry the WTBS signal transmitted by SpinCo (provided
that SpinCo is able to transmit such signal), it being understood that nothing
in this Agreement shall prohibit any such affiliate or other person or entity
from deleting carriage of the WTBS signal transmitted by SpinCo, provided that
upon such deletion such affiliate or other person or entity does not carry the
WTBS signal from any other source (it being understood that nothing in this
Section 11(d) shall limit the effects of the "HITS" provisions of the Program
and Digitization Agreement with respect to the carriage of the WTBS signal, or
the rights and obligations of the parties thereunder, when those provisions
become effective in accordance with their terms).
(e) Acknowledgement by SpinCo and LMC. Each of SpinCo and LMC
acknowledges and agrees for itself and each of its Affiliates that, from and
after the closing of the Mergers (as defined in the LMC Agreement), (i) Holdco
intends to (and may) communicate directly with MVPDs (including MVPDs that are
WTBS Distributors) regarding the transformation of WTBS into a copyright-paid,
satellite delivered, twenty-four-hour-per-day cable television programming
service and (ii) Holdco intends to (and may) communicate with WTBS Distributors
about (x) the terms of a new WTBS distribution contract or arrangement directly
with Holdco or any of its Managed Subsidiaries (conditioned on transformation of
WTBS to such a copyright-paid service) and (y) the possible termination of their
existing contracts or arrangements with SpinCo (upon transformation of WTBS to a
copyright-paid service), and Holdco intends to (and may) enter into agreements
with WTBS Distributors with respect to the foregoing (conditioned upon the
transformation of WTBS to a copyright-paid service), all without creating any
liability to SpinCo, LMC or any of their respective Affiliates. Neither Spinco,
LMC nor any of their respective
43
Affiliates will discourage any MVPD from engaging in any such conversations or
negotiations with Holdco or its Affiliates with respect to the converted WTBS
program service or discourage any MVPD from entering into any such contracts or
arrangements with respect to the converted WTBS program service.
(f) Holdco's Right to Assign Program and Digitization
Agreement to Managed Subsidiaries. LMC, SpinCo and Satellite hereby acknowledge
and agree that, from and after the closing of the Mergers (as defined in the LMC
Agreement), the rights (but not the obligations) of TBS under the Program and
Digitization Agreement with respect to the carriage of the copyright-paid WTBS
service may be assigned to any Managed Subsidiary, provided that any such
assignment shall terminate if the assignee ceases to be a Managed Subsidiary.
This Section 11(f) shall survive the exercise of the Contract Option and any
termination of this Agreement.
(g) Non-Exclusive Right to Digitize, Compress and Reuplink.
Reference is made to the "HITS" provisions of the Program and Digitization
Agreement. The Parties hereby consent to any action taken by Satellite during
the term of this Agreement that would be permitted by such provisions of the
Program and Digitization Agreement, as if such agreement were then in effect
with respect to WTBS prior to its conversion to a copyright-paid service and (i)
all references therein to "TBS" referred to SpinCo, (ii) all references therein
to "TBS services" referred to WTBS, and (iii) the reference in the third line to
"licensed by TBS" meant "authorized by SpinCo pursuant to contractual
relationships". In that connection, and on the same basis, Satellite shall
comply with the obligations required to be performed by Satellite in such "HITS"
provisions.
12. [Reserved.]
13. [Reserved.]
44
14. Survival. The representations, warranties and agreements
of the Parties in this Agreement and in the other documents and instruments to
be delivered by any Party pursuant to this Agreement will continue in full force
and effect from the time made or deemed to have been made until the Closing,
whereupon such representations, warranties and agreements shall terminate.
Notwithstanding any other provision of this Agreement, the tax representations
and warranties in Section 4(b)(i), and the representations and warranties of
Holdco contained in Sections 4(c)(i) and (ii) and Sections 6(b)(i) and (ii)
shall survive the Execution Date, the Closing and the termination of this
Agreement pursuant to Section 10 and shall continue in full force and effect
indefinitely. In addition, the provisions of Section 2(f) and Section 11(b)(ix)
shall survive the Execution Date, the Closing and the termination of this
Agreement pursuant to Section 10 and shall survive in accordance with their
terms.
15. Parties Obligated and Benefited; LMC's Right to Designate
Recipient; Other Transaction. (a) Subject to the limitations set forth below,
this Agreement will be binding upon the Parties and their respective assigns and
successors in interest and will inure solely to the benefit of the Parties and
their respective assigns and successors in interest, and no other person will be
entitled to any of the benefits conferred by this Agreement. Without the prior
written consent of the other Party, no Party will assign any of its rights or
delegate any of its duties under this Agreement or the Distribution Contract,
except: (i) LMC may assign (without the consent of Holdco) any of its rights
(including, without limitation, the right to receive the Section 2 payment for
the non-competition agreement in Section 11(b)(ix) to any person that, at the
time of such assignment (and, in the case of any such person designated to
receive such payment, at the payment date), is (A) a Liberty Party (as defined
in the LMC Agreement) and (B) a member of the affiliated group (within the
meaning of Section 1504(a) of the Code) of which LMC is (at such time)
45
a member; (ii) by operation of law; and (iii) with respect to any merger of
SpinCo or sale or disposition of the Business, in each case, permitted under
Section 11(b)(vi).
(b) If, as contemplated by Section 2, the Letter Ruling shall
have not been obtained by May 31, 1997 or TCI shall have been advised or have
determined that it will not obtain the Letter Ruling (or, that it will not
obtain the Letter Ruling unless TCI and the other parties thereto agree to
changes in the transactions contemplated by the LMC Agreement and the Additional
Agreements (as defined in the LMC Agreement) or any other conditions imposed as
a prerequisite by the Internal Revenue Service), the Parties agree that (i)
notwithstanding the provisions of Section 2, the Grant Date shall be postponed
for 30 days during which period the Parties shall mutually endeavor in good
faith to negotiate the consummation of a transaction that is more tax efficient
to both Parties and (ii) the references to June 1, 1997, in this Agreement
(including as they relate to the definition of the Termination Date, Holdco's
delivery of an Exercise Notice, Holdco's conditions to Closing, Holdco's access
to the Business and SpinCo's delivery of the Disclosure Letter and related
schedules) shall be automatically extended to the date, if later than June 1,
1997, that is five days after the termination of the discussions contemplated by
this Section 15(b).
16. Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by
46
first class, postage prepaid, registered or certified mail, or sent by courier
or, if receipt is confirmed, by telecopier:
If to Holdco:
Time Warner Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
with a copy similarly addressed to the attention
of General Counsel
with a copy (which shall not constitute notice)
to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
If to LMC:
Liberty Media Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
47
with copies (which shall not constitute notice)
to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
General Counsel
Tele-Communications, Inc.
Terrace Towers II
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
and
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
If to SpinCo:
Southern Satellite Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
48
with copies (which shall not constitute notice)
to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
General Counsel
Tele-Communications, Inc.
Terrace Towers II
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(but only prior to the Spin-off)
and
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 16. All
notices will be deemed to have been received on the date of delivery or on the
fifth business day after mailing in accordance with this Section, except that
any notice of a change of address will be effective only upon actual receipt.
17. Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any Party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
18. Interpretation. The section captions of this Agreement are
for convenience only and do not constitute a part of this Agreement. When a
reference is made in this Agreement to a Section or Exhibit such reference shall
be to
49
a Section of, or an Exhibit to, this Agreement, unless otherwise indicated.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
19. Choice of Law. This Agreement and the rights of the
Parties under it will be governed by and construed in all respects in accordance
with the laws of the State of New York applicable to contracts made and
performed wholly therein.
20. Time. If the last day permitted for the timing of any
notice or the performance of any act required or permitted under this Agreement
falls on a day which is not a business day, the time for the giving of such
notice or the performance of such act will be extended to the next succeeding
business day.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original but all of which
together shall constitute a single instrument.
22. Entire Agreement. This Agreement (including all Exhibits
and Schedules attached to this Agreement, the Distribution Contract, the
Registration Rights Agreement, the LMC Agreement and the agreements referenced
herein and therein, each of which shall be deemed to constitute a part of this
Agreement) contains the entire agreement of the Parties, and supersedes all
prior oral or written agreements and understandings with respect to the subject
matter hereof. This Agreement may not be amended or modified except by a writing
signed by the Parties.
23. Severability. Any term or provision of this Agreement
which is held to be invalid or unenforceable in any jurisdiction, as to such
jurisdiction, will be ineffective only to the extent of such invalidity or
50
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of the Agreement in any other jurisdiction, and
in the event any provision of this Agreement is held to be invalid or
unenforceable in any jurisdiction, such provision will be reformed with respect
to, and enforced as fully as possible in, such jurisdiction, consistent (to the
extent possible) with the purposes and intents of the parties expressed herein.
24. Certain Definitions. As used in this Agreement, the
following terms have the corresponding meanings:
(a) An "Affiliate" of a person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "Business" means the business of uplinking and
distributing to MVPDs the signal of the television station broadcasting on the
date hereof in Atlanta, Georgia under the call letters WTBS, and any successor
over-the-air television station in Atlanta, Georgia that broadcasts
substantially similar programming as WTBS following its conversion to a
copyright-paid programming service (as such converted service may be renamed);
provided that the Business shall refer to the business of uplinking and
distributing only one such broadcast television station at any one time.
Anything contained herein to the contrary notwithstanding, neither (i) the
existence of an agreement between SpinCo or any unrelated third party and any
intermediary (such as Satellite and/or Netlink USA) pursuant to which such
intermediary arranges for the WTBS signal transmitted by SpinCo or such
unrelated third party to be received by an "affiliate" of such intermediary as
defined in Section 11(d) of this Agreement (or an analogous definition, if the
intermediary is not Satellite), and any
51
other person to whom such intermediary is authorized to arrange for the
transmission of such signal, as contemplated by Section 11(d), nor (ii) any
activities by any intermediary of the type contemplated by Section 11(g) hereof,
shall in itself (A) cause such an intermediary to be construed as engaging in
the "Business" as defined herein or (B) cause such an intermediary to be in
violation of the restrictions of Section 4 pursuant to the last sentence of the
first paragraph thereof;
(c) "Current Market Price", as of any date, means the average
of the daily closing prices for the shares of the Holdco Common Stock for the 20
trading day period ending on the full trading day immediately prior to the date
in question, appropriately adjusted to take into account any stock dividends,
splits, reverse splits, combinations and the like, the ex-dividend date or
effective date for which occurs during (but after the first day of) such 20
trading day period. The closing price for each trading day shall be the last
reported sale price on such day (or if no such reported sale takes place on such
day, the average of the reported closing bid and asked prices) of the Holdco
Common Stock (regular way) as shown on the Composite Tape of the New York Stock
Exchange;
(d) "FTC Agreement in Principle" means the Agreement in
Principle with FTC Staff re: Consent Order dated July 16, 1996, entered into by
the Federal Trade Commission, Holdco and TCI;
(e) "FTC Consent Decree" means the Agreement Containing
Consent Order (including the FTC Agreement in Principle, the "ACCO") dated as of
August , 1996, with the Federal Trade Commission, together with the Order issued
in connection with the ACCO;
(f) "Governmental Entity" means a court, administrative agency
or commission or other governmental authority or instrumentality;
52
(g) "Holdco Common Stock" means the Common Stock, $.01 par
value, of Holdco;
(h) "Letter Ruling" means a letter ruling from the Internal
Revenue Service (i) to the effect that, at the time thereof, the Spin-off shall
constitute a tax free distribution under Section 355 of the Internal Revenue
Code of 1986, as amended, and (ii) that is otherwise acceptable to Holdco and
TCI;
(i) "Liberty Subsidiaries" means TCI ▇▇▇▇▇▇ Preferred, Inc.,
Liberty Broadcasting, Inc., United Cable ▇▇▇▇▇▇ Investment, Inc. and
Communication Capital Corp.;
(j) "Managed Subsidiary" means, as to Holdco, an Affiliate of
Holdco (i) in which Holdco has, directly or indirectly, a majority ownership
interest and (ii) as to which Holdco has day-to-day management control,
specifically including, without limitation, as of the date hereof, Time Warner
Entertainment Company L.P. and Time Warner Entertainment/ Advance ▇▇▇▇▇▇▇▇
Partnership;
(k) "Material Adverse Effect" means, as to any person, a
material adverse effect on the business, assets, financial condition or results
of operations of such person and its consolidated subsidiaries, taken as a
whole, or on the ability of such person to perform its obligations under any of
the Relevant Agreements to which it is a party;
(l) "MVPDs" means all cable, MMDS, LMDS, TVRO, DBS, video dial
tone and/or other distributors of multichannel video programming by any means;
(m) "Ordinary Course Guidelines" means the general guidelines
with respect to the operation of the Business of SpinCo as set forth on Exhibit
3 hereto;
(n) "Spin-off" means the distribution by TCI of 100% of the
capital stock of SpinCo to holders of record of
53
TCI's Tele-Communications, Inc. Series A Liberty Media Group Common Stock and
Tele-Communications, Inc. Series B Liberty Media Group Common Stock;
(o) "Taxing Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
(p) "Tax" shall mean any Federal, state, local and foreign
taxes and assessments, including all interest penalties and additions imposed
with respect to such amounts; and
(q) "WTBS Distributors" means those persons and entities with
whom SpinCo has an affiliate agreement or other arrangement or agreement for the
distribution of WTBS.
25. Enforcement. The Parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement, and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the States of Colorado, Delaware or New York, or in
Delaware or Colorado state court (in addition to any other remedy to which they
are entitled at law or in equity). In addition, each of the Parties hereto (a)
hereby consents and submits itself to the non-exclusive personal jurisdiction of
any Federal court located in the States of Colorado, Delaware and New York or
any Delaware or Colorado state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
54
26. No Unauthorized Transfer of Control. Nothing in this
Agreement or the Distribution Contract shall, nor shall be construed to,
constitute a transfer of control of the licenses held by SpinCo and its
subsidiaries without prior approval by the Federal Communications Commission
("FCC") of the transfer of all such licenses issued by the FCC to SpinCo and its
subsidiaries. SpinCo shall at all times retain full, exclusive and absolute
control of the licensed facilities as well as ultimate responsibility for the
operation of the FCC licensed facilities pursuant to all applicable rules and
policies of the FCC and the Communications Act of 1934, as the foregoing may be
superseded or amended.
27. Continuation as Passive Carrier. SpinCo is and will
continue to be a passive carrier, and nothing in this Agreement or the
Distribution Contract shall, nor shall be construed to, require SpinCo to
operate with respect to carriage of the WTBS signal other than as a passive
carrier pursuant to 17 U.S.C. ss. 111(a)(3) and as a satellite carrier pursuant
to 17 U.S.C. ss. 119(a), prior to the Converted WTBS, as defined in Section 18
of the Distribution Contract.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be duly executed and delivered as of the date first written above.
TW INC.,
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
55
LIBERTY MEDIA CORPORATION,
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice
President
SOUTHERN SATELLITE SYSTEMS,
INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice
President
With respect to Section 11(d),
Section 11(f) and
Section 11(g) only:
SATELLITE SERVICES, INC.,
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
EXHIBIT 3 TO
THE SSSI AGREEMENT
ORDINARY COURSE GUIDELINES
Under Section 6(a)(ix) of the SSSI Agreement to which this
Exhibit 3 is attached, SpinCo is required to represent on the Closing Date that,
except as set forth in the Disclosure Letter, the Business has been operated in
the ordinary course consistent with past practices and the following guidelines.
Capitalized terms used, but not defined herein, have the
meanings assigned thereto in the SSSI Agreement.
In operating the Business:
(i) SpinCo distributes WTBS only pursuant to service
agreements;
(ii) SpinCo requires that all WTBS Distributors make all
required payments to the Copyright Tribunal;
(iii) SpinCo requires in its service agreements that its WTBS
Distributors receive the WTBS signal from no other source other than
(A) SpinCo or (B) Holdco and its Managed Subsidiaries;
(iv) SpinCo requires mandatory carriage of WTBS on all the
systems covered under its service agreements on all tiers of service
other than the lifeline tier, subject to (A) SpinCo's ability to
provide the WTBS signal and (B) customary termination provisions; and
(v) SpinCo enforces the Copyright Tribunal, exclusivity,
carriage and tiering provisions described in (ii), (iii) and (iv)
above.