Exhibit 99.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF JUNE 28, 1995
BY AND BETWEEN
THE CHRONICLE PUBLISHING COMPANY
AND
TELE-COMMUNICATIONS, INC.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
DATED AS OF JUNE 28, 1995
BY AND BETWEEN
THE CHRONICLE PUBLISHING COMPANY
AND
TELE-COMMUNICATIONS, INC.
TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.1 Closing and Closing Date..............................2
1.2 The Merger............................................2
1.3 Effective Time of the Merger..........................3
ARTICLE II
CONVERSION OF CAPITAL STOCK
2.1 Conversion of Stock...................................4
2.2 Conversion Number.....................................4
2.3 Definitions Relating to Subscribers...................7
2.4 Provisions Relating to Debt..........................10
2.5 Procedures for Determining Purchase Price............12
2.6 Escrowed Shares......................................13
2.7 Alternative Merger Consideration.....................14
2.8 Exchange of Certificates.............................16
2.9 Distribution With Respect to Shares Represented by
Unsurrendered Chronicle Stock Certificates...........18
2.10 No Fractional Shares.................................19
2.11 No Liability.........................................19
2.12 Lost Certificates....................................19
2.13 Dissenting Shares....................................20
ARTICLE III
OTHER TRANSACTIONS
3.1 Contribution of Assets to and Assumption of
Liabilities by Spinco................................20
3.2 Distribution of Spinco Common Stock and AAA Notes....23
3.3 Prepayment of Certain Indebtedness...................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
4.1 Organization and Authority; Binding Effect...........25
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4.2 No Breach............................................25
4.3 Governmental Consents and Approvals..................26
4.4 Recommendations of the Board of Directors............26
4.5 Capitalization.......................................26
4.6 Financial Statements.................................27
4.7 Absence of Certain Changes...........................27
4.8 Absence of Undisclosed Liabilities...................27
4.9 Compliance With Law; Litigation......................28
4.10 Title to Assets......................................28
4.11 Real Property........................................29
4.12 Tangible Personal Property...........................29
4.13 Intangible Property..................................29
4.14 Material Contracts...................................29
4.15 Cable Systems........................................30
4.16 Brokers and Finders..................................32
4.17 Taxes................................................32
4.18 Employees; Labor Relations...........................33
4.19 Employee Benefit Plans...............................33
4.20 Environmental Matters................................34
4.21 Transactions with Affiliates.........................35
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
5.1 Organization and Authority; Binding Effect...........35
5.2 No Breach............................................36
5.3 Governmental Consents and Approvals..................36
5.4 Capitalization.......................................37
5.5 SEC Reports..........................................37
5.6 Financial Statements.................................37
5.7 Absence of Certain Changes...........................38
5.8 Absence of Undisclosed Liabilities...................38
5.9 Compliance with Law..................................38
5.10 Brokers and Finders..................................39
5.11 Taxes................................................39
ARTICLE VI
COVENANTS REGARDING CONDUCT OF BUSINESS
6.1 Conduct of Business of Western.......................40
6.2 Conduct of Business of Acquiror......................42
ARTICLE VII
OTHER AGREEMENTS
7.1 No Solicitation......................................42
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7.2 Access to Information................................42
7.3 Private Placement Information; Registration of
Acquiror Common Stock................................42
7.4 Reasonable Best Efforts..............................52
7.5 Public Announcements.................................52
7.6 Notification.........................................52
7.7 Meeting of Shareholders of Chronicle.................52
7.8 Regulatory and Other Authorizations..................53
7.9 Further Assurances...................................54
7.10 Internal Revenue Service Ruling......................55
7.11 Records Retention....................................55
7.12 Chronicle Name.......................................56
7.13 Tax Matters..........................................56
7.14 Employee Benefits; Employee Matters..................60
7.15 Bay TV Joint Venture.................................61
7.16 Environmental Reports................................61
7.17 Approval of Acquiror's Board of Directors............61
7.18 Suspension of Chronicle's Covenants..................61
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of Chronicle and
Acquiror.............................................61
8.2 Conditions to the Obligations of Chronicle...........62
8.3 Conditions to Obligations of Acquiror................64
8.4 Exception to Conditions to Obligations of Acquiror...66
ARTICLE IX
TERMINATION
9.1 Termination..........................................66
9.2 Effect of Termination................................67
9.3 Fees and Expenses....................................67
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties..........68
10.2 Entire Agreement....................................68
10.3 Notices.............................................68
10.4 GOVERNING LAW.......................................70
10.5 Rules of Construction...............................70
10.6 Parties in Interest.................................70
10.7 Counterparts........................................70
10.8 Payment of Expenses.................................70
10.9 No Personal Liability...............................70
10.10 Binding Effect; Assignment..........................71
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10.11 Amendment...........................................71
10.12 Extension; Waiver...................................71
10.13 Legal Fees; Costs...................................71
10.14 Alternative Structure of Contribution and
Distribution........................................71
10.15 Time................................................72
ARTICLE XI
DEFINITIONS
11.1 Terms Defined Elsewhere in this Agreement...........72
11.2 Terms Defined in this Section.......................75
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this "Agreement"),
dated as of June 28, 1995, is made by and between The Chronicle Publishing
Company, a Nevada corporation ("Chronicle"), and Tele-Communications, Inc., a
Delaware corporation ("Acquiror").
PRELIMINARY STATEMENTS
The Board of Directors of Chronicle has approved a plan of distribution
pursuant to which, subject to the terms and conditions of this Agreement,
Chronicle would form a new Nevada corporation ("Spinco"), and contribute to
Spinco, in exchange for all the capital stock of Spinco and other undertakings
of Spinco as set forth in a Contribution and Assumption Agreement, the form of
which is attached to this Agreement as Exhibit A, all the assets of Chronicle
except those relating to the cable television operations of its Western
Communications division ("Western") and an undivided 49% interest in certain
assets relating to the operation of the local cable television network
distributed in the San Francisco Bay area under the name "Bay TV" as described
in Section 3.1(a) of this Agreement, and subsequent to such contribution,
Chronicle would distribute all the shares of capital stock of Spinco and the
AAA Notes (as defined herein) to the shareholders of Chronicle in the manner
described in this Agreement.
The Boards of Directors of Chronicle and, subject to the provisions of
Section 7.17, Acquiror have each determined that it is in the best interests of
their respective corporations and shareholders that, following the contribution
and distribution described in the preceding paragraph, Chronicle merge with and
into Acquiror, as a result of which the shareholders of Chronicle immediately
prior to such merger would become shareholders of Acquiror.
Chronicle and Acquiror intend that, for federal income tax purposes, the
transactions contemplated by this Agreement will qualify as one or more
tax-free reorganizations within the meaning of Section 368(a)(1)(D), Section
355, and Section 368(a)(1)(A) of the Code, and this Agreement is adopted as a
plan of reorganization.
This Agreement constitutes a plan of merger with respect to the Merger
for purposes of Section 78.451 of the Nevada Corporation Law and an agreement
of merger with respect to the Merger for purposes of Section 252 of the
Delaware Corporation Law.
Certain capitalized terms used in this Agreement are defined in Article
XI or in the sections of this Agreement indicated in Article XI.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, and agreements set forth below, the parties to
this Agreement agree as follows:
ARTICLE I
THE MERGER
1.1 Closing and Closing Date.
------------------------
(a) Closing. On the later of (i) January 9, 1996, or (ii) as
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soon as practicable after the satisfaction or, to the extent permitted by law,
waiver of the conditions set forth in Article VIII, (but, subject to Section
1.1(b), no later than ten business days after the satisfaction or waiver of the
conditions set forth in Section 8.1 (other than the conditions in Section
8.1(d) and Section 8.1(f)), Section 8.2(e), Section 8.2(i), Section 8.3(c),
Section 8.3(d), Section 8.3(e), Section 8.3(f), Section 8.3(g), Section 8.3(h),
Section 8.3(i), Section 8.3(k), and Section 8.3(l)) and, in the case of (i) or
(ii) above, immediately prior to the filing of the Articles of Merger and the
Certificate of Merger, a closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇, White &
▇▇▇▇▇▇, San Francisco, California, or on such other date and at such other
location as the parties may agree in writing.
(b) Postponement of Closing. If Acquiror makes a public
-----------------------
announcement during the period that, but for an election by Chronicle or
Acquiror pursuant to this Section 1.1(b), would be the period of 20 trading
days ending on the third trading day preceding the Closing Date, and either
Acquiror's financial adviser has advised Acquiror or Chronicle's financial
adviser has advised Chronicle that such announcement would reasonably be
expected to have a temporary effect on the price of Acquiror Common Stock,
either Acquiror or Chronicle may, by written notice given to the other party
not later than three business days after such announcement, elect to delay the
Closing until the thirtieth trading day after such announcement. If Acquiror
commences or announces an intention to commence a tender offer for any
outstanding shares of Acquiror Common Stock and the last day on which Acquiror
accepts shares for purchase pursuant to such tender offer (or, if applicable,
the date on which Acquiror otherwise terminates or abandons such tender offer)
is within thirty trading days prior to the date that, but for an election by
Chronicle or Acquiror pursuant to this Section 1.1(b), would be the Closing
Date, either Chronicle or Acquiror may, by written notice to the other party,
elect to delay the Closing until the thirtieth trading day following the last
day on which Acquiror accepts shares for purchase pursuant to such tender offer
(or, if applicable, the date on which Acquiror otherwise terminates or abandons
such tender offer).
(c) Closing Date Defined. The date on which the Closing
--------------------
occurs is referred to in this Agreement as the "Closing Date."
1.2 The Merger. Subject to the terms and conditions of this
----------
Agreement, the Nevada Corporation Law, and the Delaware Corporation Law, at the
Effective Time, Chronicle shall be merged with and into Acquiror (the "Merger")
and the separate existence of Chronicle shall cease and Acquiror shall continue
as the surviving corporation in the Merger (the "Surviving Corporation"). From
and after the Effective Time, and without any further action on the part of any
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Person, the Merger will have all the effects provided by applicable law,
including Section 78.459 of the Nevada Corporation Law and Section 259 of the
Delaware Corporation Law, the effects described in Section 2.1 with respect to
the capital stock of Chronicle and Acquiror, and, subject to applicable law, the
following additional effects:
(a) Certificate of Incorporation. At the Effective Time, the
----------------------------
Certificate of Incorporation of Acquiror, as in effect immediately prior to the
Effective Time, shall become the Certificate of Incorporation of the Surviving
Corporation, and such Certificate of Incorporation may thereafter be amended as
provided therein and by the Delaware Corporation Law.
(b) Bylaws. At the Effective Time, the Bylaws of Acquiror,
------
as in effect immediately prior to the Effective Time, shall become the Bylaws
of the Surviving Corporation, and such Bylaws may thereafter be amended or
repealed in accordance with their terms and the Certificate of Incorporation of
the Surviving Corporation and as provided by the Delaware Corporation Law.
(c) Directors. At the Effective Time, the directors of
---------
Acquiror immediately prior to the Effective Time shall become the directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation and the
Delaware Corporation Law and until the earlier of his or her resignation or
removal or until his or her successor is duly elected and qualified, as the
case may be.
(d) Officers. At the Effective Time, the officers of
--------
Acquiror immediately prior to the Effective Time shall become the officers of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation and the
Delaware Corporation Law and until the earlier of his or her resignation or
removal or until his or her successor is duly appointed and qualified, as the
case may be.
(e) Properties and Liabilities. At the Effective Time, all
--------------------------
the properties, rights, privileges, powers, and franchises of Chronicle and
Acquiror shall vest in the Surviving Corporation, and all debts, liabilities,
and duties of Chronicle and Acquiror shall become the debts, liabilities, and
duties of the Surviving Corporation.
1.3 Effective Time of the Merger. Subject to the terms and
----------------------------
conditions in this Agreement, the parties shall (a) prepare, sign, and
acknowledge, in accordance with the Nevada Corporation Law, articles of merger
(the "Articles of Merger") and deliver the Articles of Merger to the Secretary
of State of the State of Nevada for filing pursuant to the Nevada Corporation
Law on the Closing Date, and (b) prepare, execute, and acknowledge, in
accordance with the Delaware Corporation Law, a certificate of merger (the
"Certificate of Merger") and deliver the Certificate of Merger to the Secretary
of State of the State of Delaware for filing pursuant to the Delaware
Corporation Law on the Closing Date. The Merger shall become effective upon
the later of the filing of the Articles of Merger with the Secretary of State
of the State of Nevada or the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware. As used in this Agreement, the
"Effective
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Time" means the later of the time at which the Articles of Merger are filed with
the Secretary of State of the State of Nevada or the time at which the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware.
ARTICLE II
CONVERSION OF CAPITAL STOCK
2.1 Conversion of Stock. At the Effective Time, by virtue of the
-------------------
Merger and without any action on the part of the holder of any shares of
capital stock of any corporation:
(a) Subject to Section 2.7, each share of Common Stock, $0.01 par
value per share, of Chronicle ("Chronicle Common Stock") issued and outstanding
immediately prior to the Effective Time (except shares subject to Section
2.1(b) and, to the extent provided in Section 2.13, Dissenting Shares) shall be
converted into and shall thereafter evidence and become (i) that number of
validly issued, fully paid, and nonassessable shares of Class A Common Stock,
$1.00 par value per share, having one vote per share, of Acquiror or, if
applicable, any successor class or series of Acquiror's common stock resulting
from a redesignation of such Class A Common Stock in connection with an
Acquiror Restructuring ("Acquiror Class A Common Stock"), equal to the
Conversion Number, (ii) that number of validly issued, fully paid, and
nonassessable shares of each class of Other Acquiror Common Stock, if any,
equal to the product of the Conversion Number times the Other Acquiror Common
Stock Ratio applicable to such class of Other Acquiror Common Stock, and (iii)
the right to receive cash in lieu of fractional shares in accordance with
Section 2.10. "Acquiror Common Stock" means, collectively, Acquiror Class A
Common Stock and any class of Other Acquiror Common Stock (as determined in
accordance with Section 2.7).
(b) Each share of the capital stock of Chronicle issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by Chronicle as treasury stock, if any, shall be cancelled and
retired, and no Acquiror Common Stock or other consideration shall be delivered
in exchange therefor.
(c) Each share of the capital stock of Acquiror issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding.
2.2 Conversion Number. For purposes of this Agreement:
-----------------
(a) The "Conversion Number" shall be equal to the quotient of the
Chronicle Common Stock Value divided by the Acquiror Common Stock Value
(rounded to the nearest one-thousandth).
(b) The "Chronicle Common Stock Value" shall equal the quotient
of the Purchase Price divided by the number of shares of Chronicle Common Stock
issued and outstanding immediately prior to the Effective Time (excluding
shares subject to Section 2.1(b) and any Dissenting Shares).
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(c) The "Acquiror Common Stock Value" shall equal the sum of the
Average Trading Price of Acquiror Class A Common Stock as of the Closing Date
plus, with respect to each class of Other Acquiror Common Stock, the product of
the Average Trading Price of such class of Other Acquiror Common Stock as of
the Closing Date times the Other Acquiror Common Stock Ratio applicable to such
class of Other Acquiror Common Stock. Notwithstanding the foregoing, if the
Acquiror Common Stock Value as calculated pursuant to the preceding sentence
and without regard to this sentence (i) is less than the Minimum Value, then
the Acquiror Common Stock Value shall be equal to the Minimum Value, and (ii)
is greater than the Maximum Value, then the Acquiror Common Stock Value shall
be equal to the Maximum Value.
(d) The "Minimum Value" shall be $20.00 and the "Maximum Value"
shall be $24.00, subject, in each case, to adjustment as provided below:
(i) If between the date of this Agreement and the
Effective Time Acquiror shall (A) pay a dividend or make a distribution on
outstanding shares of any class of Acquiror Common Stock in shares of Acquiror
Class A Common Stock, (B) subdivide the then outstanding shares of Acquiror
Class A Common Stock into a greater number of shares of Acquiror Class A Common
Stock or (C) combine the then outstanding shares of Acquiror Class A Common
Stock into a smaller number of shares of Acquiror Class A Common Stock, then
the Minimum Value and the Maximum Value then in effect shall be adjusted by
multiplying each by a fraction, the numerator of which is the number of shares
of Acquiror Class A Common Stock outstanding immediately before the event
giving rise to such adjustment and the denominator of which is the number of
shares of Acquiror Class A Common Stock outstanding immediately after such
event.
(ii) If between the date of this Agreement and the
Effective Time Acquiror shall pay a dividend or make a distribution on
outstanding shares of Acquiror Class A Common Stock in the form of cash,
securities or other assets (other than any cash dividend payable out of
earnings or any dividend or distribution in the form of Acquiror Common Stock
or in the form of any rights to acquire stock of the kind described in Section
2.7(d)), then the Minimum Value and the Maximum Value then in effect shall be
adjusted by multiplying each by a fraction, the numerator of which is the
Average Trading Price of Acquiror Class A Common Stock on the record date of
such dividend or distribution less the amount of cash or the fair market value
on such record date (as reasonably determined by Acquiror's Board of Directors)
of the portion of the securities or other assets so to be distributed that is
applicable to one share of Acquiror Class A Common Stock, and the denominator
of which is the Average Trading Price of Acquiror Class A Common Stock on such
record date.
(iii) If between the date of this Agreement and the
Effective Time Acquiror shall pay a dividend or make a distribution on
outstanding shares of any class of Acquiror's capital stock other than Acquiror
Class A Common Stock in the form of cash, securities or other assets (other
than any cash dividend payable out of earnings, any dividend payable on any
class or series of preferred stock of Acquiror in accordance with the terms
thereof, any dividend or
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distribution in the form of shares of any class of Acquiror Common Stock or of
shares of any class of Acquiror's common stock that are identical to shares of
Other Acquiror Common Stock except for voting rights and that are distributed on
outstanding shares of Acquiror's Class B Common Stock, par value $1.00 per share
(including, if applicable, any successor class or series of Acquiror's common
stock resulting from a redesignation of such Class B Common Stock in connection
with an Acquiror Restructuring, "Acquiror Class B Common Stock"), or any
dividend or distribution in any form that is paid or made pro rata on shares of
Acquiror Class A Common Stock and Acquiror Class B Common Stock as if Acquiror
Class A Common Stock and Acquiror Class B Common Stock were a single class,
treating as a pro rata dividend or distribution for this purpose any dividend or
distribution on shares of Acquiror Class B Common Stock that is paid or made in
shares of that class in the same proportion as a contemporaneous dividend or
distribution on shares of Acquiror Class A Common Stock in shares of that class)
then the Minimum Value and the Maximum Value then in effect shall be adjusted by
multiplying each by a fraction, the numerator of which is the sum of (A) the
product of the Average Trading Price of Acquiror Class A Common Stock on the
record date of such dividend or distribution and the number of shares of
Acquiror Class A Common Stock outstanding on such date and (B) the product of
the Average Trading Price of Acquiror Class B Common Stock on such record date
and the number of shares of Acquiror Class B Common Stock outstanding on such
date minus (C) the amount of cash or the fair market value on such record date
(as reasonably determined by Acquiror's Board of Directors) of the securities or
other assets so to be distributed, and the denominator of which is the sum of
(A) and (B) above.
(iv) If any event involving distributions with respect to or
any changes in the number of outstanding shares of capital stock of Acquiror
occurs as to which in the reasonable opinion of Acquiror, acting in good faith,
the other provisions of this Section 2.2(d) are not strictly applicable but the
failure to make an adjustment in the Minimum Price or the Maximum Price would
be inconsistent with the general intent and principles reflected in such
provisions, or if strictly applicable would be inconsistent with the general
intent and principles reflected in such provisions, then Acquiror, by action of
its Board of Directors, shall make an adjustment, on a basis that Acquiror's
Board of Directors determines reasonably and in good faith is consistent with
such general intent and principles. Acquiror will respond reasonably and in
good faith to any request by Chronicle that Acquiror's Board of Directors make
a determination pursuant to this Section 2.2(d)(iv). Acquiror may, at its
election, request that Chronicle approve such an adjustment, and if Chronicle,
by action of its Board of Directors, grants such approval, Acquiror shall be
deemed to have acted reasonably and in good faith in making that adjustment.
The failure of Acquiror to request such approval or of Chronicle to approve
such a request shall not be construed as in any way affecting the rights of any
of the parties.
(e) "Average Trading Price" of Acquiror Class A Common Stock,
Acquiror Class B Common Stock, or any class of Other Acquiror Common Stock
shall equal, as of a particular date, the average of the reported closing
market prices of such stock for the 20 consecutive trading days (or, if a
market for such stock first comes into being less than 23 trading days before
the date of determination, those trading days for which reported market prices
for such stock are available) ending on the third trading day prior to such
date. The closing market price for each day in question
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shall be the last sale price, regular way or, if no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system of the principal national securities exchange on which such stock is
listed or admitted to trading or, if such stock is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
no such sale price is quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the Nasdaq National Market System
("Nasdaq") or such other system then in use or, if on any such trading day such
capital stock is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by the professional market maker who has been
most active in making a market in such capital stock during the preceding 12
months. The Average Trading Price of such stock shall be appropriately adjusted
to reflect the effects of any stock dividend, stock split, reclassification,
recapitalization or combination affecting such stock, the record date, ex-
dividend date or similar date of which occurs during the period in which the
Average Trading Price is to be determined or thereafter prior to the Effective
Time.
(f) The "Purchase Price" means $565,580,146 reduced by the sum of
(A) the product of the Per Subscriber Reduction Amount times the amount, if
any, by which the number of Basic Subscribers of Western as of the Closing Date
is less than the Subscriber Target as of the Closing Date (the "Subscriber
Shortfall"), (B) the aggregate principal amount of the Retained Chronicle Debt
immediately prior to the Effective Time, and (C) the aggregate amount of
interest accrued but unpaid on the Retained Chronicle Debt immediately prior to
the Effective Time.
2.3 Definitions Relating to Subscribers. For purposes of this
-----------------------------------
Agreement:
(a) The "Subscriber Target" and the "Per Subscriber Reduction
Amount" shall be (i) if the Closing Date is on the first day of a calendar
month, the number of Basic Subscribers and the dollar amount set forth below
next to the last day of the calendar month immediately preceding the Closing
Date, (ii) if the Closing Date is on the last day of a calendar month, the
number of Basic Subscribers and the dollar amount set forth below next to the
last day of the calendar month on which the Closing Date occurs, or (iii) if
the Closing Date is on a day other than the first day or the last day of a
calendar month, the "Subscriber Target" shall be the sum of the number of Basic
Subscribers set forth below next to the last day of the calendar month
immediately preceding the calendar month in which the Closing occurs plus the
pro rata amount of the difference between the number of Basic Subscribers set
forth below next to the last day of the calendar month in which the Closing
occurs, and the number of Basic Subscribers set forth below next to the last
day of the calendar month immediately preceding the calendar month in which the
Closing occurs and the "Per Subscriber Reduction Amount" shall be the dollar
amount set forth below next to the last day of the calendar month immediately
preceding the calendar month in which the Closing occurs minus the pro rata
amount of the difference between the dollar amount set forth below next to the
last day of the calendar month in which the Closing occurs and the dollar
amount set forth below next to the last day of the calendar month immediately
preceding the calendar month in which the Closing occurs.
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MONTH SUBSCRIBER TARGET PER SUBSCRIBER
December 31, 1995 331,000 Basic Subscribers $1,707
January 31, 1996 331,400 Basic Subscribers $1,705
February 29, 1996 331,700 Basic Subscribers $1,705
March 31, 1996 332,000 Basic Subscribers $1,703
(b) "Basic Subscribers" means, as of any date of determination,
the sum of Household Basic Subscribers and Equivalent Basic Subscribers;
provided, however, that in no event shall the number of Broadcast Basic
Subscribers included in the calculation of the number of Basic Subscribers
exceed 11,700.
(c) "Household Basic Subscribers" means, as of any date of
determination, the total number of households subscribing on such date to cable
television services offered by Western and paying standard monthly service fees
and charges imposed by Western for Broadcast Basic Service, other than:
(i) "second outlets," as such term is commonly understood
in the cable television industry;
(ii) commercial and bulk subscribers;
(iii) any subscriber who is more than 60 days past due
(measured from the first day of the monthly billing period during which the
service to which such ▇▇▇▇▇▇▇▇ relate is provided) in the payment of any amount
due to Western in excess of $5.00;
(iv) any subscriber who has not paid at least one full
month's payment for Broadcast Basic Service before the Closing Date, except
with respect to subscribers pending connection to the cable television services
offered by Western in accordance with the last paragraph of this Section
2.3(c);
(v) any subscriber who is pending disconnection for any
reason other than non-payment for cable service and 10% of subscribers who are
pending disconnection due to non-payment for cable service; and
(vi) any subscriber who was solicited by Western within 90
days prior to the Closing Date to purchase any cable television services by any
promotions or by offers of discounts other than those that are consistent with
the promotions and offers of discount of Western as set forth on Schedule
2.3(c).
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After making the adjustments described in clauses (i) through (vi) above, there
shall be added to the total number of Household Basic Subscribers as so
determined 80% of subscribers pending connection to the cable television
services offered by Western. Pending disconnections, pending non-pay
disconnections and pending connections shall be determined in accordance with
Western's policies and practices for such activities, as described on Schedule
2.3(c).
(d) "Broadcast Basic Service" means, with respect to any
subscriber of Western, the lowest tier of cable television service offered to
such subscriber by Western.
(e) "Broadcast Basic Subscribers" means, as of any date of
determination, the number of Household Basic Subscribers subscribing to
Broadcast Basic Service who do not subscribe to Expanded Basic Service.
(f) "Equivalent Basic Subscribers" means, as of any date of
determination, the sum of the quotients obtained for each System of Western by
dividing (i) the amount billed by Western to commercial or bulk subscribers of
such System for the sale of Broadcast Basic Service or Expanded Basic Service,
whether on a discounted or undiscounted basis, during the most recent calendar
month ended prior to the date of determination, by (ii) the average monthly
rate of such System for such month, where the "average monthly rate" of a
System as of any month equals the sum of:
(A) the total revenues received by Western during such
month from the sale of Broadcast Basic Service to Household Basic Subscribers
of such System divided by the number of Household Basic Subscribers of such
System as of the last day of such month, plus
(B) the total revenues received by Western during such
month from the sale of Expanded Basic Service (excluding any charge for
Broadcast Basic Service) to Household Basic Subscribers of such System divided
by the number of Household Basic Subscribers of such System as of the last day
of such month who purchase Expanded Basic Service.
For purposes of Section 2.3(f)(i) above, the amount billed by Western to
any commercial or bulk subscriber shall exclude:
(i) ▇▇▇▇▇▇▇▇ in excess of a single month's charges for such
subscriber's account;
(ii) all ▇▇▇▇▇▇▇▇ to any subscriber who is more than 60 days
past due (measured from the first day of the monthly billing period during
which the service to which such ▇▇▇▇▇▇▇▇ relate is provided) in the payment of
any amount due to Western in excess of $5.00;
(iii) that portion of the ▇▇▇▇▇▇▇▇ to any subscriber that
represents an installation or other non-recurring charge, a charge for
equipment or for any outlet or connection
- 9 -
other than the first outlet or first connection in any single family household
or in any individual apartment or rental unit of a bulk account, a charge for
any tiered service other than Expanded Basic Service whether or not included
within a premium programming service, or a pass-through charge for sales taxes,
line-itemized franchise fees and charges, and similar charges;
(iv) all ▇▇▇▇▇▇▇▇ to a subscriber who has not paid for at
least one full month's service, except with respect to subscribers pending
connection to the cable television services offered by Western in accordance
with the last paragraph of this Section 2.3(f);
(v) all ▇▇▇▇▇▇▇▇ to any subscriber who is pending
disconnection for any reason other than non-payment for cable service and 10%
of all ▇▇▇▇▇▇▇▇ to subscribers who are pending disconnection due to non-payment
for cable service; and
(vi) all ▇▇▇▇▇▇▇▇ to any subscriber who was solicited by
Western within 90 days prior to the Closing Date to purchase any cable
television services by any promotions or by offers of discounts other than
those that are consistent with the promotions and offers of discounts of
Western as set forth on Schedule 2.3(c).
After making the adjustments described in clauses (i) through (vi) above, there
shall be added to the total number of Equivalent Basic Subscribers as so
determined 80% of ▇▇▇▇▇▇▇▇ to commercial and bulk subscribers (determined in
accordance with the provisions of this Section 2.3(f)) pending connection to
the cable television services offered by Western. Pending disconnections,
pending non-pay disconnections and pending connections shall be determined in
accordance with Western's policies and practices for such activities as
described on Schedule 2.3(c).
(g) "Expanded Basic Service" means, with respect to any
subscriber of any System of Western, the tier of cable television service
offered to such subscriber by Western that includes ESPN, MTV, and CNN, or any
of such programming services offered on such System, but excludes Broadcast
Basic Service.
2.4 Provisions Relating to Debt.
---------------------------
(a) For purposes of this Agreement, "Retained Chronicle Debt"
means indebtedness and liabilities of Chronicle immediately prior to the
Effective Time, that have not been assumed by Spinco, in the aggregate
principal amount of not less than $295,000,000 nor more than $305,000,000 as
determined by Chronicle in its sole discretion, or such lesser or greater
amount as determined by mutual agreement of Chronicle and Acquiror, and that
shall consist of:
(i) the obligations of Chronicle (as successor to Inland
Valley Cablevision) to make payments pursuant to Section 3.1(b) of the Asset
Purchase Agreement, dated as of February 29, 1988, between Inland Valley
Cablevision and V U West Communications (the "V U West Agreement"), and
pursuant to Section 2 of the Noncompetition Agreement, dated as of March 11,
1988, among Inland Valley Cablevision, V U West Communications, and
- 10 -
▇▇▇▇▇▇/Bedford Properties, Inc. (for purposes of this Agreement, the aggregate
principal amount of such obligations as of the Effective Time shall be the
present value thereof as of the Effective Time, calculated at a discount rate of
8.62% per year, compounded annually);
(ii) the capitalized portion of obligations of Chronicle
under capital leases;
(iii) indebtedness and other liabilities incurred by
Chronicle after the date of this Agreement and described in Section 6.1(d)(iv),
Section 6.1(d)(v) or Section 6.1(e)(ii);
(iv) all Acquiror Loans made pursuant to Section 3.3(a);
(v) any indebtedness incurred by Chronicle pursuant to
Section 3.3(c);
(vi) Existing Chronicle Debt that is due and payable in full
or is permitted to be prepaid in full at or immediately after the Closing, as
identified by Chronicle in the schedule to be delivered to Acquiror prior to
Closing pursuant to Section 2.5(a), together with any premium, penalty, or
other fee or charge with respect to such Existing Chronicle Debt that is
required to be included in Retained Chronicle Debt pursuant to Section 3.3(b);
and
(vii) any premium, penalty, or other fee or charge paid by
Acquiror to any holder of any indebtedness or liability described in (iii) or
(vi) above, upon the repayment thereof within 60 days after the Closing Date,
other than any premium, penalty, or other fee or charge that was included in
Retained Chronicle Debt pursuant to Section 3.3(b) or was not required by the
terms of any instrument establishing or evidencing such Existing Chronicle Debt
as in effect at the Effective Time.
(b) For purposes of this Agreement, "Existing Chronicle Debt"
means any of the following indebtedness:
(i) indebtedness of Chronicle arising under the Credit
Agreement, dated as of December 12, 1986, among Chronicle, the financial
institutions named therein as "Banks," and ▇▇▇▇▇ Fargo Bank, National
Association, as agent for such Banks, as amended by Amendment No. 1 thereto
dated November 20, 1987, Amendment No. 2 thereto dated March 2, 1990, Amendment
No. 3 thereto dated December 20, 1991, Amendment No. 4 thereto dated November
1, 1993, and Amendment No. 5 thereto dated as of June 14, 1995;
(ii) indebtedness of Chronicle arising under the Note
Agreement, dated as of March 1, 1987, as amended by letter agreements dated
November 1, 1993 and May 15, 1995, between Chronicle and the "Purchasers" named
therein, and the "Series A Notes," the "Series B Notes," the "Series C Notes,"
and the "Series D Notes," as defined therein; and
(iii) indebtedness of Chronicle arising under the Note
Purchase Agreements, each dated as of January 1, 1986, as amended and restated
by Agreements, each dated
- 11 -
as of March 1, 987, and as amended by letter agreements dated November 1, 1993
and May 15, 1995, between Chronicle and the "Purchasers" named therein, and the
"11.165% Notes," as defined therein.
2.5 Procedures for Determining Purchase Price.
-----------------------------------------
(a) At least five business days prior to the Closing Date,
Chronicle shall deliver or cause to be delivered to Acquiror a schedule
identifying the Existing Chronicle Debt to be included in the Retained
Chronicle Debt, together with a calculation of any premium, penalty, or other
fee or charge with respect to such Existing Chronicle Debt that is required to
be included in Retained Chronicle Debt pursuant to Section 3.3(b), and setting
forth Chronicle's reasonable and good faith estimates of the Retained Chronicle
Debt, the number of Basic Subscribers in each of Western's Systems as of the
Closing Date, and the Purchase Price, all determined as of the Closing Date.
The Purchase Price as determined on an estimated basis in accordance with the
preceding provisions of this Section 2.5(a) is referred to in this Agreement as
the "Estimated Purchase Price." Such schedule shall be accompanied by a
certificate, executed on behalf of Chronicle by its chief financial officer, to
the effect that the estimates contained therein were made in good faith and on
a reasonable basis. Chronicle shall make available to Acquiror prior to
Closing all information that Acquiror reasonably requests supporting
Chronicle's estimate of the Retained Chronicle Debt and the number of Basic
Subscribers as of the Closing Date.
(b) Not later than 60 days following the Closing Date, Acquiror
shall deliver or cause to be delivered to Spinco a schedule substantially in
the form of the schedule described in Section 2.5(a) setting forth Acquiror's
determination of Retained Chronicle Debt (including any premium, penalty, or
other fee or charge paid by Acquiror after the Closing Date and required to be
included in Retained Chronicle Debt pursuant to Section 2.4(a)(vii)), the
number of Basic Subscribers in each of Western's Systems, and the Purchase
Price. Such schedule shall be accompanied by a certificate, executed on behalf
of Acquiror by a vice president of Acquiror, that such calculations were
prepared in good faith and on a reasonable basis. Acquiror shall make
available to Spinco all information that Spinco reasonably requests supporting
Acquiror's calculation of the Retained Chronicle Debt and the number of Basic
Subscribers as of the Closing Date.
(c) Following receipt of the schedule and other information
referred to in Section 2.5(b), Spinco shall have 20 business days to review
such information and to notify Acquiror in writing of any disagreement with
Acquiror's calculations, which notice shall specify in reasonable detail the
nature and extent of such disagreement.
(d) If Spinco fails to provide a written notice of disagreement
with Acquiror's calculations of Retained Chronicle Debt, numbers of Basic
Subscribers, and the Purchase Price within the period specified in Section
2.5(c), Acquiror's calculations thereof in the schedule delivered pursuant to
Section 2.5(b) shall be final, conclusive, and nonappealable.
- 12 -
(e) If Spinco provides a written notice of disagreement with
Acquiror's calculations within the period specified in Section 2.5(c), Acquiror
and Spinco shall negotiate in good faith to resolve any such dispute for a
period of 30 days following the notification thereof. At the end of such period,
if the dispute has not been resolved or the negotiation period has not been
extended by agreement between Spinco and Acquiror, the dispute shall be referred
to an independent public accounting firm selected by agreement of Spinco and
Acquiror (or, if Spinco and Acquiror cannot agree to the selection of such a
firm within ten days after Spinco shall have provided a notice of disagreement,
an independent public accounting firm selected by agreement of KPMG Peat Marwick
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.), which firm shall render its decision as to whether
Acquiror's position is correct, Spinco's position is correct, or some position
between the two is correct (together with an explanation of the basis therefor)
to the parties to the dispute not later than 45 days following submission of the
dispute to it, which decision shall be final, conclusive, and nonappealable. The
costs of such accounting firm shall be paid one-half by Acquiror and one-half by
Spinco.
(f) Except as otherwise provided herein, Chronicle and Acquiror
shall make the calculations required pursuant to this Section 2.5 in a manner
consistent with the accounting practices and methods utilized by Chronicle in
the preparation of its financial statements as of and for the period ended
December 31, 1994.
2.6 Escrowed Shares.
---------------
(a) The "Escrowed Shares" means a portion of the shares deposited
by Acquiror with the Exchange Agent in accordance with Section 2.8(a)
consisting of (i) that number of shares of Acquiror Class A Common Stock equal
to the quotient of the sum of $15,000,000 plus the amounts used for purposes of
calculating the Estimated Purchase Price of (A) any reduction to the Purchase
Price attributable to the Subscriber Shortfall and (B) any premium, penalty, or
other fee or charge described in Section 2.4(a)(vii) included in the estimate
of the aggregate principal amount of the Retained Chronicle Debt immediately
prior to the Effective Time divided by the Acquiror Common Stock Value, and
(ii) with respect to each class of Other Acquiror Common Stock, if any, that
number of shares of such class of Other Acquiror Common Stock equal to the
product of (A) the quotient of the sum of $15,000,000 plus the amounts used for
purposes of calculating the Estimated Purchase Price of (1) any reduction to
the Purchase Price attributable to the Subscriber Shortfall and (2) any
premium, penalty, or other fee or charge described in Section 2.4(a)(vii)
included in the estimate of the aggregate principal amount of the Retained
Chronicle Debt immediately prior to the Effective Time divided by the Acquiror
Common Stock Value times (B) the Other Acquiror Common Stock Ratio applicable
to such class of Other Acquiror Common Stock. Any cash dividends or other
taxable distributions payable with respect to the Escrowed Shares during the
period of time that the Escrowed Shares are held in escrow by the Exchange
Agent shall be for the benefit of the shareholders of Chronicle in accordance
with their proportional interests in the Acquiror Common Stock to be issued in
the Merger pursuant to this Agreement, and the shareholders of Chronicle shall
include any such taxable dividends or distributions in their gross income for
all purposes related to income taxes. Throughout the period that the Escrowed
Shares are held in escrow by the Exchange Agent, the shareholders of Chronicle
shall be entitled to vote
- 13 -
such Escrowed Shares in accordance with their proportional interests in the
Acquiror Common Stock to be issued in the Merger pursuant to this Agreement. The
Escrowed Shares shall be held in escrow by the Exchange Agent in accordance with
Section 2.8 pending final determination of the Purchase Price and distribution
of certificates representing that portion, if any, of the Escrowed Shares
required to be delivered to the shareholders of Chronicle entitled thereto, as
provided in Section 2.8(b) below.
(b) If the Purchase Price as finally determined pursuant to
subsections (b) - (f) of Section 2.5 is less than the Estimated Purchase Price,
the Exchange Agent shall deliver to Acquiror certificates evidencing that
portion of the Escrowed Shares in excess of the number of Escrowed Shares
remaining to be delivered by the Exchange Agent in accordance with Section
2.8(b), taking into account all shares of Acquiror Common Stock previously
delivered in exchange for Chronicle Stock Certificates in accordance with
Section 2.8(b)(i), and all Escrowed Shares evidenced by the certificates
delivered to Acquiror pursuant to this sentence shall be cancelled, together
with all non-taxable distributions payable with respect to the Escrowed Shares.
Any cash dividends or other taxable distributions payable with respect to such
Escrowed Shares during the period of time that the Escrowed Shares are held in
escrow by the Exchange Agent shall continue to be for the benefit of the
shareholders of Chronicle in accordance with Section 2.6(a) notwithstanding the
cancellation of such Escrowed Shares. If the Purchase Price is greater than
the sum of the Estimated Purchase Price plus the amounts used for purposes of
calculating the Estimated Purchase Price of (i) any reduction to the Purchase
Price attributable to the Subscriber Shortfall and (ii) any premium, penalty,
or other fee or charge described in Section 2.4(a)(vii) included in the
estimate of the aggregate principal amount of the Retained Chronicle Debt
immediately prior to the Effective Time, Acquiror shall deposit with the
Exchange Agent for delivery to the shareholders of Chronicle entitled thereto
certificates representing the number of shares of each class of Acquiror Common
Stock equal to the difference between (x) the number of shares of such class of
Acquiror Common Stock issuable in the Merger pursuant to this Agreement upon
final determination of the Purchase Price and (y) the number of shares of such
class of Acquiror Common Stock previously deposited with the Exchange Agent
pursuant to Section 2.8(a).
2.7 Alternative Merger Consideration.
--------------------------------
(a) If Acquiror approves a dividend or other distribution to all
holders of Acquiror Class A Common Stock of any shares of any class of common
stock of Acquiror other than Acquiror Class A Common Stock, on terms not
requiring such holders to deliver any consideration therefor and with respect
to which the record date, ex-dividend date or similar date occurs between the
date of this Agreement and the Closing Date (an "Acquiror Restructuring"),
then, such other class of common stock of Acquiror shall constitute "Other
Acquiror Common Stock," subject to Section 2.7(c), and the consideration to be
received by the holders of Chronicle Common Stock in the Merger pursuant to
Section 2.1(a) shall include a combination of Acquiror Class A Common Stock and
Other Acquiror Common Stock as provided in Section 2.1(a).
- 14 -
(b) The "Other Acquiror Common Stock Ratio" applicable to any
class of Other Acquiror Common Stock shall be the quotient of (i) the number of
shares, rounded to the nearest one-thousandth of a share, of Other Acquiror
Common Stock that a holder of one share of Acquiror Class A Common Stock on the
record date, ex-dividend date or other similar date for the Acquiror
Restructuring would hold or have the right to receive as of the Effective Time
pursuant to this Agreement if such holder had participated in the distribution
of the Other Acquiror Common Stock to the fullest extent permitted by Acquiror
and had continued to hold any Other Acquiror Common Stock received by such
holder in the Acquiror Restructuring until the Effective Time, divided by (ii)
the number of shares, rounded to the nearest one-thousandth of a share, of
Acquiror Class A Common Stock that a holder of one share of Acquiror Class A
Common Stock on the record date, ex-dividend date or other similar date for the
Acquiror Restructuring would hold or have the right to receive as of the
Effective Time pursuant to this Agreement if such holder continued to hold such
Acquiror Class A Common Stock until the Effective Time, in each case taking
into account as appropriate any stock dividend, stock split, reclassification,
recapitalization, or combination with respect to any Acquiror Common Stock
prior to the Effective Time.
(c) Notwithstanding the provisions of Section 2.7(a), shares of
any class of stock of Acquiror shall not constitute Other Acquiror Common Stock
if Acquiror has not completed the Acquiror Restructuring with respect to such
stock prior to the Closing Date or if Chronicle notifies Acquiror in writing at
any time prior to the Closing Date that Chronicle has determined reasonably and
in good faith that Chronicle is unable to obtain from the IRS an advance letter
ruling as contemplated by Section 7.10 as a result of inclusion of such class
of stock in the consideration to be received by the holders of Chronicle Common
Stock in the Merger pursuant to this Agreement or that Chronicle is unable to
obtain an opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, special tax counsel
to Chronicle, in form and substance reasonably satisfactory to Chronicle
substantially to the effect that such class of stock constitutes common stock
of Acquiror for purposes of Section 368(a) of the Code. For purposes of the
foregoing, Chronicle shall permit Acquiror to participate in the IRS ruling
process in the manner described in Section 7.10 and shall permit Acquiror to
discuss the tax opinion with tax counsel for Chronicle.
(d) With respect to any stock or rights offering made to the
holders of Acquiror Class A Common Stock by Acquiror or any Affiliate of
Acquiror on or before the Closing Date (other than as described in Section
2.7(a)), all (but not less than all) of the holders of Chronicle Common Stock
shall, with respect to the shares of Acquiror Class A Common Stock that are to
be issued to them at the Effective Time, be entitled to participate at the sole
discretion of Chronicle for all purposes, and subject to all requirements and
limitations of such offering, as if they were holders of Acquiror Class A
Common Stock as of the relevant time, and to receive the benefits of such
offering effective as of the Effective Time. Notwithstanding the foregoing,
Chronicle will not elect to have the holders of Chronicle Common Stock
participate in such offering if Chronicle believes such participation would
prevent Chronicle from obtaining from the IRS the advance letter ruling
contemplated by Section 7.10 or would prevent Chronicle from obtaining the
opinion of counsel contemplated by Section 8.2(f).
- 15 -
2.8 Exchange of Certificates.
------------------------
(a) Exchange Agent. Prior to the Closing Date, Acquiror
--------------
shall select a bank or trust company reasonably acceptable to Chronicle to act
as exchange agent (the "Exchange Agent") in connection with the surrender of
certificates that, immediately prior to the Effective Time, evidenced
outstanding shares of Chronicle Common Stock ("Chronicle Stock Certificates").
Prior to the Closing Date, Acquiror shall deposit with the Exchange Agent for
exchange in accordance with this Section 2.8 certificates evidencing the number
of shares of Acquiror Common Stock to be issued in the Merger pursuant to this
Agreement, assuming that the Purchase Price were to be equal to the sum of the
Estimated Purchase Price plus the amounts used for purposes of calculating the
Estimated Purchase Price of (i) any reduction to the Purchase Price attributable
to the Subscriber Shortfall and (ii) any premium, penalty, or other fee or
charge described in Section 2.4(a)(vii) included in the estimate of the
aggregate principal amount of the Retained Chronicle Debt immediately prior to
the Effective Time, which shares of Acquiror Common Stock (including the
Escrowed Shares) shall be deemed to be issued at the Effective Time. At and
following the Effective Time, Acquiror shall deliver to the Exchange Agent such
cash as may be required from time to time to make payments of cash in lieu of
fractional shares in accordance with Section 2.10.
(b) Exchange. As soon as practicable after the Effective
--------
Time, Acquiror shall cause the Exchange Agent to mail to each Person who was a
holder of record of Chronicle Common Stock at the Effective Time, other than
Chronicle, (i) a letter of transmittal (which shall specify that delivery shall
be effective, and risk of loss and title to any Chronicle Stock Certificates
shall pass, only upon delivery of the Chronicle Stock Certificates to the
Exchange Agent and shall be in such form and shall have such other provisions
that are specified by Acquiror and reasonably acceptable to Chronicle or, to
the extent that the form and provisions of the letter of transmittal are
specified by Acquiror after the Effective Time, Spinco) and (ii) instructions
for use in effecting the surrender of Chronicle Stock Certificates in exchange
for certificates representing Acquiror Common Stock (together with any dividend
or distribution with respect thereto made after the Effective Time and any cash
to be paid in lieu of fractional shares pursuant to Section 2.10). Upon
surrender of a Chronicle Stock Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Acquiror and
reasonably acceptable to Spinco, together with such letter of transmittal, duly
executed, and such other documents as may be required by the Exchange Agent or
such other agent, the holder of such Chronicle Stock Certificate shall be
entitled to receive in exchange therefor certificates representing the number
of whole shares of each class of Acquiror Common Stock that such holder has the
right to receive pursuant to the terms of this Agreement (together with any
dividend or distribution with respect thereto made after the Effective Time and
any cash to be paid in lieu of fractional shares pursuant to Section 2.10), and
the Chronicle Stock Certificate so surrendered shall be cancelled. Shares of
Acquiror Common Stock (together with dividends or distributions with respect
thereto made after the Effective Time and any cash to be paid in lieu of
fractional shares pursuant to Section 2.10) shall be delivered to holders of
Chronicle Stock Certificates in accordance with the following:
- 16 -
(i) If any Chronicle Stock Certificate is presented to the
Exchange Agent accompanied by all documents required by Section 2.8(b) prior to
the final determination of the Purchase Price pursuant to Section 2.5, the
Exchange Agent shall deliver to the holder of such Chronicle Stock Certificate:
(A) certificates representing the number of whole
shares of each class of Acquiror Common Stock that such holder would have the
right to receive pursuant to the terms of this Agreement if the Purchase Price
were to equal the Estimated Purchase Price specified by Chronicle in the
schedule delivered by it pursuant to Section 2.5(a), less such holder's
proportionate share of the Escrowed Shares (together with dividends or
distributions with respect to the shares described in this paragraph (A) made
after the Effective Time); and
(B) upon the final determination of the Purchase
Price pursuant to Section 2.5, certificates representing the number of whole
shares of each class of Acquiror Common Stock that such holder has the right to
receive pursuant to the terms of this Agreement (including Escrowed Shares)
less the number of shares evidenced by the certificates delivered pursuant to
paragraph (A) (together with dividends or distributions with respect to the
shares described in this paragraph (B) made after the Effective Time, such
holder's proportional interest in any cash dividends or other taxable
distributions paid with respect to any Escrowed Shares that are returned to
Acquiror and cancelled pursuant to Section 2.6(b), and any cash to be paid in
lieu of fractional shares pursuant to Section 2.10).
(ii) If any Chronicle Stock Certificate is presented to the
Exchange Agent accompanied by all documents required by Section 2.8(b) after
the final determination of the Purchase Price pursuant to Section 2.5, the
Exchange Agent shall deliver to the holder of such Chronicle Stock Certificate
upon the presentation of such Chronicle Stock Certificate and other documents,
certificates representing the number of whole shares of each class of Acquiror
Common Stock that such holder has the right to receive pursuant to the terms of
this Agreement (together with dividends or distributions with respect thereto
made after the Effective Time, such holder's proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
and any cash to be paid in lieu of fractional shares pursuant to Section 2.10).
(iii) The number of shares of each class of Acquiror Common
Stock that each holder of a Chronicle Stock Certificate shall have the right to
receive pursuant to this Agreement shall not be affected by any change in the
Average Trading Price of any class of Acquiror Common Stock between the time
that the Acquiror Common Stock Value is determined in accordance with Section
2.2(c) and the date on which certificates evidencing any shares of Acquiror
Common Stock are delivered to such holder pursuant to this Section 2.8.
(c) Transfers of Chronicle Common Stock. In the event of a
-----------------------------------
transfer of ownership of Chronicle Common Stock that is not registered in the
transfer records of Chronicle, a certificate representing the proper number of
shares of each class of Acquiror Common Stock may
- 17 -
be issued to a Person other than the Person in whose name the surrendered
Chronicle Stock Certificate is registered if the Chronicle Stock Certificate
representing such Chronicle Common Stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence reasonably satisfactory to Acquiror that any applicable stock
transfer tax has been paid.
(d) Certificates Not Exchanged. After the Effective Time,
--------------------------
each outstanding Chronicle Stock Certificate (other than certificates for
shares described in Section 2.1(b)) shall, until surrendered for exchange in
accordance with this Section 2.8, be deemed for all purposes to evidence
ownership of the number of whole shares of each class of Acquiror Common Stock
into which the shares of Chronicle Common Stock (which, prior to the Effective
Time, were represented thereby) shall have been converted in accordance with
Section 2.1, together with the right to receive any dividend or distribution
with respect thereto made after the Effective Time, such holder's proportional
interest in any cash dividends or other taxable distributions paid with respect
to any Escrowed Shares that are returned to Acquiror and cancelled pursuant to
Section 2.6(b), and any cash to be paid in lieu of fractional shares pursuant
to Section 2.10.
(e) Expenses. Except as otherwise expressly provided herein,
--------
Acquiror shall pay all charges and expenses, including those of the Exchange
Agent, in connection with the exchange of shares of Acquiror Common Stock for
shares of Chronicle Common Stock, except for any charges or expenses that are
otherwise solely the liability of one or more holders of Chronicle Common
Stock.
(f) Unclaimed Stock. Any Acquiror Common Stock deposited
---------------
with the Exchange Agent that remains unclaimed by the former shareholders of
Chronicle after six months following the Effective Time shall be delivered to
Acquiror, upon demand, and any former shareholders of Chronicle who have not
then complied with the instructions for exchanging their Chronicle Stock
Certificates shall thereafter look only to Acquiror for exchange of Chronicle
Stock Certificates and for any dividend or distribution with respect thereto
made after the Effective Time, such holder's proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
and any cash to be paid in lieu of fractional shares pursuant to Section 2.10.
2.9 Distribution With Respect to Shares Represented by Unsurrendered
-----------------------------------------------------------------
Chronicle Stock Certificates. No dividends or other distributions declared
----------------------------
or made after the Effective Time with respect to any class of Acquiror Common
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Chronicle Stock Certificate with respect to the shares of
any class of Acquiror Common Stock issuable upon surrender thereof until the
holder of such Chronicle Stock Certificate shall surrender such Chronicle Stock
Certificate in accordance with Section 2.8. Subject to the effect of
applicable law, following surrender of any such Chronicle Stock Certificate,
Acquiror shall pay or cause to be paid, without interest, to the record holder
of certificates representing shares of such class of Acquiror Common Stock
issued in exchange therefor, (i) at the time of such surrender, the amount of
cash in lieu of fractional shares to which such holder is entitled
- 18 -
pursuant to Section 2.10, such holder's proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
and the amount of dividends or other distributions by Acquiror with a record
date after the Effective Time theretofore paid with respect to such whole shares
of such class of Acquiror Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions by Acquiror with a record
date after the Effective Time but prior to surrender of such Chronicle Stock
Certificate and a payment date subsequent to such surrender payable with respect
to such whole shares of such class of Acquiror Common Stock.
2.10 No Fractional Shares.
--------------------
(a) Cash Payment in Lieu of Fractional Shares. No
-----------------------------------------
certificates or scrip representing fractional shares of any class of Acquiror
Common Stock shall be issued upon the surrender of Chronicle Stock Certificates
pursuant to Section 2.8. Such fractional share interests shall not entitle the
owner thereof to any rights as a security holder of Acquiror. In lieu of any
such fractional shares of any class of Acquiror Common Stock, each holder of
Chronicle Common Stock entitled to receive shares of such class of Acquiror
Common Stock in the Merger pursuant to this Agreement, upon surrender of a
Chronicle Stock Certificate for exchange pursuant to Section 2.8, shall be
entitled to receive an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying the Average Trading Price of such class
of Acquiror Common Stock as of the Closing Date by the fractional interest in
such class of Acquiror Common Stock to which such holder would otherwise be
entitled (after taking into account all shares of Chronicle Common Stock held
of record by such holder immediately prior to the Effective Time).
(b) Deposit with Exchange Agent. As soon as practicable
---------------------------
after the determination of the amount of cash, if any, to be paid to holders of
Chronicle Common Stock in lieu of any fractional share interests, Acquiror
shall promptly deposit with the Exchange Agent cash in the required amounts and
the Exchange Agent will mail such amounts without interest to such holders;
provided, however, that no such amount will be paid to any holder with respect
to any Chronicle Stock Certificate prior to the surrender by such holder of
such Chronicle Stock Certificate.
2.11 No Liability. None of Acquiror, Spinco, Chronicle, or the
------------
Exchange Agent will be liable to any holder of shares of Chronicle Common Stock
for any shares of Acquiror Common Stock, dividends, or distributions with
respect thereto or cash payable in lieu of fractional shares delivered to a
state abandoned property administrator or other public official pursuant to any
applicable abandoned property, escheat, or similar law.
2.12 Lost Certificates. If any Chronicle Stock Certificate shall
-----------------
have been lost, stolen, or destroyed, the Exchange Agent or Acquiror will issue
in exchange for such lost, stolen, or destroyed Chronicle Stock Certificate the
shares of Acquiror Common Stock (and any dividend or distribution with respect
thereto made after the Effective Time and any cash payable in lieu of
fractional shares pursuant to Section 2.10) deliverable in respect thereof as
determined in accordance with the terms of this Agreement, subject to the
condition that the Person to whom the Acquiror Common Stock
- 19 -
(and any dividend or distribution with respect thereto made after the Effective
Time and any cash payable in lieu of fractional shares pursuant to Section 2.10)
is to be issued, shall have (i) delivered to Acquiror an affidavit claiming such
Chronicle Stock Certificate to be lost, stolen, or destroyed, and (ii) given
Acquiror an indemnity satisfactory to Acquiror against any claim that may be
made against Acquiror with respect to the Chronicle Stock Certificate alleged to
have been lost, stolen, or destroyed.
2.13 Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, shares of Chronicle Common Stock outstanding immediately prior
to the Effective Time that are held by holders of such shares who have not
voted in favor of the Merger or consented thereto in writing and who have
demanded appraisal rights with respect thereto in accordance with Section
78.471 through Section 78.502 of the Nevada Corporation Law (the "Dissenting
Shares") shall not be converted into or be exchangeable for the right to
receive Acquiror Common Stock or any dividend or distribution with respect
thereto made after the Effective Time, any proportional interest in any cash
dividends or other taxable distributions paid with respect to any Escrowed
Shares that are returned to Acquiror and cancelled pursuant to Section 2.6(b),
or any cash payable in lieu of fractional shares pursuant to Section 2.10, but
holders of Dissenting Shares shall be entitled to receive payment of the fair
value of their Dissenting Shares in accordance with the provisions of the
Nevada Corporation Law and this Section 2.13. Any shares of Chronicle Common
Stock held by a shareholder who, prior to the Effective Time, withdraws a
demand for appraisal of such shares or loses the right to appraisal as provided
in the Nevada Corporation Law shall not be considered Dissenting Shares.
Chronicle shall give Acquiror prompt notice of any written demands for
appraisal of any shares of Chronicle Common Stock, attempted withdrawals of
such demands, and any other instruments received by Chronicle pursuant to the
Nevada Corporation Law relating to shareholders' rights of appraisal. Spinco
shall make on behalf of Chronicle or Acquiror, as applicable, all payments
required by the Nevada Corporation Law to be made in respect of Dissenting
Shares, including any costs assessed against Chronicle pursuant to Section
78.502 of the Nevada Corporation Law.
ARTICLE III
OTHER TRANSACTIONS
3.1 Contribution of Assets to and Assumption of Liabilities by
-----------------------------------------------------------
Spinco.
------
(a) Contribution. Subject to the satisfaction of the
------------
conditions to Closing in Article VIII of this Agreement, other than the
condition in Section 8.1(d), and prior to the Closing, Chronicle shall, and
shall cause Spinco to, enter into a Contribution and Assumption Agreement in
the form attached to this Agreement as Exhibit A (the "Contribution
Agreement"), and, pursuant thereto, Chronicle shall contribute and transfer to
Spinco all of Chronicle's right, title, and interest in any and all assets of
Chronicle, whether tangible or intangible and whether fixed, contingent, or
otherwise, other than those assets that are used or held for use in the conduct
of the cable television business operations of Western, including (to the
extent not disposed of prior to the Contribution in accordance with the terms
of this Agreement) all assets reflected on the balance sheet of Western as
- 20 -
at December 31, 1994 included in Schedule 4.6(b); provided, however, that: (i)
Chronicle shall in any event contribute and transfer to Spinco an undivided 51%
interest and shall retain an undivided 49% interest in those assets that are to
be contributed to the joint venture to be formed by Acquiror and Spinco
pursuant to Section 7.15; (ii) Chronicle shall in any event retain (A) that
amount of cash necessary to cause the Working Capital Deficit of Western
immediately prior to the Effective Time to be zero, and (B) Chronicle's rights
created pursuant to this Agreement and the Contribution Agreement; and (iii)
Chronicle shall in any event contribute and transfer to Spinco (A) the assets
described on Schedule 3.1(a), except to the extent such assets are disposed of
prior to the Contribution, (B) the Chronicle Employee Benefit Plans and all
assets of Chronicle related to the Chronicle Employee Benefit Plans, (C) all
receivables from shareholders, directors, officers, or employees of Chronicle,
and (D) all rights of Chronicle to any payment of costs assessed against any
holder of Dissenting Shares pursuant to Section 78.502 of the Nevada
Corporation Law. The contribution and transfer by Chronicle to Spinco of the
assets to be contributed and transferred to Spinco pursuant to this Section
3.1(a) are referred to in this Agreement as the "Contribution."
(b) Definition of Working Capital Deficit. For purposes of
-------------------------------------
Section 3.1(a), "Working Capital Deficit" means, as of the Effective Time, the
amount by which (i) the sum, without duplication, of all liabilities as
determined in accordance with GAAP (other than any principal or interest on
Retained Chronicle Debt, any obligations under any capitalized leases which are
included in Retained Chronicle Debt, or any premiums, penalties, or other fees
or charges included in Retained Chronicle Debt pursuant to Section 3.3(b) or
Section 2.4(a)(vii)) of Chronicle after the Contribution, including subscriber
prepayments, unearned income, and deposits with respect to services to be
provided by the Surviving Corporation after the Effective Time, exceeds (ii)
the sum, without duplication, of cash on hand or in banks, cash equivalents,
prepaid pole attachment rentals, other prepaid rentals, subscriber receivables
and other accounts receivable (other than receivables from shareholders,
directors, officers, or employees of Chronicle, and reduced, in the case of
subscriber and other accounts receivable, by allowances for doubtful accounts),
deposits properly characterized as current assets arising in connection with
the business of Western (including deposits attributable to leases of personal
property and postage but in no event including any deposits under leases of
real property, any deposits attributable to Franchises, or any deposits or
other prepayments, however characterized, under developer agreements), and
one-half of the deposits, whether current or long-term, under leases of real
property and one-half of the deposits, whether current or long-term,
attributable to Franchises, as set forth on Schedule 3.1(b), all determined as
of the Effective Time in accordance with GAAP, consistently applied with the
preparation of the balance sheet of Western as at December 31, 1994 included in
Schedule 4.6(b) and the following provisions:
(i) allowances for doubtful accounts shall be calculated
in accordance with the accounting policies of Western used in the preparation
of the balance sheet of Western included in Schedule 4.6(b), provided that all
subscriber receivables from inactive subscribers (regardless of aging) and all
subscriber receivables from subscribers any portion of whose account in excess
of $5.00 is more than 60 days past due shall be treated as doubtful accounts;
- 21 -
(ii) accrued expenses shall include accruals for vacation
only for those employees of Western who become employees of the Surviving
Corporation as of the Effective Time, subject to reduction in accordance with
Section 7.14(b); and
(iii) current assets shall not include (A) any assets that
are assigned to Spinco pursuant to this Agreement or the Contribution
Agreement, (B) any assets to the extent that Acquiror will not realize the book
value of such assets after the Closing Date (for example, prepaid insurance),
or (C) inventory;
(iv) liabilities shall not include any liability or
obligation (or any reserve for any liability or obligation) that is assumed by
Spinco or with respect to which Spinco is obligated to indemnify the Surviving
Corporation pursuant to this Agreement (including Section 7.13(a) hereof) or
the Contribution Agreement; and
(v) liabilities shall include any obligation of Chronicle
to make payments pursuant to Section 10.1 of the V U West Agreement arising or
relating to the period prior to the Effective Time.
(c) Issuance of Shares and Assumption of Liabilities. In
------------------------------------------------
consideration for the Contribution, Spinco shall, concurrently with the
Contribution,
(i) issue and deliver to Chronicle a number of validly
issued, fully paid, and nonassessable shares of Common Stock, $0.01 par value
per share, of Spinco ("Spinco Common Stock") equal to the number of shares of
Chronicle Common Stock then outstanding;
(ii) in accordance with the terms of the Contribution
Agreement, assume any and all liabilities and obligations (including
contractual obligations to be performed after the Effective Time) of Chronicle
as of the Effective Time, whether fixed, contingent, or otherwise, including
obligations and liability for withholding and payroll taxes accrued prior to
the Effective Time other than (A) the Retained Chronicle Debt and the aggregate
amount of interest accrued but unpaid on the Retained Chronicle Debt
immediately prior to the Effective Time, (B) liabilities and obligations
associated with the business operations of Western which are included in
determining the Working Capital Deficit in accordance with Section 3.1(b), (C)
obligations for the delivery of cable television service to subscribers of
Western's Systems after the Effective Time, and (D) all obligations (1) under
the Franchises and related to the FCC licenses set forth on Schedule 4.15, (2)
under the Material Contracts set forth on Schedule 4.14, (3) under agreements
with developers set forth on Schedule 3.1(c), and (4) under any contract or
agreement (other than any agreement with a developer) entered into in the
ordinary course of the operation of Western's Systems or in compliance with
Chronicle's covenants under Section 6.1, in the case of (1), (2), (3), and (4)
of this clause (D) to the extent required to be performed after the Effective
Time, and (E) Chronicle's liabilities and obligations created pursuant to this
Agreement;
- 22 -
(iii) in accordance with the terms of the Contribution
Agreement, and whether or not specifically included in clause (B) of Section
3.1(c)(ii), assume (A) all liabilities of the Chronicle Employee Benefit Plans
and all liabilities with respect to employee claims arising or relating to the
period prior to the Effective Time under any employee medical and dental plans
of Chronicle, including employee bonuses, executive deferred compensation of
current or former executives of Chronicle, and any COBRA liability, (B) all
liabilities with respect to any employee of Western terminated prior to the
Effective Time and all obligations for severance pursuant to the severance
plans described on Schedule 3.1(c)(iii), (C) all liabilities of Chronicle to
indemnify any officer or director of Chronicle against liabilities based on or
arising out of any action or omission of such officer or director as an officer
or director of Chronicle at or relating to the period prior to the Effective
Time, (D) all liabilities of Chronicle with respect to workers' compensation
claims arising or relating to the period prior to the Effective Time, and (E)
all liabilities of Chronicle with respect to any claims arising or relating to
the period prior to the Effective Time for which Chronicle is self insured;
(iv) in accordance with the terms of the Contribution
Agreement, assume and undertake to discharge, satisfy, and perform all
obligations and liabilities specified in this Agreement as obligations and
liabilities of Spinco, including the obligation to make payments on behalf of
Chronicle in respect of Dissenting Shares, obligations of Chronicle under the
AAA Notes, obligations of Chronicle under the Guaranty dated as of November 29,
1988, between Chronicle and Bank of America National Trust and Savings
Association, and obligations of Chronicle to Salomon Brothers Inc and ▇▇▇▇▇▇
Capital Corporation in connection with the transactions contemplated by this
Agreement;
(v) in accordance with the terms of the Contribution
Agreement, assume all liabilities associated with business activities of
Western other than Western's cable television business, including any
businesses previously operated by Western directly or through any other Person
in which Chronicle held an ownership interest and accounted for as part of the
Western division, including Wescom Productions, Chronicle Videocassettes, and
International Video Network Partnership; and
(vi) in accordance with the terms of the Contribution
Agreement, and subject to the limitations set forth therein, agree to
indemnify, defend, and hold harmless the Surviving Corporation, from and after
the Effective Time, against losses, claims, damages, or liabilities arising
from the operations of Western prior to the Effective Time.
3.2 Distribution of Spinco Common Stock and AAA Notes. Subject to
-------------------------------------------------
the satisfaction of the conditions to Closing in Article VIII of this
Agreement, other than the condition in Section 8.1(d), and immediately
following the Contribution and prior to the Closing, Chronicle shall (a)
distribute to its shareholders, with respect to their shares of Chronicle
Common Stock, all of the shares of Common Stock, $0.01 par value per share, of
Spinco, and (b) distribute to each shareholder, with respect to such
shareholder's shares of Chronicle Common Stock, an unsecured note of Chronicle,
to be assumed by Spinco pursuant to Section 3.1(c)(iv) (the "AAA Note"), in an
- 23 -
amount equal to such shareholder's share of Chronicle's accumulated adjustments
account immediately before the Contribution and the Distribution, as determined
pursuant to Section 1367(e) of the Code. The distribution of Spinco Common
Stock to the shareholders of Chronicle as described in this Section 3.2 is
referred to in this Agreement as the "Distribution."
3.3 Prepayment of Certain Indebtedness.
----------------------------------
(a) Acquiror Loans. If (i) all conditions to Closing in
--------------
Article VIII of this Agreement, other than the conditions in Section 8.1(d) and
Section 8.2(i), shall have been satisfied, and (ii) the condition in Section
8.2(i) shall not have been satisfied solely as the result of the failure of one
or more holders of any indebtedness that, but for the repayment of such
indebtedness pursuant to this Section 3.3(a), would be Retained Chronicle Debt,
to grant any consent to the transactions contemplated by this Agreement that is
required pursuant to the instrument establishing or evidencing such
indebtedness, and (iii) Chronicle shall have the right (whether pursuant to the
instruments establishing or evidencing such indebtedness or pursuant to
agreements of the holders of such indebtedness) to prepay all such indebtedness,
then Chronicle may elect to require that Acquiror lend to Chronicle, immediately
prior to the Effective Time, the exact amount necessary to satisfy all
obligations of Chronicle to all such holders with respect to all such
indebtedness (including any premium, penalty, or other fee or charge payable to
the holders of such indebtedness as a condition to its prepayment), and
Chronicle shall use all the proceeds of such loans ("Acquiror Loans") solely to
satisfy such obligations. Any Acquiror Loan to Chronicle pursuant to this
Section 3.3(a) shall bear interest at a rate of 9% per year and shall be repaid
on demand (but no such demand shall be made by Acquiror prior to the earlier of
the Effective Time or the termination of this Agreement).
(b) Repayment Upon Merger. If (i) any instrument
---------------------
establishing or evidencing any Existing Chronicle Debt all or any portion of
which is to be included in Retained Chronicle Debt requires the consent of the
holders thereof to the transactions contemplated by this Agreement, and (ii)
the holders of such Retained Chronicle Debt require, as a condition to granting
such consent, that all such indebtedness be repaid immediately upon the
consummation of the Merger, then Acquiror agrees to prepay all such Retained
Chronicle Debt on the Closing Date immediately after the Effective Time,
together with any premium, penalty, or other fee or charge payable to the
holders of such indebtedness as a condition to its prepayment, and the amount
of any such premium, penalty, or other fee or charge shall be included in the
amount of the Retained Chronicle Debt for purposes of Section 2.4(a).
(c) Refinancing. Notwithstanding anything in this Agreement
-----------
to the contrary, Chronicle shall have the right prior to Closing to borrow
money from one or more lenders on commercially reasonable terms provided that
such borrowing may be repaid in full at or immediately after the Closing
without premium, penalty, or other fee or charge and the proceeds of any such
borrowing are used (i) to prepay any Existing Chronicle Debt, (ii) to pay any
premium, penalty, or other fee or charge payable to the holders of such
Existing Chronicle Debt as a condition to its
- 24 -
prepayment, and (iii) to pay fees and expenses incurred by Chronicle in
connection with such borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CHRONICLE
Chronicle represents and warrants to Acquiror as follows:
4.1 Organization and Authority; Binding Effect. Chronicle is a
------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada. Chronicle has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its business
as now being conducted in each jurisdiction in which the properties owned,
leased, or operated by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to have such power or
authority would not have a material adverse effect on the financial condition,
results of operations, liabilities, assets, or business of Western or, following
the Contribution, of Spinco. Any reference in this Article IV to a prospective
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western (or on any one or more of such
attributes of Western) is intended to encompass any such adverse effect that may
arise either before or after the Merger, other than an adverse effect that may
arise after the Merger as a result of the activities, actions, assets,
liabilities, or status of Acquiror or any of its Subsidiaries, either before or
after the Merger and is not intended to encompass any such adverse effect on the
business prospects of Western. Chronicle has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. All necessary corporate action
required to have been taken by or on behalf of Chronicle by applicable law, its
Restated Articles of Incorporation and Bylaws, or otherwise to authorize (a) the
approval, execution, and delivery on behalf of Chronicle of this Agreement and
(b) the performance by Chronicle of its obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement has been taken,
except that this Agreement, the Merger, the Contribution, and the other
transactions contemplated by this Agreement must be approved by the shareholders
of Chronicle in accordance with the Nevada Corporation Law and the Restated
Articles of Incorporation and Bylaws of Chronicle. Assuming that this Agreement
constitutes a valid, binding, and enforceable agreement of Acquiror, this
Agreement constitutes a valid and binding agreement of Chronicle, enforceable
against it in accordance with its terms, except (x) as enforcement of this
Agreement may be limited by applicable bankruptcy, insolvency, moratorium, or
similar laws of general application relating to or affecting creditors' rights,
including the effect of statutory or other laws regarding fraudulent conveyances
and preferential transfers, (y) as the availability of indemnification and other
remedies may be limited by federal and state securities laws, and (z) for the
limitations imposed by general principles of equity. Chronicle has made
available to Acquiror true and complete copies of its Restated Articles of
Incorporation and Bylaws.
4.2 No Breach. The execution and delivery of this Agreement by
---------
Chronicle do not, and the consummation of the transactions contemplated by this
Agreement by Chronicle will not, (a)
- 25 -
violate or conflict with the Restated Articles of Incorporation or Bylaws of
Chronicle, or (b) except as set forth on Schedule 4.2, constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third-party right of termination,
cancellation, modification, or acceleration under any Material Contract, or (c)
except as set forth on Schedule 4.2 and, with respect to Franchises, subject to
obtaining the approvals and making the filings described in Section 4.3,
constitute a breach or default (or an event that with notice or lapse of time or
both would become a breach or default) or give rise to any lien, third-party
right of termination, cancellation, modification, or acceleration under any
agreement or undertaking to which Chronicle is a party or by which it or any of
its assets is bound (other than a Material Contract), except where such breach,
default, lien, third-party right of termination, cancellation, modification, or
acceleration would not have a material adverse effect on the financial
condition, results of operations, liabilities, assets, or business of Western
or, following the Contribution, of Spinco, or (d) subject to obtaining the
approvals and making the filings described in Section 4.3, constitute a
violation of any statute, law, ordinance, rule, or regulation, except where such
violation would not have a material adverse effect on the financial condition,
results of operations, liabilities, assets, or business of Western or, following
the Contribution, of Spinco.
4.3 Governmental Consents and Approvals. Neither the execution and
-----------------------------------
delivery of this Agreement by Chronicle nor the consummation of the
transactions contemplated by this Agreement will require any consent, approval,
authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except (a) for notification pursuant to,
and expiration or termination of the waiting period under, the HSR Act, (b) for
consents from the relevant governmental entities necessary to assign or
transfer control of licenses issued to Chronicle by the FCC (including licenses
to be assigned to Spinco in the Contribution) and Franchises, and (c) where the
failure to obtain such consents, approvals, authorizations, or permits, or to
make such filings or notifications, would not have a material adverse effect on
the financial condition, results of operations, liabilities, assets, or
business of Western or, following the Contribution, of Spinco, or prevent
Chronicle from performing its obligations under this Agreement.
4.4 Recommendations of the Board of Directors. The Board of
-----------------------------------------
Directors of Chronicle has, by resolution duly adopted at a meeting duly called
and held, adopted this Agreement (as a plan of merger under Section 78.451 of
the Nevada Corporation Law) and approved the Merger, the Contribution, the
Distribution, and the other transactions contemplated by this Agreement on the
terms and conditions set forth herein, in accordance with Section 78.451 of the
Nevada Corporation Law.
4.5 Capitalization. The authorized capital stock of Chronicle
--------------
consists of 5,040,000 shares of Chronicle Common Stock. As of the date of this
Agreement, there are issued and outstanding 3,780,000 shares of Chronicle
Common Stock, and no shares of Chronicle Common Stock are held in treasury.
All issued and outstanding shares of Chronicle Common Stock are validly issued
and are fully paid and nonassessable. There are no existing options, warrants,
calls, subscriptions, or other rights or other agreements or commitments
obligating Chronicle to issue, transfer, or sell any
- 26 -
securities of Chronicle. There are no voting trusts or other agreements to which
Chronicle is a party with respect to the voting of capital stock of Chronicle.
4.6 Financial Statements.
--------------------
(a) Chronicle. The financial statements included in Schedule
---------
4.6(a) consist of audited balance sheets of Chronicle and the notes thereto as
at December 31, 1994 and December 31, 1993 and statements of income,
shareholders' equity, and cash flow and the notes thereto for the two fiscal
years ended December 31, 1994 and December 31, 1993, certified by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co., whose reports thereon are included therewith. The financial
statements of Chronicle included in Schedule 4.6(a) were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and present fairly the financial
position and the results of operations of Chronicle as of the relevant dates
thereof and for the periods covered thereby.
(b) Western. The financial statements included in Schedule
-------
4.6(b) consist of an unaudited balance sheet of Western as at December 31, 1994
and an unaudited statement of income for the fiscal year ended December 31,
1994. The financial statements of Western included in Schedule 4.6(b) fairly
present in all material respects the financial position of Western and results
of operations of Western as of the date thereof and for the period covered
thereby and, except as noted therein, were prepared on a basis consistent with
the financial statements of Chronicle included in Schedule 4.6(a).
4.7 Absence of Certain Changes. Except as set forth on Schedule
--------------------------
4.7, since December 31, 1994, there have not been any (a) material adverse
changes in the financial condition, results of operations, liabilities, assets,
or business of Western, except for material adverse changes due to general
economic or industry-wide conditions, (b) other events or conditions that,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western or, following the Contribution, of
Spinco, except for events or conditions of a general economic nature or of
industry-wide applicability, or (c) other events or conditions that,
individually or in the aggregate, have had or would reasonably be expected to
have a material adverse effect on the ability of Chronicle to perform its
obligations under this Agreement.
4.8 Absence of Undisclosed Liabilities. Except as disclosed on
----------------------------------
Schedule 4.8, Chronicle does not have any indebtedness, liability, or
obligation of a type required by GAAP to be reflected on a balance sheet that
is not reflected or reserved against in the balance sheet dated as at December
31, 1994 included in Schedule 4.6(a) other than liabilities, obligations, and
contingencies that (a) were incurred after December 31, 1994 in the ordinary
course of business, or (b) would not, individually or in the aggregate, have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western or, following the Contribution, of
Spinco, taking into account the consummation of the transactions contemplated
by this Agreement (including the
- 27 -
undertakings of Spinco described in Section 3.1(c)), and, in the case of
contingencies, the probability that the contingency would be realized and the
probable liability that would result therefrom.
4.9 Compliance With Law; Litigation.
-------------------------------
(a) Chronicle holds all licenses, franchises, certificates,
consents, permits, and authorizations from all governmental authorities
necessary for the lawful conduct of Western's business, except where the
failure to hold any of the foregoing would not have a material adverse effect
on the financial condition, results of operations, liabilities, assets, or
business of Western. To Chronicle's knowledge, Chronicle has not violated, and
is not in violation of, any such licenses, franchises, certificates, consents,
permits, or authorizations or any applicable statutes, laws, ordinances, rules,
and regulations of any governmental authorities, except where such violations
do not, and in so far as reasonably can be foreseen will not, have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Western, and, except as otherwise set forth on Schedule
4.9, as of the date of this Agreement, Chronicle has not received any notice
from any governmental or regulatory authority within three years of the date of
this Agreement of any such violation.
(b) Except as may affect the cable television industry generally,
and except as set forth on Schedule 4.9, as of the date of this Agreement, with
respect to Western, (i) there is no legal or governmental action or proceeding
pending or, to the knowledge of Chronicle, threatened against Chronicle that,
individually or in the aggregate, relates to or involves more than $100,000 or
seeks any material injunctive relief, and (ii) there are no judgments, orders,
writs, injunctions, decrees, or other similar instruments of any court or
governmental authority outstanding against Chronicle, or by which Chronicle is
bound, that, individually or in the aggregate, would have a material adverse
effect on the financial condition, results of operations, liabilities, assets,
or business of Western.
4.10 Title to Assets. Chronicle has good title to all material
---------------
assets reflected on the balance sheet of Western as at December 31, 1994
included in Schedule 4.6(b), free and clear of any lien, including any right of
any Person to acquire any interest in any System or assets of Western
(including any right of first refusal or similar right), except for (a)
landlord's liens and liens for property taxes not delinquent, (b) statutory
liens that were created in the ordinary course of business and do not
materially detract from the value of such assets or materially impair the use
thereof in the operation of the business of Western, (c) the liens listed on
Schedule 4.10, (d) leased interests in property owned by others and leased
interests in property leased to others, (e) restrictions set forth in, or
rights granted to governmental authorities as set forth in, the Franchises,
licenses issued by the FCC, or applicable law, and (f) zoning, building, or
similar restrictions, easements, rights-of-way, reservations of rights,
conditions, or other restrictions or encumbrances relating to or affecting real
property, that do not, individually or in the aggregate, materially interfere
with the use of such real property in the operation of the business of Western
as now conducted. Chronicle's assets used in the business of Western are
adequate to conduct the business of Western as now conducted in material
compliance with all Franchises, licenses, Material Contracts, and applicable
laws.
- 28 -
4.11 Real Property.
-------------
(a) Schedule 4.11 describes all real property (other than
easements, rights-of-way, and similar interests in real property) owned by
Chronicle and used in the business of Western. All of the real property listed
on Schedule 4.11 or leased by Chronicle pursuant to any lease listed on
Schedule 4.14, and all buildings, fixtures, and improvements thereon are in
good operating condition and repair (subject to normal wear and tear), except
where the failure of such property, buildings, fixtures, or improvements to be
in good operating condition would not have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Western.
(b) Except as set forth on Schedule 4.11, Chronicle holds
easements, licenses, and rights-of-way that are valid and in full force and
effect for the location, maintenance, installation, and operation of
substantially all the assets of Western upon, over, or under the property of
any other Person, except where the failure to have any such easement, license,
or right-of-way would not, individually or in the aggregate, have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Western.
4.12 Tangible Personal Property. Except as set forth in Schedule
--------------------------
4.12, all material tangible personal property of Western, taken as a whole, is
in good operating condition and repair (subject to normal wear and tear) and is
suitable for continued use in connection with the operation of the business of
Western immediately after the Merger in the manner in which it is now used,
except where the failure of such property to be in good operating condition
would not have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Western.
4.13 Intangible Property. Except as disclosed on Schedule 4.13,
-------------------
Chronicle possesses or has the right to use all material copyrights, patents,
trademarks, service marks, trade names, trade secrets, technology, and other
intangible property that is necessary for use in the operation and conduct of
the business of Western as now conducted without any known conflicts with the
rights of others that, individually or in the aggregate, would have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Western.
4.14 Material Contracts.
------------------
(a) Schedule 4.14 sets forth a complete list as of the date of
this Agreement of the following contracts, agreements, arrangements, and
commitments to which Chronicle is a party or by which Chronicle or its assets
is bound ("Material Contracts"):
(i) each lease of real property used in the business of
Western;
(ii) each agreement for the borrowing or lending of money
involving an amount in excess of $100,000 or evidencing Retained Chronicle
Debt;
- 29 -
(iii) each agreement under which Chronicle guarantees or
otherwise is liable for the obligations or liabilities of others involving an
amount in excess of $50,000;
(iv) each arrangement for the procurement of video or audio
programming carried by any System of Western (including programming carried out
of contract as indicated on Schedule 4.14(a)(iv) and including retransmission
consent agreements); and
(v) each other agreement not listed above relating to the
business of Western that involves aggregate monetary obligations in excess of
$250,000.
(b) Except as set forth in Schedule 4.14, Chronicle is not in
default under any contract, agreement, arrangement, or commitment required to
be listed on Schedule 4.14, except for defaults that in the aggregate would not
have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Western or, following the
Contribution, of Spinco. Chronicle has made available to Acquiror true and
complete copies of all contracts, agreements, arrangements, and commitments
listed on Schedule 4.14.
4.15 Cable Systems.
-------------
(a) Schedule 4.15 includes a list of the Systems of Western, the
Franchise Areas encompassed by each such System, and the approximate number of
homes passed (calculated in accordance with Western's customary practices) and
Basic Subscribers served by each Franchise Area within such System as of June
22, 1995.
(b) Schedule 4.15 also sets forth the following information
relating to the operation of each System of Western: (i) the rates charged by
Western in connection with such System for every service, level of service,
package of services, installations, and outlets or other services, equipment,
or items for which Chronicle has an established charge as of the date of this
Agreement; and (ii) the video signals carried on such System as of the date of
this Agreement.
(c) Schedule 4.15 also includes, for each System of Western, a
list of all Franchises that are necessary or required in order to operate such
System and a list of all FCC licenses held by Chronicle in connection with the
operation of such System as of the date of this Agreement. Chronicle has made
available to Acquiror true and complete copies of all Franchises listed on
Schedule 4.15. Except as disclosed on Schedule 4.15, Chronicle has not made
any commitments (oral or written) to franchise authorities with respect to
Western's Systems other than those contained in the Franchises. Except in
connection with the renewal of a Franchise or as otherwise disclosed in
Schedule 4.15, there are no proceedings pending, or, to the knowledge of
Chronicle, threatened, to cancel, modify, or change in a material way any
Franchise.
(d) Except as set forth in Schedule 4.15, no governmental
authority has any right to acquire any interest in any System or assets of
Western (including any right of first refusal or similar right), other than
rights of condemnation or eminent domain afforded by law.
- 30 -
(e) Except as set forth in Schedule 4.15, as of the date of this
Agreement, to the knowledge of Chronicle, no other Person:
(i) has been granted or has applied for the consent or
approval of any governmental authority for the installation, construction,
development, ownership, or operation of a cable television system (as defined
in the Cable Communications Policy Act of 1984, as amended) within all or part
of the geographic area served by any System of Western; or
(ii) operates, or has commenced the construction,
installation, or development of, any cable television system (as defined in the
Cable Communications Policy Act of 1984, as amended) within all or part of the
geographic area served by any System of Western, regardless of whether the
consent or approval of any governmental authority is required or has been
obtained.
(f) Except as set forth on Schedule 4.15, Chronicle has filed
with the appropriate governmental authorities all appropriate requests for
renewal under the Communications Act within 30 to 36 months prior to the
expiration of each Franchise.
(g) Other than requests for network non-duplication, syndicated
exclusivity protection, and sports blackout requirements, and other than as set
forth in Schedule 4.15, as of the date of this Agreement, Chronicle has not
received any written requests, notices, or demands from the FCC, any other
governmental authority, or any other Person, challenging or questioning the
legal rights of Chronicle to operate any System or carry any broadcast
television signal or requesting signal carriage pursuant to the FCC's
"must-carry" rules, other than any such request, notice, or demand that has
since been resolved. All of the local broadcast television signals carried by
the Systems of Western are carried either pursuant to the must-carry
requirements or pursuant to executed retransmission consent agreements. Except
as set forth in Schedule 4.15, as of the date of this Agreement, Chronicle has
not received any notification of any petition or submission that is currently
pending before the FCC to modify any television market or for a waiver of any
rules and regulations of the FCC as they apply to any System of Western.
(h) Chronicle has made available to Acquiror true and complete
copies of all reports and filings for the past three years made or filed by
Chronicle with the FCC pursuant to the Communications Act with respect to the
business of Western.
(i) Chronicle has timely and accurately made all requisite
filings and payments with the Register of Copyrights and is otherwise in
compliance with all applicable rules and regulations of the Copyright Office
except as disclosed on Schedule 4.15 or where such noncompliance would not have
a material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western. Chronicle has made available to
Acquiror true and complete copies of all current reports and filings, and all
reports and filings for the past five
- 31 -
years, made or filed pursuant to copyright rules and regulations with respect to
the business of Western.
(j) Chronicle has made available to Acquiror true and complete
copies of (i) the final versions of all FCC Forms 393, 1200, 1205, 1210, 1220,
and 1225 that have been prepared with respect to Western's Systems and filed
with any governmental authority and the most recent draft of any such Form that
has been prepared with respect to Western's Systems in which no version of such
Form was filed with any governmental authority, (ii) all material
correspondence with any governmental body relating to rate regulation under the
Cable Television Consumer Protection and Competition Act of 1992, (iii) any
complaints on FCC Form 329 filed with the FCC with respect to any rates charged
to subscribers of Western's Systems and any correspondence from Chronicle to
any subscriber with respect to any such complaint, and (iv) any documentation
formally prepared by Chronicle to support an exemption from the rate regulation
provisions of the Cable Television Consumer Protection and Competition Act of
1992 claimed by Chronicle with respect to Western's Systems. Schedule 4.15
hereto sets forth (i) a list of all rate complaints on FCC Form 329 filed
pursuant to the Communications Act and received by Chronicle that have not been
deemed invalid by the FCC, (ii) those Systems in which the franchising authority
has been certified upon filing FCC Form 328 or, to Chronicle's knowledge, has
filed FCC Form 328 with the FCC for certification under the Cable Television
Consumer Protection and Competition Act of 1992 to regulate Western's rates, and
(iii) a list of all letters of inquiry from the FCC received by Chronicle since
September 1, 1993 with regard to rate restructuring.
4.16 Brokers and Finders. Neither Chronicle nor any officer,
-------------------
director, or employee of Chronicle has employed any broker or finder or
incurred any liability for any brokerage fees, commissions, or finder's fees
for which Acquiror or Chronicle would be liable, unless such liability is
assumed by Spinco, in connection with the transactions contemplated by this
Agreement, except that Chronicle has employed Salomon Brothers Inc and ▇▇▇▇▇▇
Capital Corporation as its financial advisors in connection with such
transactions.
4.17 Taxes.
-----
(a) Chronicle is an S corporation as defined in Section 1361 of
the Code and has been an S corporation since January 1, 1989.
(b) All material Tax Returns required to be filed by Chronicle on
or before the date of this Agreement have been duly and timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax
Returns are required to be filed; all of the foregoing Tax Returns are true and
complete in all material respects; and all Taxes required to have been paid by
Chronicle in connection with such Tax Returns have been paid. All estimated
Taxes payable as of December 31, 1994 by Chronicle but not reflected on any Tax
Return required to be filed prior to December 31, 1994 have been fully paid or
adequate provision therefor has been made and reflected on the balance sheet as
at December 31, 1994 included in Schedule 4.6(a).
- 32 -
(c) Except as set forth on Schedule 4.17 hereto, as of the date
of this Agreement there are no claims or investigations pending or, to
Chronicle's knowledge, threatened against Chronicle for past Taxes, and
adequate provision for the claims or investigations set forth on Schedule 4.17
has been made as reflected on Chronicle's balance sheet dated as at December
31, 1994 included in Schedule 4.6(a). Except as set forth on Schedule 4.17,
Chronicle has not waived or extended any applicable statute of limitations
relating to the assessment of federal, state, or local Taxes that would be
payable by Chronicle.
(d) Chronicle does not have any plan or intention to take any
action before or after the Effective Time that would adversely affect the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code or the qualification of the Contribution and Distribution
under Section 355 or Section 368(a) of the Code.
4.18 Employees; Labor Relations. Schedule 4.18 lists as of the date
--------------------------
of this Agreement the identity and position of each person employed by
Chronicle with respect to the business of Western. Except as disclosed on
Schedule 4.18, Chronicle is not a party to any employment agreement of any
kind, oral or written, that would require Acquiror to employ any Person after
the Closing Date. Chronicle has complied with all laws relating to the
employment of labor except where such noncompliance would not have had a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western. Except as disclosed on Schedule
4.18, (a) Chronicle is not a party to any contract with any labor organization
with respect to the operation of the business of Western, (b) Chronicle has not
agreed to recognize any union or other collective bargaining unit with respect
to the operation of the business of Western, and (c) as of the date of this
Agreement, no union or other collective bargaining unit has been certified as
representing any of the employees of Western. To Chronicle's knowledge, as of
the date of this Agreement, there is no representation or organizing effort
pending or threatened against or affecting or involving Western.
4.19 Employee Benefit Plans.
----------------------
(a) Schedule 4.19 lists all Western Employee Benefit Plans and
Pension Plans.
(b) Except as disclosed in Schedule 4.19, neither Chronicle nor
any ERISA Affiliate of Chronicle currently has or in the preceding six years
has (i) had any obligation to make any contribution to a Multiemployer Plan for
the benefit of any employee or former employee of Western, or (ii) incurred any
withdrawal liability under Section 4201 of ERISA with respect to any
Multiemployer Plan providing any benefit to employees or former employees of
Western.
(c) Each Pension Plan that is intended to qualify under Section
401 of the Code and each trust maintained pursuant thereto are the subjects of
favorable determination letters from the IRS regarding their exemptions from
federal income taxation under Section 501 of the Code, and no plan amendment
that is not the subject of a favorable determination letter would affect the
validity of the determination letter previously received from the IRS with
respect to the Pension Plan to which the plan amendment relates.
- 33 -
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under the
terms of any of the Chronicle Employee Benefit Plans or by law (without regard
to any waivers granted under Section 412 of the Code) to any funds or trusts
established thereunder or in connection therewith have been made by the due
date thereof (including any valid extension or grace period), and all
contributions for any period ending on or before the Closing Date that are not
yet due will have been paid or accrued on or prior to the Closing Date. No
accumulated funding deficiencies exist in any of the Chronicle Employee Benefit
Plans that are subject to Section 412 of the Code.
(e) The Chronicle Employee Benefit Plans have been maintained, in
all material respects, in accordance with their terms and with the provisions
of ERISA and other applicable federal and state law. Neither Chronicle, any
ERISA Affiliate of Chronicle, nor, to Chronicle's knowledge, any other Person
has engaged in a non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA with respect to the Chronicle
Employee Benefit Plans.
(f) Chronicle has made available to Acquiror true and complete
copies of the following documents with respect to each of the Western Employee
Benefit Plans, where applicable: (i) any plans and related trust documents,
and amendments thereto, (ii) any summary plan descriptions, (iii) written
descriptions of any non-written agreements relating to the Western Employee
Benefit Plans, and (iv) annual reports for the years 1992 to 1994 to the extent
such reports are available.
(g) There are no pending actions, claims, or lawsuits that have
been asserted or instituted against any of the Chronicle Employee Benefit
Plans, the assets of any of the trusts under such plans, or the plan sponsor or
the plan administrator, or against any fiduciary of any of the Chronicle
Employee Benefit Plans with respect to the operation of such plans other than
routine benefit claims.
(h) Except as disclosed on Schedule 4.19, no Chronicle or Western
Employee Benefit Plan provides life or health benefits to retirees or former
employees of Chronicle or Western (or their dependents), except as may be
required under COBRA.
4.20 Environmental Matters. Except as set forth in Schedule 4.20,
---------------------
to the knowledge of Chronicle, there are no flammable, explosive, or
radioactive materials, toxic substances, or other hazardous substances or
wastes on, under, or about any assets of Chronicle that could reasonably be
expected to result in any governmental or third-party action, proceeding, or
claim against Chronicle that, individually or in the aggregate, would have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Western or, following the Contribution, of
Spinco. Except as set forth in Schedule 4.20, to the knowledge of Chronicle,
no release of hazardous substances or wastes outside of any real property
owned, leased, or otherwise used by Chronicle has entered or threatened to
enter any such property and to the knowledge of Chronicle there is not any
- 34 -
claim pending or threatened in writing based upon any environmental laws
arising from any condition of the land surrounding any such property. Except
as set forth in Schedule 4.20, to the knowledge of Chronicle, no claim or
investigation based on any applicable environmental laws has been asserted or
conducted in the past or is currently pending or threatened in writing with
respect to any real property owned, leased, or otherwise used by Chronicle.
Except as set forth in Schedule 4.20, to the knowledge of Chronicle, (i) no
aboveground or underground storage tanks are currently or have been located at
any of the real property owned, leased, or otherwise used by Western and (ii)
no real property owned, leased, or otherwise used by Western has been used at
any time as a gasoline service station or any other facility for storing,
pumping, dispensing, or producing gasoline or other petroleum products or
wastes. Chronicle has made available to Acquiror true and complete copies of
all (i) environmental audits, investigations, studies, or reports with respect
to any real property of Western that have been performed by or at the direction
of Chronicle or that are in Chronicle's possession, (ii) notices or other
materials in Chronicle's possession from governmental authorities having the
power to administer or enforce any applicable environmental laws relating to
current or past ownership, use, or operation of or activities at any real
property owned, leased, or otherwise used by Chronicle in the business of
Western, and (iii) materials in Chronicle's possession relating to any claim,
allegation, or action by any Person (other than any governmental authority)
under any applicable environmental law. For the purpose of this Section
"hazardous substances" and "hazardous waste" shall have the meanings set forth
in any applicable federal, state, or local laws pertaining to environmental
matters.
4.21 Transactions with Affiliates. Except as set forth in Schedule
----------------------------
4.21, there is no lease, sublease, indebtedness, contract, agreement,
commitment, understanding, or other arrangement of any kind entered into by
Chronicle with respect to Western with any officer, director, or shareholder of
Chronicle or any "affiliate" or "associate" of any of them (as those terms are
defined in the Exchange Act), except, in each case, for management fees and
other compensation paid to directors and officers consistent with previously
established policies (including normal merit increases in such compensation in
the ordinary course of business), reimbursements of ordinary and necessary
expenses incurred in connection with their employment, and amounts paid
pursuant to employee benefit plans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to Chronicle as follows:
5.1 Organization and Authority; Binding Effect. Acquiror is a
------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Acquiror and its Subsidiaries have all
requisite corporate or partnership power and authority to own, lease, and
operate their properties and to carry on their businesses as now being
conducted, except where the failure to have such power or authority would not
have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Acquiror and its Subsidiaries
taken as a whole. Acquiror has all requisite corporate power and authority to
execute and deliver this
- 35 -
Agreement and, subject to Section 7.17, to consummate the transactions
contemplated by this Agreement. Subject to Section 7.17, all necessary corporate
action required to have been taken by or on behalf of Acquiror by applicable
law, its charter documents, or otherwise to authorize (a) the approval,
execution, and delivery on behalf of Acquiror of this Agreement and (b) the
performance by Acquiror of its obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement has been taken.
Assuming that this Agreement constitutes a valid, binding, and enforceable
agreement of Chronicle, this Agreement constitutes a valid and binding agreement
of Acquiror, enforceable against it in accordance with its terms, except (x) as
enforcement of this Agreement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws of general application relating to or
affecting creditors' rights, including the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, (y) as the
availability of indemnification and other remedies may be limited by federal and
state securities laws, and (z) for the limitations imposed by general principles
of equity.
5.2 No Breach. The execution and delivery of this Agreement by
---------
Acquiror do not, and, subject to Section 7.17, the consummation of the
transactions contemplated by this Agreement by Acquiror will not, (a) violate
or conflict with the Certificate of Incorporation or Bylaws of Acquiror, (b)
except as set forth on Schedule 5.2, constitute a breach or default (or an event
that with notice or lapse of time or both would become a breach or default) or
give rise to any lien, third-party right of termination, cancellation,
modification, or acceleration under any contract to which Acquiror or any of its
Subsidiaries is a party or by which any of them is bound that has been or is
required to be filed by Acquiror with the SEC, or (c) except as set forth on
Schedule 5.2 and, with respect to cable television franchises, subject to
obtaining the approvals and making the filings described in Section 5.3,
constitute a breach or default (or an event that with notice or lapse of time or
both would become a breach or default) or give rise to any lien, third-party
right of termination, cancellation, modification, or acceleration under any
agreement or undertaking to which Acquiror or any of its Subsidiaries is a party
or by which any of them is bound (other than a contract described in clause
(b)), except where such breach, default, lien, third-party right of termination,
cancellation, modification, or acceleration would not have a material adverse
effect on the financial condition, results of operations, liabilities, assets,
or business of Acquiror and its Subsidiaries taken as a whole, or (c) subject to
obtaining the approvals and making the filings described in Section 5.3,
constitute a violation of any statute, law, ordinance, rule, or regulation,
except where such violation would not have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries taken as a whole.
5.3 Governmental Consents and Approvals. Neither the execution and
-----------------------------------
delivery of this Agreement by Acquiror nor the consummation of the transactions
contemplated by this Agreement by Acquiror will require any consent, approval,
authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except (a) for filings required under the
Securities Act, (b) for filings required under the Exchange Act, (c) for
filings required under state securities or "blue sky" laws, (d) for
notification pursuant to, and expiration or termination of the waiting period
under, the HSR Act, and (e) where the failure to obtain such consents,
approvals, authorizations, or permits, or to make such filings or
notifications, would not have a material adverse
- 36 -
effect on the financial condition, results of operations, liabilities, assets,
or business of Acquiror and its Subsidiaries taken as a whole or prevent
Acquiror from performing its obligations under this Agreement.
5.4 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized capital
stock of Acquiror consists of (i) 1,100,000,000 shares of Acquiror Class A
Common Stock, (ii) 150,000,000 shares of Acquiror Class B Common Stock, (iii)
700,000 shares of Class A Preferred Stock ("Class A Preferred"), (iv) 1,675,096
shares of Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
("Class B Preferred"), (v) 10,000,000 shares of Series Preferred Stock of which
80,000 shares have been designated as Convertible Preferred Stock, Series C
("Series C Preferred") and 400,000 shares have been designated as Redeemable
Convertible Preferred Stock, Series E ("Series E Preferred"). As of December
31, 1994, there were issued and outstanding, including treasury stock and
shares held by Affiliates of Acquiror, (i) 571,423,943 shares of Acquiror Class
A Common Stock, (ii) 89,287,429 shares of Acquiror Class B Common Stock, (iii)
592,798 shares of Class A Preferred, (iv) 1,675,096 shares of Class B
Preferred, (v) 70,559 shares of Series C Preferred and (vi) 246,402 shares of
Series E Preferred. All issued and outstanding shares of capital stock of
Acquiror are validly issued and are fully paid and nonassessable.
(b) The shares of Acquiror Common Stock to be issued in the
Merger, upon their issuance in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid, and nonassessable.
5.5 SEC Reports. Acquiror has filed all forms, reports, and
-----------
documents required to be filed by Acquiror with the SEC since January 1, 1992
(collectively, "Acquiror's SEC Reports"). Acquiror's SEC Reports have complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act. As of their respective dates, none of Acquiror's SEC
Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Acquiror has heretofore delivered to Chronicle, in the form filed with the SEC,
those SEC Reports of Acquiror listed in Schedule 5.5.
5.6 Financial Statements. The audited consolidated financial
--------------------
statements of Acquiror contained in Acquiror's SEC Reports comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), and present fairly
Acquiror's consolidated financial condition and the results of its operations
as of the relevant dates thereof and for the periods covered thereby. The
unaudited consolidated interim financial statements of Acquiror contained in
Acquiror's SEC Reports comply in all material respects with applicable
accounting requirements and
- 37 -
with the published rules and regulations of the SEC with respect thereto, were
prepared on a basis consistent with prior interim periods, and include all
adjustments (consisting only of normal recurring accruals) that management
considers necessary for a fair presentation of Acquiror's consolidated financial
condition and the results of operations for such periods.
5.7 Absence of Certain Changes. Except as set forth on Schedule
--------------------------
5.7 or as otherwise disclosed in Acquiror's SEC Reports filed prior to the date
of this Agreement, since the date of the most recent balance sheet of Acquiror
included in Acquiror's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, there has not been any (a) material adverse change in the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries, taken as a whole, except for material adverse
changes due to general economic or industry-wide conditions, (b) other events
or conditions that, in the aggregate, have or would reasonably be expected to
have a material adverse effect on the financial condition, results of
operations, liabilities, assets, or business of Acquiror and its Subsidiaries,
taken as a whole, except for events or conditions of a general economic nature
or of industry-wide applicability, or (c) other events or conditions that,
individually or in the aggregate, have had or would reasonably be expected to
have a material adverse effect on the ability of Acquiror to perform its
obligations under this Agreement.
5.8 Absence of Undisclosed Liabilities. Acquiror does not have any
----------------------------------
indebtedness, liability, or obligation of a type required by GAAP to be
reflected on a balance sheet that is not reflected or reserved against in its
consolidated balance sheet dated as at March 31, 1995, included in Acquiror's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 or otherwise
disclosed in such Form 10-Q or in any Form 8-K filed subsequent to such Form
10-Q and included in the Acquiror's SEC Reports listed in Schedule 5.5, other
than liabilities, obligations, and contingencies that (a) were incurred after
March 31, 1995 in the ordinary course of business or (b) would not, in the
aggregate, have a material adverse effect on the financial condition, results
of operations, liabilities, assets, or business of Acquiror and its
Subsidiaries taken as a whole, taking into account, in the case of
contingencies, the probability that the contingency would be realized and the
probable liability that would result therefrom.
5.9 Compliance with Law.
-------------------
(a) Acquiror and its Subsidiaries hold all licenses, franchises,
certificates, consents, permits, and authorizations from all governmental
authorities necessary for the lawful conduct of their businesses, except where
the failure to hold any of the foregoing would not have a material adverse
effect on the financial condition, results of operations, liabilities, assets,
or business of Acquiror and its Subsidiaries taken as a whole. To Acquiror's
knowledge, neither Acquiror nor any of its Subsidiaries has violated, or is in
violation of, any such licenses, franchises, certificates, consents, permits,
or authorizations or any applicable statutes, laws, ordinances, rules, and
regulations of any governmental authorities, except where such violations do
not, and in so far as reasonably can be foreseen will not, have a material
adverse effect on the financial condition, results of operations, liabilities,
assets, or business of Acquiror and its Subsidiaries taken as a whole, and,
- 38 -
except as otherwise set forth on Schedule 5.9, Acquiror has not received any
notice from a governmental or regulatory authority within three years of the
date of this Agreement of any such violation.
(b) Except as may affect the cable television industry generally,
and except as set forth on Schedule 5.9, as of the date of this Agreement (i)
there is no legal or governmental action or proceeding pending or, to the
knowledge of Acquiror, threatened against Acquiror or any of its Subsidiaries
that, if determined adversely, would have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries, taken as a whole, or seeks any material
injunctive relief, and (ii) there are no judgments, orders, writs, injunctions,
decrees, or other similar instruments of any court or governmental authority
outstanding against Acquiror or any of its Subsidiaries, or by which any of
them is bound, that, in the aggregate, would have a material adverse effect on
the financial condition, results of operations, liabilities, assets, or
business of Acquiror and its Subsidiaries taken as a whole.
5.10 Brokers and Finders. Neither Acquiror nor any of its officers,
-------------------
directors, employees, or Affiliates has employed any broker or finder or
incurred any liability for any brokerage fees, commissions, or finder's fees in
connection with the transactions contemplated by this Agreement.
5.11 Taxes.
-----
(a) All material Tax Returns required to be filed by Acquiror or
any of its Subsidiaries on or before the date of this Agreement have been duly
and timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed; all of the
foregoing Tax Returns are true and complete in all material respects; and all
Taxes required to have been paid in connection with such Tax Returns have been
paid. All estimated Taxes payable as of March 31, 1995 by or with respect to
Acquiror and its Subsidiaries but not reflected on any material Tax Return
required to be filed prior to March 31, 1995, have been fully paid or adequate
provision therefor has been made and reflected on the balance sheet of Acquiror
included in Acquiror's Quarterly Report on Form 10-Q for the three months ended
March 31, 1995.
(b) Except as disclosed in Acquiror's SEC Reports filed prior to
the date of this Agreement, there are no claims or investigations pending or,
to Acquiror's knowledge, threatened against Acquiror or any of its Subsidiaries
for past Taxes, except for claims and investigations that would not have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Acquiror and its Subsidiaries taken as a
whole, and adequate provision for the claims or investigations disclosed in
Acquiror's SEC Reports filed prior to the date of this Agreement has been made
as reflected on the most recent balance sheet of Acquiror included in
Acquiror's SEC Reports filed prior to the date of this Agreement.
(c) Acquiror is not, and at the Effective Time, will not be, an
"investment company" within the meaning of Section 368(a)(2)(F)(iii) and (iv)
of the Code.
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(d) Neither Acquiror nor any of its Affiliates has any plan or
intention to take any action before or after the Effective Time that would
adversely affect the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code or the qualification of the Contribution
and the Distribution under Section 355 or Section 368(a) of the Code.
ARTICLE VI
COVENANTS REGARDING CONDUCT OF BUSINESS
6.1 Conduct of Business of Western. Except as contemplated by this
------------------------------
Agreement, during the period from the date of this Agreement to the Closing
Date, Chronicle will conduct the operations of Western according to its
ordinary and usual course of business consistent with past practices. Without
limiting the generality of the foregoing, Chronicle shall not, without the
prior written consent of Acquiror:
(a) amend its Restated Articles of Incorporation or Bylaws;
(b) declare, set aside, or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
its capital stock, except for (i) the Distribution, (ii) cash dividends and
distributions declared and paid in accordance with past practices as described
on Schedule 6.1(b), and (iii) a dividend or distribution in the form of the AAA
Notes;
(c) redeem or otherwise acquire any of its securities;
(d) create, incur, or assume any indebtedness not currently
outstanding other than:
(i) indebtedness assumed by Spinco pursuant to Section
3.1(c);
(ii) Acquiror Loans incurred pursuant to Section 3.3(a);
(iii) indebtedness incurred pursuant to Section 3.3(c);
(iv) other indebtedness of Chronicle incurred in the
ordinary and usual course of Western's business (other than indebtedness that
will be included in liabilities for purposes of calculating the Working Capital
Deficit pursuant to Section 3.1(b)) that, together with liabilities included in
Section 6.1(e)(ii), does not exceed $500,000 in the aggregate; and
(v) other indebtedness that is permitted to be prepaid in
full without penalty at or immediately after the Closing;
(e) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the obligations
of any other Person, other than:
(i) liabilities assumed by Spinco pursuant to Section
3.1(c); and
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(ii) other liabilities of Chronicle incurred in the ordinary
and usual course of Western's business (other than liabilities that will be
included in liabilities for purposes of calculating the Working Capital Deficit
pursuant to Section 3.1(b)) that, together with indebtedness included in
Section 6.1(d)(iv), do not exceed $500,000 in the aggregate;
(f) except for the Contribution and except for any investment
transferred to Spinco pursuant to Section 3.1(a), make any loans, advances, or
capital contributions to, or investments in, any one or more Persons, which
loans, advances, capital contributions, or investments in the aggregate exceed
$250,000;
(g) issue, sell, deliver, or agree or commit to issue, sell, or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase, or otherwise) any stock of any
class or any other securities or amend any of the terms of any securities
outstanding on the date of this Agreement;
(h) dispose of or lease (as lessor) any assets material to
Western, other than the disposition of any assets described on Schedule 3.1(a),
sales of inventory in the ordinary and usual course of business consistent with
past practice, and dispositions of assets no longer used in the business or
operations of Western or in connection with the acquisition of replacement
property of equivalent kind and value;
(i) mortgage, pledge, or subject to any lien, lease, security
interest, or other charge or encumbrance any properties or assets, tangible or
intangible, material to Western, other than in the ordinary and usual course of
business consistent with past practice;
(j) acquire or lease (as lessee) any assets for use in Western's
business other than in the ordinary and usual course of business consistent
with past practice or as described on Schedule 6.1(j) (the "Capital Budget");
(k) fail to make capital expenditures substantially in accordance
with the Capital Budget; provided, however, that capital expenditures for
individual projects may vary from the Capital Budget so long as the aggregate
amount of capital expenditures provided for in the Capital Budget are made;
(l) make any affirmative election to commence any cost of service
proceeding conducted in accordance with Part 76.922 of Title 47 of the Code of
Federal Regulations or any similar proceeding, provided that Acquiror's consent
thereto may not be unreasonably withheld; or
(m) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions that would (i) make any representation or
warranty of Chronicle contained in this Agreement untrue or incorrect as of the
date when made or as of the Closing Date or (ii) result in any of the
conditions to Closing in Article VIII of this Agreement not being satisfied.
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6.2 Conduct of Business of Acquiror. Except as contemplated by
-------------------------------
this Agreement, during the period from the date of this Agreement to the
Closing Date, Acquiror will not take, any actions that would (i) make any
representation or warranty of Acquiror contained in this Agreement untrue or
incorrect as of the date when made or as of the Closing Date or (ii) result in
any of the conditions to Closing in Article VIII of this Agreement not being
satisfied.
ARTICLE VII
OTHER AGREEMENTS
7.1 No Solicitation. Neither Chronicle nor any of its officers,
---------------
directors, representatives, or agents shall, directly or indirectly, knowingly
encourage, solicit, initiate or, unless the Board of Directors of Chronicle
determines, with the advice of outside counsel, to do so in the exercise of its
fiduciary duties, participate in any way in discussions or negotiations with,
or knowingly provide any confidential information to, any Person or group
(other than Acquiror or any Affiliate or associate of Acquiror and their
respective directors, officers, employees, representatives, and agents)
concerning any merger of Chronicle, the sale of any substantial part of the
assets of Western, any issuance of shares of capital stock of Chronicle so as
to effect the acquisition of any substantial part of the assets of Western, or
any similar transaction involving Western; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of Chronicle
from (i) making any disclosure to Chronicle's shareholders, or (ii) responding
to any unsolicited proposal or inquiry by advising the Person making such
proposal or inquiry of the terms of this Section 7.1. Chronicle will promptly
communicate to Acquiror the fact that it has received any proposal or inquiry in
respect of any such transaction and of any such information requested from it or
of any such negotiations or discussions being sought to be initiated with
Chronicle.
7.2 Access to Information. Between the date of this Agreement and
---------------------
the Effective Time, Chronicle and Acquiror will each (a) give the other party
and its authorized representatives reasonable access, during regular business
hours upon reasonable notice, to all offices and other facilities of such party
and its Subsidiaries and to all books and records of such party and its
Subsidiaries, (b) permit the other party to make such reasonable inspections of
the offices, facilities, books, and records described in clause (a) as it may
require, and (c) cause its officers and those of its Subsidiaries to furnish
the other party with such financial and operating data and other information
with respect to the business and properties of Chronicle and Western or
Acquiror and its Subsidiaries, as the case may be, as the other party may from
time to time reasonably request. All such access and information obtained by
either Chronicle or Acquiror and their respective authorized representatives
shall be subject to the confidentiality agreement between Chronicle and
Acquiror dated June 3, 1994.
7.3 Private Placement Information; Registration of Acquiror Common
---------------------------------------------------------------
Stock.
-----
(a) Private Placement Memorandum. Acquiror, at its expense,
----------------------------
shall prepare a private placement memorandum or similar document (the "PPM")
and shall deliver the PPM to
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Chronicle for delivery to shareholders of Chronicle before the shareholders'
meeting contemplated by Section 7.7. Acquiror will include in the PPM copies of
Acquiror's SEC Reports described in Rule 502(b)(2)(ii)(B) and (C) of Regulation
D under the Securities Act and such other information concerning Acquiror, its
business and assets and Acquiror Common Stock as Acquiror deems necessary or
appropriate (such SEC Reports and other information being referred to as the
"Acquiror PPM Information"). Chronicle shall have exclusive responsibility for
preparing, or causing its counsel to prepare, and delivering to Acquiror in
writing for inclusion in the PPM all other information to be included in the PPM
(the "Chronicle PPM Information"), for the accuracy and completeness of the
Chronicle PPM Information and for the timely delivery of the PPM to shareholders
of Chronicle.
(b) Preparation and Filing. Acquiror, at its expense, shall
----------------------
prepare and, on or before the date that is 45 days after the date of approval
of this Agreement by the shareholders of Chronicle, file with the SEC a
Registration Statement (the "Registration Statement") on Form S-3, or other
appropriate form, for the offering and sales on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act by those shareholders of
Chronicle as of the Effective Time (and any transferee thereof pursuant to a
transfer described in clauses (i) - (v) of the proviso to the third sentence of
this Section 7.3(b)) who have executed and delivered to Acquiror an instrument
in the form of Exhibit B (the "Selling Shareholders") of the shares of Acquiror
Common Stock to be issued to the Selling Shareholders in the Merger. The section
of the Registration Statement entitled "Plan of Distribution" shall be prepared
in accordance with the requirements of Item 508 of Regulation S-K promulgated
under the Securities Act and, notwithstanding anything to the contrary contained
herein, shall provide that the Selling Shareholders may distribute Acquiror
Common Stock pursuant to such Registration Statement solely in the manner set
forth in Schedule 7.3(b). Notwithstanding any other provision of this Agreement
or the "Plan of Distribution" contained in the Registration Statement, the
Selling Shareholders shall agree pursuant to the instrument in the form of
Exhibit B not to sell or otherwise distribute more than 25% in the aggregate of
the number of shares of each class of Acquiror Common Stock issued to the
Selling Shareholders in the Merger within one year after the Closing Date or
more than 50% in the aggregate of the number of shares of each class of Acquiror
Common Stock issued to the Selling Shareholders in the Merger within two years
after the Closing Date; provided, however, that the foregoing restriction shall
not apply to and shall not be taken into account for purposes of determining
whether any other transfer complies with the foregoing restriction (i) any
transfer by will or the laws of intestacy, (ii) any transfer by a trust which is
a Selling Shareholder to the beneficiaries of such trust, (iii) any transfer by
a Selling Shareholder to another Selling Shareholder, (iv) any transfer by a
Selling Shareholder to such Selling Shareholder's spouse, parents, grandparents,
or lineal descendants of such Selling Shareholder's grandparents, or (v) any
transfer by a Selling Shareholder to a trust all of the beneficial interests in
which are owned by one or more of the members of the group consisting of the
Selling Shareholder and the individuals described in the preceding clause (iv).
For a period of two years after the Closing Date, Acquiror agrees not to
register in its stock transfer records any transfer of shares of Acquiror Common
Stock by shareholders of Chronicle, unless Acquiror receives the written consent
of Spinco to such transfer. Each certificate evidencing shares of Acquiror
Common Stock issued to any shareholder of Chronicle pursuant to this Agreement
shall bear a legend relating to the transfer
- 43 -
restrictions set forth in the two immediately preceding sentences and each
certificate evidencing shares of Acquiror Common Stock issued to any shareholder
of Chronicle who is not a Selling Shareholder shall bear a legend to the effect
that the shares evidenced thereby may not be transferred unless such transfer is
registered under the Securities Act and applicable state securities laws or
unless exemptions from such registration requirements are available. Acquiror
will have exclusive responsibility for the preparation, filing, accuracy, and
completeness of the Registration Statement, and any amendments or supplements
thereto, except as to information therein and any amendments or supplements
thereto, that Chronicle, Spinco or any of the Selling Shareholders shall have
furnished in writing to Acquiror expressly for inclusion in the Registration
Statement or any amendment or supplement thereto. Acquiror shall furnish to
Chronicle, for Chronicle's review and comment, copies of the Registration
Statement and any amendment or supplement thereto, in the forms proposed to be
filed by Acquiror, not less than five business days prior to the filing thereof
with the SEC, and Chronicle shall advise Acquiror in writing of any recommended
changes to the Registration Statement or any amendment or supplement thereto
within three business days following receipt of such documents from Acquiror.
Acquiror will furnish to Chronicle and, after the Effective Time, the Selling
Shareholders copies of the Registration Statement, any prospectus relating to
the Registration Statement (as amended or supplemented from time to time, a
"Prospectus"), and any amendments or supplements thereto, in the forms filed,
immediately upon the filing of such documents with the SEC, together with any
other documents that the Selling Shareholders reasonably request in order to
facilitate the disposition of the Acquiror Common Stock registered pursuant to
the Registration Statement. Acquiror shall use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC and shall make
available to the Selling Shareholders, as soon as reasonably practicable (but
not more than 18 months) after the effective date of the Registration Statement,
an earnings statement that satisfies the provisions of Section 11(a) of the
Securities Act; provided, however, that Acquiror shall be deemed to have
complied with this sentence if it has complied with Rule 158 promulgated under
the Securities Act.
(c) Cooperation. Acquiror will use its reasonable best
-----------
efforts to respond to any comments of the SEC with respect to the Registration
Statement and to cause the Registration Statement to become effective as soon
as possible after filing. Chronicle and Acquiror shall cooperate with each
other and provide to each other in writing all information necessary in order
to prepare the PPM and the Registration Statement and shall each provide
promptly to the other party in writing any information that such party may
obtain that could necessitate amending any such document. Acquiror will notify
Chronicle and, after the Effective Time, the Selling Shareholders promptly of
the receipt of any comments from the SEC or its staff or any other government
official and of any requests by the SEC or its staff or any other government
official for any amendment or supplement to the Registration Statement or for
additional information and will supply Chronicle and, after the Effective Time,
the Selling Shareholders with copies of all correspondence between Acquiror or
any of its representatives, on the one hand, and the SEC or its staff or any
other government official, on the other hand, with respect thereto.
- 44 -
(d) Information and Compliance with Legal Requirements.
--------------------------------------------------
(i) Acquiror covenants that the PPM, the Registration
Statement, each Prospectus, and any amendment or supplement thereto (other than
the Chronicle PPM Information and any information that Chronicle, any Selling
Shareholder, or any of their respective representatives shall have furnished in
writing to Acquiror expressly for inclusion in any such document) (A) will
comply in all material respects with the Securities Act and the Exchange Act
and (B) will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under
which they are made, not misleading.
(ii) Chronicle covenants that the Chronicle PPM Information
and the information supplied or to be supplied in writing to Acquiror by
Chronicle or any of its representatives expressly for inclusion in the
Registration Statement, each Prospectus, and any amendment or supplement
thereto, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(iii) Each Selling Shareholder, as a condition to the
inclusion in the Registration Statement of the shares of Acquiror Common Stock
to be issued to such Selling Shareholder in the Merger, shall, by his or her
execution and delivery of an instrument in the form of Exhibit B, covenant that
the information supplied or to be supplied in writing to Acquiror by such
Selling Shareholder or any of his or her representatives expressly for inclusion
in the Registration Statement, each Prospectus, and any amendment or supplement
thereto, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(e) Amendments. Until the first to occur of (i) the
----------
expiration of three years after the Effective Time, and (ii) the sale of all
Acquiror Common Stock covered by the Registration Statement, Acquiror shall
promptly prepare and file with the SEC any amendments, post-effective
amendments, and supplements to the Registration Statement or each Prospectus
and shall use its reasonable best efforts to take all actions that are
necessary or appropriate to keep the Registration Statement effective and
current and to comply with the provisions of the Securities Act with respect to
the disposition of all shares of Acquiror Common Stock covered by the
Registration Statement. If the Registration Statement, as from time to time in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or if a post-
effective amendment to the Registration Statement or a supplement to any
Prospectus relating to the Registration Statement is required, Acquiror shall
immediately notify each Selling Shareholder and shall promptly prepare and file
with the SEC and furnish to each Selling Shareholder a supplement or amendment
to the Registration Statement or the Prospectus included therein so that, as
thereafter delivered to purchasers of the Selling Shareholders' shares of
Acquiror Common Stock covered by
- 45 -
the Registration Statement, such Prospectus will not contain any untrue
statement of any material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances then existing.
(f) Blackout Periods. Notwithstanding anything to the
----------------
contrary contained in this Section 7.3, if Acquiror determines, in its
reasonable judgment, that the use of the Registration Statement would adversely
affect any financing, acquisition, corporate reorganization, or other material
transaction involving Acquiror or any of its Affiliates or require Acquiror to
disclose matters that otherwise would not be required to be disclosed at such
time, then until such time as Acquiror has no further obligation pursuant to
the first sentence of Section 7.3(e) hereof, Acquiror may require the
suspension by each Selling Shareholder of the distribution of any Acquiror
Common Stock registered pursuant to the Registration Statement for a reasonable
period of time, but not in excess of 15 consecutive business days (a "Blackout
Period"), by giving notice to such Selling Shareholder. Any such notice need
not specify the reasons for such suspension if Acquiror determines, in its
reasonable good faith judgment, that doing so would adversely affect any such
transaction or would result in the disclosure of material non-public
information. In the event that such notice is given, then until Acquiror has
determined, in its reasonable good faith judgment, that such registration and
distribution would no longer have the effect described in the preceding
sentence and has given notice thereof to the Selling Shareholders, Acquiror's
obligations with respect to the Registration Statement under Section 7.3(b),
(c), (d), (e), and (k) will be suspended. In no event, however, may there be
more than four Blackout Periods in any period of 12 consecutive calendar
months, and the number of days Selling Shareholders are required to suspend
distributions of Acquiror Common Stock registered pursuant to the Registration
Statement pursuant to Section 7.3(k)(v) may not exceed 45 business days in any
period of 12 consecutive calendar months. Acquiror shall give written notice to
each Selling Shareholder of the commencement and the termination of any Blackout
Period. Each Blackout Period shall begin and end when the applicable notice is
given (unless it shall earlier terminate pursuant to the terms thereof);
provided, however, in the event Acquiror does not deliver written notice of the
termination of such Blackout Period prior to the end of the fifteenth business
day thereof, Acquiror shall be deemed to have delivered notice of the
commencement of another Blackout Period on the subsequent business day.
(g) Notification. Acquiror shall notify Chronicle and, after
------------
the Effective Time, each Selling Shareholder immediately upon (i) the
effectiveness of the Registration Statement, (ii) the issuance or threatened
issuance of any stop order or other order preventing or suspending the use of
any Prospectus, (iii) any suspension or threatened suspension of the use of any
Prospectus in any state, (iv) any proceedings commenced or threatened to be
commenced by the SEC or any state securities commission that would result in
the issuance of such stop order or other order preventing or suspending the use
of any Prospectus, or (v) any request by the SEC to supplement or amend any
Prospectus after the effectiveness of the Registration Statement. Acquiror
shall use its reasonable best efforts to prevent or promptly remove any stop
order or other order preventing or suspending the use of any Prospectus and to
comply with any such request by the SEC to amend or supplement such Prospectus.
- 46 -
(h) Blue-Sky; Nasdaq. Acquiror shall use its reasonable best
----------------
efforts to qualify the shares of Acquiror Common Stock to be issued and
delivered to the Selling Shareholders in the Merger for resale by the Selling
Shareholders under the securities or blue-sky laws of the District of Columbia
and the States of California, Georgia, Massachusetts, Pennsylvania, and
Wyoming, and such other states as shall be reasonably requested by the Selling
Shareholders, or obtain the approval of any state authority that may be
required in connection with the proposed distribution in any of such states,
except, in each case, in any state in which Acquiror must either qualify to do
business or file a general consent to service of process as a condition to the
qualification of such shares of Acquiror Common Stock. Acquiror shall use its
reasonable best efforts to cause all of the Acquiror Common Stock to be issued
and delivered to the Selling Shareholders in the Merger to be listed on Nasdaq
or any securities exchange on which any class of Acquiror Common Stock is then
listed.
(i) Expenses. Acquiror shall be responsible for all expenses
--------
incurred by Acquiror in complying with this Section 7.3, including all
registration, qualification, and filing fees, printing expenses, fees and
disbursements of counsel for Acquiror, applicable blue-sky fees and expenses,
and the expense of any special audits incident to or required by the
registration contemplated hereby. Each Selling Shareholder shall be
responsible for all underwriting discounts and commissions and transfer taxes,
if any, relating to any resale by such Selling Shareholder of his or her
Acquiror Common Stock and of all fees and disbursements of counsel and of any
other advisor to such Selling Shareholder.
(j) Other Filings. Acquiror shall file with the SEC in a
-------------
timely manner all reports and other documents required to be filed by Acquiror
under the Securities Act and the Exchange Act.
(k) Obligations of Selling Shareholders. Acquiror's
-----------------------------------
obligations under this Section 7.3 with respect to registration of shares of
Acquiror Common Stock shall be conditioned upon each Selling Shareholder's
compliance with the following:
(i) The Selling Shareholder shall cooperate with Acquiror
in connection with the preparation of the Registration Statement, and for so
long as Acquiror is obligated to keep a Registration Statement effective, the
Selling Shareholder will provide to Acquiror, in writing, for use in the
Registration Statement, reasonably promptly after a request by Acquiror, all
information relating to the Selling Shareholder as may be necessary to enable
Acquiror to prepare the Registration Statement and to maintain the currency and
effectiveness thereof.
(ii) The Selling Shareholder shall permit Acquiror and its
representatives and agents to examine such documents and records and shall
supply such information relating to the Selling Shareholder as they may
reasonably request in connection with the offering or other distribution of
Acquiror Common Stock registered pursuant to the Registration Statement in
which the Selling Shareholder proposes to participate.
(iii) During such time as the Selling Shareholder may be
engaged in a distribution of Acquiror Common Stock registered pursuant to the
Registration Statement, the
- 47 -
Selling Shareholder will comply with all applicable laws including Rules 10b-6
and 10b-7 promulgated under the Exchange Act and pursuant thereto will, among
other things: (A) not engage in any stabilization activity in connection with
the securities of Acquiror in contravention of such rules; (B) distribute the
Acquiror Common Stock registered pursuant to the Registration Statement owned by
such Selling Shareholder solely in the manner described in the Registration
Statement; (C) cause to be furnished to each agent or broker-dealer to or
through whom the Acquiror Common Stock registered pursuant to the Registration
Statement owned by such Selling Shareholder may be offered, or to the offeree if
an offer is made directly by the Selling Shareholder, such copies of each
Prospectus (as amended and supplemented to such date) and documents incorporated
by reference therein as may be required by applicable stock exchange rules, NASD
rules, or law; and (D) not bid for or purchase any securities of Acquiror or
attempt to induce any Person to purchase any securities of Acquiror in any
manner prohibited under the Exchange Act.
(iv) At least 10 days prior to any distribution by the
Selling Shareholder of Acquiror Common Stock registered pursuant to the
Registration Statement, the Selling Shareholder will advise Acquiror in writing
of the dates on which the distribution will commence and the maximum amount of
Acquiror Common Stock to be sold.
(v) Upon receipt of notice from Acquiror pursuant to
Section 7.3(e) or of the commencement of a Blackout Period pursuant to Section
7.3(f), then the Selling Shareholder shall cease offering or distributing
Acquiror Common Stock registered pursuant to the Registration Statement until
such time as Acquiror notifies the Selling Shareholder that offering and
distribution of Acquiror Common Stock registered pursuant to the Registration
Statement may recommence.
(l) Indemnification.
---------------
(i) Acquiror shall indemnify, defend, and hold harmless
Spinco, each of its officers and directors, each Selling Shareholder, and each
underwriting and selling broker of any of the Acquiror Common Stock that is the
subject of the Registration Statement, and each other Person, if any, who
controls any of the foregoing within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the "Selling
Shareholder Indemnified Parties"), against any losses, claims, damages, or
liabilities (collectively, "Losses"), joint or several, to which any Selling
Shareholder Indemnified Party may become subject under the Securities Act or
the Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the PPM, the Registration Statement
or a Prospectus, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that Acquiror will not indemnify or hold
harmless any Selling Shareholder Indemnified Party from or against such Losses
if the untrue statement, omission or allegation thereof upon which such Losses
are based (x) was in the Chronicle PPM Information or was made in reliance upon
and in conformity with written information provided by Chronicle, Spinco or any
Selling Shareholder Indemnified Party or their respective representatives
specifically for use or inclusion in the PPM, the Registration Statement
- 48 -
or any Prospectus, or (y) was made in any Prospectus used after such time as
Acquiror provided notice to such Selling Shareholder pursuant to Section 7.3(e),
or (z) was made in any Prospectus used after such time as the obligation of
Acquiror hereunder to keep the Registration Statement effective and current has
expired or been suspended hereunder. Acquiror shall promptly reimburse each
Selling Shareholder Indemnified Party for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such Losses or actions in respect thereof.
(ii) Spinco shall indemnify, defend, and hold harmless
Acquiror, each of its officers and directors, and each other Person, if any,
who controls any of the foregoing within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the "Acquiror
Indemnified Parties") against any Losses, joint or several, to which any
Acquiror Indemnified Party may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the PPM, the Registration Statement
or any Prospectus, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, if the statement or omission was in the Chronicle PPM Information
or was made in reliance upon and in conformity with written information
provided by Chronicle or Spinco or their respective representatives
specifically for use or inclusion in the PPM, the Registration Statement or any
Prospectus. Spinco shall promptly reimburse the Acquiror Indemnified Parties
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such Losses or actions in
respect thereof.
(iii) Each Selling Shareholder, as a condition to the
inclusion in the Registration Statement of the shares of Acquiror Common Stock
to be issued to such Selling Shareholder in the Merger, shall, by his or her
execution and delivery of an instrument in the form of Exhibit B, undertake to
indemnify, defend, and hold harmless the Acquiror Indemnified Parties against
any Losses, joint or several, to which any of the Acquiror Indemnified Parties
may become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such Losses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any Prospectus, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if the statement or
omission was made in reliance upon and in conformity with written information
provided by or on behalf of such Selling Shareholder or any Person who controls
such Selling Shareholder specifically for use or inclusion in any Registration
Statement or any Prospectus, (ii) the use of any Prospectus by or on behalf of
such Selling Shareholder after such time as Acquiror has provided notice to
such Selling Shareholder pursuant to Section 7.3(e) or the failure by such
Selling Shareholder to comply with the provisions of Section 7.3(k)(v), (iii)
the use by or on behalf of such Selling Shareholder of any Prospectus after
such time as the obligation of Acquiror hereunder to keep the Registration
Statement effective and current has expired or been suspended
- 49 -
hereunder, (iv) any violation by such Selling Shareholder or any Person who
controls such Selling Shareholder within the meaning of either the Securities
Act or the Exchange Act (or any agent, broker-dealer or underwriter engaged by
such Selling Shareholder or any such controlling Person) of any federal or state
securities law or rule or regulation thereunder, or (v) any failure by such
Selling Shareholder to give any purchaser of Acquiror Common Stock registered
pursuant to the Registration Statement at or prior to the written confirmation
of such sale, a copy of the most recent Prospectus to the extent required by
law. Each Selling Shareholder, as a condition to the inclusion in the
Registration Statement of the shares of Acquiror Common Stock to be issued to
such Selling Shareholder in the Merger, shall also undertake, by his or her
execution and delivery of an instrument in the form of Exhibit B, to reimburse
promptly the Acquiror Indemnified Parties for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such Losses or actions in respect thereof. For purposes of this Section
7.3(l), any information concerning Chronicle or the plan of distribution
included in the PPM or the Registration Statement or any Prospectus which is
provided to Chronicle for review within a reasonable period before filing or use
thereof and as to which information Chronicle has not promptly provided written
notice of objection to Acquiror shall be deemed to have been written information
provided by Chronicle specifically for use in the PPM or in the Registration
Statement or such Prospectus.
(iv) For purposes of this Section 7.3(l), the term
"Indemnifying Party" shall mean the Person having an obligation hereunder to
indemnify any other Person pursuant to this Section 7.3(l), and the term
"Indemnified Party" shall mean the Person having the right to be indemnified
pursuant to this Section 7.3(l). Whenever any claim shall arise for
indemnification under this Section 7.3(l), the Indemnified Party shall promptly
notify the Indemnifying Party in writing of such claim and, when known, the
facts constituting the basis for such claim (in reasonable detail). Failure by
the Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder except to the extent that such
failure prejudices the Indemnifying Party.
(v) After such notice, if the Indemnifying Party undertakes
to defend any such claim, then the Indemnifying Party shall be entitled, if it
so elects, to take control of the defense and investigation with respect to
such claim and to employ and engage attorneys of its own choice to handle and
defend such claim, at the Indemnifying Party's cost, risk, and expense, upon
written notice to the Indemnified Party of such election, which notice
acknowledges the Indemnifying Party's obligation to provide indemnification
hereunder. The Indemnifying Party shall not settle any third-party claim that
is the subject of indemnification without the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld; provided,
however, that the Indemnifying Party may settle a claim without the Indemnified
Party's consent if the settlement (A) makes no admission or acknowledgment of
liability or culpability with respect to the Indemnified Party, (B) includes a
complete release of the Indemnified Party, and (C) does not require the
Indemnified Party to make any payment or forego or take any action. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and its attorneys in the investigation, trial, and defense
of any lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnified Party's name of appropriate
cross claims and counterclaims).
- 50 -
The Indemnified Party may, at its own cost, participate in any investigation,
trial, and defense of such lawsuit or action controlled by the Indemnifying
Party and any appeal arising therefrom. If, after receipt of a claim notice
pursuant to Section 7.3(l)(iv), the Indemnifying Party does not undertake to
defend any such claim, the Indemnified Party may, but shall have no obligation
to, contest any lawsuit or action with respect to such claim and the
Indemnifying Party shall be bound by the result obtained with respect thereto by
the Indemnified Party (including the settlement thereof without the consent of
the Indemnifying Party). If there are one or more legal defenses available to
the Indemnified Party that conflict with those available to the Indemnifying
Party, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to participate in the defense of the lawsuit or action;
provided, however, that the Indemnified Party may not settle such lawsuit or
action without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. At any time after the commencement of defense of any
lawsuit or action, the Indemnifying Party may request the Indemnified Party to
agree in writing to the abandonment of such contest or to the payment or
compromise by the Indemnifying Party of such claim, whereupon such action shall
be taken unless the Indemnified Party determines that the contest should be
continued and so notifies the Indemnifying Party in writing within 15 days of
such request from the Indemnifying Party. Any request from the Indemnifying
Party that any contest be abandoned shall specify the amount that the other
party or parties to the contested claim have agreed to accept in payment or
compromise of the claim. If the Indemnified Party determines that the contest
should be continued, the Indemnifying Party shall be liable hereunder only to
the extent of the lesser of (A) the amount that the other party or parties to
the contested claim had agreed to accept in payment or compromise as of the time
the Indemnifying Party made its request therefor to the Indemnified Party, as
specified in the Indemnifying Party's request, or (B) the amount for which the
Indemnifying Party may be liable with respect to such claim by reason of the
provisions of this Agreement.
(vi) If the indemnification provided for in this Section
7.3(l) shall for any reason be unavailable to the Indemnified Party in respect
of any Losses referred to herein, then the Indemnifying Party shall, in lieu of
indemnifying the Indemnified Party, contribute to the amount paid or payable by
the Indemnified Party as a result of such Losses or any action in respect
thereof, in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and the Indemnified Party on the other
with respect to the action, statement or omission that resulted in such Losses,
as well as any other relevant equitable considerations. Relative fault with
respect to an untrue or alleged untrue statement or omission of a material
fact shall be determined by reference to whether the untrue or alleged untrue
statement or omission of a material fact related to information supplied by the
Indemnifying Party on the one hand or the Indemnified Party on the other, the
intent of the parties and their relative knowledge, access to information, and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by the Indemnified Party as a result of the Losses referred to above in
this paragraph shall be deemed to include any legal or other expenses reasonably
incurred by the Indemnified Party in connection with investigating or defending
any such action or claim. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
- 51 -
(m) Further Assurances. For the period of time specified in
------------------
the first sentence of Section 7.3(e), each of the Selling Shareholders and
Acquiror will take such other actions and enter into such other agreements as
may be reasonably necessary or advisable in connection with the resale by the
Selling Shareholders of the Acquiror Common Stock covered by the Registration
Statement. Each Selling Shareholder, as a condition to the inclusion in the
Registration Statement of the shares of Acquiror Common Stock to be issued to
such Selling Shareholder in the Merger, shall, by his or her execution and
delivery of an instrument in the form of Exhibit B, undertake to comply with
this Section 7.3(m).
7.4 Reasonable Best Efforts. Subject to the fiduciary duties of
-----------------------
the Board of Directors of Chronicle as advised by outside counsel, each of the
parties to this Agreement agrees to use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable law to consummate and
make effective the transactions contemplated by this Agreement in the most
expeditious manner practicable, including the satisfaction of all conditions to
the Merger.
7.5 Public Announcements. No party to this Agreement shall make
--------------------
any public announcements or otherwise communicate with any news media with
respect to this Agreement or any of the transactions contemplated by this
Agreement without such prior consultation with the other parties as to the
timing and contents of any such announcement as may be reasonable under the
circumstances; provided, however, that nothing contained herein shall prevent
any party from promptly making all filings with governmental authorities that
may, in its judgment, be required or advisable in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement so long as such party gives timely notice to the
other parties of the anticipated disclosure and cooperates with the other
parties in designing reasonable procedural and other safeguards to preserve, to
the maximum extent possible, the confidentiality of all information furnished by
the other parties pursuant to this Agreement.
7.6 Notification. Each party to this Agreement shall, in the event
------------
of, or promptly after obtaining knowledge of the occurrence or threatened
occurrence of, any fact or circumstance that would cause or constitute a breach
of any of its representations and warranties set forth herein, give notice
thereof to the other parties and shall use its reasonable best efforts to
prevent or remedy such breach.
7.7 Meeting of Shareholders of Chronicle. Chronicle shall take all
------------------------------------
action necessary, in accordance with the Nevada Corporation Law and its
Restated Articles of Incorporation and Bylaws, to duly call, give notice of,
convene, and hold a meeting of its shareholders as promptly as practicable, to
consider and vote upon the adoption and approval of this Agreement (as a plan
of merger under Section 78.451 of the Nevada Corporation Law), the Merger, the
Contribution, and the other transactions contemplated by this Agreement, to the
extent such approval is required by the Nevada
- 52 -
Corporation Law and Chronicle's Restated Articles of Incorporation. The
shareholder vote required for the adoption and approval of this Agreement, the
Merger, the Contribution, and the other transactions contemplated by this
Agreement shall be the vote required by the Nevada Corporation Law and
Chronicle's Restated Articles of Incorporation. In addition, at such meeting of
the Chronicle shareholders, Chronicle shall request that the shareholders of
Chronicle take any action required to amend any agreement among the shareholders
to permit the Merger, the Contribution, and the other transactions contemplated
by this Agreement to be consummated without contravening such agreement, and if
the shareholders approve this Agreement, the Merger, the Contribution, and the
other transactions contemplated by this Agreement at such meeting, Chronicle
shall use its reasonable best efforts to cause each shareholder to execute and
deliver to Acquiror an instrument in the form of Exhibit B or an investment
letter in form and substance substantially similar to the provisions of Section
1 of Exhibit B. Subject to the fiduciary duty of the Board of Directors of
Chronicle under applicable law as advised by outside counsel, Chronicle shall
use its reasonable best efforts to secure the vote of shareholders required by
the Nevada Corporation Law and Chronicle's Restated Articles of Incorporation to
effect such transactions and to cause all necessary actions to be taken to amend
such shareholders' agreement by the later of 30 days after the date of this
Agreement or 20 days after delivery of the PPM by Acquiror to Chronicle.
7.8 Regulatory and Other Authorizations.
-----------------------------------
(a) Governmental Consents. Chronicle and Acquiror agree to
---------------------
use their respective reasonable best efforts to obtain all authorizations,
consents, orders, and approvals of federal, state, local, and foreign
regulatory bodies and officials and non-governmental third parties that may be
or become necessary for its respective execution and delivery of, and the
performance of its respective obligations pursuant to, this Agreement, and will
cooperate fully with the other parties in promptly seeking to obtain all such
authorizations, consents, orders, and approvals; provided, however, that
neither Acquiror nor Chronicle shall have any obligations under this Section
7.8(a) until this Agreement is approved by the shareholders of Chronicle.
(b) HSR Act Filings. Chronicle and Acquiror shall each make
---------------
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
no later than 45 days after the date of approval of this Agreement by the
shareholders of Chronicle. Each such filing shall request early termination of
the waiting period imposed by the HSR Act. Chronicle and Acquiror shall use
their respective reasonable best efforts to respond as promptly as reasonably
practicable to any inquiries received from the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") for additional information or documentation and to respond as
promptly as reasonably practicable to all inquiries and requests received from
any other governmental authority in connection with antitrust matters;
provided, however, that nothing contained herein shall be deemed to preclude
either Chronicle or Acquiror from negotiating reasonably with any governmental
authority regarding the scope and content of any such requested information or
documentation. Chronicle and Acquiror shall use their respective reasonable
best efforts to overcome any objections that may be raised by the FTC, the
Antitrust Division or any other governmental authority having jurisdiction over
antitrust matters. Notwithstanding the foregoing, Acquiror shall not be
required to make any significant change in the operations or activities of the
business (or any material assets employed therein) of Acquiror or any of its
Affiliates, if Acquiror determines in good faith that such change would be
materially adverse to the operations or activities
- 53 -
of the business (or any material assets employed therein) of Acquiror or any of
its Affiliates having significant assets, net worth, or revenue.
(c) Franchise Consents. Any application to any governmental
------------------
authority for any authorization, consent, order, or approval necessary for the
transfer of control of any Franchise shall be mutually acceptable to Chronicle
and Acquiror. Without limiting the obligations of Chronicle and Acquiror under
Section 7.8(a), each of Chronicle and Acquiror agrees, upon reasonable prior
notice, to make appropriate representatives available for attendance at
meetings and hearings before applicable governmental authorities in connection
with the transfer of control of any Franchise.
(d) Restructuring for Franchise Compliance. If any
--------------------------------------
authorization, consent, order, or approval of any governmental authority
necessary for the transfer of control of any Franchise shall not have been
obtained prior to the Effective Time, Spinco and Acquiror shall cooperate with
each other and use their respective reasonable best efforts (i) to restructure
the ownership and control of such Franchise from and after the Effective Time
in such a manner that, to the extent feasible, prevents any violation of the
terms of such Franchise that would have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries taken as a whole or of Spinco yet preserves the
intent of the parties as set forth in this Agreement with respect to the terms
and conditions of the Merger, and (ii) notwithstanding the Closing, to continue
to seek any authorization, consent, order, or approval necessary for the
transfer of control of such Franchise.
(e) Other Transferee. Acquiror shall deliver written notice
----------------
to Chronicle of the identity of any intended assignee of any of the assets of
Western other than Acquiror and its wholly owned subsidiaries within 10 days
after the date of approval of this Agreement by Chronicle's shareholders. If
Acquiror develops any additional plans or intentions for such assignments after
such 10-day period but before the Effective Time, Acquiror will inform Chronicle
promptly of such plans or intentions. Acquiror agrees that any such assignments
described in the preceding two sentences shall not include more than 55% of the
fair market value of the assets to be acquired pursuant to the Merger in the
aggregate. Any obligations set forth in this Section 7.8(e) are in addition to
Acquiror's obligations under Section 7.13(h).
7.9 Further Assurances. Each of the parties to this Agreement
------------------
shall execute such documents and other instruments and take such further
actions as may be reasonably required or desirable to carry out the provisions
of this Agreement and consummate the transactions contemplated by this
Agreement or, at and after the Closing Date, to evidence the consummation of
the transactions contemplated by this Agreement. Upon the terms and subject to
the conditions of this Agreement, each of the parties to this Agreement shall
take or cause to be taken all actions and to do or cause to be done all other
things necessary, proper, or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and to
obtain in a timely manner all necessary waivers, consents, and approvals and to
effect all necessary registrations and filings.
- 54 -
7.10 Internal Revenue Service Ruling.
-------------------------------
(a) Cooperation. As promptly as practicable after the date
-----------
of approval of this Agreement by the shareholders of Chronicle, after
reasonable consultation with and review by Acquiror, Chronicle shall prepare
and submit to the IRS a request for an advance letter ruling from the IRS with
respect to the matters described on Schedule 7.10. Chronicle shall furnish to
Acquiror, for Acquiror's review and comment, copies of the ruling request to be
filed by Chronicle, prior to the filing thereof with the IRS, and Acquiror
shall advise Chronicle of any recommended changes to the ruling request as soon
as reasonably practicable following receipt from Chronicle. Chronicle shall
notify Acquiror prior to any in person meeting scheduled with the IRS to
discuss the ruling request and shall provide Acquiror with an opportunity to
participate in any such meeting if requested by Acquiror. Chronicle shall
provide Acquiror promptly with copies of any correspondence between Chronicle
and the IRS with respect to the ruling request. Acquiror shall reasonably
cooperate in good faith with Chronicle in seeking to obtain such ruling.
(b) Drop-down of Assets. If Chronicle determines in good
-------------------
faith that one or more of the contributions referred to in paragraphs 15, 16 or
17 of Schedule 7.10 of this Agreement, other than transfers by Acquiror to TCI
Communications, Inc., are materially interfering with (i) the IRS' willingness
to issue the advance letter ruling referred to in Section 7.10(a) of this
Agreement based on communications with the IRS or (ii) the opinion referred to
in Section 8.2(f) of this Agreement (in either case an "Interfering Transfer"),
then Acquiror shall be given an opportunity to participate in a discussion with
the IRS regarding such contributions. If, after such discussion, Chronicle
determines reasonably and in good faith that any such contribution is an
Interfering Transfer, Acquiror shall abandon any plan or intent to make any
such Interfering Transfer and shall not take steps to make any such Interfering
Transfer within two years after the Effective Time. Any obligations set forth in
this Section 7.10(b) are in addition to Acquiror's obligations under Section
7.13(h).
7.11 Records Retention.
-----------------
(a) Spinco Obligation. For a period of five years after the
-----------------
Closing Date, Spinco shall retain all of its books and records relating to
Western for periods prior to the Closing Date (except that Spinco shall retain
all such books and records relating to Taxes for the period of the applicable
statute of limitation), and the Surviving Corporation shall have the right to
inspect such books and records during normal business hours, upon five days'
prior notice, in connection with the preparation of financial statements,
reports, and filings and any other reasonable purpose.
(b) Surviving Corporation Obligation. For a period of five
--------------------------------
years after the Closing Date, the Surviving Corporation shall retain all of its
books and records relating to Western for periods prior to the Closing Date
(except that the Surviving Corporation shall retain all such books and records
relating to Taxes for the period of the applicable statute of limitation), and
Spinco shall have the right to inspect such books and records during normal
business hours, upon five days' prior
- 55 -
notice, in connection with the preparation of financial statements, reports, and
filings and any other reasonable purpose.
7.12 Chronicle Name.
--------------
(a) Acquiror acknowledges that the name "Chronicle," whether
alone or in combination with one or more other words, is an asset of Chronicle
being transferred to Spinco in the Contribution. Promptly after the Closing
Date, Acquiror shall take all actions necessary to permit Spinco to change its
name to "The Chronicle Publishing Company."
(b) Between the consummation of the Contribution and the Closing,
Chronicle shall have a non-exclusive license to use the name "The Chronicle
Publishing Company."
7.13 Tax Matters.
-----------
(a) Spinco Obligations.
------------------
(i) Spinco shall be liable for, shall pay, and shall
indemnify and hold the Surviving Corporation harmless, on an after-tax basis,
against all Chronicle Taxes (including any Taxes resulting from payments made
pursuant to this Section 7.13(a)(i)), and any and all liabilities, losses,
damages, costs, and expenses (including court costs and reasonable professional
fees incurred in the investigation, defense, or settlement of any claims
covered by this indemnity) attributable to any such Chronicle Taxes. Spinco
shall be liable for all Taxes resulting from the failure of the Contribution
and the Distribution to qualify as a tax-free reorganization under Section
368(a)(1)(D) and Section 355 of the Code and the failure of the Merger to
qualify as a tax-free reorganization under Section 368(a) of the Code to the
extent such failure results from any action or omission by Chronicle or its
shareholders before the Effective Time or (B) by Spinco or Spinco's shareholders
(including Spinco's breach of any of its covenants in Section 7.13(h)).
(ii) Spinco or its shareholders, as applicable, shall be
entitled to any credits or refunds of Chronicle Taxes paid or allocable to
Chronicle or its shareholders at any time, and Spinco shall indemnify and hold
harmless the Surviving Corporation against any subsequent disallowance of such
credits or refunds.
(iii) Spinco shall be responsible for the preparation and
filing of all Chronicle Tax Returns for all taxable periods that end on or
before the Closing Date, including Tax Returns of Chronicle with respect to
such periods that are due after the Closing Date, and Spinco shall be
responsible for the payment of all Taxes payable by Chronicle shown to be due
thereon.
(iv) Spinco shall be designated as the agent for Chronicle
with respect to Chronicle Taxes, and shall have the sole authority to deal with
any matters relating to Chronicle Taxes, including but not limited to the
filing of amended returns, except that such authority shall not
- 56 -
include a change of accounting method or revocation of tax elections that could
have an adverse effect on the Surviving Corporation after the Effective Time.
(v) Acquiror shall promptly inform Spinco whenever any
taxing authority asserts a claim, makes an assessment, or otherwise disputes
the amount of any Chronicle Taxes. Spinco, at its cost and expense, shall have
the right to control any resulting proceedings and to determine whether and
when to settle any such claim, assessment, or dispute.
(b) Acquiror Obligations.
--------------------
(i) Acquiror shall be liable for, shall pay, and shall
indemnify and hold Spinco and each Person who was a shareholder of Chronicle at
or at any time prior to the Effective Time harmless, on an after-tax basis,
against all Taxes (including any Taxes resulting from any payments made
pursuant to this Section 7.13(b)(i)), and any and all liabilities, losses,
damages, costs, and expenses (including court costs and reasonable professional
fees incurred in the investigation, defense, or settlement of any claims
covered by this indemnity) attributable to any such Taxes, resulting from (A)
the failure of the Merger to qualify as a tax-free reorganization under Section
368(a) of the Code, or (B) the failure of the Contribution and the Distribution
to qualify as a tax-free reorganization under Section 368(a)(1)(D) and Section
355 of the Code, in each case to the extent such failure results from any
action or omission by Acquiror (including Acquiror's breach of any of its
covenants in Section 7.13(h)).
(ii) Whenever any taxing authority asserts a claim or makes
an assessment for Taxes for which Acquiror is or may be liable under Section
7.13(b)(i) of this Agreement, Spinco or the former shareholder of Chronicle
against whom such claim or assessment is asserted shall promptly inform
Acquiror. Acquiror, at its cost and expense, shall have the right to control
any resulting proceedings and to determine whether and when to settle any such
claim, assessment, or dispute.
(iii) (A) Acquiror agrees (1) to claim or to cause one or
more of its Affiliates to claim deductions, losses or credits with respect to
any liabilities assumed by Spinco as described in Section 3.1(c) of this
Agreement or indemnified by Spinco pursuant to the Contribution Agreement
("Spinco Assumed Liabilities") that Spinco reasonably determines and notifies
Acquiror should be reported as an item of deduction, loss or credit on a
federal Tax Return of Acquiror or any of its Affiliates (an "Acquiror Deduction
Item") provided such notice is received by Acquiror at least 30 days before the
filing of such Tax Return and (2) at such time as there is a final
determination relating to Taxes with respect to a federal Tax Return for any
taxable year in which an Acquiror Deduction Item is claimed, to pay to Spinco
an amount equal to the sum of the realized tax benefits from such Acquiror
Deduction Item plus an amount equal to the deemed state tax benefit realized by
Acquiror from such Acquiror Deduction Item determined based upon an imputed
state tax rate of four and one-half percent (4-1/2%), together with interest
from March 15 of the year following the taxable year in which tax benefits are
realized from an Acquiror Deduction Item until the date of payment to Spinco at
a rate equal to the prime rate charged by The Bank of New York as of such
- 57 -
March 15. If Acquiror has been given notice of an Acquiror Deduction Item,
Acquiror will notify Spinco at least 60 days prior to the date it intends to
file a federal Tax Return of Acquiror or its Affiliates if such Tax Return is to
be filed on a date other than the first date such Tax Return is due without
extensions.
(B) With respect to a taxable year which includes or
begins after the Merger, Acquiror agrees to notify Spinco at least 60 days
prior to the date any amended federal Tax Return of Acquiror or any of its
Affiliates is to be filed. Acquiror further agrees (1) to claim or to cause
one or more of its Affiliates to claim deductions, losses or credits with
respect to any Spinco Assumed Liabilities that Spinco reasonably determines and
notifies Acquiror should be reported as an item of deduction, loss or credit on
an amended federal Tax Return to be filed by Acquiror or any of its Affiliates
(an "Amended Deduction Item") provided such notice is received by Acquiror at
least 30 days before the filing of such amended Tax Return and (2) at such time
as there is a final determination relating to Taxes with respect to a federal
Tax Return for any taxable year in which an Amended Deduction Item is claimed,
to pay to Spinco an amount equal to the sum of the realized tax benefits from
such Amended Deduction Item plus an amount equal to the deemed state tax
benefit realized by Acquiror from such Amended Deduction Item determined based
upon an imputed state tax rate of four and one-half percent (4-1/2%), together
with interest from the later of (A) the date Acquiror or any of its Affiliates
is entitled to interest pursuant to such amended Tax Return or (B) March 15 of
the year following the taxable year in which tax benefits are realized from
such Amended Deduction Item, until the date of payment to Spinco at a rate
equal to the prime rate charged by The Bank of New York as of the later of the
two dates described above.
(C) As used in this Section 7.13(b)(iii) "final
determination" means (i) a decision of the United States Tax Court or a
judgment, decree, or other order by any court of competent jurisdiction that
has become final and unappealable, (ii) a closing agreement under Section
7121 of the Code that is binding on the IRS or other final settlement with the
IRS, or (iii) any final disposition by reason of the expiration of the statute
of limitations. As used in this Section 7.13(b)(iii), "realized tax benefits"
from an Acquiror Deduction Item or an Amended Deduction Item shall be the
positive difference (if any) between (1) income Taxes that would be shown as
due and payable on the consolidated federal Tax Return filed by Acquiror and
its Affiliates without regard to any Acquiror Deduction Item or Amended
Deduction Item, but otherwise taking into account all other information in such
Tax Return as filed (either originally or as amended) and otherwise making such
calculations in conformity with applicable Tax laws and regulations (including
the carryback of losses or credits) and (2) the income Taxes actually shown as
due and payable on such Tax Return as filed (either originally or as amended).
(c) Other Taxes. Except as otherwise provided in Section
-----------
7.13(a) and Section 7.13(b), all Taxes shall be the responsibility of the
taxpayer on which they are imposed, and any refunds and credits of Taxes shall
be for the account of the taxpayer responsible for such Taxes.
(d) Cooperation. Acquiror, Chronicle, and Spinco shall
-----------
cooperate with each other in a timely manner in the preparation and filing of
any Tax Returns, the payment of any Taxes in
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accordance with this Agreement, and the conduct of any audit or other proceeding
and to effect the provisions of this Agreement relating to Taxes including the
determination of tax benefits pursuant to Section 7.13(b)(iii). Each party shall
execute and deliver such powers of attorney and make available such other
documents as are necessary to carry out the intent of this Section 7.13. Each
party agrees to notify the other party of any audit adjustments that do not
result in a tax liability to that party but can reasonably be expected to affect
Tax Returns of the other party or a former shareholder of Chronicle.
(e) Retention of Records. Acquiror, Chronicle, and Spinco
--------------------
shall (i) retain records, documents, accounting data, and other information
(including computer data) necessary for the preparation and filing of all Tax
Returns or the audit of such returns, and (ii) give to each other reasonable
access to such records, documents, accounting data, and other information
(including computer data), to its personnel (and shall insure their
cooperation), and to its premises, for the purpose of the review or audit of
such Tax Returns to the extent relevant to an obligation or liability of a
party under this Agreement.
(f) Payments; Disputes. Except as otherwise provided in this
------------------
Section 7.13, any amounts owed by any party to any other party under this
Section 7.13 shall be paid within ten days after notice from the party entitled
to such payment; provided, however, that if any party entitled to
indemnification under this Section 7.13 has not paid the amount for which such
party is entitled to indemnification and such amount is being contested before
the appropriate governmental authorities in good faith, the indemnifying party
shall not be required to make payment to the indemnified party until an
appropriate governmental authority determines finally that payment is due. If
the parties cannot agree on any calculation of any liabilities under this
Section 7.13, such calculation (but not the determination of whether any
liability in fact exists) shall be made by any independent public accounting
firm acceptable to the disputing parties. The decision of such firm shall be
final and binding. The fees and expenses incurred in connection with such
calculation shall be borne equally by the disputing parties. For purposes of the
immediately preceding sentence, all former shareholders of Chronicle, all
shareholders of Spinco, and Spinco shall collectively be deemed to constitute a
single party.
(g) Termination of Liabilities. Notwithstanding any other
--------------------------
provision in this Agreement, the liabilities of Spinco and Acquiror for any Tax
under this Section 7.13 shall apply only to Taxes properly assessed before the
expiration of the applicable statute of limitations for such Tax.
(h) Other Covenants.
---------------
(i) Spinco will not take or fail to take any action if such
action taken by Spinco or such failure to act by Spinco would cause the Merger
not to qualify as a reorganization within the meaning of Section 368(a) of the
Code or would cause the Contribution and Distribution not to qualify as a
reorganization within the meaning of Section 355 or Section 368(a) of the Code.
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(ii) Neither Acquiror nor any of its Affiliates will take
any action or fail to take any action if such action taken by Acquiror or any
of its Affiliates or such failure to act by Acquiror or any of its Affiliates
would cause the Merger not to qualify as a reorganization under Section 368(a)
of the Code or would cause the Contribution and the Distribution not to qualify
under Section 355 or Section 368(a) of the Code. Neither Acquiror nor any of
its Affiliates will take any action that is inconsistent with any
representation or statement contained in (A) the request (including any
exhibits or supplements thereto) for an advance letter ruling from the IRS as
contemplated by Section 7.10 unless such representation or statement is
objected to by Acquiror prior to the filing of such request (including any
exhibits or supplements thereto) with the IRS or (B) a certificate of an
appropriate officer of Acquiror in the form of Exhibit 7.13(h) to be executed
in conjunction with the tax opinion described in Section 8.2(f).
7.14 Employee Benefits; Employee Matters.
-----------------------------------
(a) Each employee of the Surviving Corporation or any of its
Subsidiaries who was an employee of Western immediately prior to the Effective
Time and such employee's eligible dependents (i) shall be entitled to
participate in the Surviving Corporation's Employee Benefit Plans to the same
extent as similarly situated employees of Acquiror and their dependents; (ii)
shall receive credit for such employee's past service with any cable television
system owned by Chronicle as of the Effective Time (including past service with
any prior owner or operator of such cable television system) for purposes of
eligibility and vesting under the Surviving Corporation's Employee Benefit
Plans, including for purposes of eligibility and participation under the
Surviving Corporation's severance policies and plans, including the calculation
of such employee's "Years of Continuous Service" under the Tele-Communications,
Inc. Severance Pay Plan, effective January 1, 1995, as amended, to the extent
such service was credited under the Western Employee Benefit Plans on the
Closing Date; and (iii) shall not be subject to any waiting periods or
limitations on benefits for pre-existing conditions under the Surviving
Corporation's Employee Benefit Plans, including any group health and disability
plans, except to the extent such employees were subject to such limitations
under the Western Employee Benefit Plans.
(b) Employees of the Surviving Corporation or any of its
Subsidiaries who were employees of Western immediately prior to the Effective
Time shall be entitled to carry forward (i) ten days of sick leave to be
applied to the year in which the Closing occurs and (ii) vacation accrued by
them as employees of Chronicle, in either case to the extent accrued by
Chronicle for purposes of determining the Working Capital Deficit under Section
3.1(b); provided, however, that if requested by Acquiror, the amount of accrued
vacation permitted to be carried over by such employees shall be limited to the
maximum amount of vacation permitted to be accrued by employees of Acquiror in
accordance with Acquiror's standard practices, Chronicle shall pay such
employees for any accrued vacation not permitted to be carried over prior to
the Effective Time, and the amount accrued for purposes of determining the
Working Capital Deficit under Section 3.1(b) shall be reduced by the amount
paid by Chronicle to such employees pursuant to this Section 7.14(b).
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(c) Not later than 30 days prior to the Closing Date, Acquiror
shall notify Chronicle of any employees of Western whom Acquiror does not
intend to employ after the Effective Time; provided, however, that any such
notification by Acquiror shall include only (i) any "corporate" employees of
Western identified on Schedule 4.18 under Location Code "SF" and (ii) up to 30
"non-corporate" employees of Western. At Chronicle's option, Chronicle shall
offer employment to such employees with Spinco after the Effective Time or
shall terminate such employees effective prior to the Effective Time. Spinco
shall assume all liabilities with respect to any such employees terminated by
Chronicle prior to the Effective Time.
7.15 Bay TV Joint Venture. At Closing, Acquiror and Spinco shall
--------------------
execute and deliver a joint venture agreement and related documents
substantially in accordance with the term sheet attached as Exhibit C.
7.16 Environmental Reports. Acquiror, at its expense, may cause to
---------------------
be prepared for any owned real property of Western a current Phase I
Environmental Site Assessment prepared by a nationally known environmental
engineering firm. Acquiror will provide to Chronicle a copy of any such Phase
I environmental report that is prepared for Acquiror.
7.17 Approval of Acquiror's Board of Directors. Acquiror shall use
-----------------------------------------
reasonable best efforts to obtain, within 10 days after the execution of this
Agreement by Chronicle and Acquiror, the ratification by Acquiror's Board of
Directors in accordance with its charter documents and applicable law for the
execution and delivery of this Agreement on behalf of Acquiror and the
performance by Acquiror of its obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement.
7.18 Suspension of Chronicle's Covenants. Notwithstanding anything
-----------------------------------
in this Agreement to the contrary, if the condition set forth in Section 8.1(a)
is not satisfied within 120 days after the date of this Agreement, then
Chronicle will not be deemed to be in default under this Agreement for
any failure prior to the satisfaction of such condition to perform or comply
with any of its covenants under this Agreement (except its covenants under
Section 7.1, Section 7.5 and Section 7.7) to be performed or complied with by
it prior to the Closing. If, however, any such failure causes the condition
set forth in Section 8.3(b) not to be satisfied on the Closing Date, Acquiror
shall not be obligated to effect the transactions contemplated by this
Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
8.1 Conditions to the Obligations of Chronicle and Acquiror. The
-------------------------------------------------------
respective obligations of Chronicle and Acquiror to consummate the transactions
contemplated by this Agreement are subject to the requirements that:
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(a) This Agreement, the Merger, the Contribution, and the other
transactions contemplated by this Agreement shall have been approved and
adopted by the shareholders of Chronicle to the extent provided in Section 7.7;
(b) Any waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated;
(c) The Registration Statement shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order;
(d) The transactions contemplated by Section 3.1(a) and Section
3.2 shall have been consummated in accordance with the terms of this Agreement
and the Contribution Agreement;
(e) Chronicle shall have received from the IRS an advance letter
ruling as contemplated by Section 7.10, substantially to the effect set forth
in paragraphs 1 through 14 of Schedule 7.10; and
(f) No federal, state, or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced, or entered any statute or rule, regulation,
injunction, or other order (whether temporary or preliminary or permanent) that
remains in effect and has the effect of making the transactions contemplated by
this Agreement illegal or otherwise prohibiting the transactions contemplated
by this Agreement, or that questions the validity or the legality of the
transactions contemplated by this Agreement and that could reasonably be
expected to materially and adversely affect the value of the business of
Western or Acquiror; provided, however, that this condition shall not apply
with respect to any statute or rule, regulation, injunction, or other order
that prohibits the transfer of control of any Franchise if the condition in
Section 8.3(d) has been satisfied or waived by Acquiror and Chronicle.
8.2 Conditions to the Obligations of Chronicle. The obligations of
------------------------------------------
Chronicle to effect the transactions contemplated by this Agreement are subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) The representations and warranties of Acquiror contained in
this Agreement or in any other document delivered pursuant to this Agreement
shall be true and correct in all material respects on and as of the Closing
Date with the same effect as if made on and as of the Closing Date and Acquiror
shall have delivered to Chronicle and Spinco at the Closing a certificate
executed on behalf of Acquiror by an executive officer of Acquiror to that
effect;
(b) Each of the covenants of Acquiror to be performed on or
before the Closing Date pursuant to the terms of this Agreement shall have been
duly performed in all material respects
- 62 -
on or before the Closing Date and Acquiror shall have delivered to Chronicle at
the Closing a certificate executed on behalf of Acquiror by an executive officer
of Acquiror to that effect;
(c) Acquiror shall have performed its obligations under Section
3.3(a);
(d) The Acquiror Class A Common Stock shall not have been
suspended from trading on Nasdaq and the shares of Acquiror Class A Common
Stock to be issued in the Merger shall have been authorized for listing on
Nasdaq, subject only to official notice of issuance, and each other class of
Acquiror Common Stock shall not have been suspended from trading on Nasdaq or
any securities exchange on which each such other class of Acquiror Common Stock
is then listed and the shares of such other class of Acquiror Common Stock to
be issued in the Merger shall have been authorized for listing on Nasdaq or any
securities exchange on which such other class of Acquiror Common Stock is then
listed, subject only to official notice of issuance;
(e) The FCC shall have consented, to the extent such consent is
legally required, to the assignment to Spinco of all FCC licenses possessed by
Chronicle in connection with its business (other than that conducted by
Western), except where the failure to obtain any such consent would not have a
material adverse effect on the financial condition, results of operations,
liabilities, assets, or business of Spinco;
(f) Chronicle shall have received an opinion of Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, special tax counsel to Chronicle, in form and substance
reasonably satisfactory to Chronicle, dated as of the Effective Time,
substantially to the effect that, on the basis of facts, representations, and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code (in rendering
such opinion, Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ may require and rely upon
representations and covenants contained in certificates of officers of
Acquiror, Chronicle, and others, including shareholders of Chronicle);
(g) Chronicle and Spinco shall have received an opinion of
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C., counsel for Acquiror, dated as of the Closing Date
(which opinion may rely on the opinions of other counsel for Acquiror), in form
and substance reasonably satisfactory to Chronicle, Spinco, and their counsel;
(h) The Acquiror Common Stock Value as defined in the first
sentence of Section 2.2(c), without regard to the adjustments set forth in the
second sentence of Section 2.2(c), shall be equal to or greater than the
Minimum Value; and
(i) Those consents of third parties listed on Schedule 8.2(i)
shall have been obtained.
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8.3 Conditions to Obligations of Acquiror. The obligations of
-------------------------------------
Acquiror to effect the transactions contemplated by this Agreement are subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Subject to Section 8.4, the representations and warranties of
Chronicle contained in this Agreement or in any other document delivered
pursuant to this Agreement shall be true and correct in all material respects
on and as of the Closing Date with the same effect as if made on and as of the
Closing Date and Chronicle shall have delivered to Acquiror at the Closing a
certificate executed on behalf of Chronicle by an executive officer of
Chronicle to that effect;
(b) Subject to Section 8.4, each of the covenants of Chronicle to
be performed on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed in all material respects on or before
the Closing Date and Chronicle shall have delivered to Acquiror at the Closing
a certificate executed on behalf of Chronicle by an executive officer of
Chronicle to that effect;
(c) The FCC shall have consented, to the extent such consent is
legally required, to the transfer to Acquiror of all FCC licenses possessed by
Chronicle in connection with Western's business, except where the failure to
obtain any such consent would not have a material adverse effect on the
financial condition, results of operations, liabilities, assets, or business of
Acquiror and its Subsidiaries taken as a whole;
(d) The aggregate number of Basic Subscribers in those Franchise
Areas that are Transferable Franchise Areas shall be at least 90% of the
aggregate number of Basic Subscribers in all Franchise Areas. For purposes of
this Section 8.3(d) and Section 8.3(e):
(i) The number of Basic Subscribers in a Franchise Area
shall be the number of Basic Subscribers set forth next to the name of such
Franchise Area on Schedule 4.15 (regardless of any change in the number of
Basic Subscribers in such Franchise Area between June 22, 1995 and the Closing
Date) and the aggregate number of Basic Subscribers in all Franchise Areas
shall be the total number of Basic Subscribers for all Franchise Areas as set
forth on Schedule 4.15 (regardless of any change in the aggregate number of
Basic Subscribers between June 22, 1995 and the Closing Date); and
(ii) A "Transferable Franchise Area" means any Franchise
Area with respect to which (A) any authorization, consent, order, or approval
of any governmental authority necessary for the transfer of control of the
Franchise for such Franchise Area in connection with the consummation of the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory, based on cable industry standards, to Acquiror, shall have been
obtained and shall be in full force and effect as of the Effective Time, and
the right of any governmental authority to acquire the System serving any
Franchise Area shall have been waived, other than rights of condemnation or
eminent domain afforded by law; or (B) no authorization, consent, order, or
approval of any governmental authority is necessary for the transfer of control
of the Franchise for
- 64 -
such Franchise Area in connection with the consummation of the transactions
contemplated by this Agreement, or (C) no Franchise is required for the
provision of cable television service in the Franchise Area;
(e) Each of the Franchise Areas designated on Schedule 8.3(e)
shall have become a Transferable Franchise Area (as defined in Section
8.3(d)(ii));
(f) The Franchises for the following Franchise Areas shall have
been renewed or extended on terms and conditions reasonably satisfactory to
Acquiror:
(i) Thousand Oaks, California (and related franchises in
Ventura County, California);
(ii) South San Francisco, California; and
(iii) Carmel-By-The-Sea, California;
(g) The rebuild required under the Franchise for Camarillo,
California shall have been completed;
(h) The retransmission consent agreement for KITV in Hawaii shall
have been amended such that no cash consideration shall be required to be paid
thereunder on or after the Effective Time and the retransmission consent
agreement for KDBC in Las Cruces, New Mexico shall have been amended to clarify
that the obligation of the Surviving Corporation thereunder on or after the
Effective Time shall be limited to purchasing promotional spots up to the
stated dollar amounts, not to make cash payments;
(i) The programming affiliation agreements for carriage of Nippon
Golden Network and all agreements pursuant to which programming is acquired by
Chronicle through Telesynergy, Inc. shall have been terminated prior to the
Effective Time and, after the Effective Time, carriage of Bay TV in Western's
Systems shall be governed by the affiliation agreement with Satellite Services,
Inc., an Affiliate of Acquiror, in effect at the Effective Time;
(j) Acquiror shall have received an opinion of Dow, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, counsel for Chronicle, and Cole Raywid & ▇▇▇▇▇▇▇▇▇, FCC counsel for
Chronicle, dated as of the Closing Date (which opinions may rely on the
opinions of other counsel for Chronicle), in form and substance reasonably
satisfactory to Acquiror and its counsel;
(k) The lease for office space at Two ▇▇▇▇▇▇ Center, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ shall have been extended on a
month-to-month basis or for a term of no longer than six months after December
31, 1995 on terms and conditions reasonably satisfactory to Acquiror or the
facilities located at such location shall have been moved to another location
reasonably satisfactory to Acquiror and Chronicle; and
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(l) Those consents of third parties described on Schedule 8.3(l)
shall have been obtained.
8.4 Exception to Conditions to Obligations of Acquiror.
--------------------------------------------------
(a) For purposes of the conditions contained in Section 8.3(a)
and Section 8.3(b) to the obligations of Acquiror to effect the Merger, the
representations and warranties of Chronicle shall be true and correct in all
material respects as of the Closing Date, and the covenants of Chronicle to be
performed on or before the Closing Date shall have been performed in all
material respects, if the aggregate amount of damages that could reasonably be
expected to be suffered by the Surviving Corporation as a result of any
failures of such representations and warranties to be true and correct as of
the Closing Date or as a result of the nonperformance by Chronicle of any such
covenant would not exceed $1,000,000.
(b) The conditions contained in Section 8.3(a) and Section 8.3(b)
to the obligations of Acquiror to effect the Merger shall be deemed satisfied
notwithstanding the failures of any representations and warranties of Chronicle
to be true and correct as of the Closing Date or the nonperformance by
Chronicle of any covenant to be performed on or before the Closing Date if (i)
the aggregate amount of damages that could reasonably be expected to be
suffered by the Surviving Corporation as a result of the failures of such
representations and warranties to be true and correct as of the Closing Date or
as a result of the nonperformance by Chronicle of any such covenant would not
exceed $100,000,000 and (ii) Spinco agrees to indemnify the Surviving
Corporation against any such damages actually suffered by the Surviving
Corporation to the extent they exceed, in the aggregate, $500,000.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing Date:
(a) by mutual written consent duly authorized by the Boards of
Directors of Chronicle and Acquiror;
(b) by either Chronicle or Acquiror, if Acquiror's Board of
Directors has not approved the transactions contemplated by this Agreement
within 10 days after execution of this Agreement as provided in Section 7.17,
at any time prior to the date on which Acquiror's Board of Directors has
approved the transactions contemplated by this Agreement;
(c) by Acquiror, if the condition set forth in Section 8.1(a)
shall not have been satisfied within 60 days after the date of this Agreement
unless Acquiror is in default of its
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obligations under Section 7.3(a) of this Agreement, at any time prior to the
satisfaction of the condition set forth in Section 8.1(a);
(d) by either Chronicle or Acquiror, so long as the terminating
party is not in default under this Agreement in any material respect, after the
later of (i) March 31, 1996 (or, at Acquiror's option, if the condition set
forth in Section 8.1(a) shall not have been satisfied as of such date, June 30,
1996), or (ii) any date to which the Closing has been postponed pursuant to
Section 1.1(b) (such later date, the "Termination Date"), if the Merger has not
been consummated on or before such date;
(e) by Chronicle, if it is not in default under this Agreement in
any material respect, and either (i) Acquiror has failed to perform in any
material respect, any covenant in this Agreement when performance thereof was
due and has not cured the failure within twenty business days after Chronicle
delivered written notice thereof to Acquiror, or (ii) any condition in Section
8.1 or Section 8.2 has not been satisfied in any material respect, and is not
capable of being satisfied prior to the Termination Date; or
(f) by Acquiror, if it is not in default under this Agreement in
any material respect, and either (i) Chronicle has failed to perform in any
material respect, any covenant in this Agreement when performance thereof was
due and has not cured the failure within 20 business days after Acquiror
delivered written notice thereof to Chronicle, except where the failure to
perform such covenant would not cause the condition in Section 8.3(b) not to be
satisfied, after giving effect to Section 8.4, (ii) any condition in Section
8.1 or Section 8.3 has not been satisfied and is not capable of being satisfied
prior to the Termination Date, or (iii) the Board of Directors of Chronicle has
materially modified or withdrawn the approval, determination, or recommendation
referred to in Section 4.4.
9.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 9.1, this Agreement, except for the provisions of
Section 7.3(i), Section 7.3(l), Section 9.3, Section 10.8 (subject to Section
9.3), and Section 10.13, shall immediately become null and void and have no
effect, without any liability on the part of any party or its directors,
officers, or shareholders. Nothing in this Section 9.2 shall relieve any party
to this Agreement of liability for breach of this Agreement.
9.3 Fees and Expenses.
-----------------
(a) If this Agreement is terminated by Acquiror (i) pursuant to
Section 9.1(f), other than as a result of the failure of any condition in
Section 8.1 or the condition in Section 8.3(a) or Section 8.3(l) to be
satisfied or to be capable of being satisfied prior to the Termination Date, or
(ii) pursuant to Section 9.1(f) as a result of the failure of the condition in
Section 8.3(a) to be satisfied or to be capable of being satisfied prior to the
Termination Date, unless such condition was not satisfied and was not capable
of being satisfied as a result of a change in circumstances after the date of
this Agreement, Chronicle shall promptly pay to Acquiror an amount equal to the
actual
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reasonable fees and expenses paid or payable by or on behalf of Acquiror to its
attorneys, accountants, environmental consultants, management consultants, and
other consultants and advisors in connection with the negotiation, execution,
and delivery of this Agreement and the transactions contemplated by this
Agreement; provided, however, that such payment shall in no event exceed
$1,500,000. Such payment shall be made in same day funds no later than five
business days after receipt by Chronicle of detailed written statements
describing the fees and expenses.
(b) If this Agreement is terminated by Chronicle (i) pursuant to
Section 9.1(e), other than as a result of the failure of any condition in
Section 8.1 or the condition in Section 8.2(a) or Section 8.2(i) to be
satisfied or to be capable of being satisfied prior to the Termination Date, or
(ii) pursuant to Section 9.1(e) as a result of the failure of the condition in
Section 8.2(a) to be satisfied or to be capable of being satisfied prior to the
Termination Date, unless such condition was not satisfied and was not capable
of being satisfied as a result of a change in circumstances after the date of
this Agreement, Acquiror shall pay promptly to Chronicle an amount equal to the
actual reasonable fees and expenses paid or payable by or on behalf of
Chronicle and Spinco to their attorneys, accountants, environmental
consultants, management consultants, and other consultants and advisors in
connection with the negotiation, execution, and delivery of this Agreement;
provided, however, that such payment shall in no event exceed the sum of
$1,500,000. Such payment shall be made in same day funds no later than five
business days after receipt by Acquiror of detailed written statements
describing the fees and expenses.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. The
------------------------------------------
representations of Chronicle in Section 4.17(d) and the representations of
Acquiror in Section 5.11(d) shall survive beyond the Closing Date. All other
representations and warranties contained in this Agreement shall not survive
beyond the Closing Date. This Section 10.1 shall not limit (a) any covenant or
agreement of the parties to this Agreement that by its terms requires
performance after the Closing Date, including the covenants of Acquiror in
Section 7.10(b), Section 7.13(b), and Section 7.13(h), or (b) the obligations
of Spinco under the Contribution Agreement and this Agreement.
10.2 Entire Agreement. This Agreement, the Exhibits and Schedules
----------------
to this Agreement, and the Confidentiality Agreement referred to in Section
7.2, together constitute the entire agreement between the parties with respect
to the subject matter of this Agreement and supersede all prior written and
oral and all contemporaneous oral agreements and understandings with respect to
the subject matter of this Agreement.
10.3 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
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if to Acquiror: Tele-Communications, Inc.
Terrace Tower II
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to: Tele-Communications, Inc.
Terrace Tower II
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Legal Department
and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
if to Chronicle: The Chronicle Publishing Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
with copies to: Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
and Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person
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shall be deemed effective on delivery. Any notice or communication sent by
telecopy shall be deemed effective when confirmed. Any notice or communication
sent by registered or certified mail, return receipt requested, shall be deemed
effective when received, as evidenced by the return receipt. This Section 10.3
shall not preclude delivery of any notice or communication by means other than
those specified in this Section 10.3.
10.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER PRINCIPLES OF CONFLICTS OF LAWS
APPLICABLE THERETO, EXCEPT THAT CERTAIN PROVISIONS OF THIS AGREEMENT RELATING
TO THE MERGER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE NEVADA
CORPORATION LAW TO THE EXTENT PROVIDED IN THIS AGREEMENT.
10.5 Rules of Construction. The descriptive headings in this
---------------------
Agreement are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
Words used in this Agreement, regardless of the gender and number specifically
used, shall be deemed and construed to include any other gender, masculine,
feminine, or neuter, and any other number, singular or plural, as the context
requires. As used in this Agreement, the word "including" is not limiting, and
the word "or" is not exclusive.
10.6 Parties in Interest. This Agreement shall be binding upon and
-------------------
inure solely to the benefit of each party to this Agreement, and nothing in
this Agreement, express or implied, is intended to confer upon any other Person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement except (a) for Section 7.3, Section 7.13(b) and Section 10.9, which
are intended to be for the benefit of the Persons provided for therein and may
be enforced by such Persons, and (b) for those other provisions of this
Agreement that by their terms afford certain rights and remedies to Spinco,
which are intended to be for the benefit of Spinco and may be enforced by
Spinco.
10.7 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
10.8 Payment of Expenses. Except as otherwise expressly provided in
-------------------
this Agreement, each of the parties to this Agreement shall bear its own
expenses, including the fees of any attorneys and accountants engaged by such
party, in connection with this Agreement and the consummation of the
transactions contemplated herein. Any sales or other transfer taxes payable in
connection with the Contribution and the Distribution shall be paid by Spinco,
and any such sales or other transfer taxes payable in connection with the Merger
shall be paid by Acquiror and Spinco in equal shares.
10.9 No Personal Liability. This Agreement shall not create or be
---------------------
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of any
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party to this Agreement or any officer, director, employee, agent,
representative, or investor of any party to this Agreement.
10.10 Binding Effect; Assignment. This Agreement shall inure to the
--------------------------
benefit of and be binding upon the parties to this Agreement and their
respective legal representatives and successors. This Agreement may not be
assigned by any party to this Agreement.
10.11 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of all the parties. To the extent
permitted by applicable law, any amendment to this Agreement after the meeting
of the shareholders of Chronicle referred to in Section 7.7 may be made without
seeking the approval of such shareholders.
10.12 Extension; Waiver. Any party to this Agreement may (a) extend
-----------------
the time for the performance of any of the obligations or other acts of the
other parties to this Agreement, (b) waive any inaccuracies in the
representations and warranties of any other party contained herein or in any
document, certificate, or writing delivered pursuant to this Agreement by any
other party, or (c) waive compliance by any other party with any of the
agreements or conditions contained herein or any breach thereof. Any agreement
on the part of any party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
10.13 Legal Fees; Costs. If any party to this Agreement institutes
-----------------
any action or proceeding, whether before a court or arbitrator, to enforce any
provision of this Agreement, the prevailing party therein shall be entitled to
receive from the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
10.14 Alternative Structure of Contribution and Distribution.
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, at any
time prior to 60 days prior to the Closing Date, or such later date as Acquiror
shall agree, such agreement not to be unreasonably withheld, Chronicle shall be
entitled to revise the structure of the Contribution and the Distribution
provided that any such revised structure (i) has been approved by the requisite
shareholders of Chronicle, (ii) does not adversely affect the status of the
Merger as a tax-free reorganization under Section 368(a) of the Code, (iii)
requires Chronicle to form one or more new corporations (each corporation
referred to as "New Spinco" and collectively the "New Spincos") to which all
the assets described in Section 3.1(a) are in the aggregate transferred, (iv)
requires all the outstanding shares of all the New Spincos to be issued to and
held by Chronicle immediately prior to the Distribution, (v) requires the New
Spincos to jointly and severally assume all the liabilities of Chronicle
required to be assumed by Spinco pursuant to this Agreement and the Contribution
Agreement, (vi) requires Chronicle to transfer (pursuant to a pro rata
distribution, a non-pro rata exchange offer or otherwise) all the outstanding
stock of all the New Spincos to the shareholders of Chronicle prior to the
Merger, (vii) will be consummated in as timely a manner as the structure
contemplated by this Agreement, and (viii) provides Acquiror with
indemnification rights against New Spincos, jointly and severally, that are at
least as favorable to Acquiror, determined by Acquiror in its reasonable, good
faith discretion, as Acquiror's indemnification rights against Spinco pursuant
to this Agreement. If Chronicle elects
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to revise the structure of the Contribution and Distribution pursuant to this
Section 10.14, this Agreement and any related documents, including the
Contribution Agreement, shall be appropriately amended in order to reflect any
such revised structure. If Chronicle elects to pursue any such revised
structure, it shall promptly notify Acquiror and provide it with sufficient
detail as to such revised structure.
10.15 Time. Time is of the essence under this Agreement. If the
----
last day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
business day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in Denver, Colorado or San
Francisco, California are required or authorized to be closed.
ARTICLE XI
DEFINITIONS
11.1 Terms Defined Elsewhere in this Agreement. The following
-----------------------------------------
terms, as used in this Agreement, have the meanings set forth in the sections
indicated below:
Term Section
---- -------
AAA Note Section 3.2
Acquiror Preamble
Acquiror Class A Common Stock Section 2.1(a)
Acquiror Class B Common Stock Section 2.2(d)(iii)
Acquiror Common Stock Section 2.1(a)
Acquiror Common Stock Value Section 2.2(c)
Acquiror Deduction Item Section 7.13(b)(iii)(A)
Acquiror Indemnified Parties Section 7.3(l)(ii)
Acquiror Loans Section 3.3(a)
Acquiror PPM Information Section 7.3(a)
Acquiror Restructuring Section 2.7(a)
Acquiror's SEC Reports Section 5.5
Agreement Preamble
Amended Deduction Item Section 7.13(b)(iii)(B)
Antitrust Division Section 7.8(b)
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Term Section
---- -------
Articles of Merger Section 1.3
Average Trading Price Section 2.2(e)
Basic Subscribers Section 2.3(b)
Bay TV Preliminary Statements
Blackout Period Section 7.3(f)
Broadcast Basic Service Section 2.3(d)
Broadcast Basic Subscribers Section 2.3(e)
Capital Budget Section 6.1(j)
Certificate of Merger Section 1.3
Chronicle Preamble
Chronicle Common Stock Section 2.1(a)
Chronicle Common Stock Value Section 2.2(b)
Chronicle PPM Information Section 7.3(a)
Chronicle Stock Certificates Section 2.8(a)
Class A Preferred Section 5.4(a)
Class B Preferred Section 5.4(a)
Closing Section 1.1(a)
Closing Date Section 1.1(c)
Contribution Section 3.1(a)
Contribution Agreement Section 3.1(a)
Conversion Number Section 2.2(a)
Dissenting Shares Section 2.13
Distribution Section 3.2
Effective Time Section 1.3
Equivalent Basic Subscribers Section 2.3(f)
Escrowed Shares Section 2.6(a)
Estimated Purchase Price Section 2.5(a)
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Term Section
---- -------
Exchange Agent Section 2.8(a)
Existing Chronicle Debt Section 2.4(b)
Expanded Basic Service Section 2.3(g)
FTC Section 7.8(b)
Household Basic Subscribers Section 2.3(c)
Indemnified Party Section 7.3(l)(iv)
Indemnifying Party Section 7.3(l)(iv)
Interfering Transfer Section 7.10(b)
Losses Section 7.3(l)(i)
Material Contracts Section 4.14(a)
Maximum Value Section 2.2(d)
Merger Section 1.2
Minimum Value Section 2.2(d)
Nasdaq Section 2.2(e)
New Spinco Section 10.14
Other Acquiror Common Stock Section 2.7(a)
Other Acquiror Common Stock Ratio Section 2.7(b)
Per Subscriber Reduction Amount Section 2.3(a)
PPM Section 7.3(a)
Prospectus Section 7.3(b)
Purchase Price Section 2.2(f)
Registration Statement Section 7.3(b)
Retained Chronicle Debt Section 2.4(a)
Selling Shareholder Indemnified Parties Section 7.3(l)(i)
Selling Shareholders Section 7.3(b)
Series C Preferred Section 5.4(a)
Series E Preferred Section 5.4(a)
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Term Section
---- -------
Spinco Preliminary Statements
Spinco Assumed Liabilities Section 7.13(b)(iii)(A)
Spinco Common Stock Section 3.1(c)(i)
Subscriber Shortfall Section 2.2(f)
Subscriber Target Section 2.3(a)
Surviving Corporation Section 1.2
Termination Date Section 9.1(d)
Transferable Franchise Area Section 8.3(d)(ii)
V U West Agreement Section 2.4(a)(i)
Western Preliminary Statements
Working Capital Deficit Section 3.1(b)
11.2 Terms Defined in this Section. The following terms, as used in
-----------------------------
this Agreement, shall have the meanings set forth in this Section:
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, controls, or is under common control with, or is controlled by such
Person. As used in this definition, "control" means possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies of a Person (whether through the ownership of voting securities, by
contract, or otherwise), and the terms "controlling," "controlled by," and
"under common control with" have meanings corresponding to that of the term
"control."
"Chronicle Employee Benefit Plan" means any Employee Benefit Plan that is
(i) currently maintained or sponsored by Chronicle or any ERISA Affiliate of
Chronicle, or (ii) to which Chronicle or any ERISA Affiliate of Chronicle is
obligated to contribute on behalf of any current or former employee of
Chronicle or any ERISA Affiliate of Chronicle.
"Chronicle Taxes" means (a) any Tax payable by Chronicle attributable to
any taxable period ending on or before the Effective Time, and (b) all Taxes
not associated with the business operations of Western.
"Chronicle Tax Returns" means any Tax Return with respect to Chronicle
Taxes.
"COBRA" means Section 4980B of the Code and Part 6 of Subtitle B of Title
I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Communications Act" means, collectively, the Communications Act of 1934,
as amended, the Cable Communications Policy Act of 1984, as amended, and the
Cable Television Consumer Protection and Competition Act of 1992, and the
applicable rules and regulations thereunder.
"Delaware Corporation Law" means the General Corporation Law of Delaware.
"Employee Benefit Plan" means any "employee benefit plan," as defined in
Section 3(3) of ERISA, including any plan providing severance pay, disability
benefits, or death benefits, any retirement plan, and any hospitalization,
medical, or life insurance plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to any Person, any trade or
business that at any relevant time is treated as a single employer with or
under common control with such Person, within the meaning of Section 414(b),
Section 414(c), Section 414(m), or Section 414(o) of the Code.
"Exchange Act" means, collectively, the Securities Exchange Act of 1934,
as amended, and, unless the context indicates otherwise, the rules and
regulations thereunder.
"FCC" means the Federal Communications Commission.
"Franchise" means any governmental franchise or similar authorization
(other than any license issued by the FCC or any municipal business licenses)
pursuant to which Western is authorized to provide cable television service.
"Franchise Area" means any of the geographic areas in which Western is
authorized to provide cable television service pursuant to a Franchise or
provides cable television service in any geographic area in which a Franchise
is not required pursuant to applicable law.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"HSR Act" means, collectively, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
"IRS" means the Internal Revenue Service.
"Multiemployer Plan" means any "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
"Nevada Corporation Law" means the General Corporation Law of Nevada,
Nevada Revised Statutes, Title 7, Chapter 78, as in effect from time to time.
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"Pension Plan" means any "employee pension plan," as defined in Section
3(2) of ERISA (but excluding any Multiemployer Plan) that is (i) currently
maintained or sponsored by Chronicle or any ERISA Affiliate of Chronicle and
under which any current or former employees of Western are covered, or (ii) to
which Chronicle or any ERISA Affiliate of Chronicle is obligated to contribute
on behalf of any current or former employee of Western.
"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, or other entity or organization.
"Securities Act" means, collectively, the Securities Act of 1933, as
amended, and, unless the context indicates otherwise, the rules and regulations
thereunder.
"Subsidiary" means, with respect to any Person, any other Person, whether
or not incorporated, of which (a) such Person or any other Subsidiary of such
Person is a general partner or (b) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect
to such other Person is directly or indirectly owned or controlled by such
Person, by one or more Subsidiaries of such Person, or by such Person and one
or more of its Subsidiaries.
"System" means a cable television reception and distribution system
consisting of one or more headends, trunk cable, subscriber drops, and
associated electronic equipment, that is operated, or is capable of being
operated, as an independent system without interconnection to another system.
"Tax" means any income, gross receipts, ad valorem, premium, excise,
value-added, sales, use, transfer, gains, franchise, license, severance, stamp,
occupation, service, lease, withholding, employment, payroll, premium,
property, or windfall profits tax, alternative or add-on-minimum tax, or other
tax, fee, or assessment, together with any interest and any penalty, addition
to tax, or additional amount imposed by any governmental authority responsible
for the imposition of any such tax.
"Tax Return" means any return, report, statement, information statement,
or similar document required to be filed with any authority with respect to
Taxes.
"Western Employee Benefit Plan" means any Employee Benefit Plan that is
(i) currently maintained or sponsored by Chronicle or any ERISA Affiliate of
Chronicle and under which any current or former employee of Western is covered,
or (ii) to which Chronicle or any ERISA Affiliate of Chronicle is obligated to
contribute on behalf of any current or former employee of Western.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
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THE CHRONICLE PUBLISHING COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President & Chief Executive Officer
TELE-COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
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SCHEDULE 7.3(B)
Registrable Securities may be sold by Selling Shareholders directly or
through agents designated from time to time or to or through broker-dealers
designated from time to time. To the extent required, any such agent or
broker-dealer involved in the offer and sale of Registrable Securities and any
applicable commissions, discounts or other items constituting compensation to
such agents or broker-dealers will be set forth in a Prospectus Supplement.
The distribution of Registrable Securities may be effected from time to
time in one or more public or private transactions at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at prices determined on a
negotiated or competitive bid basis. Registrable Securities may be sold
through a broker-dealer acting as agent or broker for a Selling Shareholder, or
to a broker-dealer acting as principal. In the latter case, the broker-dealer
may then resell such Registrable Securities to the public at varying prices to
be determined by such broker-dealer at the time of resale. Registrable
Securities may be sold in connection with equity swap, put or call, margin and
similar transactions entered into by a Selling Shareholder, including sales by
or at the direction of the counterparty to any of such transactions.
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