HomeMy WebLinkAbout1995-07-11 - AGENDA REPORTS - CABLE TELEVISION (2)City Manjgy Approval
Item to be presented by:
Steve Stark s�
UNFINISHED BUSINESS
DATE: July 11, 1995
SUBJECT:. CABLE TELEVISION: APPLICATION TO TRANSFER FRANCHISE
AND SETTLEMENT OF DISPUTE RE: FRANCHISE FEES AND PUBLIC
ACCESS OBLIGATIONS
DEPARTMENT: Administrative Services
BACKGROUND
In 1987, the County of Los Angeles granted a cable television franchise to King Videocable
Company -Newhall ("King"). King is a wholly owned subsidiary of King Videocable Company
("KVC"), which in turn is a wholly-owned subsidiary of King Broadcasting Company ("KBC"). In
1992, the City approved the transfer of the Franchise to King Holding Corp.("KHC"), which is
equally owned by the Providence Journal Company and Kelso Partners IV, L.P,("Kelso").
On February 10, 1995, Continental Communication, Inc., the third largest cable operator in the
country, applied to the City for approval to acquire control of King.
Because the Franchise is granted to one company on the basis of its professional, financial and
technical ability to operate the cable system, it may not be transferred to another company without
the consent of the City. The purpose of City consent to a transfer is to insure that: (1) King is
presently in full compliance with the terms of the franchise, (ii) Continental has the professional,
financial and technical ability to operate the system, and (iii) the financial terms and conditions of the
purchase would not negatively impact cable operations..
In connection with reviewing the proposed transfer, the City has identified two Franchise compliance
issues concerning payment of franchise fees as well as providing community access programming.
One critical factor for determining Continental's qualifications to own the cable system is their
willingness to comply with the Franchise and remedy these existing Franchise violations.
Adopted:— 9_5'
�,
Based upon its Analysis of the Transfer, Staff recommends approval of the attached Resolution,
which disapproves the Transfer, without prejudice to King and Continental reapplying with a plan to
remedy the violations. Staff had hoped that, through face-to-face meetings, it would be able to agree
with King on the terms and conditions of the Transfer Resolution, These meetings continued through
last Friday, June 30, 1995. Some progress has been made through these meetings, and Staff had even
prepared a Transfer Resolution and a Settlement Agreement that would remedy all existing violations.
However, Continental and King have rejected these documents.
Federal law requires that the City Council act to approve or disapprove the transfer application within
120 days of receipt. In order to allow for further negotiations, King extended the 120 day period
through July 11, 1995. Consequently, the City Council must act on the transfer application by July
11, 1995; otherwise the application will be "deemed" approved. Given that all compliance issues have
not yet been resolved, and the 120 days is about to expire, Staff recommends denial of the transfer
application.
RECOMMENDATION
That the City Council adopt Resolution number 95-89 entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, DISAPPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION
FRANCHISE FROM THE PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
ATTACHMENTS
The following attachments can be located in the reading file:
-Staff Analysis of Application to Transfer King Videocable Franchise to Continental Cablevision
-Summary of Social Contract
-Resolution Approving the Transfer
-Settlement Agreement
-Transaction Information
RESOLUTION NO. 95-89
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, DISAPPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION
FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
WHEREAS, on September 29, 1987, the Board of Supervisors of the County of Los
Angeles, pursuant to Section 16.58.010 of the Los Angeles County Code (the "Cable Television
Ordinance"), adopted Ordinance No. 87-1069F (the "Franchise Ordinance") granting King
Videocable Company -Newhall ("King" or "Grantee"), a cable television franchise to construct,
operate and maintain a cable television system. The Cable Television Ordinance and the Franchise
Ordinance constitute, and will be hereinafter referred to as the ("Franchise");
WHEREAS, on December 15, 1987, the City of Santa Clarita was incorporated.
Following incorporation, the City codified the Cable Television Ordinance at Chapter 4.10 of the
Santa Clarita Municipal Code, and readopted and amended the Franchise Ordinance pursuant to City
Ordinance No. 88-27;
WHEREAS, King is a wholly-owned subsidiary of King Videocable Company
("KVC" ), which in turn is a wholly-owned subsidiary of King Broadcasting Company ("KBC");
WHEREAS, pursuant to Resolution No. 92-14, the City approved the transfer of
control of the Franchise, whereby King Holding Corp.("KHC"), which is equally owned by the
Providence Journal Company and Kelso Partners IV, L.P.("Kelso'), became the owner of the stock
of KBC;
WHEREAS, PJC and Continental Cablevision, Inc. ("Continental') have entered into
an. Amended and Restated Agreement and Plan of Merger dated as of November 18, 1994 (the
"Agreement"), subject to, among other considerations, any required approval of the franchising
authorities with respect thereto;
WHEREAS, in connection with the merger and other transactions (hereinafter referred
to as the "Transaction") contemplated by the Agreement, the fifty (50%) percent interest in KHC held
by Kelso will be sold to PJC;
WHEREAS, Continental will be a publicly owned company;
WHEREAS, the effect of the Transaction will be to transfer effective control of the
Grantee from PJC and Kelso to Continental;
WHEREAS, the Cable Television Ordinance requires City Council consent to any
transfer or change of control of the franchise;
WHEREAS, FCC Regulations (47 CFR § 76.502(i)(1)) require that in order for a cable
operator to obtain City approval of a transfer or change in control of the franchise, it must submit to
the City a FCC Form 394 and any other information as may be required by the City;
WHEREAS, PJC and Continental have filed a FCC Form 394 with the City requesting
City Council approval of the transfer of control of the Grantee to Continental (hereinafter referred
to as the "Transfer");
WHEREAS, effect of the Transaction and the Transfer will change effective control
of the Grantee from PJC and Kelso to Continental;
WHEREAS, in support of its Form 394 Application, PJC and Continental have
submitted to the City the following documents which are on file with the City Clerk, and are
collectively referred to as the "Transfer Documents":
1, Form 394 with Exhibits, filed with the City on February 28, 1995;
2. Letter with a three volume appendix from Continental to City of Santa Clarita,
dated April 17, 1995:
WHEREAS, the Conference Report to the 1992 Federal Cable Television Act, in
discussing franchise renewal under Section 626 of the Communications Act of 1934 (47 U.S.C.
§ 546) states that transferees of a cable television franchise are not responsible for breaches of the
franchise committed by the transferor: Consequently, the City Council finds that it is necessary that
all Franchise noncompliance issues be remedied prior to the Transfer;
WHEREAS, as part of the Form 394 application, Continental must certify that it "will
use its best efforts to comply with the terms of the franchise and applicable state laws or local
ordinances and related regulations, and to effect changes, as promptly as practicable, in the operation
of the system, if any changes are necessary to cure any violations thereof or defaults thereunder
presently in effect or ongoing'
WHEREAS, the City has evaluated the Grantee's compliance with the Cable
Television Ordinance and the Franchise Agreement;
WHEREAS, the City has identified violations of the Franchise in the areas of payment
of franchise fees, community programming, and provision of a public access studio, as more
specifically described in the Agenda Report regarding the proposed Transfer, dated July 11, 1995.
King and Continental refuse to remedy these violations to the reasonable satisfaction of the City;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, DOES RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. The Santa Clarita City Council hereby disapproves the Transfer for the reasons and
on the grounds contained in the Agenda Report regarding the Transfer, dated July 11, 1995, which
Report is incorporated into this Resolution by reference as if fully stated herein. This denial is
without prejudice to King vdeocable-Newhall and Continental refiling an application to transfer the
Franchise accompanied by a plan for remedying the Franchise violations described is said Report.
PASSED, APPROVED AND ADOPTED this _ day of 1995.
MAYOR, CITY OF SANTA CLARITA
ATTEST:
CITY CLERK
STAFF ANALYSIS OF APPLICATION TO TRANSFER KING
VIDEOCABLE FRANCHISE TO CONTINENTAL CABLEVISION
On November 18, 1994, the Providence Journal Company and Continental entered into a Merger
Agreement. The first step in the Merger is that the Providence Journal Company will acquire Kelso's
interest in the cable systems owned by the two companies. In the second step, Continental will
acquire all of the cable systems owned by the Providence Journal. After the Merger is complete,
Continental will own effective control of King.
The City Code requires that the City Council approve any transfer or change of control of the
franchise. FCC Regulations (47 CFR § 76.502(I)(1)) require that in order for a cable operator to
obtain City approval of a franchise transfer, it must submit to the City a FCC Form 394 and any other
information as may be required by the City, FCC Regulations also require the City to act to approve
or disapprove the transfer of the franchise within 120 days after submittal of the Form 394. The
Providence Journal and Continental submitted the Form 394 to the City on February 27, 1995, which
gives the City until June 27, 1995 to act. This time has been extended through July 11, 1995.
There are two primary issues for the City to consider when reviewing a franchise transfer. First, is
King in full compliance with the terms and conditions of the existing franchise. Second, does
Continental possess the financial, technical, legal and character qualifications to hold and operate the
franchise.
Regarding Continental's qualifications, Continental Cablevision is a well respected multiple system
operator and the third largest cable television system operator in the United States. Continental
operates 125 cable television systems in 650 communities in 16 states. As of September 30, 1994,
Continental's systems and those of its domestic affiliates passed approximately 5,311,000 homes and
provided basic service to approximately 3,027,000 basic subscribers. In addition, Continental is an
approximate 50% owner of one of the largest cable television system operators in Argentina, with
550,000 basic subscribers, and has an investment in a joint venture in Singapore to construct, own
and operate a cable television system serving Singapore's approximately 820,000 households.
Continental also has numerous investments in the United States in the telecommunications and
technology industries, including companies involved in the competitive access telephony business and
direct broadcast satellite service, as well as cable television programming.
Given these facts, Continental is well-qualified to hold the Franchise, assuming it is prepared to
comply with the terms and conditions of the Franchises and if Franchise violations exist to remedy
them. Consequently, our review has focused on whether King is in full compliance with the existing
terms and conditions of the Franchise, and if not, how the violations can be remedied. Among other
provisions, Form 394 requires the Continental to certify that it:
"will use its best efforts to comply with the terms of the Franchise and applicable state laws and local
ordinances and related regulations, and to effect changes, as promptly as practical in the operation
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of the system, if any changes are necessary to cure any violations thereof or default thereunder
presently in effect or ongoing."
Further, the legislative history of the 1992 Cable Act indicates that failure to correct Franchise
violations prior to a transfer may amount to a waiver by the City of its ability to enforce those terms
and conditions of the Franchise.
Our review has identified Franchise violations in the areas of franchise fees and community
programming.
Pursuant to the Franchise, King is required to pay 5% of its gross revenues to the City. Gross
revenues are defined to include any revenues the King receives "directly or indirectly" from any
source as a result of the Franchise. In particular, they include revenues received by King through
sales of advertising on cable channels.
In the course of reviewing King's compliance with the Franchise in connection with the proposed
transfer to Continental, King submitted a certified financial statement stating that it reduces its gross
advertising revenues by advertising commissions, and then pays the City the franchise fee based upon
the net revenue. The unreported revenue amounts to approximately $250,000 per year, or
approximately $12,500 in franchise fees, or $75,000 for the past five years. When Staff brought this
underpayment to King's attention, King claim the certified statement was wrong, and that it was
actually overoayine the City on advertising revenues. However, to date, King has been unable to
further explain how it "books" advertising revenues.
In addition, the Franchise requires King to provide public, educational and governmental ("PEG")
access equipment and facilities that meet the demands, needs and interests of the community. Section
6(E) of the Franchise Ordinance required King to submit to the City, on approximately September
1988, and every three to five years thereafter, a written plan for community access programming.
This plan was to include a study identifying the demand and available resources for PEG access
programming. During the periodic reassessments, the first of which was to occur between 1991 and
1993, King was to identify whether additional facilities, equipment, materials and/or training
opportunities are necessary to meet community needs and interests.
King had submitted a initial plan providing for the installation of a public access studio. Pursuant to
this study, King, and its neighboring franchisee, American Telecommunications Corporation, have
entered into an agreement to construct, install and operate a public access studio, which is expected
to open during July 1995. Because of the delays in completing and implementing the first study, no
additional studies have been performed to date.
During the last few years, the City Council has received substantial public input to the effect that City
Council meetings should be cablecast live on the cable system. Given that King is now several years
behind in completing the first reassessment, City Staff has proposed that, instead of now conducting
an assessment of community needs and interest, the City and King agree on immediately installing
additional facilities, equipment and offering additional training facilities.
S:%p abk` 195A..A
To attempt to resolve these issues prior to approving the Continental transfer, City Staff and King
met on numerous occasions to attempt to negotiate a Settlement Agreement to remedy all Franchise
violations. A copy of the latest version of the Settlement Agreement as drafted by the City Attorney's
office is attached. However, King has not agreed to all the terms of the Settlement Agreement.
Consequently, since the Franchise compliance issues have not been resolved and the City is statutorily
required to act on the application by no later than June 11, 1995, City Staff recommends disapproval
of the Franchise Transfer, without prejudice to King filing a new Transfer application with a plan for
remending the Franchise violations described above. A Resolution disapproving the transfer is
attached, and Staff recommends its adoption.
It may be possible that between the time of this Agenda Report and the July 11, 1995 City Council
meeting, King and Continental may be willing to enter into a settlement agreement more closely
resembling the attached draft. Consequently, we have included the attached draft of the Settlement
Agreement, which provides as follows:
• increases the advertising revenues King reports to the City as part of gross revenues subject
to the 5% franchise fee by approximately $250,000 per year.. This will increase future
franchise fees to the City by at least $12,500 per year.
• requires King to install remote controlled video cameras in the Council Chambers, and a trunk
from the Chambers to the system head end, to permit the live carriage of City Council
meetings.
Finally, we have also included a draft Resolution approving the Resolution, to be used if King and
Continental agree to cure the Franchise violations.: In order to insure that the King and Continental
comply with the Franchise in the future, approval of the Transfer is subject to certain conditions, as
set forth in the Franchise Transfer Resolution. These conditions are as follows:
The documents comprising the Franchise are defined to include the Cable, Television Ordinance, the
Franchise Agreement originally entered into between the City and the King, the Settlement
Agreement between the City and the King, and the Transfer Resolution. Violation of any of these
documents amounts to a breach of the Franchise.
King will continue to operate the Wilmington access studio and produce local origination
programming.. The King will continue to make the studio available for the use by City residents.
A. The King will reimburse the City up to $10,000 for the cost of processing the Franchise
transfer.
B. Continental will apply to the FCC to extend the "Social Contract" to the City of Santa Clarita.
Once extended, the Social Contract will offer the City rate stability s well as upgrades to the
cable system. A summary of the Social Contract is attached.
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SUNMARY OF SOCIAL CONTRACT
FCC regulations permit cable operators to establish their maximum rates either pursuant to the
benchmark or cost of service methodology. To date, King has chosen to establish benchmark rates.
On the other hand, Continental has used the benchmark and the cost of service approach to set rates.
In virtually every case, the cost of service methodology Continental has employed has allowed it to
establish maximum rates far in excess of the actual rates it was charging. Although Continental has
chose not to charge the full cost -of -service rate, rate complaints were still filed against Continental
being considered at both the local city level as well as at the FCC.
To resolve the many ongoing rate disputes, Continental and the FCC negotiated a "Social Contract"
pursuant to the FCC's authority under the Federal Cable Act. It is expected the FCC will take final
action to approve the Contract in the near future.
The proposed Contract is designed to (1) assure fair and reasonable rates for Continental's cable
service customers; (2) improve Continental's cable service by substantially upgrading channel capacity
and technical reliability of its cable systems; and (3) reduce the administrative burden and cost of rate
regulation for local governments, the FCC and Continental.
If the Social Contract is applied to the City, the effect would be that by January 1, 1996, Continental
would reduce its basic service tier rates to 15% below the benchmark rate formula. Continental will
be permitted to offset these 15% reductions by increasing the rate for the cable programming service
tier. Once these rate adjustments were made, all future rate increases will be governed by the FCC's
rules regarding the pass-through of external costs increases and inflation. As a practical matter, this
would mean that the rates established by the City in connection with reviewing King's benchmark
rates would remain in effect, except that the basic tier will be reduced by 15% and the second tier will
be increased by a like amount, All future increases will be limited to inflation and any external cost
increases.
In addition, Continental will commit to invest substantial funds in upgrading and rebuilding its existing
cable systems. Specifically, all cable systems must be upgraded or rebuilt by no later than December
31, 2000 to have 550 NI11z capacity, and half the systems must have 750 MHz capacity. Using
advanced fiber optic network designs in these rebuilds and upgrades, Continental's customers should
enjoy significant benefits from increased channel capacity, better picture quality and improved system
reliability,
Lastly, under the Social Contract, Continental will be authorized to move four currently on the
second tier to a new tier, comparable to King's "a la carte" tier. However, because King has already
taken this action, if the Social contract is extended to the City, Continental will not be permitted to
create additional unregulated tiers. The Social Contract specifically provides that it does not apply
to systems acquired by Continental after April 3, 1995. However, such systems may be added to the
Social Contract if the FCC and Continental agree upon an amendment to include such systems under
the contract. Should such an amendment be negotiated, the City still would have the opportunity to
opt out of the Social Contact if it wishes.
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RESOLUTION NO. 95-89
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION
FRANCHISE FROM THE PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
WHEREAS, on September 29, 1987, the Board of Supervisors of the County of Los Angeles,
pursuant to Section 16.58.010 of the Los Angeles County Code (the "Cable Television Ordinance"),
adopted Ordinance No. 87-1069F (the "Franchise Ordinance") granting King Videocable Company -
Newhall ("King' or "Grantee"), a cable television franchise to construct, operate and maintain a cable
television system. The Cable Television Ordinance and the Franchise Ordinance constitute, and will
be hereinafter referred to as the ("Franchise");
WHEREAS, on December 15, 1987, the City of Santa Clarita was incorporated. Following
incorporation, the City codified the Cable Television Ordinance at Chapter 4.10 of the Santa Clarita
Municipal Code, and readopted and amended the Franchise Ordinance pursuant to City Ordinance
No. 88-27;
WHEREAS, King is a wholly-owned subsidiary of King Videocable Company ("KVC" ),
which in turn is a wholly-owned subsidiary of King Broadcasting Company ("KBC");
WHEREAS, pursuant to Resolution No. 92-14, the City approved the transfer of control of
the Franchise, whereby King Holding Corp.("KHC"), which is equally owned by the Providence
Journal Company and Kelso Partners IV, L.P.("Kelso"), became the owner of the stock of KBC;
WHEREAS, on June 27, 1995, the City and Grantee entered in an agreement entitled
"Settlement Agreement between the City of Santa Clarita and King Videocable Company -Newhall,
regarding Cable Television Franchise Obligations";
WHEREAS, PJC and Continental Cablevision, Inc. ("Continental") have entered into an
Amended and Restated Agreement and Plan of Merger dated as of November 18, 1994 (the
"Agreement"), subject to, among other considerations, any required approval of the franchising
authorities with respect thereto;
WHEREAS, in connection with the merger and other transactions (hereinafter referred to as
the "Transaction") contemplated by the Agreement, the fifty (50%) percent interest in KHC held by
Kelso will be sold to PJC;
WHEREAS, Continental will be a publicly owned company;
S:pg b6` 195A.jd
WHEREAS, the effect of the Transaction will be to transfer effective control of the Grantee
from PJC and Kelso to Continental;
WHEREAS, the Cable Television Ordinance requires City Council consent to any transfer or
change of control of the franchise;
WHEREAS, FCC Regulations (47 CFR § 76.502(1)(1)) require that in order for a cable
operator to obtain City approval of a transfer or change in control of the franchise, it must submit to
the City a FCC Form 394 and any other information as may be required by the City;
WHEREAS, PJC and Continental have filed a FCC Form 394 with the City requesting City
Council approval of the transfer of control of the Grantee to Continental (hereinafter referred to as
the "Transfer");
WHEREAS, effect of the Transaction and the Transfer will change effective control of the
Grantee from PJC and Kelso to Continental;
WHEREAS, in support of its Form 394 Application, PJC and Continental have submitted to
the City the following documents which are on file with the City Clerk; and are collectively referred
to as the "Transfer Documents":
Form 394 with Exhibits, filed with the City on February 2S, 1995;
2. Letter with a three volume appendix from Continental to City of Santa Clarita, dated
April 17, 1995;
WHEREAS, the Conference Report to the 1992 Federal Cable Television Act, in discussing
franchise renewal under Section 626 of the Communications Act of 1934 (47 U. S.C. § 546) states
that transferees of a cable television franchise are not responsible for breaches of the franchise
committed by the transferor. Consequently, the City Council finds that it is necessary that all
Franchise noncompliance issues be remedied prior to the Transfer;
WHEREAS, the City has evaluated the Grantee's compliance with the Cable Television
Ordinance and the Franchise Agreement;
WHEREAS, all disputes regarding Franchise compliance have been remedied pursuant to the
"Settlement Agreement between the City of Santa Clarita and King Videocable-Newhall regarding
Cable Television Franchise Obligations" (hereinafter referred to as the "Settlement Agreement");
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, DOES RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1. The Santa Clarita City Council finds that, based upon the representations contained
in the Transfer Documents, and the terms and conditions of this Resolution, Continental will have
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the legal, financial, character, technical and public interest qualifications to control the Franchise. The
City Council hereby approves and consents to the Transfer, subject to the Grantee complying with
the terms and conditions of this Resolution.
Section 2. Upon the close of the Transfer, the Grantee shall comply with and be bound by
the following documents:
1. Chapter 4.10 of the Santa Clarita Municipal Code;
2. Los Angeles County Ordinance No. 87-1069F as readopted and amended
pursuant to City Ordinance No. 88-27,-
3.
8-27;
3. Resolution No. 92-14, inclusive of Exhibits A, B and C thereto;
4. Letter from Shirley Aronson to Ellie Kane, dated April 27, 1989;
5. The Settlement Agreement; and
6. This Resolution.
Section 3. At the present, the City has chosen not to regulate the rates and associated
equipment and installation charges for the basic service tier pursuant to Section 76.900, et sec of Title
47 of the Code of Federal Regulations (the "Rate Regulations"). This decision has been based upon
the expectation that the Grantee would conform its rates and charges to the Rate Regulations. The
City Council finds that the itemization on subscribers' bills of the possessory interest tax ("PIT") in
the amount of $1.26 per month is contrary to the Rate Regulations. Consequently, beginning July
21, 1995, Grantee shall charge subscribers a PIT of not more than $0.28 per month. Said amount
shall not be increased without the approval of the City Manager. Grantee may apply for an increase
in this amount by submitting documentation demonstrating an incremental increase in the PIT since
March 1994. The City Manager shall evaluate the application for an increase pursuant to same
criteria and within the same time as required under the Rate Regulations.
Section 4. Grantee and Continental agrees that notwithstanding Section 521 et. seq. of Title
47 of the United States Code, following the close of the Transfer, the Grantee shall assume
responsibility with respect to the Franchise for all prior acts or omissions of the Grantee while under
the control of PJC. The City Council hereby finds that the Franchise is presently in full force and
effect. The City Council further finds that the Grantee is currently in compliance with the Franchise
and its obligations.
Section 5. Following the close of the Transfer, the Grantee, in partnership with Time -Warner
Cable, shall continue to operate the existing public access studio located in Santa Clarita, California,
and the related facilities required for public, educational and governmental ("PEG") access at the
same level of effort as currently provided as of the effective date of this Resolution. Said facility shall
be made available for use by City residents.
$.XV1.tewm195njd
Section 6. Grantee and Continental shall apply to the Federal Communications Commission
to extend to the City of Santa Clarita the "Social Contract," as set forth at FCC 95-137,
Section 7, Failure of Grantee or Continental to comply with any material provision of this
Resolution, the Settlement Agreement or the Franchise shall be grounds for the City to invoke any
of the City's remedies under and in accordance with the Franchise.
Section 8. The consent herein granted shall be effective upon the closing of the proposed
transfer and the City shall be notified by letter directed to the City Clerk promptly upon such closing.
Section 9. Grantee and Continental shall, within ninety (90) days of the adoption of this
Resolution, file in the office of the City Clerk, a written Acceptance and Guarantee of this Resolution
executed in the form of Exhibit A, attached hereto. By executing and filing the Acceptance and
Guarantee, Grantee accepts and Continental guarantees performance of all obligations hereunder.
The Acceptance and Guarantee shall be notarized so as to indicate that the persons executing the
Acceptance and Guarantee have the authority to bind Grantee and Continental. Failure of Grantee
and Continental to timely file the Acceptance and Guarantee shall void the approval of the Transfer,
Section 10. Grantee shall reimburse the City its reasonable administrative, accounting,
consulting and legal costs incurred in processing the application for approval of the Transfer within
30 days of receiving an invoice from the City. The reimbursement amount shall not exceed Ten
Thousand Dollars ($10,000). Grantee shall reimburse the City said costs regardless of whether the
Transaction closes. Grantee shall not treat this obligation as an "external cost" under Title 47,
Sections 76.922 and 76.925 of the Code of Federal Regulations.
Section 11. The City Administrator and the City Attorney, or their designees, are hereby
authorized and empowered to execute any documents necessary, in their discretion, to implement the
approvals contained herein.
PASSED, APPROVED AND ADOPTED this day of , 1995.,
MAYOR, CITY OF SANTA CLARITA
ATTEST:
CITY CLERK
SAV%cab1c)M195Ajd
ACCEPTANCE AND GUARANTEE OF
TRANSFER OF CONTROL OF FRANCHISE
King Videocable company -Newhall ("Grantee"), hereby accepts and guarantees each and
every term of Resolution No. 95-89 of the City of Santa Clarita, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA CLARITA, CALIFORNIA, APPROVING THE TRANSFER
OF CONTROL OF A CABLE TELEVISION FRANCHISE FROM THE
PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
Grantee hereby further agrees to reimburse the City of Santa Claris costs in the amount of not to
exceed Ten Thousand Dollars ($10,000.00) by August 1, 1995 regardless of whether the Transfer
referred to in said Resolution has not closed by said date.
Dated: '1995
KING VIDEOCABLE COMPANY-NEWHALL
0
Name:
Title:
Continental Cablevision, Inc. ("Continental'), hereby unconditionally guarantees each and every term
of Resolution No. 95-89 of the City of Santa Clarita, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION
FRANCHISE FROM THE PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
S:1y�W=195A.jd
Continental hereby waives any right to require the City to proceed first against Grantee or pursue any
other remedy in City's power.
Dated: 1995
CONTINENTAL CABLEVISION, INC.
M
Name:
Title:
SAye�`0'XMAJQ
SETTLEMENT AGREEMENT BETWEEN THE CITY OF SANTA CLARITA AND KING
VIDEOCABLE COMPANY-NEWHALL REGARDING CABLE TELEVISION FRANCHISE
OBLIGATIONS
WHEREAS, on September 29, 1987, the Board of Supervisors of the County of Los Angeles,
pursuant to Section 16.58.010 of the Los Angeles County Code (the "Cable Television Ordinance"),
adopted Ordinance No. 87-1069F (the "Franchise Ordinance") granting King Videocable Company -
Newhall ("King" or "Grantee"), a cable television franchise to construct, operate and maintain a cable
television system. The Cable Television Ordinance and the Franchise Ordinance constitute and
hereinafter will be referred to as the "Franchise";
WHEREAS, on December 15, 1987, the City of Santa Clarita was incorporated. 'Following
incorporation, the City codified the Cable Television Ordinance at Chapter 4.10 of the Santa Clarita
Municipal Code, and readopted and amended the Franchise Ordinance pursuant to City Ordinance
No. 88-27;
WHEREAS, King is a wholly-owned subsidiary of King Videocable Company ("KVC"),
which in turn is a wholly-owned subsidiary of King Broadcasting Company ("KBC");
WHEREAS, pursuant to Resolution No. 92-14, the City approved the transfer of control of
the Franchise, whereby King Holding Corp.("KHC"), which is equally owned by the Providence
Journal Company and Kelso Partners IV, L.P.("Kelso"), became the owner of the stock of KBC;
WHEREAS, King sells advertising time on the cable system to advertisers. Pursuant to the
Franchise, all advertising revenue is included as part of gross revenues. The Franchise then requires
King to pay the City a franchise fee of 5% of gross revenues. According to certified statements
submitted by King, it pays the franchise fee on advertising revenues net of advertising commissions;
WHEREAS, there is a good faith disagreement between the City and King regarding the
inclusion of commissions on advertising sales as part of gross revenues for purposes of the franchise
fee and whether subscribers' payments to Grantee for the possessory interest tax, franchise fee, and
FCC regulatory fee are part of gross revenues subject to the franchise fee;
WHEREAS, Section 6(E) of the Franchise Ordinance required King to submit to the City,
on approximately September 1988, and every three to five years thereafter, a written plan for
community access programming. Such plan was to include a study identifying the demand and
available resources for public, educational and governmental access programming. During the
periodic reassessments, the first of which was to occur between 1991 and 1993, King was to identify
whether additional facilities, equipment, materials and/or training opportunities are necessary to meet
community needs and interests;
WHEREAS, King had submitted a initial plan providing for the installation of a public access
studio. Pursuant to this study, King, and its neighboring franchisee, American Telecommunications
Corporation, have entered into an agreement to construct, install and operate a public access studio,
S:lgs4v6k`Ofi195Ajrj
which is expected to open during July 1995. Because of the delays in completing and implementing
the first study, no additional studies have been performed to date;
WHEREAS, during the last few years, the City Council has received substantial public input
to the effect that City Council meetings should be cablecast live on the cable system;
WHEREAS, there is an additional good faith disagreement between the City and Grantee
regarding whether compliance with the Franchise requirements concerning the public, educational and
governmental ("PEG") access equipment and facilities presently offered by the Grantee meets the
demands, needs and interests of the community;
WHEREAS, it is agreed between the City and King that based upon this community input,
it is unnecessary that the periodic reassessment of community needs and interest to be conducted
between 1991 and 1993 be conducted now, but instead, the City and King may agree on now
installing additional facilities, equipment and offering additional training facilities;
WHEREAS, King and City desire that there be no further disputes by and between them
regarding the above -referenced terms and conditions of the Franchise.
NOW, THEREFORE, City and Grantee agree as follows:
Section 1. Advertising Revenue.
C. Grantee shall include in gross revenues reported to the City for the purpose of calculating
franchise fee payments all conunissions paid to any advertising agency, regardless of whether
the agency is affiliated with, or unaffiliated with Grantee. Grantee further agrees that this
method of calculation of gross revenues shall be effective as of July 14, 1990, and going
forward. Grantee shall pay the City the currently -owed difference between the franchise fees
paid and franchise fees owed pursuant to the foregoing within thirty (30) days of this
Agreement. The parties have agreed the past due is $75,000.
D. Grantee shall include as part of gross revenues reported to the City for the purpose of
calculating franchise fee payments all amounts itemized on subscriber bills, including, but not
limited to, the possessory interest tax, the FCC regulatory fee, and public, educational and
governmental access fees, unless and until the FCC orders otherwise, and all administrative
and judicial appeals of the FCC order are exhausted. Should it ultimately be held that such
amounts are not part of gross revenues subject to the franchise fee, then Grantee may cease
including the itemized amount as part of gross revenues, provided that the City shall have no
liability to Grantee for any franchise fees previously paid.
E. Grantee currently includes the franchise fee itemized on subscriber bills as part of gross
revenues subject to the 5% franchise fee.: The Federal Communications Commission ("FCC")
is currently considering whether the franchise fee itemized on subscriber bills may be included
as part of gross revenues for purposes of calculating the franchise fee owed the franchising
SAp\l 610=195A.J4
authority in the proceeding entitled "In the Matter of United Artists Cable of Baltimore", DA
95-737 (decision of Chief of the FCC Cable Services Bureau, released April 6, 1995) ("In
re Baltimore"). In re Baltimore is on appeal. Grantee shall continue the practice of
including the franchise fee as part of gross revenues unless and until all administrative and
judicial appeals are exhausted and in In Re Baltimore holds that the inclusion of the subscriber
payment in gross revenues is preempted. Should In re Baltimore ultimately hold that
franchise fees itemized on subscriber bills may not be included as part of gross revenues
subject to the franchise fee, then, notwithstanding subsection B above, Grantee may cease
including the itemized franchise fee as part of gross revenues, provided that the City shall
have no liability to Grantee for any franchise fees previously paid.
Section 2. Access Facilities and Equipment. Grantee shall pay the City $60,000 to be used
for installing a cable television studio within the City Council chambers for the purposes of cable
casting City Council and other public meetings. By January 1, 1996, Grantee shall install a trunk
between the City Council chambers and the cable system headend to permit live cable casting of City
Council meetings. Grantee shall cavy the live Council meetings and one replay a week on the
existing public, educational and governmental channel, unless and until the City requests an additional
channel pursuant to the terms of the Franchise. Grantee will not treat any term or condition of this
Section as an "external cost" under Title 47, Section 76.922 and 76.925 of the Code of Federal
Regulation.
Section 3. It is understood and agreed that this Settlement Agreement represents settlement
of disputed claims and is not to be construed as representing an admission on behalf of either party
to this Agreement. The parties, however, intend to buy their peace and to forever resolve their
differences regarding the matters more particularly identified hereinabove:
Section 4. Failure of Grantee to comply with any material provision of this Agreement shall
be grounds for the City to invoke any of the City's remedies under and in accordance with the
Franchise.
Section 5., This Agreement shall be binding upon the successors and assigns of the parties.
IN WITNESS WHEREOF, the parties hereto certify that they have read and understood all the terms
and conditions contained herein and have duly authorized and caused this Settlement Agreement to
be executed as of June 27, 1995.
SAV%.bk"195Aj4
CITY OF SANTA CLARITA
By
Mayor
ATTEST:
By:
City Clerk
APPROVED AS TO FORM;
By:
Carl Newton
City Attorney
KING VIDEOCABLE-NEWHALL
Name:
SApg b6`ll'10195A.jd
RESOLUTION NO, 95-89
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE
TELEVISION FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO
CONTINENTAL CABLEVISION, INC.
WHEREAS, on September 29, 1987, the Board of Supervisors of the County
of Los Angeles, pursuant to Section 16.58.010 of the Los Angeles County Code (the "Cable
Television Ordinance"), adopted Ordinance No. 87-1069F (the "Franchise Ordinance") granting King
Videocable Company -Newhall ("King" or "Grantee"), a cable television franchise to construct,
operate and maintain a cable television system. The Cable Television Ordinance and the Franchise
Ordinance constitute, and will be hereinafter referred to as the ("Franchise");
WHEREAS, on December 15, 1987, the City of Santa Clarita was incorporated.
Following incorporation, the City codified the Cable Television Ordinance at Chapter 4.10 of the
Santa Clarita Municipal Code, and readopted and amended the Franchise Ordinance pursuant to City
Ordinance No. 88-27;
WHEREAS, King is awholly-owned subsidiary of King Videocable Company
("KVC"), which in turn is a wholly-owned subsidiary of King Broadcasting Company ("KBC");
WHEREAS, pursuant to Resolution No. 92-14, the City approved the transfer
of control of the Franchise, whereby King Holding Corp.("KHC"), which is equally owned by the
Providence Journal Company and affiliates of Kelso & Company, Inc. ("Kelso"), became the owner
of the stock ofKBC;
WHEREAS, on July 11, 1995, the City and Grantee entered in an agreement
entitled "Settlement Agreement between the City of Santa Clarita and King Videocable Company -
Newhall, regarding Cable Television Franchise Obligations" (hereinafter referred to as the "Settlement
Agreement");
WHEREAS, PJC and Continental Cablevision, Inc. ("Continental") have entered
into an Amended and Restated Agreement and Plan of Merger dated as of November 18, 1994 (the
"Agreement"), subject to, among other considerations, any required approval of the franchising
authorities with respect thereto;
WHEREAS, in connection with the merger and other transactions (hereinafter
referred to as the "Transaction") contemplated by the Agreement, the fifty (50%) percent interest in
KHC held by Kelso will be sold to PJC;
WHEREAS, Continental will be a publicly owned company;
WIIEREAS, the Cable Television Ordinance requires City Council consent to
any transfer or change of control of the franchise;
WHEREAS, FCC Regulations (47 CFR § 76.502(I)(1)) require that in order for
a cable operator to obtain City approval of a transfer or change in control of the franchise, it must
submit to the City a FCC Form 394 and any other information as may be required by the City;
WHEREAS, PJC and Continental have filed a FCC Form 394 with the City
requesting City Council approval of the transfer of control of the Grantee to Continental (hereinafter
refereed to as the "Transfer");
WHEREAS, effect of the Transaction and the Transfer will change effective
control of the Grantee from PIC and Kelso to Continental;
WHEREAS, in support of its Form 394 Application, PJC and Continental have
submitted to the City the following documents which are on file with the City Clerk, and are
collectively referred to as the "Transfer Documents":
Form 394 with Exhibits, filed with the City on February 28, 1995;
2. Letter with a three volume appendix from Continental to City of Santa. Clarita, dated
April 17, 1995:
WHEREAS, the Conference Report to the 1992 Federal Cable Television Act,
in discussing franchise renewal under Section 626 of the Communications Act of 1934 (47 U.S.C.
§ 546) states that transferees of a cable television franchise are not responsible for breaches of the
franchise committed by the transferor. Consequently, the City Council finds that it is necessary that
all Franchise noncompliance issues be remedied prior to the Transfer;
WHEREAS, the City has evaluated the Grantee's compliance with the Cable
Television Ordinance and the Franchise Agreement;
WHEREAS, all disputes regarding Franchise compliance have been remedied
pursuant to the Settlement Agreement;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, DOES RESOLVE, DETERMINE AND ORDER AS FOLLOWS:
Section 1.
The Santa Clarita City Council finds that, based upon the representations contained in the Transfer
Documents, and the terms and conditions of this Resolution, Continental has the legal, financial,
character, technical and public interest qualifications to control the Franchise. The City Council
hereby approves and consents to the Transfer, subject to the Grantee complying with the terms and
conditions of this Resolution.
Section 2.
Upon the close of the Transaction, the Grantee shall comply with and be bound by the following
documents:
Chapter 4,10 of the Santa Clarita Municipal Code;
ii, Los Angeles County Ordinance No. 87-1069F as readopted and amended
pursuant to City Ordinance No. 88-27;
iii.. Resolution No. 92-14, inclusive of Exhibits A, B and C thereto;
iv. Letter from Shirley Aronson to Ellie Kane, dated April 27, 1989;
V. The Settlement Agreement; and
vi. This Resolution.
Section 3.
Grantee and Continental agrees that notwithstanding Section 521 et. seq. of Title 47 of the United
States Code, following the close of the Transfer, the Grantee shall assume responsibility with respect
to the Franchise for all prior acts or omissions of the Grantee while under the control of PJC. The
City Council hereby finds that the Franchise is presently in full force and effect, The City Council
further finds that the Grantee is currently in compliance with the Franchise and its obligations.
Section 4.
Following the close of the Transaction, the Grantee, in partnership with Time -Warner Cable, shall
continue to operate the existing public access studio located in Santa Clarita, California, and the
related facilities required for public, educational and governmental ("PEG") access at the same level
of effort as currently provided as of the effective date of this Resolution. Said facility shall be made
available for use by City residents.
Section 5.
Grantee and Continental shall apply to the Federal Communications Commission to extend to the City
of Santa Clarita the "Social Contract," as set forth at FCC 95-137,
Section 6.
Failure of Grantee under Continental's control to comply with any material provision of this
Resolution, the Settlement Agreement or the Franchise shall be grounds for the City to invoke any
of the City's remedies under and in accordance with the Franchise.
Section 7.
The consent herein granted shall be effective upon the closing of the Transaction and the City shall
be notified by letter directed to the City Clerk promptly upon such closing.
Section 8.
Grantee and Continental shall, within ninety (90) days of the adoption of this Resolution, file in the
office of the City Clerk, a written Acceptance and Guarantee of this Resolution executed in the form
of Exhibit A, attached hereto, By executing and filing the Acceptance and Guarantee, Grantee
accepts and Continental guarantees performance of all obligations hereunder, The Acceptance and
Guarantee shall be notarized so as to indicate that the persons executing the Acceptance and
Guarantee have the authority to bind Grantee and Continental. Failure of Grantee and Continental
to timely file the Acceptance and Guarantee shall void the approval of the Transfer.
Section 9.
Grantee shall reimburse the City its reasonable, actual administrative, accounting, consulting and
legal costs incurred in processing the application for approval of the Transfer within 30 days of
receiving an invoice from the City. The reimbursement amount shall not exceed Ten Thousand
Dollars ($10,000), Grantee shall reimburse the City said costs regardless of whether the Transaction
closes. Grantee shall not treat this obligation as an "external cost' under Title 47, Sections 76.922
and 76.925 of the Code of Federal Regulations.
Section 10.
The City Administrator and the City Attorney, or their designees, are hereby authorized and
empowered to execute any documents necessary, in their discretion, to implement the approvals
contained herein,
PASSED, APPROVED AND ADOPTED this _ day of . 1995.
MAYOR CITY OF SANTA CLARITA
ATTEST
CITY CLERK
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss
CITY OF SANTA CLARITA
I, Donna M. Grindey, City Clerk of the City of Santa Clarita, do hereby certify
that the foregoing Resolution was duly adopted by the City Council of the City of Santa
Clarita at a regular meeting thereof, held on the day of , 1995 by the
following vote of Council:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
CITY CLERK
ACCEPTANCE AND GUARANTEE OF
TRANSFER OF CONTROL OF FRANCHISE
King Videocable company -Newhall ("Grantee"), hereby accepts and guarantees each and
every term of Resolution No. 95-89 of the City of Santa Clarita, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA CLARITA, CALIFORNIA, APPROVING THE TRANSFER
OF CONTROL OF A. CABLE TELEVISION FRANCHISE FROM
PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
Grantee hereby further agrees to reimburse the City of Santa Clarita's actual costs in the amount not
to exceed Ten Thousand Dollars ($10,000.00) within 30 days of receipt of an invoice from the City
regardless of whether the Transaction referred to in said Resolution has not closed by said date.
Dated: , 1995
KING VIDEOCABLE COMPANY-NEWHALL
10
Name:
Title:
Continental Cablevision, Inc. ("Continental"), hereby unconditionally guarantees each and every term
of Resolution No. 95-89 of the City of Santa Clarita, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION
FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
Continental hereby waives any right to require the City to proceed first against Grantee or pursue any
other remedy in City's power. The guarantee provided herein shall only be effective upon the close
of the Transaction.
Dated: 1 1995
CONTINENTAL CABLEVISION, INC,.
M
Name:
Title:
Continental Cablevision, Inc. ("Continental"), hereby unconditionally guarantees each and every term
of Resolution No. 95-89 of the City of Santa Clarita, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA,
CALIFORNIA, APPROVING THE TRANSFER OF CONTROL OF A CABLE TELEVISION
FRANCHISE FROM PROVIDENCE JOURNAL COMPANY TO CONTINENTAL
CABLEVISION, INC.
Continental hereby waives any right to require the City to proceed first against Grantee or pursue any
other remedy in City's power. The guarantee provided herein shall only be effective upon the close
of the Transaction.
Dated: // 1995
CONTINENTAL CABLEVISION, INC.
Name: &,l 'e. 4 vr, W I1
SETTLEMENT AGREEMENT BETWEEN THE CITY OF SANTA CLARITA AND KING
VIDEOCABLE COMPANY-NEWHALL REGARDING CABLE TELEVISION FRANCHISE
OBLIGATIONS
WHEREAS, on September 29, 1987, the Board of Supervisors of the County of Los Angeles,
pursuant to Section 16.58.010 of the Los Angeles County Code (the "Cable Television Ordinance"),
adopted Ordinance No. 87-1069F (the "Franchise Ordinance") granting King Videocable Company -
Newhall ("King" or "Grantee"), a cable television franchise to construct, operate and maintain a cable
television system. The Cable Television Ordinance and the Franchise Ordinance constitute and
hereinafter will be referred to as the "Franchise";
WHEREAS, on December 15, 1987, the City of Santa Clarita was incorporated. Following
incorporation, the City codified the Cable Television Ordinance at Chapter 4.10 of the Santa Clarita
Municipal Code, and readopted and amended the Franchise Ordinance pursuant to City Ordinance
No. 88-27;
WHEREAS, King is a wholly-owned subsidiary of King Videocable Company ("KVC"),
which in turn is a wholly-owned subsidiary of King Broadcasting Company ("KBC");
WHEREAS, pursuant to Resolution No. 92-14, the City approved the transfer of control of
the Franchise, whereby King Holding Corp.("KHC"), which is equally owned by the Providence
Journal Company and affiliates of Kelso & Company, Inc. ("Kelso"), became the owner of the stock
of KBC;
WHEREAS, King sells advertising time on the several cable systems, including the Santa
Clarita system, to advertisers. Pursuant to the Franchise, all advertising revenue is included as part
of gross revenues. The Franchise then requires King to pay the City a franchise fee of 5% of gross
revenues attributable to King's subscribers located in the City of Santa Clarita;
WHEREAS, there is a good faith disagreement between the City and King regarding whether
revenues attributable to subscribers outside the City were included as part of gross revenues reported
to the City, whether the inclusion of commissions on advertising sales as part of gross revenues for
purposes of the franchise fee and whether subscribers' payments to Grantee for the possessory interest
tax, franchise fee, and FCC regulatory fee are part of gross revenues subject to the franchise fee;
WHEREAS, during the last few years, the City Council has received substantial public
input to the effect that City Council meetings should be cablecast live on the cable system;
WHEREAS, King and City desire that there be no further disputes by and between them
regarding the above -referenced terms and conditions of the Franchise.
NOW, THEREFORE, City and Grantee agree as follows:
Section 1. Advertising Revenue.
A. Within 45 days of the effective date of this Settlement Agreement, Grantee shall submit a
financial statement stating gross revenues received since February 1992. The statement
shall be certified by Grantee' s external, independent auditor. City shall have the right to
review Grantee's books and records to determine the accuracy of the financial statement.
The City Manager shall approve or disapprove the financial statement within 30 days of
receipt, which approval shall not be unreasonably withheld. Should the financial
statement indicate an overpayment of franchise fees, Grantee shall have the right to offset
future franchise fee payments to the City in an amount equal to the amount of the
franchise fee overpayment. The amount of the offset shall not exceed $15,000 in June
1996, and $20,000 in each subsequent June. Should the financial statement indicate an
underpayment of franchise fees, Grantee shall repay the underpayment within 60 days of
City Manager approval of the financial statement. City and Grantee waive any right to
interest on any overpayment or underpayment.
B. Grantee shall include in gross revenues reported to the City for the purpose of calculating
franchise fee payments all commissions paid to any advertising agency, regardless of
whether the agency is affiliated with, or unaffiliated with Grantee.
C. Grantee shall include as part of gross revenues reported to the City for the purpose of
calculating franchise fee payments all amounts itemized on subscriber bills, including, but
not limited to, the possessory interest tax, the FCC regulatory fee, and public, educational
and governmental access fees, unless and until the FCC orders otherwise, and all
administrative and judicial appeals of the FCC order are exhausted. Should it ultimately
be held that such amounts are not part of gross revenues subject to the franchise fee, then
Grantee may cease including the itemized amount as part of gross revenues, provided that
the City shall have no liability to Grantee for any franchise fees previously paid..
D. Grantee currently includes the franchise fee itemized on subscriber bills as part of gross
revenues subject to the 5% franchise fee. The Federal Communications Commission
("FCC') is currently considering whether the franchise fee itemized on subscriber bills may
be included as part of gross revenues for purposes of calculating the franchise fee owed
the franchising authority in the proceeding entitled "In the Matter of United Artists Cable
of Baltimore", DA 95-737 (decision of Chief of the FCC Cable Services Bureau, released
April 6, 1995) ("In re Baltimore"). In re Baltimore is on appeal. Grantee shall continue
the practice of including the franchise fee as part of gross revenues unless and until all
administrative and judicial appeals are exhausted and in In Re Baltimore holds that the
inclusion of the subscriber payment in gross revenues is preempted. Should In re
Baltimore ultimately hold that franchise fees itemized on subscriber bills may not be
included as part of gross revenues subject to the franchise fee, then, notwithstanding
subsection C above, Grantee may cease including the itemized franchise fee as part of
gross revenues, provided that the City shall have no liability to Grantee for any franchise
fees previously paid.
Section 2: Access Facilities and E ui ment.
A. By January 1, 1996, Grantee shall install a fiber optic return line from City Hall to the
public access studio to provide cable casting transmission of live City Council meetings to
City residents on the existing public, educational and governmental ("PEG") channel.
Grantee will not treat any term or condition of this Subsection as an "external cost" under
Title 47, Section 76.922 and 76.925 of the Code of Federal Regulation.
B. The City shall provide a minimum of $10,000 in funds to purchase cameras and other
video equipment to cablecast City Council meetings live from City Hall. By October 31,
1995, Grantee and City shall jointly develop a plan to: (I) raise sufficient funds from the
community to purchase cameras and video equipment to cablecast City Council meetings
from City Hall, (ii) provide for operation of live cable casting without additional cost to
Grantee, and (iii) revise the operating guidelines of the PEG channel to address
programming priorities. The return line shall not be activated until said plan is in place.
Nothing herein shall be construed as an obligation of Grantee to make any additional
contribution to support the City's purchase of cameras and video equipment.
Section 3.
Itis understood and agreed that this Settlement Agreement represents settlement of disputed
claims and is not to be construed as representing an admission on behalf of either party to this
Agreement. The parties, however, intend to buy their peace and to forever resolve their
differences regarding the matters more particularly identified hereinabove.
Section 4.
Failure of Grantee to comply with any material provision of this Agreement shall be grounds for
the City to invoke any of the City's remedies under and in accordance with the Franchise.
Section 5.
This Agreement shall be binding upon the successors and assigns of the parties.
IN WITNESS WHEREOF, the parties hereto certify that they have read and understood all the
terms and conditions contained herein and have duly authorized and caused this Settlement
Agreement to be executed as of July 11, 1995.
CITY OF SANTA CLARITA
By:
Mayor
ATTEST:
By:
City Clerk
APPROVED AS TO FORM:
By:
Carl Newton
City Attorney
KING VIDEOCABLE-NEWHALL
By:
Name:
Mr. Jesse Juarros
General Services Manager
CITY OF SANTA CLARITA
23920 Valencia Blvd., Suite 300
Santa Clarita, CA 91355
Dear Mr. Juarros:
Continental
Cablevision
Continental Cablevision, Inc. is pleased to submit this application with Providence
Journal Company ("PJC") for a transfer of control of the local cable television franchise.
Continental has recently entered into a merger agreement with PJC, which now controls the
franchisee. Submitted along with this letter is the FCC Form 394 and accompanying materials
which will explain the transaction in more detail.
The franchisee under Continental's control will continue to be bound by all the existing
terms and conditions of the franchise. Continental is not asking for any changes in the
franchise in this approval process, and Continental's overall financial strength will assure that
there is no default on any existing contract or obligation necessary for the continued operation
of the system.
_ Continental was founded in 1963 by Amos B. Hostetter, Jr. and H. I. Grousbeck. Mr.
Hostetter is now Chairman and Chief Executive Officer. Since its founding, Continental has
grown to become the third largest cable company in the United States. Continental and its
affiliates now own and operate cable television systems in 16 states, and serve over 3 million
subscribers nationwide.
Continental has long been an advocate of making decisions for a cable system in the
local area of service rather than from corporate headquarters. Yet while each Continental
system operates independently, our overall size permits us the efficiencies of scale to offer
extra support in crucial areas such as engineering, marketing, employee training and customer
service responsiveness.
Continental looks forward to working with you throughout this approval process and
particularly to serving your community in the years ahead.
CONTINENTAL CABLEVISION, INC.
Gvutr
Jat#s H. Smith III
Senior Vice President
Western Region
Government & Public Affairs
Southern California Regional Office
550 North Continental Boulevard - Suite 250 . EI Segundo, CA 90245 • Telephone (310) 647-3000
•t•
■C
King Videocable Company 20. WashinBox gton
Place
P.Providence, Rhode Island 02901
401'277-7446
FAX: 401!277-7658
Managed by Colony
Communications, Inc.
Bruce A. Clark
President
Mr. Jesse Juarros, General Services Manager
City of Santa Clarita
23920 Valencia Blvd., Suite 300
Santa Clarita, CA 91355
Re-- Submission of FCC Form 394
Dear Mr. Juarros:
Submitted with this letter is the FCC Form 394 requesting consent to the transaction described
herein. As explained in this application book, there will be a transfer of control of the cable
television franchise from Providence Journal Company to Continental Cablevision, Inc. Included
\ with the Form 394 exhibits is a Description of the Transaction, along with charts that show the
U steps that will occur in the merger -
Also presented in this book is detailed information on Continental Cablevision, Continental
enjoys an excellent and well-deserved reputation in the cable television industry. Furthermore,
no changes in franchise obligations are being requested., Continental intends to fulfill the current
franchise commitments.
Thank you for your expeditious consideration of this request.
Respectfully submitted, /
Bruce A. Clark
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State •
r
OPPOSE@ 11p,
personally
NAME,
me - OR - ❑ proved to me on the
oESTrA sAFAw1c
'a COAML�lOCW83 f
_ ' ' Ndory Pib:c — Ca6fornla
LOS ANGELES COUNTY
My Comm. Expires OCT 2.1998
No. 5907
PUBLIC"
of satisfactory evidence
to be the person(s) whose name(s) is/are
subscribed to the within instrument and ac-
knowledged to me that he/she/they executed
the same in his/her/their authorized
capacity(ies), and that by his/her/their
signature(s) on the instrument) the person(s),
or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS
OPTIONAL
hand and official seal.
SIGNATURE OF NOTARY
Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent
fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER
❑ INDIVIDUAL
ORATE OFFICER
��!/�, TITLEi
STATE OF RHODE ISLAND)
) ss
COUNTY OF PROVIDENCE)
OnjW"etzly q ��y�, before me a Notary Public of the State of Rhode
Island, Bruce A. Clark pe onally appeared before me to be the person who executed the within
document as President of Colony Communications, Inc. on behalf of the corporation therein
named.
Notary Public
0
TABLE OF CONTENTS
C
MAPS OF FRANCHISE AREAS
FEDERAL COMMUNICATIONS
COMMISSION FORM 394
WITH EXHIBITS
CERTIFICATION UNDER
2
SECTION 76.502 OF
THE FCC RULES
TRANSFER APPROVAL RESOLUTION
3
CONTINENTAL CABLEVISION, INC.
4.
HISTORY AND RECOGNITION
CONTINENTAL CABLEVISION
5
IN SOUTHERN CALIFORNIA
C
MAPS OF FRANCHISE AREAS
Federal Communications Commission
Washington, D. C. 20554
INSTRUCTIONS FOR FCC 394
APPLICATION FOR FRANCHISE AUTHORITY
CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL
OF CABLE TELEVISION FRANCHISE
Approved by OMB
3060-0573
Expires 08/31/96
A. This form shall be used when applying for franchise authority approval to assign or transfer control of a cable television
system owned for three years or more pursuant to the Cable Television Consumer Protection and Competition Act of
1992 ("1992 Cable Act"). As required by Section 617(e) of the 1992 Cable Act, the franchise authority shall have 120
days from the date of filing of this form, complete with all exhibits and any information required by the franchise
agreement or applicable state or local law, to act upon such request. If the franchise authority fails to render a final
decision on such request within 120 days, such request shall be deemed granted unless the requesting party and the
franchise authority agree to an extension of time.
This form consists of the following sections:
I. General Information: Transferor/Assignor (Part 1); Transferee/Assignee (Part Iq
it. Transferee's/Assignee's Legal Qualifications
111. Transferee's/Assignee's Financial Qualifications
IV. Transferee's/Assignee's Technical Qualifications
V. Certification: Transferor/Assignor (Part 1); Transferee/Assignee (Part 11)
The transferor/assignor will fill out Part I of Section 1 and Part I of Section V.
The transfereelassignee will fill out Part 11 of Section 1; all of Sections 11, Ill and IV, as appropriate; and Part 11 of Section V.
B. In addition to the information requested on this form, cable operators are required to submit all information required by
( the cable franchise agreement or applicable local law or that the franchising authority deems necessary or appropriate in
connection with the transfer determination. Requests for such additional information by the franchise authority shall not
toll the 120 day limit on franchise authority consideration of transfer requests.
C. This form should be filed with the local franchising authority. Prepare and submit an original and two copies of this form
and all exhibits associated therewith. Number exhibits serially in the space provided in the body of the form and date
each exhibit.
D. The names of the applicants shall be the exact corporate names, if corporation; if partnerships, the names of all general
partners and limited partners with equity interests above 5%, and the names under which the partnerships do business; if
unincorporated associations, the names of executive officers, their offices, and the names of the associations.
E. This application shall be personally signed by the applicant, if the applicant is an individual; by one of the partners, if the
applicant is a partnership; by an officer, if the applicant is a corporation; by a member who is an officer, if the applicant is
an unincorporated association; or by the applicant's attorney in case of the applicant's physical disability or of his/her
absence from the United States. The attorney shall, in the event the attorney signs for the applicant, separately set forth
the reason why the application is not signed by the applicant. In addition, if any matter is stated on the basis of the
attorney's belief only (rather than his/her knowledge), he/she shall separately set fojth his/her reason for believing that
such statements are true.
F. All items must be answered fully and all necessary information furnished. Time and care should be devoted to all replies,
which should reflect accurately the applicants' responsible consideration of the questions asked. If any items of the
application are not applicable, write N.A. Defective or incomplete applications may be returned without consideration.:
FCC NOTICE TO INDIVIDUALS REQUIRED BY THE PRIVACY ACT AND THE PAPERWORK REDUCTION ACT
The disclosure of said information is solicited under the Communications Act of 1934, as amended, 47 U.S.C. Section 537. The disclosure of said
information is required to obtain the requested authority. The principal purpose of said information is to provide basic legal, technological, financial and
ownership data concerning the qualifications of the proposed transferee/assignee. All information provided in this form will be available for public
inspection, subject to local requirements.
Public reporting burden for this collection of information is estimated to average 5 hours per application, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed and completing and reviewing the collection of information. Send comments
�) regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to the Federal
Communications Commission, Records Management Division, AMD-PIRS, Washington, D. G 20554, and to the Office of Management and Budget,
Paperwork Reduction Project (3060-0573), Washington, O. C. 20503.
THE FOREGOING NOTICE IS REQUIRED BY THE PRIVACY ACT OF 1974, P.L 93-579, DECEMBER 31; 1974, U.S.C. 552a(e)(3), AND THE
PAPERWORK REDUCTION ACT OF 1980, P.L. 95-511. DECEMBER 11, 1980, 44 U.S.G. 3507.
FCC 394 Instructions
October 1993.
FCLCral Cann kation CA fission
Washington, o.G 26554
( FCC 394
APPLICATION FOR FRANCHISE AUTHORITY
CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL
OF CABLE TELEVISION FRANCHISE
SECTION 1. GENERAL INFORMATION
Approved by OMS
1o6"sn
Expires ea/11/96
FOR FRANCHISE AUTHORITY USE ONLY
DATE 1/17/9.5 1. Community Unit Identification Number. CA0177
2. Application for. E .Assignment of Franchise X❑ Transfer of Control
3. Franchising authority:
City of Santa Clarita, California
4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located:
Santa Clarita
S. Date system was acquired or (for system's constructed by the transferor/assignor) the date on
which service was provided to the first subscriber in the franchise
City
area:
2/24/92
6.. Proposed effective date ofclosing of the transaction assigning or transferring ownership of the
Providence
system to transfereelassignee:
7/1/95
7. Attach as an Exhibit a schedule of any and all additional information or material filed with this
application that is identified in the franchise as required to be provided to the franchising
authority when requesting its approval of the type of transaction that is the subject of this
i ) application.
PART i - TRANSFERORIASSIGNOR
1. Indicate the name. mailing address. and tplenhnne mv„hn.,.f ts— t.....F.....f...:a.....
Exhibit No.
1
Legal name of Transferor/Assignor (if individual, list last name first -
Providence Journal Company
Assumed name used for doing business (if any)
Mailing street address or P.O. Box
75 Fountain Street
City
State
ZIP Code
Telephone No. (include area code)
Providence
I RI
02902
401 277-7000
2.(a) Attach as an. Exhibit a copy of the contract or agreement that provides for the assignment or
transfer of control (including any exhibits or schedules thereto necessary in order to understand the
terms thereof). If thereis only an oral agreement, reduce the terms to writing and attach.
(Confidential trade, business, pricing or marketing information, or other information not otherwise.
publicly available, may be redacted).
(b) Does the contract submitted in response to (a) above embody. the full and complete agreement
between the transferodassignor and the transfereelassignee?
If No, explain in an Exhibit.
Exhibit No.
2
M Yes 0 No
Exhibit No.
PART 11- TRANSFEREEIASSIGNEE
Ml 1n ra,a f" n,.w....,n:.... ,,ra._... .-J _.._1-_- _r ______ •- -- -- -` . - -.. - .. , . . .
_._-___ .....__. _. _..-.. ...-.....-�... .....�. ...... uanmvcoaaa nee. Lut.a I
Name of contact person (list last name first)_.._.._
Legal name of TransferedAssignee �F individual, list last name firsU
Continental Cablevision Inc.
Assumed name used for doing business (if any)
Mailing street address or P.O. Box
The Pilot House Lewis Wharf
City State
I
ZIP Code
Telephone No. Include area code)
Boston MA
02110
617-742-9500
Ml 1n ra,a f" n,.w....,n:.... ,,ra._... .-J _.._1-_- _r ______ •- -- -- -` . - -.. - .. , . . .
_._-___ .....__. _. _..-.. ...-.....-�... .....�. ...... uanmvcoaaa nee. Lut.a I
Name of contact person (list last name first)_.._.._
Perry Parks, Vice President, Government & Public Affairs
Firm or company name (if arty)
Continental Cablevision of Southern California
Mailing street address or P.O. Box
550 North Continental Boulevard
GtyEl Segundo
State CA
ZIP Codg0245
y
telephone No. (include area code)
310-647-3000
(c) Attach as an Exhibit the tame, mailing address, and telephone number of each additional person who Exhibit No.
should be contacted, if any.
" Street address -
22620 Market Street
city Santa Clarita state California ZIP Code 91322
2- Indicate on an attached exhibit any plans to change the current terms and conditions of service and Exhibit No.
operations of the system as a consequence of the transaction for which approval is sought. 1 3
FCC 394 (Page 2)
October 1993
II(( SECTION 1. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS
C. ). Transferee/Assignee is:
.® .Corporation
❑ limited Partnership
❑ General Partnership
❑ Individual,
a. Jurisdiction of incorporation:
d. Name and address of registered agent in
Delaware
jurisdiction:
The Prentice -Hall.
b. Date ofincorporatiom
May 29 1963
Corporation System, Inc.
r an .Square
c. For profit or not-for-profit-
Profit
g3Z,LOock
Dover LDE0�19904
a. Jurisdiction in which formed:.
c. Name and address of registered agent in
jurisdiction:.
b. Date of formation:
a: jurisdiction whose laws govem formation: b. Date of formation:
❑ other. Describe in an Exhibit Exhibit No.
2 List the transfereefassignee, and, if the transfereelassignee isnot a natural person, each of its officers, directors, stockholders
Cf -' ,,beneficially holding more than 5% of the outstanding voting shares, general partners, and limited partners holding an equity
I J interest of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read
/ .carefully— the lettered items below refer to corresponding lines in the following table.)
(a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show
name, address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the
applicant first, officers, next, then directors and, thereafter, remaining stockholders andlor partners.
(b) Citizenship.
(c) Relationship to the transfereelassignee (e.g., officer, director, etc.).
(d) Number of shares or nature of partnersfhp interest
(e) Number of votes.
(f) Percentage of votes.
ontinental Cablevision,)
The Pilot House
c.
(See Attached Sheets)
Lewis Wharf
Boston, MA 02110
(b) U S A
M Transferee
(d) 5,765,299
(f111(e).
54, 544 ,849
M 100%
rcc n+v.,, v
011 1- 1113
3. If the applicant is a corporation or a limited partnership, is the transfereefassignee formed under the
- laws of, or duly qualified to transact business in, the State or other jurisdiction in which the system
I/ operates?
If the answer is No, explain in an Exhibit.
4. Has the transferee/assignee had any interest in or in connection with an application which has been
dismissed or denied by any franchise authority?
If the answer is Yes, describe circumstances in an Exhibit.
S. Has an adverse finding been made or an adverse final action been taken by any court or
administrative body with respect to the transfereefassignee in a civil, criminal or administrative
proceeding, brought under the provisions of any law or regulation related to the following: any
felony, revocation, suspension or involuntary transfer of any authorization ('including cable
franchises) to provide video programming servicer, mass media related antitrust or unfair
competition; fradulent statements to another governmental unite or employment discrimination?
If the answer is Yes, attach as an Exhibit a full description of the persons and matter(s) involved,
including an identification of any court or administrative body and any proceeding (by dates and file
numbers, if applicable), and the disposition of such proceeding.
Are there any documents, instruments, contracts or understandings relating to ownership or future
ownership rights with respect to any attributable interest as described in Question 2 (including, but
not limited to, non-voting stock interests, beneficial stock ownership interests, options, warrants,
debentures)?
If Yes, provide particulars in an Exhibit.
❑ Yes In No
Exhibit No.
4
❑ Yes ❑ No
Exhibit No.
❑ Yes ® No
Exhibit No.
❑ Yes ® No
( 7. Do documents, instruments, agreements or understandings for the pledge of stock of the ❑ Yes ® No
transfereelassignee, as security for loans or contractual performance, provide that: (a) voting rights
will remain with the applicant, even in the event of default on the obligation; (b) in the event of
default, there will be either a private or public sale of the stock; and (c) prior to the exercise of any
ownership rights by a purchaser at a sale described in (b), any prior consent of the FCC andfor of the
franchising authority, if required pursuant to federal, state or local law or pursuant to the terms of
the franchise agreement will be obtained?
If No, attach as an Exhibit a full explanation. Exhs t No.
SECTION 111-TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS
1. The transfereelassignee certifies that it has sufficient net liquid assets on hand or available from ® Yes ❑ No
committed resources to consummate the transaction and operate the facilities for three months..
2.. Attach as an Exhibit the most recent financial statements, prepared in accordance with generally
accepted accounting principles, including a balance sheet and income statement for at least one full
Exhibit No.
6
year, for the tranfseree/assignee or parent entity that has been prepared in the ordinary course of
business, if any such financial statements are routinely prepared. Such statements, if not otherwise
publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the
franchise authority and its agents to the extent permissible under local law.
SECTION IV -TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS
Set forth in an Exhibit a narrative account of the transferee'slassignee's technical qualifications, experience
Exhibit No.
expertise regarding cable television systems, including, but not limited to, summary information about
7
oand
appropriate management personnel that will be involved in the system's management and operations. The
transfereelassignee may, but need not, list a representative sample of cable systems currently or formerly
owned or operated.
FCC 194 (Page O
od.bee 1913
SECTION V - CERTIFICATIONS
Part/-Transferor/Assignor
_J
All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a
material part hereof and are incorporated herein as if set out in full in the application.
Part It - Transferee/Assignee
All the statements made in the application and attached Exhibits are considered material representations, and all the Exhibits are a
r material part hereof and are incorporated herein as if set out in full in the application.
The transferedassignee certifies that he/she:
(a) Has a current copy of the FCC's Rules governing cable television systems.
(b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and
related regulations,
(c) Will use its hest efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related
regulations, and to effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any
violations thereof or defaults thereunder presently in effect or ongoing.
Signature
1 CERTIFY thatthe statements in this application are true
complete and correct to the best of my knowledge and belief anJ
are made in good faith
J (�..
WILLFUL FALSE STATEMENTS MADE ON 7f115 FORM ARE
Date 1/17/95
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE,
Print full Pam Harry Harry Dyson.
TITLE 18, SECTION 1001.
Check a ropriate classification:��ppoorrato Officer
Individual❑ General Panner ❑ Other. Explain:
0ndinte Tye)
Secretary
Part It - Transferee/Assignee
All the statements made in the application and attached Exhibits are considered material representations, and all the Exhibits are a
r material part hereof and are incorporated herein as if set out in full in the application.
The transferedassignee certifies that he/she:
(a) Has a current copy of the FCC's Rules governing cable television systems.
(b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and
related regulations,
(c) Will use its hest efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related
regulations, and to effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any
violations thereof or defaults thereunder presently in effect or ongoing.
Senior Vice President
Corporate & Legal Affairs
i�
FCC 394 (hg. A
O0.ba 1993
Signature
1 CERTIFY that the statements in this application are true
complete and correct to the best of my knowledge and belief ana
J
J (�..
are made in good faith
e �`�
e`e
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
Date 1/17/95
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE,
Print full name
TITLE 18, SECTION 1001.
Robert
J.
Sachs
Check a ropriate classification:
Individual ❑' General Partner
ateOfficer
® OnC dporicaterdle)
❑
Other. Explain:.
Senior Vice President
Corporate & Legal Affairs
i�
FCC 394 (hg. A
O0.ba 1993
ATTACHMENTS FOR
SECTION 11. TRANSFEREE/ASSIGNEE'S LEGAL QUALIFICATIONS
QUESTION 2
OFFICERS
a. Amos B. Hostetter, Jr.
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Chairman, Chief Executive Officer and
d. Shares Beneficially Held: 1,800,897
e. Number of Votes: 18,008,970
f. Percentage Voting Power: 33.02°1
a. Timothy P. Neher
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Vice Chairman and Director
d. Shares Beneficially Held: 66,869
e. Number of Votes: 668,690
f. Percentage Voting Power: 1.231
a. Michael J. Ritter
Director
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. President; Chief Operating Officer and Director
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage Voting Power: ***
a. William T. Schleyer
Continental Cablevision, Inc.
180 Greenleaf Avenue
Portsmouth, NH 03801
b. U.S.
C. Executive Vice President
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage Voting Power: ***
** means Director or officer holds less than 10-. of total
equity.
*** means Director or officer holds shares totalling less than
1< of the outstanding capital stock and has less than to of
the total voting power.
-2-
a. Jeffrey T. DeLorme
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
c.
d.
e.
f.
a
b.
c.
d.
e.
f;
a.
b.
c.
d.
e.
f.
Executive Vice President
Shares Beneficially Held: **
Number of Votes: ***
Percentage of Voting Power: ***
Nancy Hawthorne
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
U.S.
Chief Financial Officer and Senior Vice President
Shares Beneficially Held: **
Number of Votes: ***
Percentage Voting Power: ***
Richard A. Hoffstein
Continental Cablevision, Inc.
The Pilot House- Lewis Wharf
Boston, MA 02110
U.S.
Senior Vice President and Corporate Controller
Shares Beneficially Held: **
Number of Votes: ***'
Percentage Voting Power: ***
a. Frederick C. Livingston
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Senior Vice President - Marketing
d_ Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage Voting Power: ***
** means Director or officer holds less than to of total
equity.
** means Director or officer holds shares totalling 'less than
1% of the outstanding capital stock and has less than I- of
the total voting power.
-3-
a. Robert J. Sachs
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Senior Vice President - Corporate
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
and Legal Affairs
a, David M. Fellows
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Senior Vice President - Engineering
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
a. Robert A. Stengel
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Senior Vice President - Programming
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
a. Robert Strickland
and Technology
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Senior Vice President - Information Systems
d. No shares held.
e. N/A
f. N/A
** means Director or officer holds less than 1°> of total
equity.
*** means Director or officer holds shares totalling less than
i°s of the outstanding capital stock and has less than to of
the total voting power.
a. Andrew J. Dixon, Jr.
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Senior Vice President - Human Resources
d Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
a. Nancy B. Larkin
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Vice President - Community Relations
d. No shares held.
e. N/A
f. N/A
a.
P. Eric Krauss
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b,
U.S.
C.
Treasurer
1
-- d.
Shares Beneficially Held: **
e.
Number of Votes: ***
f.
Percentage of Voting Power:. ***
a. Christina Fernandez-Haegg
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Financial Manager
d. No shares held.
e. N/A
f. N/A
** means Director or officer holds less than 1% of
equity.
*** means Director or officer holds shares totalling
1% of the outstanding capital stock and has less
the total voting power.
total
less than
than to of
-5-
a. Benjamin A. Gomez
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Assistant Treasurer
d. No shares held.
e. N/A
f. N/A
a. Larry Christofori
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Assistant Treasurer
d. No shares held.
e. N/A
f. N/A
a. Robert B. Luick, Esq.
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
b. U.S.
C. Secretary and Director
d. Shares Beneficially Held: **
e. Number of: Votes: ***
f. Percentage of Voting Power: ***
a. W. Lee H. Dunham
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
b. U.S.
C. Assistant Secretary
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
** means Director or officer holds less than 1% of total
equity.
*** means Director or officer holds shares totalling less than
1% of the outstanding capital stock and has less than 1% of
the total voting power.
a. Patrick K. Miehe
Sullivan & Worcester
One Post Office Square
' Boston, MA 02109
b. U.S.
C. Assistant Secretary
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
DIRECTORS (* Executive Committee)
a. Amos B. Hostetter, Jr.*
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. Chairman of the Board, Chief Executive Officer and Director
d. See above.
e. See above.
f. See above.
a. C. Alexander Howard
c/o R.C. Crisler Company
600 Vine Street
Suite 2710
Cincinnati, OR 45202
b. U.S.
C. Director
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
a. Robert B. Luick, Esq.
** means Director or officer holds less than 1% of total
equity.
*** means Director or officer holds shares totalling less than
1% of the outstanding capital stock and has less than 1% of
the total voting 'power.
l�
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
b.
U.S.
C.
Secretary and Director
d.
See above.
e.
See above.
f.
See above.
** means Director or officer holds less than 1% of total
equity.
*** means Director or officer holds shares totalling less than
1% of the outstanding capital stock and has less than 1% of
the total voting 'power.
l�
-7-
a. Henry F. McCance
Greylock Management Corp.
One Federal Street
Boston, MA 02109
b. U.S.
C. Director
d. Shares Beneficially Held: **
e. Number of Votes: ***
f. Percentage of Voting Power: ***
a. Timothy P. Neher
The Pilot House -Lewis Wharf
Continental Cablevision, Inc.
Boston, MA 02110
b. U.S.
C. Vice Chairman and Director
d. See above.
e. See above.
f. See above.
a. Michael J. Ritter
Continental Cablevision, Inc.
The Pilot House -Lewis Wharf
Boston, MA 02110
b. U.S.
C. President, Chief Operating Officer and Director
d. See above.
e. See above.
f. See above.
a. Vincent J. Ryan*
Schooner Capital Corporation
745 Atlantic Avenue
Boston, MA 02111
b. U.S.
C. Director
d. Shares Beneficially Held: 228,998
e. Number of Votes: 2,289,980
f. Percentage of: Voting Power 4.20°%
** means Director or officer holds less than 1% of
equity.
*** means Director or officer holds shares totalling
1% of the outstanding capital stock and has less
the total voting power.
total
less than
than 1% of
a. Jonathan H. Kagan*'
Corporate Partners, L.P.
One Rockefeller Plaza
--- New York, NY 10020
b. U.S.
C. Director
d. Shares Beneficially Held: 1,142,858
e. Number of Votes: 11,428,580
f. Percentage of Voting Power: 20.950
a. Lester Pollack2
** means Director or officer holds less than 1% of total
equity.
*** means Director or officer holds shares totalling less than
1% of the outstanding capital stock and has less than 1% of
the total voting power.
' Messrs. Kagan and Pollack are deemed to control Corporate
Advisors which controls the Preferred Investors.
2 Mr. Coppedge is deemed to control the shares held by Boston
Ventures.
Corporate Partners, L.P.
One Rockefeller Plaza
New York, NY 10020
b.
U.S.
C.
Director
d.
See J. Kagan for beneficial ownership information.
e.
See J. Kagan for voting information.
f.
See J. Kagan for voting information.
a.
Roy F. Coppedge III2
Boston Ventures Management, Inc.
21 Custom House Street
Boston, MA 02110
b.
U.S.
C.
Director
_) d.
Shares Beneficially Held: 18,335 (Class A)
and 282,228 (Class B)
e.
Number of Votes: 2,840,615
f.
Percentage of Voting Power: 5.21%
** means Director or officer holds less than 1% of total
equity.
*** means Director or officer holds shares totalling less than
1% of the outstanding capital stock and has less than 1% of
the total voting power.
' Messrs. Kagan and Pollack are deemed to control Corporate
Advisors which controls the Preferred Investors.
2 Mr. Coppedge is deemed to control the shares held by Boston
Ventures.
5% HOLDERS
Common
a. H. Irving Grousbeck
Room 382
Graduate School of Business
Stanford University
Stanford, CA 94305
b. U.S.
C. 5o Beneficial Holder
d. Shares Beneficially Held: 401,320
e. Number of Votes: 4,013,200
f. Percentage of Voting Power: 7,36-
a.
Schooner Capital Corporation
745 Atlantic Avenue
Boston, MA 02111
'b.
N/A
C.
5o Beneficial Holder
d.
Shares Beneficially Held: 223,548
e.
Number of Votes: 2,235,480
f.
Percentage of Voting Power: 4.101
a.
Corporate Partners, L.P.
One Rockefeller Plaza, Suite 1010
New York, NY 10020
J
Attn: Paul Zep£
b.
N/A
C.
5% Beneficial Holder
d.
Shares Beneficially Held: 728,953
e.
Number of Votes: 7,289,530
f.
Percentage of Voting Power: 13.360
a. Corporate Advisors, L.P.
One Rockefeller Plaza, Suite 1010
New York, NY 10020
Attn: Paul Zepf
b. N/A
C. 5% Beneficial Holder
d. Shares Beneficially Held: See Corporate Partners
and other Preferred Investors.
e. See Corporate Partners and other Preferred Investors.
f. See Corporate Partners and other Preferred Investors.
-10-
a. Boston Ventures (treated as a group)
-.
Boston Ventures Limited.
Partnership
III
{
Boston Ventures Limited
Partnership
IIIA
-
Boston Ventures Limited
Partnership
IV
Boston Ventures Limited
Partnership
IVA
c/o Boston Ventures Management, Inc.
21 Custom House Street
Boston, MA 02110
Attn: Roy F. Coppedge
b.
N/A
C.
5% Beneficial Holder
d.
Shares Beneficially Held:
See 'Roy Coppedge.
e.
See Roy Coppedge.
f.
See Roy Coppedge.
Preferred
a. Corporate Advisors, L.P.
One Rockefeller Plaza, Suite 1010
New York, NY 10020
Attn: Paul Zepf
b. N/A
C. 5% Beneficial Holder
d. Shares Beneficially Held; See Corporate Partners
and other Preferred Investors.
e. See Corporate Partners and other Preferred Investors.
�^ f. See Corporate Partners and other Preferred Investors.
FM
b.
c.
d.
e.
f.
0-
Corporate offshore Partners, L.P.
One Rockefeller Plaza, Suite :1010
New York, NY 10020
Attn: Paul Zepf
N/A
5% Beneficial Holder
Shares Beneficially Held:
Number of Votes: 521,070
52,107
Percentage of Voting Power:
96s-
-11-
a. The State Board of Administration
One Rockefeller Plaza, Suite 1010
New York, NY 10020
Attn: Paul Zepf
b. N/A
C. 51 Beneficial Holder
d. Shares Beneficially Held: 76,084
e. Number of Votes: 760,840
f. Percentage of Voting Power: 1.391
a. First Plaza Group Trust
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Attn: James F. Kelliher
b. N/A
C. 5% Beneficial Holder
d. Shares Beneficially Held: 171,429
e. Number of Votes: 1,714,290
f. Percentage of Voting Power: 3,141
of Florida
a. Vencap Holdings (1992) Pte Ltd
Government of Singapore Investment
255 Shoreline Drive, Suite 600
Redwood City, CA 94065
Attn: Ng Kin Sze, Regional Manager
b. N/A
C. 5% Beneficial Holder
d. Shares Beneficially Held: 71,428
e. Number of Votes: 714,280
f. Percentage of Voting 'Power: 1.31%
a. ContCable Co -Investors, L.P.
Chemical Venture Partners
270 Park Avenue
New York, NY 10017
Corporation
Attn: Michael R. Hannon (Principal)
b. N/A
C. 5% Beneficial Holder
d. Shares Beneficially Held: 42,857
e. Number of Votes: 428,570
f. Percentage of Voting Power: .79%
F:\JLY\DIST\OFFICUPD2.LIS:.1/10/95
EXHIBIT 1
The following information is provided pursuant to Master County Ordinance
Section 16.60.170(E).
SUPPLEMENTAL ATTACHMENT INFORMATION
(County of Los Angeles)
COMPLAINT LOG
County Subs/ Number of Number
System Year System Base Complaints Resolved
Santa Clarita
1993
5580/27,900
2 (service) 2
1994
5580/27,900
1 (service) 1
Cypress
1993
13/11,000
0 0
1994
13/11,000
0 0
Harbor
1993
4,000/24,600
3 (service) 3
1994
4,000/24.600
4 (service) 4
Tujunga
1993
177/31,580
0 0
1994
177/31,580
1 (service) 1
RATES
Continental Cablevision has made no decisions regarding any specific
increase or decrease in service rates which may occur in the first three years
following the approval of the transfer. All rates will be set, from time to time, in
full accord and compliance with all applicable governmental rate regulations.
l.�
EXHIBIT 2
Description of Transaction
and
Amended and Restated Agreement and Plan of Merger
dated as of November 18, 1994
CONTINENTAL CABLEVISION, INC./PROVIDENCE JOURNAL COMPANY
DESCRIPTION OF THE TRANSACTION
Providence Journal Company and Continental Cablevision, Inc. have entered
into an Amended and Restated Agreement and Plan of Merger dated as of November
18, 1994 under which Continental will acquire Providence Journal's cable television
operations, including those of Colony Communications, Inc., Colony Cablevision,
Copley/Colony, Inc. and King Videocable Company.
In this transaction, no individual cable television systems, franchises or
operating companies are being offered for sale or sold. Instead, this will be a
multistep, non-cash stock transaction which will involve an internal corporate
restructuring of Providence Journal Company, King Holding Corp.: and King
Broadcasting Company. None of Colony Communications, Inc., Copley/Colony, Inc.
and King Videocable Company will be merged or consolidated into any other
companies. They will continue to exist as distinct legal entities. Providence Journal's
non -cable television assets will be transferred to a new company which will be spun
off to the current Providence Journal Company stockholders. After giving effect to the
restructuring and spin-off, King Broadcasting Company (which, at such time, will
consist solely of Providence Journal's cable television operations) will be merged into
Continental Cablevision, Inc. As a result of this merger, Continental will be the new
controlling entity of the cable television systems now owned and controlled by
Providence Journal Company.
Attached are charts which present a picture of the complete transaction,
including steps involved in the corporate restructuring. However, because Providence
Journal has requested a private letter ruling from the Internal Revenue Service as to
the tax effect of the transaction, the structure of, and intermediate steps involved in, the
transaction remain subject to modification depending on the Internal Revenue
Service's response to this request. Any such changes will not, however, alter the
ultimate result of the transaction which, as described above, has Continental
becoming the new controlling entity of Providence Journal's cable television systems.
C)
This transaction, unlike a simple sale of Providence Journal's cable systems,
permits Providence Journal's stockholders to continue to participate in the cable
television business through ownership in a newly -enlarged Continental. Upon
completion of the transaction, Providence Journal stockholders will become
stockholders of Continental. These stockholders will hold approximately 16-19% of
the capital stock of Continental, amounting to less than 5% of the voting power. In
addition, two persons designated by Providence Journal will become members of the
board of directors of Continental.
As a consequence of the transaction, Continental will become a publicly traded
company. At the present time, both Providence Journal and Continental are privately
held companies.
In connection with the transaction, Providence Journal Company will acquire
the 50% interest in King Holding Corp. held by affiliates of Kelso & Company, Inc.
King Holding Corp. owns 100% of the stock of King Broadcasting Company, which
'\ owns 100% of the stock of King Videocable Company. King Videocable Company, in
J turn, owns 100% of the stock of King Videocable Company's operating subsidiaries.
In addition, as part of the transaction, the stock of King Videocable Company will be
contributed by King Broadcasting Company to Colony Communications, Inc. Colony
will thus become the new owner of 100% of the stock of King Videocable Company.
As the attached charts show, Continental will become Colony's parent upon
completion of the transaction. Approval of the intermediate change in control is
requested along with the approval of the ultimate transfer of control from Providence
Journal and affiliates of Kelso to Continental.
This "Description of the Transaction" is intended solely as an overview of the
transaction described in the Merger Agreement.
C'` All King
Steps in the Transaction
Providence Journal Company
Present Structure
N-5paper I Cablevision Adj
100% 50 %
100%
Colony ProvideatceJ King Holding
Communications Broadcasting
Inc. f nm �p
Step 1
Westerly Cable
Television, Inc. is
merged into Colony
Communications, Inc.
n
M-1
Colony's Cable I King Videocable
Subsidiaries Company
100%
Communications,
Colony's Cable
Subsidiaries
Company
Subsidiarie
Providence Journal Company
Shareholders
Newspaper IGblevision Ass
100%
rovidence Jouma
Broadcasting
Corp.
50%
Affiliates of Kelso &
Company, Inc.
&/Company,
50/ %
King Holding
Corp.
STV
King Vidcocable
Company
King Vidcocablc
Company rawocn
SuhSdiaries -GR coxi•nac
Step 2
Providence Journal Company
Shareholders
"Providence Journal
Company purchases
Kelso's interest in King
Providence Journal
Holding Corp. ("KHC')
then KHC transfers all
colony
Newspaper C blcAsioo As
of its assets to King
Broadcasting Company
100°% t0(
100%
("KBC� and KHC is
dissolved
Colony
Journa
FBroa�d�casting
Communications
Inc Westrsiy
Colony's Cable
Subsidiaries
Providence Journal Company
Step Shareholders
Providence Journal
Company transfers all of King Broadcasting
its assets to KBC and Conmanv T,
distributes KBC stock to Colony
shareholders. Providence Newspaper CWl inion Asx
Journal Company is
dissolved.
Colony's Cable
Subsidiaries
Broadcasting
Corp.
King Videocable
Company
King Videocable
Company
Subsidiaries
King Videocable
Company
King Videccable
Company
MojO
.CR -COW' DU.
/I
Step 4
Colony Cablevision
assets and stock of
King Videocable
Company are contrib-
uted to Colony Com-
munications by King
Broadcasting Com-
pany
Step 5
Providence Joumal Company
Shareholders
Communications, Inc.
Colony
Westerly Mbleu oo Assets
King Videomble
comfy
King Videocab
Company
Subsidiaries
New Providence Journal
Company C'NPJ'� is
created by KBC and
Newspaper, TV Stations,
and Providence Journal
Broadcasting Corp. are
contributed to NPJ,
King Broadcasting
Company
'Ncwspaper I TV
Colony's
Cable
Subsidiaries
Journal
Broadcasting
Providence Journal Company
Shareholders
Communications, Inc.
olooy
Westcdy :�blrisioD Aeras
King Videocable
Company
King Videocable
Company
Subsidiaries
King Broadcasting
Company
Colony's
Cable
Subsidiaries
New Providence
Joumal
Journal
Broadcasting
PROIOM
WGR CORPDU
Providence Journal Company
Step 6
(' Shareholders
.ew Providence
Joumal Company is
spun off to existing
shareholders.
Company
_Journal
I rn
Newspaper
Colony
_. Providence
lony Journal
Cabl_e_vision assts Broadcasting
King Videocable I I Colony's
Company Cable
Subsidiaries
King Videocable
r....,. Company
Subsidiaries
Step 7 Providence Journal Company
Shareholders
King Broadcasting
Company is merged APPmx 1619% (le100`%
into Continental voting
than 5 er
voting power)
Cablevision, Inc. ev' n
Continental Journal Coe
Cablevision, Inc. Newspaper
Colony
Providence
Journal
Broadcasting
Corp_
King Videocable I I Colony's
Company Cable
Subsidiaries
Kingable
Company
Subsidiaries
FRGI Tt
wcx Coar nae
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
By and Among
PROVIDENCE JOURNAL COMPANY,
THE PROVIDENCE JOURNAL COMPANY,
KING HOLDING CORP.,
KING BROADCASTING COMPANY,
and
CONTINENTAL CABLEVISION, INC.
dated as of
November 18, 1994
TABLE OF CONTENTS
ARTICLE 1.
THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . .
1.2 Effect of the Merger on Capital Stock . . . . . .
1.3 Dissenters' Rights . . . . . . . . . . . . . . .
1.4 Adjustment . . . . . . . . . . . . . . . . . . .
1.5 Effective Time of the Merger . . .
1.6 Exchange of Certificates . . . . . . . . .
'
1.7 Distribution with Respect to Shares Represented
by Unexchanged Certificates . . . . . . .
1.8 No Fractional Shares . . . . . . . . . . . . . . .
1.9 No Liability . . . . . . . . . . . . . . . . . . .
1.10 Lost Certificates . . . . . . . . . . . . . . . .
ARTICLE 2
CERTAIN PRE -MERGER TRANSACTIONS
2.1 New Indebtedness . . . . . . . . . . .
2.2 Kelso Acquisition . . . . . . . . . . . . . .
2.3 Dissolution of Holding . . . . . . . . . . . .
2.4 Dissolution of the Company . . . . .
2.5 Contribution of Assets to and Assumption of
Liabilities by NPJ; Distribution of NPJ Common
Stock . . . . . . . . . . . . . . . . .
2.6 Certain Other Actions . . . . . . . . .
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES REGARDING THE
COMPANY, NPJ, HOLDING AND BROADCASTING
3.1 Organization; Authority; Company/Kelso Agreement
3.2 No Breach or Conflict . _ . . . . _
3.3 Consents and Approvals . . . . . . . . . . .
3.4 "Approval of the Boards; Fairness Opinions . . . .
3.5 Vote Required . . . . . . . . . . . . . . . . .
3.6 Capitalization . . . . . . . . . . . . . . . .
3.7 Financial Statements . . . . . . . . . . .
3.8 Absence of Undisclosed Liabilities . . . . . . .
3.9 Absence of Certain Changes . . . . . . .
3.10 Compliance With Laws . . . . . . . .
3.11 Tax Matters . . . . . . . . . . . _ . . . .
3.12 Litigation . . . . . . . . . . . . . .
3.13 Employee Benefits; ERISA Matters . . . . . . . .
3.14 Full Disclosure . . . . . . . . . . . . .
3.15 Brokers and Finders . . . . .
2
2'
4
5
6
6
E
10
10
10
11
12
13
14
15
15
16
16
16
18
18
18
19
19
19
20
21
21
ARTICLE 4.
l' REPRESENTATIONS AND WARRANTIES REGARDING THE CABLE SUBSIDIARIES
4.1
Organization and Authority . . . . . . .
. . . .. 21
4_2
No Breach or Conflict . . . . . . . . . .
. . . , 22
4.3
Capitalization . . . _ . . . . . . .
. . . . 22-
4.4
Financial Statements . . . . . . _ .
. . . . 23
4.5
Absence of Undisclosed Liabilities . . . .
. . . . 23
4.6
Absence of Certain Changes . . . . . . . .
. 23
4.7
Compliance with Laws . . . . . . . . .
. . . . 24
4,8
Franchises and Material Agreements . . . .
. . . 24
4.9
Title to Properties; Encumbrances . . . .
. . 26
4.10
Labor Matters . . . . . . . .. . . _ ,. ,. .
, . . . 27
4.11
Litigation . . . . . . . . . . . . . . .
. . . . 27
4.12
Employee Benefits; ERISA Matters . . . . .
. . . 28
ARTICLE 5.
ARTICLE 6.
OTHER AGREEMENTS
6.1
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
. 44
5,1
Organization and Authority . . . . . . . .
. . 32
5.2
No Breach or Conflict . . . . . . . . . .
. . 32
5.3
Consents and Approvals . . . . . . , .
33
5.4
Approval of the Board .. . . . . . . . . . . . .
. . 33
5.S
Vote Required . . . . . . . . . . . . . . .
. . 33
r� 5.6
Capitalization . . . . . . . . . . . . . . .
. . 34
5.7
Financial Statements . . . . . . . .
, . 35
5.8
Absence of Undisclosed Liabilities
35
5.9
Absence of Certain Changes . . . . .
.. . 35
5.10
Compliance with Laws . . . . . . . . . .
. . 36
5.11
Franchises and Material Agreements
36
5,12
Tax Matters. . .. . . . . . . . . . . . . . .
. . 38
5.13
Litigation . . . . . . . . . . . . . . . . . .
. . 39
5.14
Title to Properties; Encumbrances . . . _ . .
39
5.15
Employee Benefits; ERISA Matters . .
. . 39
5.16
Labor Matters . . . . . . . . . . . . . . . .
. . 43
5.17
Full Disclosure . . . . . . . . .
. . 43
5.18
Brokers and Finders . . . . . . . . .
. . 44
ARTICLE 6.
OTHER AGREEMENTS
6.1
No Solicitation . .
. 44
6.2
Conduct of Business of the Company; Ownership of
Cable Subsidiaries . . . . . . . . . . .
45
6.3
Conduct of Business of the Cable Subsidiaries . .
. 46
6.4
Conduct of Business of Acquiror _ _ . . . . .
. 49
6.5
Access to Information . . . . . . . . . _ _ . .
. 50
6.6
SEC Filings . . . . . . . . . . . . . . . . . . .
. 50
6.7
6.8
Reasonable Best Efforts . . . . . . . . . . _
Public Announcements
. 54
55
6,9
Board Recommendation . . . . . . . _ . . . .
, 55
6.10
Tax Matters . . . . . . . . . . . . . . . . . . .
. 55
6.11
Notification . . . . . . . . . . . . . . . . . . .
. 60
,- 6.12
Employee Benefits . . . . . . . . . . . .
60
6.13
Meeting of Stockholders of the Company; Other
. 81
9.4
Agreements . . . . . I I . . . . . . . . . . .
64
6.14
Meeting of Stockholders of Acquiror . . . . . . .
64
6.15
Regulatory and Other Authorizations . . . . .
. 64
6.16
Further Assurances . . . . . . . . . . . . . .
66
6.17
Internal Revenue Service Ruling . . . . . . .
66
6.18
Records Retention . . . . . . . . .. , . . . . . .
. 66
6.19
No Related Party Agreements with NPJ . . . . . .
. 67
6.20
Company Name. . . . . . . . . . . . . . . . .
. 67
G.21
Undertakings Relating to a Public Offering;
Registration Rights . . . . . . . . . .
. 67
6.22
Matters Relating to Shareholders and Liquidity .
. 69
6.23
Acquiror Board of Directors, . . . . . . . .
. 69
6.24
Effect of Certain Events . . . . . . . . .
. 70
6,25
Acquiror Schedules . . . . . . . . . . _
71
6.26
Employee Stock Options . . . . . . . . . . . . .
. 71
6.27
Rights Plan . . . . . . . . . . . . . . . . . . .
. 71
ARTICLE 7,
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
7.1 Closing and Closing Date . . . . . . . . . 72
7.2 Conditions to the Obligations of the Company, NPJ,
Holding, Broadcasting and Acquiror . . . . . . _ 72
- 7.3 Conditions to the Obligations of the Company, NPS,
Holding and Broadcasting . . . . . . . _ . . 73
7.4 Conditions to Obligations of Acquiror . . . . 75
ARTICLE 8.
TERMINATION
8.1 Termination . . . . . . . . . . . . . . . . . . 77
8.2 Effect of Termination . . . . . . . . . . . 78
8.3 Fees and Expenses. . . . . . . . . . . . . . . 78
ARTICLE 9.
SURVIVAL; INDEMNIFICATION
9.1
Survival
. . . . . . . . . . .
. 81
9,2
Indemnification
by NPJ . . . . . . . . . . .
. 81
9.3
Indemnification
by Acquiror . . . . . . . . . . .
. 81
9.4
Indemnification
by the Company . . . . . . . . .
82
9.5
Additional Indemnification
Relating to Certain
Litigation and
Claims . .. . . . . . . . . . . . .
. 82
9.6
Notification of
Claims . . . . . . . . . . . . .
. 82
9.7
Indemnification
Procedures . . . . . . . . .
. 83
9.8
�i
Working Capital
Adjustment. .. . . . . . . . . . .
. 84
-iv -
ARTICLE 11.
DEFINITIONS
i,
EXHIBITS
Exhibit A Certificate of Designation Relating to Acquiror
Preferred Stock
Exhibit B Form of Contribution and Assumption Agreement
Exhibit C Voting Agreement
Exhibit D Non -Competition Agreement
l`�
ARTICLE 10.
�I
MISCELLANEOUS
10.1
Entire Agreement . . . . . . . . . . . . . . .
. . 85
10.2
Notices _ . . . . . . . . . . . . . . . . . .
. . 85
10.3
Governing Law . . . . . . . . . . . . .
86
10.4
Descriptive Headings . . . . . . . . . .
86
10.5
Parties in Interest . . . . . . . . . . . .
. . 86
10.6
Counterparts . . . . . . . . . . . . .
. . 86
10.7
Expenses . . . . . . . . . . . . . . . . .
. . 86
10.8
Personal Liability . . . . . . . . . . . . .
. . 87
10.9
Binding Effect; Assignment . . . . .
87
10.10
Amendment . . . . . . . . . . . . . . .
87
10.11
Extension; Waiver . . . . . . . . . . . . . .
. . 87
10.12
Legal Fees; Costs . . . . . . .
. . 88
10.13
Specific Performance . . . . . . . . . . . .
_ . 88
10.14
Severability . . . . . . . . . . . . . . .
. . 88
10.15
Further Agreements Relating to the Original
Agreement . . . . _ . . . . . . . . . . . . .
. . 88
ARTICLE 11.
DEFINITIONS
i,
EXHIBITS
Exhibit A Certificate of Designation Relating to Acquiror
Preferred Stock
Exhibit B Form of Contribution and Assumption Agreement
Exhibit C Voting Agreement
Exhibit D Non -Competition Agreement
l`�
_.% AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this
"Agreement"), dated as of November 18, 1994, is made by and among
Providence Journal, Company, a Rhode Island corporation (the
"Company"), The Providence. Journal Company, a Delaware
corporation and a wholly owned subsidiary of the Company ("NPJ"),
King Holding Corp., a Delaware corporation ("Holding"), King
Broadcasting Company, a Washington corporation ("Broadcasting"),
and Continental Cablevision, Inc., a Delaware corporation
("Acquiror").
RECITALS
WHEREAS, the Company, NPJ and Acquiror have entered into
that certain Agreement and Plan of Merger dated as of November
18, 1994 (the "Original Agreement");
WHEREAS, as contemplated by the terms of the original
Agreement, the parties have agreed to amend and restate the
Original Agreement and to enter into this Amended and Restated
Agreement and Plan of Merger;
WHEREAS, the Boards of Directors of the Company, NPJ,
i Holding, Broadcasting and Acquiror each have determined that it
is in the best interests of their respective stockholders for (i)
Holding to contribute to Broadcasting all of the assets of
Holding and, in connection therewith, Broadcasting to assume all
of the obligations and liabilities of Holding in exchange for
shares of the common stock of Broadcasting (the "Holding
Contribution"); (ii) Holding to be dissolved under applicable
Delaware law such that the sole remaining asset of Holding,
consisting of shares of Broadcasting common stock, becomes an
asset of the Company as Holding's sole stockholder (the "Holding
Dissolution"); (iii) the Company (following the Holding
Dissolution) to contribute to Broadcasting all of the assets of
the Company and, in connection therewith, Broadcasting to assume
all of the obligations and liabilities of the Company in exchange
for shares of the common stock of Broadcasting; (iv) the Company
to be dissolved under applicable Rhode Island law, and the sole
remaining asset of the Company, consisting of shares of
Broadcasting's common stock of the same class and consisting of
the same number of shares as that outstanding for the Company
immediately prior to such dissolution, to be distributed to
holders of the Company Common Stock in proportion to the class
and number of shares of the Company Common Stock so owned by such
holders; (v) Broadcasting (following such dissolution) to
contribute to NPJ substantially all of the assets then held by
Broadcasting (other than those assets described in the
Contribution Agreement as being retained by Broadcasting) and to
distribute to its stockholders the outstanding shares of NPJ
Common Stock so that the stockholders of Broadcasting will become
-2 -
the stockholders of NPJ; and (vi) Broadcasting (immediately
(( following all of the events described above) to merge with and
into Acquiror, as a result of which the stockholders of
Broadcasting immediately prior to such merger will become
stockholders of Acquiror; and
WHEREAS, for federal income tax purposes, it is intended
that such transactions will variously qualify as tax-free
dissolutions, liquidations and reorganizations as provided in the
Code.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements set forth below, the
parties hereto agree as follows:
ARTICLE 1.
THE MERGER
1.1 The Merger. Subject to the terms and conditions
hereof, at the Effective Time, (i) Broadcasting shall be merged
with and into Acquiror (the "Merger"), and the separate existence
of Broadcasting shall cease and Acquiror shall continue as the
surviving corporation in the Merger (the "Surviving
Corporation"), (ii) the Acquiror Restated Certificate, as in
effect immediately prior to the Effective Time, shall continue as
the Certificate of Incorporation of the Surviving Corporation,
(iii) the Acquiror Restated By -Laws, as in effect immediately
prior to the Effective Time, shall continue as the By -Laws of the
Surviving Corporation, and (iv) the officers and directors of
Acquiror immediately prior to the Effective Time shall continue
as the officers and directors of the Surviving Corporation
(except that the two persons listed on Schedule 1.1 shall be
appointed or elected as directors (of the Class of directors
specified on such Schedule) of the Surviving Corporation), each
to hold office in accordance with the Certificate of
Incorporation and By -Laws of the Surviving Corporation. From and
after the Effective Time, the Merger will have all the effects
provided by applicable Law. Prior to the Closing Date, the
Company shall have the right to change the persons listed on
Schedule 1.1 by written notice to Acquiror, in which case said
Schedule 1.1 shall be amended to reflect the names of such
persons, provided, that such persons shall be reasonably
satisfactory to Acquiror and its Board of Directors.
1.2 Effect of the Merger on Capital 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=
(a) Each share of Broadcasting Common Stock issued and
outstanding immediately prior to the Merger (subject to paragraph
(g) of this Section 1.2 and Section 1.3 and except shares subject
to Section 1.2(b)) shall be converted into and shall become (i)
that number equal to the Common Stock Conversion Number of fully
paid and nonassessable shares of Acquiror Class A Common Stock,
-3 -
and (ii) if Acquiror elects to issue Acquiror Preferred Stock
pursuant to paragraph (f) of this Section 1.2, that number equal
to the Preferred Stock Conversion Number of fully paid and
nonassessable shares of Series B Cumulative Redeemable Preferred
Stock of Acquiror, the terms of which shall be substantially the
same as those set forth in the Certificate of Designation
attached hereto as Exhibit A ("Acquiror Preferred Stock").
(b) Each share of the capital stock of Broadcasting issued
and outstanding immediately prior to the Merger and owned
directly or indirectly by Broadcasting as treasury stock, by NPJ
or by any of their respective Subsidiaries shall be cancelled,
and no consideration shall be delivered in exchange therefor.
(c) Each share of the capital stock of Acquiror issued and
outstanding immediately prior to the Merger shall remain
outstanding.
(d) "Common Stock Conversion Number" shall mean the
quotient obtained by dividing (i) the difference between the
Maximum Common Stock Amount and the Preferred Stock Amount by
(ii) the product obtained by multiplying $485,00 times the number
of shares of Company Common Stock issued and outstanding
immediately prior to the Dissolution (excluding shares of Company
Common Stock owned directly or indirectly by the Company as
treasury stock or by any of its Subsidiaries).
(e) "Preferred Stock Conversion Number" shall mean the
--� quotient obtained by dividing (i) the Preferred Stock Amount by
(ii) the product obtained by multiplying $485.00 times the number
of shares of Company Common Stock issued and outstanding
immediately prior to the Dissolution (excluding shares of Company
Common Stock owned directly or indirectly by the Company as
treasury stock or by any of its Subsidiaries).
(f) "Preferred Stock Amount" shall mean the aggregate issue
price of shares of Acquiror Preferred Stock to be issued by
Acquiror in connection with the Merger, if any, and shall equal
$0 if Acquiror, at its sole option, determines not to issue any
Acquiror Preferred Stock in connection with the Merger, or
$96,750,000 if Acquiror, at its sole option, determines to issue
Acquiror Preferred Stock in connection with the Merger; provided,
however, that Acquiror shall notify the Company of its
determination as to whether or not it will issue Acquiror
Preferred Stock in connection with the Merger no later than
thirty days prior to the mailing of the Joint Proxy
Statement/Prospectus to the stockholders of the Company.
(g) The parties hereto agree that, if Acquiror elects to
issue Acquiror Preferred Stock in connection with the Merger, the
Joint Proxy Statement/Prospectus may, at the Company's option,
grant to the Company's stockholders the right to elect, subject
r� to the proviso in the immediately following sentence (the
"Preferred Stock Election"), between the percentage of Acquiror
Class A Common Stock and Acquiror Preferred Stock which such
-4 -
stockholder shall be entitled to receive in respect of each share
of Broadcasting Common Stock held by such stockholder (for
1 example, subject to the proviso in the immediately following
sentence, a stockholder may elect to receive all Acquiror Class A
Common Stock or all Acquiror Preferred Stock in respect of each
share of Company Common Stock owned by such stockholder on the
date of the Preferred Stock Election). Any holder of Company
Common Stock who fails to make such election will be deemed to
have elected to receive all Acquiror Class A Common Stock.
Notwithstanding the provisions of paragraph (a) of this Section
1.2, the amount of Acquiror Class A Common Stock and Acquiror
Preferred Stock (if any) issued in respect of a share of
Broadcasting Common Stock pursuant to paragraph (a) of this
Section 1.2 shall be adjusted to give effect to the election by
the holder of each share of Company Common Stock (which election
shall be binding upon any and all subsequent transferees of such
share and the holder of shares of Broadcasting Common Stock
issued in respect of such share pursuant to the Dissolution);
Provided, however, (i) if the stockholders of the Company elect
to receive shares of Acquiror Preferred Stock having an aggregate
value of less than the Preferred Stock Amount (the difference
between such amounts being referred to herein as the "Shortfall
Amount"), then, in addition to any shares of Acquiror Preferred
Stock issued to each such stockholder as a result of such
stockholder's election, shares of Acquiror Preferred Stock having
an aggregate value equal to the Shortfall Amount shall be issued
to all holders of the Broadcasting Common Stock, pro rata in
accordance with the percentage of Broadcasting Common Stock held
by each such holder at the Effective Time, and (ii) the maximum
amount of Acquiror Preferred Stock to be issued by Acquiror
pursuant to the Merger shall in no event exceed the Preferred
Stock Amount, so that if the Company's stockholders elect to
receive shares of Acquiror Preferred Stock having an aggregate
value in excess of the Preferred Stock Amount, then the shares of
Acquiror Preferred Stock a stockholder shall receive in the
Merger shall be reduced proportionately (based upon the amount of
Acquiror Preferred Stock elected by such stockholder as compared
to the amount of Acquiror Preferred Stock elected by all
stockholders) and the shares of Acquiror Class A Common Stock
such stockholder shall receive shall be correspondingly
increased.
1.3 Dissenters' Rights. The holder of any shares of
Company Common Stock outstanding immediately prior to the
Dissolution which has validly exercised such holder's dissenter's
rights, if any, under the Rhode Island Business Corporations Act
("Dissenting Shares") shall not be entitled to receive, in
respect of the shares of Company Common Stock as to which such
holder has validly exercised dissenters' rights, shares of
Broadcasting Common Stock or, in turn, Acquiror Merger Securities
and shall not be entitled to receive shares of NPJ Common Stock
pursuant to the Distribution unless and until such holder shall
have failed to perfect, or shall have effectively withdrawn or
lost, such holder's right to payment for such holder's shares of
Company Common Stock under the Rhode Island Business Corporations
-S -
Act. In such event, such holder shall be entitled to receive the
Transaction Securities such holder would have been entitled to
had such holder not exercised dissenters' rights, The Company
shall give Acquiror prompt notice upon receipt by the Company (i)
prior to or at the meeting of stockholders at which the Merger
Transactions is voted upon of any written objection to the Merger
Transactions (any stockholder duly making such objection being
hereinafter called a "Dissenting Stockholder") and (ii) any other
notices or communications made after such time by a Dissenting
Stockholder which pertains to dissenters' rights. The Company
and Broadcasting each agrees that prior to the Effective Time,
except with the written consent of Acquiror, it will not
voluntarily make any payment with respect to, or settle or offer
to settle, any such demand. Each Dissenting Stockholder who
becomes entitled under the Rhode Island Business Corporations Act
to payment for such holder's shares of Company Common Stock shall
receive payment therefor after the Effective Time from the
Surviving Corporation, and NPJ shall reimburse the Surviving
Corporation for all payments to Dissenting Stockholders in
respect of their shares of Company Common Stock, provided that
the amounts thereof shall have been agreed upon by the Surviving
Corporation, NPJ and the Dissenting Stockholders or finally
determined pursuant to the Rhode Island Business Corporations
Act. Any Acquiror Merger Securities that would have been issued
to Dissenting Stockholders had they not exercised their
dissenters' rights shall be issued to NPJ after NPJ's
reimbursement of all payments made by the Surviving Corporation
to such Dissenting Stockholders in respect of their shares of
Company Common Stock. In the event that, as a result of the
Merger Transactions, the holders of Company Common Stock or
Broadcasting Common Stock become entitled to avail themselves of
the Laws of any state other than Rhode Island with respect to
appraisal or dissenters' rights, the parties hereto, to the
extent permitted by applicable Law, agree to abide by the
provisions of this Section 1.3 in connection with any such holder
claiming dissenters' rights thereunder.
1.4 Adjustment.
(a) If between November 18, 1994 and the Effective Time the
outstanding shares of Acquiror Common Stock, Acquiror Series A
Preferred Stock or Company Common Stock shall have been changed
into a different number of shares (other than in the case of
Company Common Stock) or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, (i) the number of
shares of Broadcasting Common Stock to be converted into Acquiror
Merger Securities or the number of Acquiror Merger Securities
into which Broadcasting Common Stock is to be converted, as
applicable, and (ii) the amounts set forth in Section 1.8 hereof
with respect to the calculation of cash payments in lieu of
fractional shares and Section 6.23(b) with respect to the
determination whether a transaction will be considered an
"Extraordinary Transaction" as a result of the per share price of
`~ Acquiror Class A Common Stock, shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares,
We
(b) If at the Effective Time any of the Cable Subsidiaries
% set forth below are not wholly owned, directly or indirectly, by
Broadcasting, the Maximum Common Stock Amount shall be decreased
as follows:
(i) if Copley/Colony, Inc. is not then wholly
owned by Broadcasting, the Maximum Common
Stock Amount shall be reduced by $42,610,000;
(ii) if Vision Cable Company of Rhode Island, Inc.
is not then wholly owned by Broadcasting, the
Maximum Common Stock Amount shall be reduced
by $2,430,000;
(iii) if Dynamic Cablevision of Florida, Ltd. is
not then wholly owned by Broadcasting, the
Maximum Common Stock Amount shall be reduced
by $11,300,000; and
(iv) if California CATV Partners is not then
wholly owned by Broadcasting, the Maximum
Common Stock Amount shall be reduced by
$1,490,000.
1.5 Effective Time of the Merger. Subject to the terms
and conditions set forth in this Agreement, a certificate of
merger shall be duly prepared, executed and acknowledged by
Acquiror and Broadcasting and thereafter delivered to the
Secretary of State of Delaware and articles of.merger shall be
duly prepared, executed and acknowledged by Acquiror and
Broadcasting and thereafter delivered to the Secretary of State
of Washington (together, the "Certificate of Merger") for filing
pursuant to the Delaware General Corporation Law and the
Washington Business Corporation Act, respectively, as soon as
practicable after the Closing Date. The Merger shall become
effective upon the date (the "Effective Date") and at the time of
the filing of the Certificate of Merger with such Secretaries of
State or at such later time in accordance with the provisions of
applicable Law as specified in the Certificate of Merger (the
"Effective Time").
1.6 Exchange of Certificates.
(a) By no later than ten (10) days prior to the Closing
Date, the Company shall retain a bank or trust company reasonably
acceptable to Acquiror to act as exchange agent (the "Exchange
Agent") in connection with the delivery of shares of NPJ Common
Stock pursuant to the Distribution and the surrender of
certificates evidencing, in accordance with Section 2.4(c)
hereof, shares of Broadcasting Common Stock converted into
Acquiror Merger Securities pursuant to the Merger. Prior to the
Closing Date, (i) NPJ shall deposit with the Exchange Agent the
shares of NPJ Common Stock to be issued in the Distribution and
(ii) Acquiror shall deposit with the Exchange Agent the amount of
Acquiror Merger Securities to be issued in the Merger, all of
-7 -
which Acquiror Merger Securities shall be deemed to be issued at
ithe Effective Time. At and following the Effective Time, the
% Surviving Corporation shall deliver to the Exchange Agent such
cash as may be required from time to time to make payment of cash
in lieu of fractional shares in accordance with Section 1.8
hereof.
(b) As soon as practicable after the Effective Time, NPJ
and Acquiror shall instruct the Exchange Agent to mail to each
Person who was, at the Effective Time, a holder of record of a
certificate or certificates that, in accordance with Section
2.4(c), immediately prior to the Effective Time evidenced
outstanding shares of Broadcasting Common Stock (the
"Certificates") other than Broadcasting, NPS or any of their
respective Subsidiaries, (i) a letter of transmittal (which shall
specify that delivery of the Certificates shall be effective, and
risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be
in such form and shall have such other provisions as Acquiror and
NPJ shall reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing the Transaction Securities.. Upon
surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent(s) as may be appointed by NPJ and
reasonably acceptable to Acquiror, together with such letter of
transmittal, duly executed and such other documents as may be
required by the Exchange Agent or such other agent(s), the holder
Of such Certificate shall be entitled to receive in exchange
therefor the number of Transaction Securities that such holder
has the right to receive pursuant to the terms hereof (together
with any cash paid in lieu of fractional shares pursuant to
Section 1.8), and the Certificate so surrendered shall be
cancelled. In the event of a transfer of ownership of Company
Common Stock that is not registered in the stock transfer records
of the Company, the proper number of Transaction Securities may
be issued to a transferee if the Certificate representing such
Broadcasting 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 NPJ and
Acquiror that any applicable stock transfer tax has been paid.
(c) After the Effective Time, each outstanding Certificate
which theretofore, in accordance with Section 2.4(c), represented
shares of Broadcasting Common Stock shall, until surrendered for
exchange in accordance with this Section 1.6, be deemed for all
purposes to evidence solely the right to receive the Merger
Securities to which such Certificate is entitled pursuant to the
Merger.
(d) Except as otherwise expressly provided herein, the
Surviving Corporation and NPJ shall share equally in the payment
of all charges and expenses, including those of the Exchange
Agent, in connection with the exchange of shares of Broadcasting
_1 Common Stock for -Transaction Securities. Any Transaction
Securities deposited with the Exchange Agent that remain
-8 -
unclaimed by the former stockholders of Broadcasting after six
months following the Effective Time shall be delivered to the
\) surviving Corporation or NPJ, as applicable (as the context may
require, the "Issuer") upon demand and any former stockholders of
Broadcasting who have not then complied with the instructions for
exchanging their Certificates shall thereafter look only to the
Issuer for exchange of Certificates.
(e) Effective upon the Closing Date, the stock transfer
books of the Company and Broadcasting shall be closed, and there
shall be no further registration of transfers of shares of
Company Common Stock or Broadcasting Common Stock, as the case
may be, thereafter on the records of the Company and Broadcasting
(other than as a result of the Dissolution).
(f) All Acquiror Merger Securities issued upon conversion
of shares of Broadcasting Common Stock and NPJ Common Stock
distributed pursuant to the Distribution, each in accordance with
the terms hereof, shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of
Broadcasting Common Stock.
1.7 Distribution with Respect to Shares Represented by
Unexchanged Certificates. No dividend or other distribution
declared .or made (i) after the Distribution by NPJ with respect
to shares of NPJ Common Stock issued pursuant to the Distribution
with a record date after the Distribution or (ii) after the
Effective Time by the Surviving Corporation with respect to the
Acquiror Merger Securities with a record date after the Effective
Time, shall be paid to the holder of any unsurrendered
Certificate with respect to any shares of NPJ Common Stock
distributed pursuant to the Distribution or any of the Acquiror
Merger Securities issuable upon surrender of a Certificate until
the holder of such Certificate shall surrender such Certificate
in accordance with Section 1.6. Subject to the effect of
applicable Law, following surrender of any such Certificate there
shall be paid, without interest; by the Surviving Corporation or
NPJ, as the case may be, to the record holder of Transaction
Securities issued in exchange therefor: (i) at the time of such
surrender, the amount of dividends or other distributions with a
record date after the Distribution or the Effective Time, as the
case may be, theretofore paid by NPJ or the Surviving
Corporation, as the case maybe, with respect to such Transaction
Securities; and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date declared
by NPJ or the Surviving Corporation, as the case may be, after
the Distribution or the Effective Time, as the case may be, but
prior to surrender of such Certificate and a payment date
subsequent to such surrender payable with respect to such
Transaction Securities. No interest shall be paid on any of the
Transaction Securities.
-9-
1.8 No Fractional Shares.
(a) No fraction of a share of Acquiror Class A Common Stock
or of. Acquiror Preferred Stock shall be issued upon surrender of
Certificates pursuant to Section 1.6. In lieu of any such
fractional interests, each holder of Broadcasting Common Stock
entitled to receive Acquiror Merger Securities pursuant to the
Merger shall be entitled to receive an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying
$485.00 by the fractional interest in the share of Acquiror Class
A Common Stock or Acquiror Preferred Stock, as the case may be,
to which such holder would otherwise be entitled (after taking
into account all shares of Acquiror Common Stock and Acquircr
Preferred Stock such holder is entitled to receive pursuant to
the Merger).
(b) Immediately prior to the Effective Time, Acquiror shall
deposit with the Exchange Agent cash in the required amounts and
the Exchange Agent will pay such amounts without interest to such
holders; provided, however, that no such amount will be paid to
any holder of Certificates prior to the surrender by such holder
of such holder's Certificates. Any such amounts that remain
unclaimed by the former stockholders of Broadcasting after six
months following the Effective Time shall be delivered to the
Surviving Corporation by the Exchange Agent upon demand and any
former stockholders of Broadcasting who have not then surrendered
their Certificates shall thereafter look only to the Surviving
`i Corporation for payment in lieu of any fractional interests.
,
1.9 No Liability. None of Acquiror, NPJ, the Company,
Holding or Broadcasting will be liable to any holder of shares of
Broadcasting Common Stock for any shares of Transaction
Securities, 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.
1.10 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost,
stolen or destroyed, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the Transaction
Securities (and any dividend or distribution with respect thereto
made after the Distribution or the Effective Time and prior to
such issuance and any cash payable in lieu of fractional shares
pursuant to Section 1.8) deliverable in respect thereof as
determined in accordance with the terms hereof. When authorizing
such payment in exchange for any lost, stolen or destroyed
Certificate, the Person to whom the Transaction Securities are to
be issued, as a condition precedent to the issuance thereof,
shall give the Issuer a bond satisfactory to the Issuer against
any claim that may be made against. the Issuer with respect to the
Certificate alleged to have been lost, stolen or destroyed.
-10 -
ARTICLE 2.
_.% CERTAIN PRE -MERGER TRANSACTIONS
The following transactions shall occur on or prior to the
Effective Time:
2.1 New Indebtedness.
(a) Prior to the Holding Contribution, Acquiror and the
Company shall use their reasonable best efforts to cooperate in
obtaining for the Company, Broadcasting and/or one or more Cable
Subsidiaries financing (the "New Company Debt") in a minimum
principal amount equal to Seven Hundred Fifty -Five Million
Dollars ($755,000,000). The New Company Debt shall be on terms
which fall within the parameters of those set forth on Schedule
2.1 attached hereto. After the New Company Debt becomes
available to the Company and such other borrowers and immediately
prior to the Holding Contribution, the Company or such other
borrowers shall draw down $755,000,000 of the New Company Debt in
order to, among other things, finance the acquisition described
in Section 2.2, finance the acquisition of interests not owned,
directly or indirectly, by the Company in the Persons identified
in Section 1.4(b) hereof and repay the existing indebtedness of
the Company and Broadcasting.
(b) Prior to the Effective Time, the Company or NPJ shall
obtain financing, which shall be the sole obligation of NPJ and
- its Subsidiaries after the Contribution (the "NPJ Debt"), in a
minimum principal amount equal to Two Hundred Million Dollars
($200,000,000). After the NPJ Debt becomes available to the
Company or NPJ and immediately prior to the Distribution; the
Company or NPJ, as the case may be, shall draw down at least
$200,000,000 of the NPJ Debt in order to, among other things,
finance certain of the transactions described in the last
sentence of Section 2.1(a) as to which the New Company Debt is
insufficient to fund.
2.2 Kelso Acquisition. Prior to the Holding Contribution,
the Company or Holding shall acquire from Kelso Investment
Associates IV, L.P., Kelso Partners IV, L.P. and Kelso Equity
Partners II, L.P., each a Delaware limited partnership
(collectively, the "Kelso Partnerships"), all shares of capital
stock and other interests owned of record or beneficially by the
Kelso Partnerships in Holding (the "Kelso Interests") in
accordance with the terms of the Company/Kelso Agreement. As a
result of such acquisition, Holding will be a wholly owned
subsidiary of the Company.
2.3 Dissolution of Holding.
(a) Following the Holding Contribution, Holding shall
contribute and transfer to Broadcasting all of Holding's right,
title and interest in and to any and all assets then held by
Holding, whether tangible or intangible and whether fixed,
-11 -
contingent or otherwise, in exchange for one hundred (100) shares
of Broadcasting Class A Common Stock. In consideration for such
contribution and transfer and concurrently therewith,
Broadcasting shall assume any and all liabilities of Holding,
whether fixed, contingent or otherwise.
(b) Immediately following the Holding Contribution and
prior to the Holding Dissolution, Holding shall cease to do
business and shall be dissolved in accordance with Sections 275
et. sec. of the Delaware General Corporation Law. As a result of
the Holding Dissolution, the sole remaining asset of Holding,
consisting of one hundred (100) shares of Broadcasting Class A
Common Stock, shall become an asset of the Company as the sole
shareholder of the capital stock of Holding. The distribution of
shares of Broadcasting Class A Common Stock pursuant to the
Holding Dissolution shall be in exchange solely for, and in
complete redemption and cancellation of, and in payment for, all
outstanding shares of capital stock of Holding.
2.4 Dissolution of the Company.
(a) Following the Holding Dissolution and prior to the
Contribution, the Company shall contribute and transfer to
Broadcasting all of the Company's right, title and interest in
and to any and all assets then held by the Company, whether
tangible or intangible and whether fixed, contingent or
otherwise, including the stock of all Subsidiaries of the Company
(including, without limitation, all of the outstanding capital
stock of Broadcasting), in exchange for shares of Broadcasting
Class A Common Stock and Broadcasting Class B Common Stock in
amounts equal to shares of such Broadcasting Common Stock the
Company will distribute to its stockholders in accordance with
paragraph (b) below. In consideration for such contribution and
transfer and concurrently therewith, Broadcasting shall assume
any and all liabilities of the Company, whether fixed, contingent
or otherwise.
(b) Immediately following such contribution and transfer
and prior to the Contribution, the Company shall cease to do
business and shall be dissolved in accordance with Sections
7-1.1-77, et. sem., of the Rhode Island Business Corporations
Act. The contribution, assumption and dissolution contemplated
by this Section 2.4 are hereinafter referred to as the
"Dissolution". Subject to Section 1.3 hereof, as a result of the
Dissolution, the sole remaining asset of the Company, consisting
of shares of Broadcasting Common Stock of the same class and
consisting of the same number of shares of each such class as
that outstanding for the Company immediately prior to the
Dissolution, shall be distributed to the holders of Company
Common Stock so that one fully paid and nonassessable share of
Broadcasting Class A Common Stock will be distributed to the
holder of each share of Company Class A Common Stock outstanding
immediately prior to the Dissolution and one fully paid and
nonassessable share of Broadcasting Class B Common Stock will be
distributed to the holder of each share of Company Class B Common
-12 -
Stock outstanding immediately prior to such Dissolution. Subject
to Section 1.3 hereof, the distribution of shares of Broadcasting
-J Common Stock pursuant to the Dissolution shall be in exchange
solely for, and in complete redemption and cancellation of, and
in payment for, all outstanding shares of capital stock of the
Company. As a result of the Dissolution, subject to Section 1.3
hereof, each holder of the Company Common Stock immediately prior
to the Dissolution will own the same number and class of shares
of Broadcasting Common Stock as such holder owned in the Company.
(c) In order to facilitate the exchange of certificates for
Transaction Securities and to avoid requiring that certificates
representing shares of Company Common Stock be exchanged for
shares of Broadcasting Common Stock prior to the Merger, for all
purposes of this Agreement the certificates representing shares
of Company Class A Common Stock and Company Class B Common Stock
immediately prior to the Dissolution (other than any such
certificate which represents Dissenting Shares or shares owned
-directly or indirectly by the Company or any of its Subsidiaries)
shall be deemed to represent the equivalent number of shares of
Broadcasting Class A Common Stock and Broadcasting Class B Common
Stock issued in connection with the Dissolution.
2.5
(a) Prior to the Effective Time and pursuant to the terms
of the Contribution and Assumption Agreement to be entered into
-' by Broadcasting and NPJ in the form attached hereto as Exhibit B
(the "Contribution Agreement"), Broadcasting shall contribute and
transfer (the "Contribution") to NPJ all of Broadcasting's right,
title and interest in and to any and all assets then held by
Broadcasting, whether tangible or intangible and whether fixed,
contingent or otherwise, including the stock of all Subsidiaries
of Broadcasting; provided, however, that Broadcasting shall not
contribute to NPJ (i) the issued and outstanding capital stock of
any Cable Subsidiary, (ii) Broadcasting's rights created pursuant
to the Contribution Agreement, (iii) cash sufficient to pay all
expenses relating to the transactions described in this Agreement
that are the responsibility of the Company, Holding or
Broadcasting hereunder, and (iv) the Palmer Systems, the Related
Assets and the assets of Westerly or Colony, as the case may be;
to the extent the transactions contemplated by the last sentence
of Section 2.6 shall have been consummated.
(b) In partial consideration for the Contribution,
concurrently therewith and pursuant to the Contribution
Agreement, NPJ shall assume any and all liabilities of
Broadcasting, whether fixed, contingent or otherwise; provided,
however, that NPJ will not assume, and will have no liability
with respect to, (i) the New Company Debt, (ii) any liabilities
associated with the business operations of the Cable Subsidiaries
or the cable operations of Broadcasting except as provided in the
C� Contribution Agreement, (iii) Broadcasting's obligations created
pursuant to the Contribution Agreement,. and (iv) the liabilities
-13 -
set forth on Schedule 2.5(b) hereto. Concurrently with the
!' Contribution, NPJ will cause Broadcasting and its Subsidiaries
(other than NPJ and its Subsidiaries) to be released by all
applicable third parties from any liability (including, if
applicable, the NPJ Debt) assumed by NPJ pursuant to this Section
2.5(b) that is (A) debt for borrowed money and similar monetary
obligations evidenced by bonds, notes, debentures or other
instruments, other than trade accounts payable in the ordinary
course of business and other than as set forth on Schedule
2.5(b), or (B) guaranties, endorsements, and other contingent
obligations, whether direct or indirect, in respect of
liabilities of others of any of the types described in clause
(A) .
(c) Following the Contribution and prior to the Effective
Time, Broadcasting shall distribute (the "Distribution") one
fully paid and nonassessable share of NPJ Class A Common Stock to
the holder of each share of Broadcasting Class A Common Stock
outstanding immediately prior to the Distribution and one fully
paid and nonassessable share of NPJ Class B Common Stock to the
holder of each share of Broadcasting Class B Common Stock
outstanding immediately prior to the Distribution. Each share of
the capital stock of 'NPJ issued and outstanding immediately prior
to the Distribution and owned directly or indirectly by
Broadcasting or any of its Subsidiaries (other than those to be
distributed in accordance with the first sentence of this
paragraph) 'shall be cancelled at the time of the Distribution.
Anything herein to the contrary notwithstanding, NPJ shall have
the right at any time to alter its capital structure; provided,
however, that any such amendment shall not unreasonably delay the
effective time of the Registration Statements.
2.6 Certain Other Actions. If the private letter ruling
contemplated by Section 6.17 hereof is based upon or indicates
its approval of the transactions identified in this sentence;
prior to the Contribution (i) the Palmer Systems, together with
all accounts receivable, inventory, supplies, machinery, plant
and equipment, tools, customer lists, contracts, goodwill and all
other assets, tangible or intangible, of Broadcasting used or
usable in connection with Broadcasting's ownership and operation
(on and after the Dissolution) of the Palmer Systems (the
"Related Assets") and the stock of King Videocable shall be
contributed to Colony Communications, Inc., a Rhode Island
corporation ("Colony"), and (ii) Westerly Cable Television, Inc.,
a Rhode Island corporation ("Westerly"), will be merged with and
into Colony. If such letter ruling is not based upon or does not
approve such transactions, prior to the Contribution, Westerly
will be merged with and into Colony and either (as the Company
and Acquiror may agree upon) the assets of Westerly will be
distributed to the Company or Broadcasting, as the case may be,
or Colony will be merged with and into the Company or
Broadcasting, as the case may be.
-14 -
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES REGARDING THE
COMPANY, NPJ, HOLDING AND BROADCASTING
The Company and NPJ jointly and severally represent and
warrant to Acquiror (such representations and warranties to be
effective as of November 18, 1994 and the schedules to the
Original Agreement shall be the schedules to this Agreement) as
follows:
3.1 Organization; Authority; Company/Kelso Agreement. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Rhode Island. Each
of NPJ and Holding is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Broadcasting is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Washington. Each of the Company, NPJ, Holding and Broadcasting
has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. All necessary action, corporate or
otherwise, required to have been taken by or on behalf of the
Company, NPJ, Holding or Broadcasting, as the case may be, by
applicable Law, their respective charter documents or otherwise
to authorize (i) the approval, execution and delivery on behalf
of the Company, NPJ, Holding and Broadcasting of this Agreement,
? (ii) the approval, execution and delivery on behalf of the
Company of, and the performance by the Company of its obligations
under, the Company/Kelso Agreement, and (iii) the performance by
the Company, NPJ, Holding and Broadcasting of their respective
obligations under this Agreement, the Plan of Reorganization, the
Contribution Agreement, the Non -Competition Agreement, and all
other documents and instruments contemplated herein (each a
"Transaction Document" and, collectively, the "Transaction
Documents") and the consummation of the transactions contemplated
hereby and thereby has ,been taken, except that the Merger
Transactions must be approved by the stockholders of the Company.
Each Transaction Document to which the Company, NPJ, Holding or
Broadcasting, as the case may be, is or will be a party
constitutes or will constitute, as the case may be, a valid and
binding agreement of the Company, NPJ, Holding or Broadcasting,
as the case may be, enforceable against it in accordance with its
terms, except (x) as the same may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including
without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and
(y) for the limitations imposed by general principles of equity.
The foregoing exceptions are hereinafter referred to as the
"Enforceability Exceptions." The Company has all requisite
corporate power and authority to execute and deliver the
/ Y Company/Kelso Agreement and to consummate the transactions
1 / contemplated thereby. The Company/Kelso Agreement is the validly
existing, legally enforceable obligation of the Company and, to
-15 -
the knowledge of the Company, of the other parties thereto,
subject to the Enforceability Exceptions.
3.2 No Breach or Conflict. The execution and delivery of
the Company/Kelso Agreement by the Company and the execution and
delivery of each Transaction Document to which it is or will be a
party by each of the Company, NPJ, Holding and Broadcasting, do
not or will not, as the case may be, and the consummation of the
transactions contemplated hereby and thereby by each of the
Company, NPJ, Holding and Broadcasting will not, (i) violate or
conflict with the charter documents or By -Laws of the Company,
NPJ, Holding or Broadcasting; (ii) except as set forth on
Schedule 3.2 hereto (which Schedule shall be delivered by the
Company to Acquiror not later than 45 days following the initial
filing of the Registration Statement with the SEC) and except for
the approvals described in Section 3.3 hereof, constitute a
breach or default (or an event that with notice or lapse of time
or both would become a breach or default) of, result in the
creation or imposition of any Lien upon the property or assets of
the Company or its Subsidiaries or NPJ or its Subsidiaries, give
rise to any third party right of termination, cancellation,
material modification or acceleration under, or require any
approval, waiver or consent under, any note, bond, mortgage,
pledge, indenture, deed of trust, lease, agreement, indemnity,
obligation, commitment or instrument to which the Company or any
of its Subsidiaries or NPJ or any of its Subsidiaries is a party
or by which any of them or their respective properties or assets
are bound, except as would not result in a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole; or
(iii) subject to obtaining the approvals and making the filings
described in Section 3.3 hereof, violate any Law, judgment,
decree, order or writ of any judicial, arbitral, public, or
governmental authority having jurisdiction over the Company or
any of its Subsidiaries or NPJ or any of its Subsidiaries or any
of their respective properties or assets except as would not
result in a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
3.3 Consents and Approvals. Neither the execution and
delivery by the Company of the Company/Kelso Agreement, the
execution and delivery by the Company, NPJ, Holding and
Broadcasting of each Transaction Document to which it is, or will
be, a party nor the consummation of the transactions contemplated
hereby or thereby will require any consent, approval,
authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, except for (i) filings
required under the Securities Act, (ii) filings required under
the Exchange Act, (iii) filings under state securities or "blue
sky" laws, (iv) the filing of a premerger notification report
pursuant to, and expiration or termination of the waiting period
under, the HSR Act, (v) the filing of certificates or articles,
as the case may be, of merger, statements of intent to dissolve
( and articles of dissolution and other documents or instruments
which may be required to be filed with any Secretary of State in
connection with the Merger, the Holding Dissolution or the
-16 -
Dissolution, and appropriate documents with the relevant
authorities of other states in which the Company and its
Subsidiaries are qualified to do business, (vi) such filings,
authorizations, orders and approvals from the FCC (the "FCC
Approvals") as may be required in connection with FCC Licenses of
the Cable Subsidiaries, (vii) such authorizations, consents,
approvals and waivers ("Local Approvals") of state and local
authorities, as may be required in connection with the Franchises
to operate the cable television systems of the Cable
Subsidiaries, and (viii) such other consents or filings as, if
not obtained or made, would not have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole or as would not
prevent the Company, NPJ, Holding or Broadcasting from performing
their respective obligations under each Transaction Document to
which it is a party or consummating the transactions contemplated
hereby.
3.4 Approval of the Boards; Fairness Opinions. The Boards
of Directors of the Company, NPJ, Holding, Broadcasting and
Westerly have each, by resolutions duly adopted at meetings duly
called and held, unanimously approved and adopted this Agreement,
the Merger Transactions and the other transactions contemplated
hereby on the terms and conditions set forth herein. The Company
Board of Directors has received the favorable opinion of Bear,
Stearns & Co., Inc., as financial advisor to the Board of
Directors of the Company, with respect to such transactions.
3.5 Vote Required. The affirmative votes or actions by
written consent of a majority of the votes that holders of the
outstanding shares of Company Common Stock, voting together as a
single class, are entitled to cast are the only votes of any
class or series of the capital stock of the Company necessary to
approve the Merger Transactions under applicable Law and the
Company's Articles of Organization and By-laws. The affirmative
votes or actions by written consent of a majority of the votes
that holders of the outstanding shares of each class of Company
Common Stock, voting separately as a single class, are entitled
to cast are the only votes of the holders of any class of series
of the capital stock of the Company necessary to approve the Plan
of Reorganization under applicable Law and the Company's Articles
of Organization and By-laws.
3.6 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 600,000 shares of Company Class A Common Stock and (ii)
300,000 shares of Company Class B Common Stock. As of November
18, 1994, there are issued and outstanding 37,728 shares of
Company Class A Common Stock and 46,961 shares of Company Class B
Common Stock. The authorized capital stock of Holding consists
of 200 shares of Class A Common Stock and 240,000 shares of Class
B Common Stock. As of November 18, 1994, there are issued and
(� outstanding 200 shares of Class A Common Stock, par value $.10
J per share, of Holding and 209,998 shares of Class B Common Stock,
par value $.10 per share,. of Holding. The authorized capital
-'17 -
stock of Broadcasting consists of 1,000 shares of Common Stock,
% par value $.01 per share. As of November 18, 1994, there are
issued and outstanding 1,000 shares of Broadcasting's Common
Stock. All shares referenced in the preceding six sentences
which are outstanding as of November 18, 1994, are duly
authorized, validly issued and fully paid and nonassessable..
Other than as set forth on Schedule 3.6(a) and in connection with
the transactions contemplated by this Agreement, there are no
outstanding options, warrants, rights, puts, calls, commitments,
or other contracts, arrangements, or understandings issued by or
binding upon the Company, Holding or Broadcasting requiring or
providing for, and there are no outstanding debt or equity
securities of the Company or its Subsidiaries which upon the
conversion, exchange or exercise thereof would require or provide
for the issuance by the Company, Holding or Broadcasting of any
new or additional equity interests in the Company, Holding or
Broadcasting (or any other securities of the Company, Holding or
Broadcasting which, with notice, lapse of time and/or payment of
monies, are or would be convertible into or exercisable or
exchangeable for equity interests in the Company, Holding or
Broadcasting, as the case may be). Other than as set forth on
Schedule 3.6(a), there are no preemptive or other similar rights
available to the existing holders of the capital stock of the
Company, Holding or Broadcasting. Except as set forth on
Schedule 3.6(a), there are no voting trusts or other agreements
or understandings to which the Company is a party with respect to
the voting of capital stock of the Company. The Company, on the
one hand, and the Kelso Partnerships, on the other hand, each own
50% of the outstanding shares of each class of capital stock of
Holding; Holding owns all of the outstanding shares of capital
stock of Broadcasting; and Broadcasting owns all of the
outstanding shares of capital stock of King Videocable.
(b) Upon the filing of its Restated Certificate of
Incorporation with the Secretary of State of the State of
Delaware, the authorized capital stock of NPJ will consist of (i)
600,000 shares of NPJ Class A Common Stock and (ii) 300,000
shares of NPJ Class B Common Stock. As of November 18, 1994,
there is issued and outstanding one share of NPJ Class A Common
Stock which is held of record and beneficially owned by the
Company, and no shares of NPJ Class B Common Stock.
(c) Upon the filing of its Restated Articles of
Incorporation with the Secretary of State of the State of
Washington, the authorized capital stock of Broadcasting will
consist of (i) 50,000 shares of Broadcasting Class A Common Stock
and (ii) 40,000 shares of Broadcasting Class B Common Stock.
(d) The Company has delivered to Acquiror a full and
complete copy of the Rights Agreement. Neither a Rights
Distribution Date nor a Stock Acquisition Date has occurred under
the Rights Agreement. Neither the execution and delivery of this
Agreement nor the consummation of the Merger Transactions
(including, without limitation, the Merger, the Dissolution and
the Distribution) are events which would (with notice or lapse of
time or both) (i) permit the holders of Rights to exercise such
Rights to acquire shares of Company Common Stock, (ii) require
�.--, the Company, in accordance with Section 11(a)(ii) of the Rights
Agreement, to exchange any or all of the outstanding Rights for
shares of Company Common Stock, or (iii) prevent, or limit in any
manner, the Company's right to amend the terms of the Rights
Agreement in accordance with the first sentence of Section 26 of
the Rights Agreement without the approval of its stockholders or
the holders of the Rights. At the Effective Time, after giving
effect to the amendment required pursuant to Section 6,27 hereof,
(i) the holders of Rights shall not have any rights to acquire
shares of Broadcasting Common Stock or Acquiror Common Stock, and
(ii) neither Broadcasting nor Acquiror shall be liable for, or
assume by virtue of the Dissolution or the Merger, any obligation
or duty of the Company pursuant to the Rights Agreement.
3.7 Financial Statements. The financial statements of the
Company included herewith as Schedule 3.7 were prepared in
accordance with GAAP and present fairly as of their respective
dates, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as at the dates
thereof and the consolidated results of their operations and
their consolidated cash flows (provided, however, that such
consolidated cash flows do not include any amounts relating to
the operations of Holding or its Subsidiaries) for each of the
respective periods covered thereby, in conformity with GAAP.
l�
3.8 Absence of Undisclosed Liabilities. Except as
disclosed on Schedule 3_8, the Company does not have any
indebtedness, liability or obligation of the type required by
GAAP to be reflected on a balance sheet, or in the notes,
schedules or exhibits thereto, that is not reflected or reserved
against in the balance sheet of the Company dated as of
September 30, 1994 previously delivered to Acquiror (the "Company
Balance Sheet") and since the Balance Sheet Date, the Company has
not incurred any such liabilities or obligations other than in
the ordinary course of business. Schedule 3,8 also lists all
outstanding letters of credit and guarantees of the Company.
3.9 Absence of Certain Chancres. Except as set forth on
Schedule 3.9, since the Balance Sheet Date, the Company has
conducted its business operations in the ordinary course and
there has not occurred (i) any Material Adverse Effect on the
Company and its Subsidiaries taken as a whole except for Material
Adverse Effects due to general economic or industry -wide
conditions (including, without limitation, determinations by the
FCC or local franchising authorities affecting or applicable to
the offering or packaging of a la carte channels or cost -of -
service showings and any rate adjustments pursuant to such
determinations), or (ii) other events or conditions of any
character that, individually or in the aggregate, have or would
reasonably be expected to have, a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole or on the ability
of the Company, NPJ, Holding or Broadcasting to perform their
-19 -
respective material obligations under the Transaction Documents
to which they are a party.
3.10 Compliance with Laws. The Company holds all
Franchises and Licenses necessary for the lawful conduct of its
business, except where the failure to hold any such Franchise or
License would not have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole. To the Company's
knowledge, it has not violated, and is not in violation of, any
such Franchises or Licenses or any applicable Law (including,
without limitation, any of the foregoing related to occupational
safety, storage, disposal, discharge into the environment of
hazardous wastes, environmental protection, conservation, unfair
competition, labor practices or corrupt practices), except where
such violations do not, and insofar as reasonably can be foreseen
will not, have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole, and the Company has not received
any notice from a governmental or regulatory authority within
three years of November 18, 1994 of any such violation.
3.11 Tax Matters.
(a) All Company Consolidated Income Tax Returns and Cable
Tax Returns (as defined in Section 6.10(h)), required to be filed
on or before November 18, 1994 have been 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, correct and complete in all material
respects; and all Taxes (as defined in Section 6.10(h)) required
to have been paid in connection with such Tax Returns have been
paid. All material Taxes payable by or with respect to the
Company and its Subsidiaries but not reflected on any Tax Return
required to be filed prior to the Balance Sheet Date have been
fully paid or adequate provision therefor has been made and
reflected on the Company Balance Sheet.
(b) Except as set forth on Schedule 3.11 hereto, there is
no claim or investigation involving an amount greater than
$250,000 pending or threatened against the Company or any Cable
Subsidiary for past Taxes, and adequate provision for the claims
or investigations set forth on Schedule 3.11 has been made as
reflected on the Company's financial statements. Except as set
forth on Schedule 3.11 hereto, the Company and its Cable
Subsidiaries have not waived or extended any applicable statute
of limitations relating to the assessment of federal, state or
local Taxes relating to the Company or any Cable Subsidiary_
3.12 Litigation. Except as set forth on Schedule 3.12,
there is no suit, action, proceeding or investigation pending or,
to the knowledge of the Company, threatened against or affecting
the Company (other than in connection with its cable operations)
or any of its Subsidiaries (other than any Cable Subsidiary)
that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on NPJ and its
Subsidiaries taken as a whole or prevent, hinder, or materially
M
-20 -
delay the ability of the Company, NPJ, Holding or Broadcasting to
consummate the transactions contemplated by this Agreement, nor
is there any judgment, decree, inquiry, rule or order outstanding
against the Company (other than in connection with its cable
operations) or any of its Subsidiaries (other than any Cable
Subsidiary) which, insofar as can reasonably be foreseen, would
have any such effect in the future.
3.13 Employee Benefits; ERISA Matters.
(a) Company Employee Plans. Schedule 3.13(a) lists each
Company Employee Plan. The Company has made available to
Acquiror true and complete copies of (i) all written documents
comprising such Company Employee Plans (including amendments and
individual agreements relating thereto); (ii) the most recent
Federal Form 5500 series (including all schedules thereto) filed
with respect to each Company Employee Plan; (iii) the most recent
financial statements and actuarial reports, if any, pertaining to
the Company Employee Plans; and (iv) the summary plan description
currently in effect and all material modifications thereto, if
any, for each such Company Employee Plan.
(b) Pension Pian Funding and Termination. With respect to
each Company Employee Plan that is subject to Title IV of ERISA,
within the six year period preceding the Closing Date:
(i) No such Company Employee Plan has been terminated
so as to subject, directly or indirectly, any asset of the
Company or NPJ to any liability, contingent or otherwise, or
the imposition of any Lien under Title IV of ERISA;
(ii) No proceeding has been initiated or threatened by
any Person, including the PBGC, nor, to the Company's
knowledge, is any such proceeding expected; to terminate any
such Company Employee Plan; u
(iii) No condition or event exists or is reasonably
expected to occur that could subject, directly or
indirectly, any assets of the Company or NPJ to any
liability, contingent or otherwise, or the imposition of any
Lien under Title IV of ERISA, whether to the PBGC or to any
other Person;
(iv) No Reportable Event has occurred and is
continuing with respect to any such Company Employee Plan;
(v) No such Company Employee Plan which is subject to
Section 302 of ERISA or Section 412 of the Code has incurred
an Accumulated Funding Deficiency, whether or not such
deficiency has been waived;
(vi) Neither the Company, NPJ nor any ERISA Affiliate
of either of them has incurred any Withdrawal Liability or
any liability based on the withdrawal from any union -
sponsored multiemployer welfare benefit fund; and
-21 -
(Vii) Neither the Company, NPJ nor any ERISA Affiliate
of either of them has been notified by the sponsor of a
�,.. Multiemployer Plan to which the Company, NPJ or any ERISA
Affiliate of either of them is required to make or accrue a
contribution, or has within the six year period preceding
the Closing Date been required to make or accrue a
contribution, that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of
Title IV of ERISA.
(c) COBRA. The Company and NPJ have complied in all
material respects with the continuation coverage requirements of
COBRA with respect to any Group Health Plan sponsored by the
Company or NPJ.
(d) Contribution to Company Employee Plans. The Company,
NPJ and their ERISA Affiliates have made full and timely payment
of all amounts required to be contributed under the terms of each
Company Employee Plan and applicable Law or required to be paid
as expenses under each Company Employee Plan.
3.14 Full Disclosure, All of the statements made by the
Company, NPJ, Holding and Broadcasting in this Agreement
(including, without limitation, the representations and
warranties made by the Company and NPJ herein and in the
schedules and exhibits hereto which are incorporated by reference
herein and which constitute an integral part of this Agreement)
do not (and on the Closing Date shall not) include or contain any
- untrue statement of a material fact, and do not (and on the.
Closing Date shall not) 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.
3,15 Brokers and Finders. None of the Company, NPJ,
Holding or Broadcasting nor any officer, director, employee or
Affiliate of the Company, NPJ, Holding or Broadcasting 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 herein, except that the Company has
employed Bear, Stearns & Co., Inc. as its financial advisor and
for whose fees and expenses the Company is responsible.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES REGARDING THE CABLE SUBSIDIARIES
The Company and NPJ jointly and severally represent and
warrant to Acquiror (such representations and warranties to be
effective as of November 18, 1994 and the schedules to the
Original Agreement shall be the schedules to this Agreement) as
follows:
4.1 Organitaticn and Authority. Each Cable Subsidiary is a
corporation duly organized, validly existing and in good standing
-22 -
under the laws of its state of incorporation. Each Cable
CSubsidiary has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now
being conducted, except where the failure to have such power or
authority would not have a Material Adverse Effect on the Cable
Subsidiaries taken as a whole.
4.2 No Breach or Conflict. The execution and delivery of
the Company/Kelso Agreement by the Company and the execution and
delivery of each Transaction Document to which it is or will be a
party by each of the Company, NPJ, Holding and Broadcasting do
not or will not, as the case may be, and the consummation of the
transactions contemplated hereby or thereby by each of the
Company, NPJ, Holding and Broadcasting will not, (i) violate or
conflict with any term or provision of the certificate of
incorporation, by-laws or other organizational documents of any
Cable Subsidiary; (ii) except as set forth on Schedule 4.2 and
except for the approvals described in Section 3.3 hereof,
constitute a breach or default (or an event that with notice or
lapse of time or both would become a breach or default) of,
result in the creation or imposition of any Lien upon the
property or assets of any Cable Subsidiary, give rise to any
third party right of termination, cancellation, material
modification or acceleration under, or require any approval,
waiver or consent under, any note, bond, mortgage, pledge,
indenture, deed of trust, lease, agreement, indemnity,
obligation, commitment or instrument to which any Cable
1 Subsidiary is a party or by which it or its properties is bound,
except as would not result in a Material Adverse Effect on the
Cable Subsidiaries taken as a whole; or (iii) subject to
obtaining the approvals and making the filings described in
Section 3.3 hereof, violate any Law, judgment, decree, order or
writ of any judicial, arbitral, public, or governmental authority
havingjurisdiction over any Cable Subsidiary or any of its
properties or assets except as would not result in a Material
Adverse Effect on the Cable Subsidiaries taken as a whole.
Except as set forth on Schedule 4.2 hereto, and except for the
Non -Competition Agreement, neither the Company nor any of the
Cable Subsidiaries is a party to or bound by any agreement that
restricts or purports to restrict the ability of any of them or
any Affiliate of any of them to engage in any location in the
business of cable television or any other business engaged in by
the Cable Subsidiaries or by Acquiror and its Subsidiaries.
4.3 Capitalization. Schedule 4.3 sets forth the name,
jurisdiction of organization and the authorized and issued and
outstanding capital stock, partnership interests or other equity
interests of each Cable Subsidiary and the registered holders
thereof. All such shares outstanding are duly authorized,
validly issued and fully paid and nonassessable. Other than in
connection with the transactions contemplated by this Agreement,
there are no outstanding options, warrants, rights, puts, calls;
commitments, or other contracts, arrangements, or understandings
issued by or binding upon any Cable Subsidiary requiring or
providing for, and there are no outstanding debt or equity
-23 -
securities of any Cable Subsidiary which upon the conversion,
exchange or exercise thereof would require or provide for, the
issuance or transfer of any shares of capital stock, partnership
interests or other equity interests of any Cable Subsidiary (or
any other securities which, with notice, lapse of time and/or
payment of monies, are or would be convertible into or
exercisable or exchangeable for shares of capital stock,
partnership interests or other equity interests of any Cable
Subsidiary). There are no voting trusts or other agreements or
understandings to which the Company or any Cable Subsidiary is a
party with respect to the voting of capital stock, partnership
interests or other equity interests of any Cable Subsidiary.
4.4 Financial Statements. The balance sheets and
financial statements of the Cable Subsidiaries and the notes
thereto identified on Schedule 4.4, which include the unaudited
balance sheets of the Cable Subsidiaries as of the Balance Sheet
Date (the "Cable Balance Sheets"), are hereinafter defined as the
"Cable Financial Statements". The Cable Financial Statements
which are audited were prepared in accordance with GAAP and
present fairly the financial position of the Cable Subsidiaries
as at the dates thereof and the results of their operations and
their cash flows for each of respective periods covered thereby
in accordance with GAAP. The Cable Financial Statements which
are not audited, in the opinion of management, present fairly the
financial position of the Cable Subsidiaries as at the dates
thereof and the results of their operations and their cash flows
for each of the respective periods covered thereby. The Cable
Balance Sheets and the unaudited statements of income and cash
flow for the period ended September 30, 1994 included in the
Cable Financial Statements were prepared on a basis consistent
with prior interim periods and, except as set forth on Schedule
4.4 hereto, include all adjustments (consisting only of normal
recurring accruals), other than adjustments for corporate
overhead and interest expense, that management of the Company
considers necessary for a fair presentation of the results of
operations for such periods_ The Cable Subsidiaries alone
generated approximately $64,000,000 in operating cash flow
(before expenses allocated to corporate and divisional/regional
overhead, management and similar fees, MIS/cable 'billing and
administration and unusual and non-recurring items) for the six
months ended June 30, 1994.
4.5 Absence of Undisclosed Liabilities. Except as set
forth on Schedule 4.5, no Cable Subsidiary has any indebtedness,
liability or obligation of the type required by GAAP to be
reflected on a consolidated balance sheet of the Cable
Subsidiaries, or in the notes, schedules or exhibits thereto,
that is not reflected or reserved against in the Cable Balance
Sheet, and since the Balance Sheet Date, no Cable Subsidiary has
incurred any such liabilities or obligations other than in the
ordinary course of business.
4.6 Absence of Certain Changes. Except as set forth in
�' Schedule 4.6, since the Balance Sheet Date, the Cable
-24 -
Subsidiaries have conducted their business operations in the
ordinary course and there has not occurred (i) any Material
Adverse Effect on the Cable Subsidiaries taken as a whole except
for Material Adverse Effects due to general economic or industry-
wide conditions (including, without limitation, determinations by
the FCC or local franchising authorities affecting or applicable
to the offering or packaging of a la carte channels or cost -of -
service showings and any rate adjustments pursuant to such
determinations), or (ii) other events or conditions of any
character that, individually or in the aggregate, have or would
reasonably be expected to have, a Material Adverse Effect on the
Cable Subsidiaries taken as a whole.
4.7 Compliance with Laws. (a) Each of the Cable
Subsidiaries holds all Franchises and Licenses necessary for the
lawful conduct of its business, except where the failure to hold
any such Franchise or License would not have a Material Adverse
Effect on the Cable Subsidiaries taken as a whole. To the
Company's knowledge, none of the Cable Subsidiaries has violated,
nor is any Cable Subsidiary in violation of, any such Franchises
or Licenses or any applicable Law (including, without limitation,
any of the foregoing related to occupational safety, storage,
disposal, discharge into the environment of hazardous waste,
environmental protection, conservation, unfair competition, labor
practices or corrupt practices), except where such violations do
not, and insofar as reasonably can be foreseen will not, have a
f- Material Adverse Effect on the Cable Subsidiaries taken as a
whole. Except as otherwise set forth on Schedule 4.7 hereto, no
Cable Subsidiary has received any notice from a governmental or
regulatory authority within three years of November 18, 1994 of
any such violation.
(b) Each Cable Subsidiary has made all submissions
(including, without limitation, registration statements) required
under the Communications Act, and has, to the Company's
knowledge, obtained all necessary FCC authorizations, Licenses,
registrations, permits and tower approvals. The cable television
systems of the Cable Subsidiaries have complied in all material
respects with the Communications Act.
4.8 Franchises and Material Agreements. (a) As of
September 30, 1994, the cable television systems owned by the
Cable Subsidiaries (i) had approximately 753,153 Basic
Subscribers and 506,148 premium subscriptions and (ii) passed
approximately 1,248,743 dwelling units. Each Franchise of the
Cable Subsidiaries and each other agreement, contract or
arrangement which is material to the ownership and operation of
the business of the Cable Subsidiaries to which any Cable
Subsidiary is a party or by which any of its properties or assets
are bound (the "Material Cable Agreements") is the validly
existing, legally enforceable obligation of each Cable Subsidiary
party thereto and, to the knowledge of the Company, of the other
parties thereto, subject to the Enforceability Exceptions. Each
Cable Subsidiary is validly and lawfully operating under its
Franchises and the Material Cable Agreements to which it is a
-25 -
party, and each Cable Subsidiary has duly complied in all
material respects with all of the terms and conditions of each of
its Franchises and each Material Cable Agreement to which it is a
party,
(b) Except as previously disclosed to Acquiror in writing,
no Person (including any governmental authority) has any right to
acquire any interest in any cable television system or assets of
the Company or the Cable Subsidiaries (including any right of
first refusal or similar right) upon an assignment or transfer of
control of a Franchise, other than rights of condemnation or
eminent domain afforded by Law and, to the knowledge of the
Company, 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 cable television system of
the Cable Subsidiaries 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 cable television system of the Cable
Subsidiaries, regardless of whether the consent or approval of
any governmental authority is required or has been obtained.
(c) Neither the Company nor any of its Cable Subsidiaries
{ } has made any material commitments in writing to any state,
municipal, local or other governmental commission, agency or body
with respect to the operation and construction of their
respective systems which are not fully reflected in the
Franchises or any Material Cable Agreement. Neither the Company
nor any of its Cable Subsidiaries has entered into any written
agreements with community groups or similar third parties
restricting or limiting the types of programming that may be
shown on such systems.
(d) No Franchising Authority has advised the Company or any
Cable Subsidiary in writing, or otherwise formally notified the
Company or any Cable Subsidiary in accordance with the terms of
the applicable Franchise, of its intention to deny renewal of an
existing Franchise. The Company and the Cable Subsidiaries have
timely filed notices of renewal in accordance with the
Communications Act with all Franchising Authorities with respect
to each Franchise expiring within 36 months after the date of
this Agreement. Such notices of renewal have been filed pursuant
to the formal renewal procedures established by Section 626(a) of
the Communications Act. As of the Closing Date, (i) the Company
will have maintained a controlling ownership in each system in
its entirety for at least 36 consecutive months following the
initial construction or acquisition of each such system by the
Company or a Subsidiary, or (ii) the consummation of the
transactions contemplated by this Agreement will not violate the
j three-year holding period requirement set forth in Section 617 of
-26 -
the Communications Act and the FCC rules and regulations
promulgated thereunder.
(e) The Company and the Cable Subsidiaries are operating
the systems in compliance in all material respects with the
provisions of the Communications Act and the rules and
regulations of the FCC relating to carriage of signals,
syndicated exclusivity, network non -duplication, and
retransmission consent except where the failure to comply,
individually or in the aggregate, would not result in a Material
Adverse Effect on the Cable Subsidiaries taken as a whole.
Except as previously disclosed to Acquiror in writing, no written
notices or demands have been received from any television station
or from any other Person claiming to have a right, or objecting
to or challenging the right of the systems, to carry any signal
or deliver the same, or challenging the channel position on which
any television station is carried.
(f) Schedule 4.8(f) indicates which television signals
carried by the systems are carried without retransmission consent
agreements (other than stations which have elected must -carry
status). The Company has delivered or made available to Acquiror
full and complete copies of all retransmission consent
agreements. For each commercial television signal on each system
that has elected must -carry status, but that is not being carried
because of signal quality problems or potential copyright
r, liability, Schedule 4.8(f) lists the signal and the reason for
non -carriage.
(g) The Company has delivered or made available to Acquiror
true, correct, and complete specimen copies of (i) all FCC Forms
393, 1200, 1205, 1210, 1215 and 1220s that have been prepared
with respect to the systems, (ii) all material correspondence
with any governmental body, subscriber, or other interested party
relating to rate regulation generally or specific rates charged
to subscribers of the systems, including, without limitation, any
complaints filed with the FCC with respect to any rates charged
to subscribers of the systems, and (iii) any documentation
supporting an exemption from the rate regulation provisions of
the Communications Act claimed by the Company or a Cable
Subsidiary with respect to the systems. Schedule 4.8(g) sets
forth (i) a list of all rate complaints filed pursuant to the
Communications Act and received by the Company or any of its
Cable Subsidiaries which have not been deemed invalid by the FCC,
and further sets forth those Franchises that have been certified
or, to the Company's knowledge, filed for certification under the
Communications Act with respect to rate regulation and (ii) a
list of all letters of inquiry from the FCC received by the
Company or any Cable Subsidiary since September 1, 1993 with
regard to rate restructuring.
4.9 Title to Properties; Encumbrances. Except as set forth
on Schedule 4.9, (a) the Cable Subsidiaries are the exclusive
holders of all rights in or to all real and personal, tangible
and intangible, property and assets of the Company or its
-27 -
Subsidiaries (other than any such assets held by the Company or
` its Subsidiaries pursuant to leases or licenses with a Person
other than the Company or another of its Subsidiaries) used or
useful in the ownership and operation of the cable television
systems owned or operated by the Company or the Cable
Subsidiaries, and (b) each Cable Subsidiary has good and valid
title to its respective assets, free and clear of all defects and
Liens except: (i) materialmen's, mechanics' carriers',
workmen's, warehousemen's, repairmen's, or other like Liens
arising in the ordinary course of business, or deposits to obtain
the release of such Liens; (ii) Liens for current taxes not yet
due and payable; and (iii) Liens or minor imperfections of title
that do not interfere with the use or detract from the value of
such property and taken in the aggregate, have a Material Adverse
Effect on the Cable Subsidiaries taken as a whole. Except as
would not result in any Material Adverse Effect on the Cable
Subsidiaries taken as a whole; each Cable Subsidiary owns or has
the lawful right to use all assets, properties, operating rights,
easements, contracts, leases, and other instruments necessary to
operate its business lawfully and to maintain the same as
presently conducted.
4.10 Labor Matters. (a) Except as set forth on Schedule
4.10(a), none of the Cable Subsidiaries is party to any labor or
collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of
any of the Cable Subsidiaries.
(b) Except as set forth on Schedule 4.10(b), (i) no
employees of any of the Cable Subsidiaries are represented by any
labor organization and (ii) as of November 18, 1994, no labor
organization or group of employees of any of the Cable
Subsidiaries has made a pending demand for recognition'or
certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of the Company, threatened
to be brought or filed, with the NLRB or any other labor
relations tribunal or authority. To the knowledge of the
Company, there are no formal organizing activities involving a
material number of employees of the Cable Subsidiaries pending
with, or threatened by, any labor organization..
(c) Except as would not result in a Material Adverse Effect
on the Cable Subsidiaries taken as a whole, (i) there are no
strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor
disputes pending or, to the knowledge of the Company, threatened
against or involving any of the Cable Subsidiaries and (ii) there
are no unfair labor practice charges, grievances or complaints
pending or, to the knowledge of the Company, threatened by or on
behalf of any employee or group of employees of any of the Cable
Subsidiaries.
(^ 4..11 Litigation. Except as set forth on Schedule 4.11,
there is no suit, action or proceeding or investigation pending
-28-
or, to the knowledge of the Company; threatened against or
affecting any Cable Subsidiary (except, for proceedings or
i investigations affecting the cable television industry generally)
that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Cable
Subsidiaries taken as a whole or prevent, hinder, or materially
delay the consummation of the transactions contemplated by this
Agreement, nor is there any judgment, decree, inquiry, rule or
order outstanding against any Cable Subsidiary which, insofar as
can reasonably be foreseen, would have any such effect in the
future.
4.12 Employee Benefits; ERISA Matters.
(a) Cable, Plans and Company Benefit Arrangements. Schedule
4.12(a) lists each Cable Employee Plan, Cable Benefit Arrangement
and Company Benefit Arrangement covering Cable Employees. The
Company has made available to Acquiror with respect to each Cable
Employee Plan, Cable Benefit Arrangement and Company Benefit
Arrangement covering Cable Employees true and complete copies of
(i) all written documents comprising such plans and arrangements
(including amendments and individual agreements relating
thereto); (ii) the two most recent. Federal Form 5500 series
(including all schedules thereto) filed with respect to each
Cable Employee Plan; (iii) the most recent financial statements
and actuarial reports, if any, pertaining to each such plan or
arrangement; and (iv) the summary plan description currently in
effect and all material modifications thereto,: if any, for each
Cable Employee Plan.
(b) Multiemployer Plans.
(i) Neither the Company, NPJ nor any ERISA Affiliate
of either of them has incurred any unsatisfied Withdrawal
Liability with respect to any Multiemployer Plan to which the
Company, NPJ or any ERISA Affiliate of either of them is required
to make or accrue a contribution or has, within the six year
period preceding the Closing Date, been required to make or
accrue a contribution, nor, to the knowledge of the Company or
NPJ, is the Company, NPJ or any ERISA Affiliate of either of them
reasonably expected to incur any Withdrawal Liability with
respect to any such Multiemployer Plan.
(ii) Neither the Company, NPJ nor any ERISA Affiliate
of either of them has been notified by the sponsor of any
Multiemployer Plan to which the Company, NPJ or any ERISA
Affiliate of either of them is required to make or accrue a
contribution or has, within the six year period preceding the
Closing Date, been required to make or accrue a contribution,
that such Multiemployer Plan is in reorganization or has been
terminated, within the meaning of Title IV of ERISA, and to the
knowledge of the Company and NPJ, no such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated,
within the meaning of Title IV of ERISA.
-29-
(c) Union Welfare Funds. Neither the Company, NPJ nor any
' ERISA Affiliate of either of them has incurred any liability
based on withdrawal from any union -sponsored multiemployer
welfare benefit fund maintained pursuant to any Welfare Benefit
Plan to which the Company, NPJ or any ERISA Affiliate of either
of them contributes pursuant to the terms of a collective
bargaining agreement.
(d) Welfare Plans. Neither the Company, NPJ nor any ERISA
Affiliate maintains any plan which is funded through a "welfare
benefit fund" as defined in Section 419(e) of the Code.
(e) Retiree Welfare Benefits Plans. Except as set forth in
Schedule 4.12(e) and pursuant to the provisions of COBRA, neither
the Company, NPJ nor any ERISA Affiliate of either of them
maintains any Cable Employee Plan or Company Employee Plan that
provides benefits described in Section 3(1) of ERISA to any
former employees or retirees of any Cable Subsidiary. Any
disclosure in Schedule 4.12(e) shall indicate the present value
of accumulated plan liabilities calculated in a manner consistent
with FAS 106 and actual annual expense for such benefits for each
of the last two years.
(f) Pension Plans. All Cable Employee Plans that are
Pension Plans intended to be qualified under Section 401 of the
Code maintained by the Company, NPJ or any ERISA Affiliate of
either of them have received favorable determinations with
.' respect to such qualified status from the IRS, To the knowledge
of the Company and NPJ, nothing has occurred since such
determinations to affect adversely such determinations, and true
and correct copies of such determination letters have been made
available to Acquiror.
(g) Prohibited Transactions and Fiduciary Responsibility.
None of the Cable Employee Plans has participated in, engaged in
or been a party to any Prohibited Transaction which could result
in the imposition of a material liability upon the Company, NPJ
or any ERISA Affiliate of either of them. To the knowledge of
the Company and NPJ, no officer, director or employee of the
Company, NPJ or any of their ERISA Affiliates has committed a
material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Cable
Employee Plan.
(h) Reporting and Disclosure.. Except with respect to any
violation relating to any Multiemployer Plan where such violation
could not result in any liability to the Company, NPJ or any
ERISA Affiliate of either of them, there are no material
violations of any reporting or disclosure requirements under
ERISA with respect to any Cable Employee Plan.
(i) Annual Reports. The Company has made available to
^, Acquiror a copy of (i) the two (2) most recently filed Federal
F} Form 5500 series and accountant's opinion, if applicable, for
each Cable Employee Plan other than Multiemployer Plans and (ii)
-30 -
the two (2) most recent actuarial valuation reports for each
/ Cable Employee Plan that is a Pension Plan subject to Title IV of
ERISA. To the knowledge of the Company and NPS, all information
provided by the Company or NPJ, as applicable, to any actuary in
connection with the preparation of such actuarial valuation
report was true, correct and complete in all respects.
(j) Funding Obligations. No Cable Employee Plan that is a
Pension Plan subject to Title IV of ERISA (other than any
Multiemployer Plan) has (i) incurred an Accumulated Funding
Deficiency, whether or not waived, (ii) an accrued benefit
obligation that exceeds the assets of the plan by more than
$50,000, determined as of the last applicable annual valuation
date, using the actuarial methods, factors and assumptions used
for the most recent actuarial report with respect to such plan,
(iii) been a plan with respect to which a Reportable Event has
occurred and is continuing, or (iv) to the knowledge of the
Company and NPJ, been a plan with respect to which any
termination liability to the PBGC has been or is expected to be
incurred or with respect to which there exist conditions or
events which have occurred presenting a significant risk of
termination by the PBGC.
(k) Liens and Penalties. Neither the Company, NPJ nor any
of their ERISA Affiliates has any liability with respect to any
Cable Employee Plan (i) for the termination of any Cable Employee
Plan that is a single employer plan under ERISA Section 4062 or a
multiple employer plan under ERISA Section 4063, (ii) for any
lien imposed under Section 302(f) of ERISA or Section 412(n) of
the Code, (iii) for any interest payments required under Section
302(e) of ERISA or Section 412(m) of the Code, (iv) for any
excise tax imposed by Sections 4971, 4972, 4974, 4975, 4976,
4977, 4978, 4978B, 4979, 4979A, 4980 or 49802 of the Code, or (v)
for any failure to make any minimum funding contributions under
Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code.
(1) Acts or Omissions. There have been no acts or
omissions with respect to any Cable Plan by the Company or any
ERISA Affiliate which have given rise to or may give rise to
fines, penalties or related charges under Sections 502 or 4071 of
ERISA or Chapter 43 of the Code for which the Company or any
ERISA Affiliate may be liable_
(m) COBRA. The Company, NPJ and their ERISA Affiliates
have complied in all material respects with the provisions of
COBRA with respect to all Cable Employee Plans that are Group
Health Plans.
(n) Additional Benefits, Except as set forth on Schedule
4.12(n), no Cable Employee shall accrue or receive additional
benefits, service or accelerated rights to payments of benefits
under any Cable Plan or Company Benefit Arrangement, including
the right to receive any parachute payment, as defined in Section
28OG of the Code, or become entitled to severance, termination
-31 -
allowance or similar payments as a direct result of the
transactions contemplated by this Agreement.
(o) Claims. Other than claims for benefits in the ordinary
course, there is no claim pending or, to the knowledge of the
Company or NPJ, threatened involving any Cable Plan by any Person
against such plan or the Company, NPJ or any of their ERISA
Affiliates. There is no pending or, to the knowledge of the
Company or NPJ, threatened proceeding involving any Cable
Employee Plan before the IRS, the United States Department of
Labor or any other governmental authority.
(p) Compliance with Laws; Contributions. Each Cable Plan
has at all times prior hereto been maintained in all material
respects, by its terms and in operation, in accordance with all
applicable Law (including Section 1862(b)(1) of the Social
Security Act). The Company, NPJ and their ERISA Affiliates have
made full and timely payment of all amounts required to be
contributed under the terms of each Cable Plan and applicable Law
or required to be paid as expenses under such Cable Plan, and the
Company, NPJ and their ERISA Affiliates shall continue to do so
through the Closing, except as the Company, NPJ and Acquiror may
otherwise agree.
(q) Definitions.
_ (i) "Benefit Arrangement" means any material benefit
f ) arrangement that is not an Employee Benefit Plan, including
(i) any employment or consulting agreement,. (ii) any
arrangement providing for insurance coverage or workers'
compensation benefits, (iii) any incentive bonus or deferred
bonus arrangement, (iv) any arrangement providing
termination allowance, severance or similar benefits, (v)
any equity compensation plan, (vi) any deferred compensation
plan and (vii) any compensation policy and practice.
(ii) "Cable Benefit Arrangement" means any Benefit
Arrangement that covers exclusively one or more of the
employees, former employees, directors and former directors
of the Cable Subsidiaries and the beneficiaries of any of
them.
(iii) "Cable Employee" means any employee or former
employee of any Cable Subsidiary.
(iv) "Cable Employee Plan" means any Employee Benefit
Plan that is sponsored or contributed to by the Company; NPJ
or any ERISA Affiliate of either of them that covers any
Cable Employees.
(v) "Cable Plan" means any Cable Employee Plan or
Cable Benefit Arrangement.
(vi) "Company Benefit Arrangement" means any Benefit
J Arrangement covering any employees, former employees,
-32 -
directors or former directors of the Company, NPJ or the
ERISA Affiliates of either of them, and the beneficiaries of
any of them, other than any Cable Benefit Arrangement.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company and NPJ as
follows (such representations and warranties to be effective as
of November 18, 1994 and the schedules to the Original Agreement
shall be the schedules to this Agreement):
5.1 Organization and Authority. Acquiror and each of its
corporate Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation. Acquiror and its Subsidiaries have all requisite
power and authority to own, lease and operate their properties
and to carry on their business as now being conducted, except
where the failure to have such power or authority would not have
a Material Adverse Effect on Acquiror and its Subsidiaries taken
a whole. Acquiror has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. All necessary action,
corporate or otherwise, required to have been taken by or on
behalf of Acquiror by applicable Law, its charter documents or
otherwise to authorize (i) the approval, execution and delivery
} on behalf of Acquiror of this Agreement and (ii) the performance
by Acquiror of its obligations under the Transaction Documents
and the consummation of the transactions contemplated hereby and
thereby has been taken, except that the Merger Transactions and
the Recapitalization Amendment must be approved by the
stockholders of Acquiror to the extent described in Section 5.5.
Each Transaction Document to which Acquiror is or will be a party
constitutes or will constitute, as the case may be, a valid and
binding agreement of Acquiror, enforceable against it in
accordance with its terms, subject to the Enforceability
Exceptions.
5.2 No Breach or Conflict. The execution and delivery of
each Transaction Document to which it is or will be a party by
Acquiror does not or will not, as the case may be, and the
consummation of the transactions contemplated hereby and thereby
by Acquiror will not, (i) violate or conflict with the
Certificate of Incorporation of Acquiror (as in effect on
November 18, 1994 and after giving effect to the Recapitalization
Amendment) or the Acquiror Restated By -Laws; (ii) except as set
forth on Schedule 5..2 hereto and except for the approvals
described in Section 5.3 hereof, constitute a breach or default
(or an event that with notice or lapse of time or both would
become a breach or default) of, result in the creation or
imposition of any Lien upon the property or assets of Acquiror or
its Subsidiaries, give rise to any third party right of
termination, cancellation, material modification or acceleration
under, or require any approval, waiver or consent under, any
-33 -
note, bond, mortgage, pledge, indenture, deed of trust, lease,
agreement, indemnity, obligation, commitment or instrument to
( which Acquiror or any of its Subsidiaries is a party or by which
any of them or their respective properties or assets is bound,
except as would not result in a Material Adverse Effect on
Acquiror and its Subsidiaries taken as a whole; or (iii) subject
to obtaining the approvals and making the filings described in
Section 5.3 hereof, violate any Law, judgment, decree, order or
writ of any judicial, arbitral, public, or governmental authority
having jurisdiction over Acquiror, any of its Subsidiaries or any
of their respective properties or assets except as would not
result in a Material Adverse Effect on Acquiror and its
Subsidiaries taken as a whole.
5.3 Consents and Approvals. Neither the execution and
delivery by Acquiror of each Transaction Document to which it is,
or will be, a party nor the consummation of the transactions
contemplated hereby and thereby will require any consent,
approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except
for (i) filings required under the Securities Act, (ii) filings
required under the Exchange Act, (iii) filings under state
securities or "blue sky" laws, (iv) the filing of a premerger
notification report pursuant to, and expiration or termination of
the waiting period under, the HSR Act, (v) the filing of the
Certificate of Merger with the Secretaries of State of Washington
and Delaware, the Recapitalization Amendment with the Secretary
(( \ of State of Delaware and appropriate documents with the relevant
1...% authorities of other states in which Acquiror and its
Subsidiaries are qualified to do business, (vi) such FCC
Approvals as may be required in connection with FCC Licenses of
Acquiror and its Subsidiaries, (vii) such Local Approvals as may
be required in connection with the Franchises to operate the
cable television systems of Acquiror and its Subsidiaries, and
(viii) such other consents or filings as, if not obtained or
made, would not have a Material Adverse Effect on Acquiror and
its Subsidiaries taken as a whole or as would not prevent
Acquiror from performing its obligations under each Transaction
Document to which it is a party.
5.4 Approval of the Board. The Board of Directors of
Acquiror has, by resolutions duly adopted at a meeting duly
called and held, unanimously approved and adopted this Agreement,
the Merger Transactions, the Recapitalization Amendment and the
other transactions contemplated hereby on the terms and
conditions set forth herein.
5.5 vote Reguired. The affirmative vote or action by
written consent of a majority of the votes that holders of the
outstanding shares of Acquiror Common Stock (treating the
Acquiror Series A Preferred Stock as if it were converted into
Acquiror Class B Common Stock), voting together as a class, are
f� entitled to cast is the only vote of the holders of any class or
\( series of the capital stock of Acquiror necessary to approve the
Merger Transactions under applicable Law and the Certificate of
-34 -
Incorporation of Acquiror (as in effect on November 18, 1994 and
( after giving effect to the Recapitalization Amendment) or the
Acquiror Restated By -Laws. The affirmative vote or action by
written consent of Sixty -Six and Two -Thirds percent of the votes
that holders of the outstanding shares of Acquiror Common Stock
(treating the Acquiror Series A Preferred Stock as if it were
converted into Acquiror Class B Common Stock), voting together as
a class, are entitled to cast is the only vote of the holders of
any class or series of the capital stock of Acquiror necessary to
approve the Recapitalization Amendment.
5.6 Capitalization; (a) As of November 18, 1994, the
authorized capital stock of Acquiror consists of (i) 7,500,000
shares of Acquiror Class A Common Stock, (ii) 7,500,000 shares of
Acquiror Class B Common Stock, and (iii) 2,700,000 shares of
Preferred Stock, 1,142,858 shares of which have been designated
Series A Participating Convertible Preferred Stock (the "Acquiror
Series A Preferred Stock"), the terms of which are set forth in
the Certificate of Designation filed by Acquiror with the
Secretary of State of the State of Delaware on June 16, 1992. As
of November 18, 1994, there are 345,348 shares of Acquiror Class
A Common Stock, 4,277,092 shares of Acquiror Class B Common Stock
and 1,142,858 shares of Acquiror Series A Preferred Stock issued
and outstanding. As a resultof the Recapitalization Amendment,
the authorized capitalization of Acquiror as of the Closing Date
will consist of not less than: 187,500,000 shares of Acquiror
Class A Common Stock, 187,500,000 shares of Acquiror Class B
j Common Stock, and 6,000,000 shares of Preferred Stock. All such
shares outstanding on November 18, 1994 are, and any shares that
will be issued under the Acquiror Restated Certificate, when
issued, will be, duly authorized, validly issued and fully paid
and nonassessable. other than in connection with the
transactions contemplated by this Agreement and except as set
forth in Schedule 5.6(a), there are no outstanding options,
warrants, rights, puts, calls, commitments, or other contracts,
arrangements, or understandings issued by or binding upon
Acquiror or any of its Subsidiaries requiring or providing for,
and there are no outstanding debt or equity securities of
Acquiror or any of its Subsidiaries which upon the conversion,
exchange or exercise thereof would require or provide for the
issuance by Acquiror or any of its Subsidiaries of any new or
additional equity interests in Acquiror or any of its
Subsidiaries (or any other securities of Acquiror which, with
notice, lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for equity
interests in Acquiror or any of its Subsidiaries). There are no
preemptive or other similar rights available to the existing
holders of the capital stock of Acquiror. Except as set forth on
Schedule 5.6(a), there are no voting trusts or other agreements
or understandings to which Acquiror is a party with respect to
the voting of capital stock of Acquiror.
(b) Schedule 5.6(b) sets forth the name, jurisdiction of
organization and the percentage of each class of capital stock,
partnership interests or other equity interests of each of
-35-
Acquiror's Subsidiaries owned by Acquiror or one of its
1 Subsidiaries. All outstanding shares of the capital stock of
-` each Subsidiary have been duly authorized, validly issued and are
fully paid and nonassessable.
(c) The shares of Acquiror Class A Common Stock and
Acquiror Preferred Stock, if any, to be issued in the Merger,
upon their issuance in accordance with the terms hereof, will be
duly authorized, validly issued, fully paid and nonassessable.
5.7 Financial Statements. The consolidated balance sheets
of the Acquiror and its Subsidiaries and the notes thereto as of
December 31, 1993, 1992 and 1991 and consolidated statements of
income, shareholder's equity and cash flows and the notes thereto
for the three fiscal years ended December 31, 1993, 1992 and 1991
certified by Deloitte & Touche, whose reports thereon are
included therewith, and the unaudited condensed consolidated
balance sheet of the Acquiror and its Subsidiaries as of the
Balance Sheet Date (the "Acquiror Balance Sheet") and unaudited
consolidated statements of income and cash flow for the nine
months then ended, were prepared in accordance with GAAP and
present fairly as of their respective dates, in all material
respects, the consolidated financial position of Acquiror and its
Subsidiaries as at the dates thereof and the consolidated results
of their operations and their consolidated cash flows for each of
( the respective periods covered thereby, in conformity with GAAP.
l �
5.8 Absence of Undisclosed Liabilities,: Except as
disclosed on Schedule 5.8, neither Acquiror nor any of its
Subsidiaries has any indebtedness, liability or obligation of the
type required by GAAP to be reflected on a consolidated balance
sheet of Acquiror or in the notes, schedules or exhibits thereto,
that is not reflected or reserved against in the Acquiror Balance
Sheet , and since the Balance Sheet Date, neither Acquiror nor
any of its Subsidiaries has incurred any such liabilities or
obligations other than in the ordinary course of business.
5.9 Absence of Certain Changes, Except as disclosed on
Schedule 5.9 or in Acquiror's Annual Report on Form 10-K for the
year ended December 31, 1993, since the Balance Sheet Date,
Acquiror and its Subsidiaries have conducted their business
operations in the ordinary course and there has not occurred (i)
any Material Adverse Effect on Acquiror and its Subsidiaries
taken as a whole except for Material Adverse Effects due to
general economic or industry -wide conditions (including, without
limitation, determinations by the FCC or local franchising
authorities affecting or applicable to the offering or packaging
of a la carte channels or cost -of -service showings and any rate
adjustments pursuant to such determinations), or (ii) other
events or conditions of any character that, individually or in
the aggregate, have or would reasonably be expected to have, a
Material Adverse Effect on Acquiror and its Subsidiaries taken as
a whole or on the ability of Acquiror to perform its material
\; obligations under the Transaction Documents to which it is a
party.
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5.10 Compliance with Laws. (a) Each of Acquiror and its
( Subsidiaries holds all Franchises and Licenses necessary for the
lawful conduct of its business, except where the failure to hold
any such Franchise or License would not have a Material Adverse
Effect on Acquiror and its Subsidiaries taken as a whole.. To
Acquiror's knowledge, none of Acquiror or any of its Subsidiaries
has violated, nor is Acquiror or are any of them in violation of,
any such Franchises or Licenses or any applicable Law (including, -
without limitation, any of the foregoing related to occupational
safety, storage, disposal, discharge into the environment of
hazardous wastes, environmental protection, conservation, unfair
competition, labor practices or corrupt practices), except where
such violations do not, and insofar as reasonably can be foreseen
will not, have a Material Adverse Effect on Acquiror and its
Subsidiaries taken as a whole, and neither Acquiror nor any of
its Subsidiaries has received any notice from a governmental or
regulatory authority within three years of November 18, 1994 of
any such violation.
(b) Each Subsidiary of Acquiror has made all submissions
(including, without limitation, registration statements) required
under the Communications Act, and has, to Acquiror's knowledge,
obtained all necessary FCC authorizations, Licenses,
registrations, permits and tower approvals. The cable television
systems of Acquiror's Subsidiaries have complied in all material
respects with the Communications Act.
5.11 Franchises and Material Agreements.
(a) As of September 30, 1994, the cable television systems
owned by Acquiror's Subsidiaries (i) had approximately 2,890,000
Basic Subscribers and 2,493,000 premium subscriptions and (ii)
passed approximately 5,055,000 dwelling units. Each Franchise of
Acquiror's Subsidiaries and each other agreement, contract or
arrangement which is material to the ownership and operation of
the cable systems of Acquiror's Subsidiaries to which any
Acquiror Subsidiary is a party or by which any of its properties
or assets are bound (the "Acquiror Material Cable Agreements") is
the validly existing, legally enforceable obligation of each
Acquiror Subsidiary party thereto and, to the knowledge of
Acquiror, of the other parties thereto, subject to the
Enforceability Exceptions. Each Acquiror Subsidiary is validly
and lawfully operating under its Franchises and the Acquiror
Material Cable Agreements to which it is a party, and each
Acquiror Subsidiary has duly complied in all material respects
with all of the terms and conditions of each of its Franchises
and each Acquiror Material Cable Agreement to which it is a
party.
(b) Except as previously disclosed to the Company in
writing, no Person (including any governmental authority) has any
right to acquire any interest in any cable television system or
assets of Acquiror or its Subsidiaries (including any right of
first refusal or similar right),. other than rights of
condemnation or eminent domain afforded by Law and, to the
ILLVA
knowledge of Acquiror, 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 cable
television system of Acquiror or its Subsidiaries 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 cable television
system of Acquiror's Subsidiaries, regardless of whether the
consent or approval of any governmental authority is required or
has been obtained.
(c) Neither Acquiror nor any of its Subsidiaries has made
any material commitments in writing to any state, municipal,
local or other governmental commission, agency or body with
respect to the operation and construction of their respective
cable systems which are not fully reflected in the Franchises or
any Acquiror Material Cable Agreement, Neither Acquiror nor any
of its Subsidiaries has entered into any written agreements with
community groups or similar third parties restricting or limiting
the types of programming that may be shown on such systems.
(d) No Franchising Authority has advised Acquiror or any of
its Subsidiaries in writing, or otherwise formally notified
j Acquiror or any of its Subsidiaries in accordance with the terms
of the applicable Franchise, of its intention to deny renewal of
an existing Franchise. Acquiror and its Subsidiaries have timely
filed notices of renewal in accordance with the Communications
Act with all Franchising Authorities with respect to each
Franchise expiring within 36 months after the date of this
Agreement. Such notices of renewal have been filed pursuant to
the formal renewal procedures established by Section 626(a) of
the Communications Act. As of the Closing Date, (i) Acauiror
will have maintained a controlling ownership in each system in
its entirety for at least 36 consecutive months following the
initial construction or acquisition of each such system by
Acquiror or an Acquiror Subsidiary, or (ii) the consummation of
the transactions contemplated by this Agreement will not
otherwise violate the three-year holding period requirement set
forth in Section 617 of the Communications Act and the FCC rules
and regulations promulgated thereunder.
(e) Acquiror and its Subsidiaries are operating the systems
in compliance in all material respects with the provisions of the
Communications Act and the rules and regulations of the FCC
relating to carriage of signals, syndicated exclusivity, network
non -duplication, and retransmission consent except where the
failure to comply would not, individually or in the aggregate,
result in a Material Adverse Effect on Acquiror and its
Subsidiaries taken as a whole. No written notices or demands
have been received from any television station or from any other
Person claiming to have a right, or objecting to or challenging
s%g
the right of the systems, to carry any signal or deliver the
same, or challenging the channel position on which any television
station is carried.
(f) Schedule 5.11(f) indicates which television signals
carried by the systems are carried without retransmission consent
agreements (other than stations which have elected must -carry
status). For each commercial television signal on each system
that has elected must -carry status, but that is not being carried
because of signal quality problems or potential copyright
liability, Schedule 5.11(f) lists the signal and the reason for
non -carriage.
(g) Acquiror has made available to the Company true,
correct, and complete specimen copies of (i) all FCC Forms 393,
1200, 1205, 1210, 1215 and 1220s that have been prepared with
respect to the systems, (ii) all material correspondence with any
governmental body; subscriber, or other interested party relating
to rate regulation generally or specific rates charged to
subscribers of the systems, including, without limitation, any
complaints filed with the FCC with respect to any rates charged
to subscribers of the systems, and (iii) any documentation
supporting an exemption from the rate regulation provisions of
the Communications Act claimed by Acquiror or a Subsidiary of
Acquiror with respect to the systems. Schedule 5.11(g) sets
forth (i) a list of all complaints filed pursuant to the
Communications Act and received by Acquiror or any of its
Subsidiaries which have not been deemed invalid by the FCC, and
further sets forth those Franchises that have been certified or,
to Acquiror's knowledge, filed for certification under the
Communications Act with respect to rate regulation and (ii) a
list of all letters of inquiry from the FCC received by Acquiror
or any Subsidiary of Acquiror since September 1, 1993 with regard
to rate restructuring. '
5.12 Tax Matters.
(a) All Tax Returns required to be filed by Acquiror or any
of its Subsidiaries on or before November 18, 1994 have been
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, correct and complete
in all material respects; and all Taxes required to have been
paid in connection with such Tax Returns have been paid. All
material Taxes payable by or with respect to Acquiror and its
Subsidiaries but not reflected on any Tax Return required to be
filed prior to the Balance Sheet Date have been fully paid or
adequate provision therefor has been made and reflected on the
Acquiror Balance Sheet.
(b) Except as set forth on Schedule 5.12 hereto, there is
no claim or investigation involving an amount greater than
$250,000 pending or threatened against Acquiror or any of its
Subsidiaries for past Taxes, and adequate provision for the
claims or investigations set forth on Schedule 5.12 has been made
-39 -
as reflected on Acquiror's financial statements. Except as set
j forth on Schedule 5.12, Acquiror and its Subsidiaries have not
waived or extended any applicable statute of limitations relating
to the assessment of federal, state or local Taxes relating to
Acquiror.
5.13 Litiyation. There is no suit, action, proceeding or
investigation pending or, to the knowledge of Acquiror,
threatened against or affecting Acquiror or any of its
Subsidiaries (except for proceedings or investigations affecting
the cable television industry generally) that, individually or in
the aggregate, would reasonably be expected to have a Material
Adverse Effect on Acquiror and its Subsidiaries taken as a whole,
or prevent, hinder, or materially delay the ability of Acquiror
to consummate the transactions contemplated by this Agreement,
nor is there any judgment, decree, inquiry, rule or order
outstanding against Acquiror or any of its Subsidiaries which,
insofar as can reasonably be foreseen, would have any such effect
in the future.
5.14 Title to Properties; Encumbrances. Acquiror and its
Subsidiaries are.the exclusive holders of all rights in or to all
real and personal, tangible and intangible, property and assets
of Acquiror and its Subsidiaries (other than any such assets held
pursuant to leases or licenses) used or useful in the ownership
and operation of the cable television systems which are wholly
owned by Acquiror or any of its Subsidiaries. Except as set
forthonSchedule 5.14, each of Acquiror and its Subsidiaries has
good and valid title to its respective assets, free and clear of
all defects and Liens except: (a) materialmen's, mechanics',
carriers', workmen's, warehousemen's, repairmen's, or other like
Liens arising in the ordinary course of business, or deposits to
obtain the release of such Liens; (b) Liens for current taxes not
yet due and payable; and (c) Liens or minor imperfections of
title that do not interfere with the use or detract from the
value of such property and, taken in the aggregate, would not
have a Material Adverse Effect on Acquiror and its Subsidiaries
taken as a whole. Except as would not result in any Material
Adverse Effect on Acquiror and its Subsidiaries taken as a whole,
each of Acquiror and its Subsidiaries owns or has the lawful
right to use all assets, properties, operating rights, easements,
contracts, leases, and other instruments necessary to operate its
business lawfully and to maintain the same as presently
conducted.
5.15 Employee Benefits; ERISA Matters.
(a) Acquiror Benefit Plans and Acquiror Benefit
Arrangements. Schedule 5.15(a) lists each Acquiror Employee Plan
and Acquiror Benefit Arrangement. Acquiror has made available to
the Company and NPJ with respect to each Acquiror Employee Plan
and Acquiror Benefit Arrangement true and complete copies of (i)
all written documents comprising such plans and arrangements
t / (including amendments and individual agreements relating
thereto); (ii) the two most recent Federal Form 5500 series
_40 -
(including all schedules thereto) filed with respect to each
Acquiror Employee Plan; (iii) the most recent financial
statements and actuarial reports, if any, pertaining to each such
plan or arrangement; and (iv) the summary plan description
currently in effect and all material modifications thereto, if
any, for each Acquiror Employee Plan.
(b) MultiemPloyer Plans.
(i) Neither Acquiror nor any of its ERISA Affiliates
has incurred any unsatisfied Withdrawal Liability with respect to
any Multiemployer Plan to which the Acquiror or any of its ERISA
Affiliates is required to make or accrue a contribution or has,
within the six year period preceding the Closing Date, been
required to make or accrue a contribution, nor, to the knowledge
of Acquiror, is Acquiror or any of its ERISA Affiliates
reasonably expected to incur any Withdrawal Liability with
respect to any such Multiemployer Plan.
(ii) Neither Acquiror nor any of its ERISA Affiliates
has been notified by the sponsor of any Multiemployer Plan to
which Acquiror or any of its ERISA Affiliates is required to make
or accrue a contribution or has, within the six year period
preceding the Closing Date, been required to make or accrue a
contribution, that such Multiemployer Plan is in reorganization
or has been terminated, within the meaning of Title IV of ERISA,
and to the knowledge of Acquiror, no such Multiemployer Plan is
`7 reasonably expected to be in reorganization or to be terminated,
within the meaning of the Title IV of ERISA.
(c) Union Welfare Funds. Neither Acquiror nor any of its
ERISA Affiliates has incurred any liability based on withdrawal
from any union -sponsored multiemployer welfare benefit fund
maintained pursuant to any Welfare Benefit Plan to which Acquiror
or any of its ERISA Affiliates contributes pursuant to the terms
of a collective bargaining agreement.
(d) Welfare Plans. Neither Acquiror nor any of its ERISA
Affiliates maintains any plan which is funded through a "welfare
benefit fund" as defined in Section 419(e) of the Code.
(e) Retiree Welfare Benefits Plans. Except as set forth in
Schedule 5.15(e) and pursuant to the provisions of COBRA, neither
Acquiror nor any of its ERISA Affiliates maintains any Acquiror
Employee Plan that provides benefits described in Section 3(1) of
ERISA to any former employees or retirees of Acquiror. Any
disclosure in Schedule 5.15(e) shall indicate the present value
of accumulated plan liabilities calculated in a manner consistent
with FAS 106 and actual annual expense for such benefits for each
of the last two years.
(f) Pension Plans. All Acquiror Employee Plans that are
` Pension Plans intended to be qualified under Section 401 of the
Code maintained by Acquiror or any of its ERISA Affiliates have
-" received favorable determinations with respect to such qualified
-41 -
status from the IRS. To the knowledge of Acquiror, nothing has
j occurred since such determinations to affect adversely such
determinations, and true and correct copies of such determination
letters have been made available to the Company and NPJ.
(g) Prohibited Transactions and Fiduciary Responsibility.
None of the Acquiror Employee Plans has participated in, engaged
in or been a party to any Prohibited Transaction which could
result in the imposition of a material liability upon Acquiror or
any of its ERISA Affiliates. To the knowledge of Acquiror, no
officer, director or employee of Acquiror or any of its ERISA
Affiliates has committed a material breach of any responsibility
or obligation imposed upon fiduciaries by Title I of ERISA with
respect to any Acquiror Employee Plan.
(h) Reporting and Disclosure. Except with respect to any
violation relating to any Multiemployer Plan where such violation
could not result in any liability to Acquiror or any of its ERISA
Affiliates, there are no material violations of any reporting or
disclosure requirements under ERISA with respect to any Acquiror
Employee Plan.
(i) Annual Reports. Acquiror has made available to the
Company and NPJ a copy of (i) the two (2) most recently filed
Federal Form 5500 series and accountant's opinion, if applicable,
for each Acquiror Employee Plan other than Multiemployer Plans
and (ii) the two (2) most recent actuarial valuation reports for
each Acquiror Employee Plan that is a Pension Plan subject to
Title IV of ERISA. To the knowledge of Acquiror, all information
provided by Acquiror to any actuary in connection with the
preparation of such actuarial valuation report was true, correct
and complete in all respects.
(j) Funding Obligations. No Acquiror Employee Plan that i�
a Pension Plan subject to Title IV of ERISA (other than any
Multiemployer Plan) has (i) incurred an Accumulated Funding
Deficiency, whether or not waived, (ii) an accrued benefit
obligation that exceeds the assets of the plan by more than
$50,000, determined as of the last applicable annual valuation
date, using the actuarial methods, factors and assumptions used
for the most recent actuarial report with respect to such plan,
(iii) been a plan with respect to which a Reportable Event has
occurred and is continuing, or (iv) to the knowledge of Acquiror,
been a plan with respect to which any termination liability to
the PBGC has been or is expected to be incurred or with respect
to which there exist conditions or events which have occurred
presenting a significant risk of termination by the PBGC.
(k) Liens and Penalties.. Neither Acquiror nor any of its
ERISA Affiliates has any liability with respect to any Acquiror
Employee Plan (i) for the termination of any Acquiror Employee
Plan that is a single employer plan under ERISA Section 4062 or a
multiple employer plan under ERISA Section 4063, (ii) for any
C_> lien imposed under Section 302(f) of ERISA or Section 412(n) of
the Code, (iii) for any interest payments required under Section
-42-
302(e) of ERISA or Section 412(m) of the Code, (iv) for any
j excise tax imposed by Sections 4971, 4972, 4974, 49.75, 4976,
4977, 4978, 4978B, 4979, 4979A, 4980 or 4980E of the Code, or (v)
for any failure to make any minimum funding contributions under
Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code.
(1) Acts or Omissions. There have been no acts or
omissions with respect to any Acquiror Plan by Acquiror or any of
its ERISA Affiliates which have given rise to or may give :rise to
fines, penalties or related charges under Sections 502 or 4071 of
ERISA or Chapter 43 of the Code for which the Acquiror or any of
its ERISA Affiliates may be liable.
(m) COBRA. The Acquiror and its ERISA Affiliates have
complied in all material respects with the provisions of COBRA
with respect to all Acquiror Employee Plans that are Group Health
Plans.
(n) Additional Benefits. Except as set forth on Schedule
5.15(n), no Acquiror Employee shall accrue or receive additional
benefits, service or accelerated rights to payments of benefits
under any Acquiror Plan or Acquiror Benefit Arrangement,
including the right to receive any parachute payment, as defined
in Section 280G of the Code, or become entitled to severance,
termination allowance or similar payments as a direct result of
the transactions contemplated by this Agreement.
(o) Claims. Other than claims for benefits in the ordinary
course, there is no claim pending or, to the knowledge of
Acquircr,'threatened involving any Acquiror Plan by any Person
against such plan or Acquiror or any of its ERISA Affiliates.
There is no pending or, to the knowledge of Acquiror, threatened
proceeding involving any Acquiror Employee Plan before the IRS,
the United States Department of Labor or ,any other governmental
authority.
(p) Compliance with Laws; Contributions. Each Acquiror
Plan has at all times prior hereto been maintained in all
material respects, by its terms and in operation, in accordance
with all applicable Law (including Section 1862(b)(1) of the
Social Security Act). Acquiror and ,its ERISA Affiliates have
made full and timely payment of all amounts required to be
contributed under the terms of each Acquiror Plan and applicable
Law or required to be paid as expenses under such Acquiror Plan,
and Acquiror and its ERISA Affiliates shall continue to do so
through the Closing, except as the Company, NPJ and Acquiror may
otherwise agree.
(q) Definitions.
(i) "Acquiror Benefit. Arrangement" means any material
benefit arrangement that is not an Employee Benefit Plan,
including (i) any employment or consulting agreement, (ii)
any arrangement providing for insurance coverage or workers,
compensation benefits, (iii) any incentive bonus or deferred
-43 -
bonus arrangement, (iv) any arrangement providing
termination allowance, severance or similar benefits, (v)
CII any equity compensation plan, (vi) any deferred compensation
plan and (vii) any compensation policy and practice
maintained by Acquiror or any of its ERISA Affiliates
covering any employees, former employees, directors or
former directors of Acquiror or its ERISA Affiliates, and
the beneficiaries of any of them.
(ii) "Acquiror Employee" means any employee or former
employee of Acquiror or any of its Subsidiaries.
(iii) "Acquiror Employee Plan" means any Employee
Benefit Plan that is sponsored or contributed to by Acquiror
or any of its ERISA Affiliates that covers any employees or
former employees of Acquiror or its ERISA Affiliates,
(iv) "Acquiror Plan" means any Acquiror Employee Plan
or Acquiror Benefit Arrangement.
5.16 Labor Matters. (a) Except as set forth on Schedule
5.16(a), neither Acquiror nor any of its Subsidiaries is party to
any labor or collective bargaining agreement and there are no
labor or collective bargaining agreements which pertain to
employees of Acquiror or any of its Subsidiaries.
(b) Except as set forth on Schedule 5.16(b), (i) no
employees of Acquiror or any of its Subsidiaries are represented
by any labor organization and (ii) as of November 18, 1994, no
labor organization or group of employees of Acquiror or any of
its Subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of Acquiror, threatened to
be brought or filed, with the NLRB or any other labor relations
tribunal or authority. To the knowledge of Acquiror, there are
no formal organizing activities involving a material number of
employees of Acquiror or any of its Subsidiaries pending with, or
threatened by, any labor organization.
(c) Except as would not result in a Material Adverse Effect
on Acquiror and its Subsidiaries taken as a whole, (i) there are
no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor
disputes pending or, to the knowledge of Acquiror, threatened
against or involving Acquiror or any of its Subsidiaries and (ii)
there are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of Acquiror, threatened
by or on behalf of any employee or group of employees of Acquiror
or any of its Subsidiaries,
5.17 Full Disclosure. All of the statements made by
Acquiror in this Agreement (including, without limitation, the
representations and warranties made by Acquiror herein and in
the schedules and exhibits hereto which are incorporated by
reference herein and which constitute an integral part of this
( Agreement) do not (and on the Closing Date shall not) include or
contain any untrue statement of a material fact, and do not (and
on the Closing Date shall not) 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.
5.18 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 herein, except that Acquiror has
employed Lazard Freres & Co. as its financial advisor and for
whose fees and expenses Acquiror is responsible..
ARTICLE 6.
OTHER AGREEMENTS
6.1 No Solicitation. Neither the Company nor any of its
Subsidiaries, officers, directors, representatives and agents
shall, directly or indirectly, knowingly encourage, solicit,
initiate or, except if the Company Board of Directors determines,
with the written advice of outside counsel, that it is required
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 (other than Acquiror
or any Affiliate or associate of Acquiror and their respective
directors, officers, employees, representatives and agents)
concerning any merger, consolidation, share exchange or similar
transaction involving the Company or any of the Cable
Subsidiaries or any purchase of any portion of the operating
assets of (other than in the ordinary course of business), or any
equity interests in, the Cable Subsidiaries; provided, however,
that nothing contained in this Section 6_1 shall prohibit the
Company Board of Directors from (i) taking and disclosing to the
Company's stockholders a position with respect to a tender offer
for Company Common Stock by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, (ii) making such
disclosure to the Company's stockholders as, in the judgment of
the Company Board of Directors, with the written advice of
outside counsel, may be required under applicable Law, or (iii)
responding to any unsolicited proposal or inquiry by advising the
Person making such proposal or inquiry of the terms of this
Section 6.1. The Company will promptly communicate to Acquiror
the fact that it has received any proposal or inquiry in respect
of any such transaction, or of any such information requested
from it or of any such negotiations or discussions being sought
to be, initiated with the Company and will furnish Acquiror with a
true and complete copy of any proposal that the Board of
Directors of the Company has determined is a Superior Proposal
r j (as defined below). Notwithstanding anything to the contrary set
i forth herein, the Board of Directors of the Company may respond
to any Superior Proposal and may provide information to, and
-45-
negotiate with, any Person, group or entity in connection
therewith if the Board of Directors of the Company determines,
C-' with the advice of outside counsel, that it is required to do so
in the exercise of its fiduciary duties. For purposes of this
Section 6.1, a "Superior Proposal" means a bona fide, written,
unsolicited proposal relating to a possible transaction described
in this Section 6.1 by any Person other than Acquiror that, in
the reasonable good faith judgment of the Board of Directors of
the Company, with the advice of outside financial advisers, is
reasonably likely to be consummated and is financially more
favorable to the stockholders of the Company than the terms of
the transactions contemplated by this Agreement.
6.2 Conduct of Business of the Comnanv; Ownership of Cable
Subsidiaries.
(a) Except as contemplated by this Agreement and except for
the Company's operation of the Palmer Systems which shall be
governed by the provisions of Section 6.3, during the period from
November 18, 1994 to the Effective Time, none of the Company,
Holding or Broadcasting shall, without the prior written consent
of Acquiror:
{i) amend its Articles of Incorporation or Certificate
of Incorporation, as the case may be, or By-laws or the Rights
Agreement;
l (ii) 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, or redeem
or otherwise acquire any of its capital stock, except (A) on the
part of the Company, for dividends declared and paid, or
redemptions or other acquisitions made, consistent with the
principles and restrictions described on Schedule 6.2(a) or in
connection with the Units Plan, the Stock Plan, the Directors
Option Plan and the Option Plan and (B) that Holding and
Broadcasting may from time to time declare dividends to their
respective stockholders; provided, however, that (I) if Acquiror
elects to issue Acquiror Preferred Stock and (II) the Company
elects to grant to its stockholders the right to make a Preferred
Stock Election, no such redemption or acquisition of the
Company's capital stock may be made after the Preferred Stock
Election;
(iii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution of any shares of its
capital stock;
(iv) except to the extent transferred to NPJ pursuant
to Section 2.5 and the Contribution Agreement, make any
acquisition of the assets of any Person, except through a
Subsidiary other than a Cable Subsidiary;
-46-
(v) except to the extent any of the following are
i transferred to or assumed by NPJ pursuant to Section 2.5 and the
= Contribution Agreement, (i) create, incur or assume any long-term
debt not currently outstanding (including obligations in respect
of capital leases), (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, (iii) enter
into any material agreement, commitment or understanding, (iv)
make any acquisition of the stock or other equity interests, by
means of merger, consolidation or otherwise, of any Person or (v)
make any loans, advances or capital contributions to, or
investments in, any Person other than a Subsidiary;
(vi) issue, sell, deliver or agree to 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 equity
securities or amend any of the terms of any such securities or
agreements outstanding on November 18, 1994, provided that a
maximum of one thousand (1,000) shares of Company Common Stock in
the aggregate may be issued with respect to the Stock Plan and
the Units Plan and a maximum of four thousand (4,000) shares of
Company Common Stock may be issued in connection with each of the
Option Plan and the Directors Option Plan;
(vii) terminate, amend, modify or waive compliance
f with any of the provisions, terms or conditions of the
Contribution Agreement directly or indirectly respecting the
Retained Assets or the Retained Liabilities or affecting the
rights or obligations of Broadcasting from and after the
Effective Time; or
(viii) take, or agree in writing or otherwise to take,
any of the foregoing actions or any actions that would (a) make
any representation or warranty of the Company or NPJ contained in
this Agreement untrue or incorrect as of the date when made or as
of the Closing Date, (b) result in any of the conditions to
Closing in Article 7 of this Agreement not being satisfied or (c)
be inconsistent with the terms of this Agreement or the
transactions contemplated hereby.
(b) The Company covenants and agrees to use its best
efforts to cause all of the Cable Subsidiaries to be wholly
owned, directly or indirectly, by the Company on or prior to the
Effective Date.
6.3 Conduct of Business of the Cable Subsidiaries. Except
as contemplated by this Agreement, during the period from
November 18, 1994 to the Effective Time, the Company shall
conduct its operation of the Palmer Systems, and shall cause the
Cable Subsidiaries to conduct their operations, according to
their ordinary and usual course of business consistent with past
practices. Without limiting the generality of the foregoing,
except as otherwise contemplated by this Agreement, without the
-47 -
prior written consent of Acquiror, the Company shall not permit
(' any Cable Subsidiary to:
(a) amend its charter or By-laws or alter through merger,
liquidation, dissolution, reorganization, restructuring or in any
other fashion the ownership of any Cable Subsidiary except as
permitted by this Agreement;
(b) 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 equity securities
or amend any of the terms of any such securities or agreements
outstanding on November 18, 1994;
(c) 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, or redeem
or otherwise acquire any of its securities; provided, however,
that (i) any Cable Subsidiary may declare and pay dividends to
any other Cable Subsidiary, and (ii) the Cable Subsidiaries may
declare and pay dividends to the Company in an aggregate amount
not to exceed the Cable Subsidiaries' consolidated adjusted net
income for the period from November 18, 1994 to the Closing Date;
for purposes of this paragraph, the Cable Subsidiaries'
consolidated adjusted net income for such period means the Cable
Subsidiaries' consolidated net income, determined in accordance
with GAAP, (i) increased by the sum of the amount of depreciation
and amortization deductions taken during such period, and the
amount of accrued but unpaid Company Consolidated Income Taxes
deducted in calculating the Cable Subsidiaries' consolidated net
income to the extent not otherwise paid pursuant to tax sharing
arrangements, and (ii) decreased by the sum of (A) the greater of
(x) the amount of capital expenditures to be made during such
period in accordance with the capital expenditure budget attached
as Schedule 6.3(g) or (y) the amount of capital expenditures
actually made by the Cable Subsidiaries during such period;
(d)(i) create, incur or assume any long-term debt not
currently outstanding (including obligations in respect of
capital leases), (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, or (iii) make
any loans, advances or capital contributions to, or investments
in, any Person other than a Cable Subsidiary;
(e) acquire, sell, lease or dispose of any assets material
to such Cable Subsidiary, other than sales of inventory and
equipment in the ordinary and usual course of business consistent
with past practice;
(f) mortgage, pledge or subject to any Lien any of its
properties or assets, tangible or intangible, material to such
Cable Subsidiary;
C_ (g) fail to effect capital expenditures substantially in
accordance with the capital expenditure budget attached hereto as
Schedule 6.3(g);
(h) without the consent of Acquiror, which shall not be
withheld or delayed unreasonably, (i) except as required by
applicable Law or as disclosed to Acquiror in writing prior to
November 18, 1994, implement any rate change, retiering or
repackaging of cable television programming offered by any of the
Cable Subsidiaries, (ii) except as disclosed in writing to
Acquiror prior to November 18, 1994, make any cost -of -service or
hardship election under the rules and regulations adopted under
the Cable Television Consumer Protection and Competition Act of
1992, or (iii) amend any Franchise or agree to make any payments
or commitments, including commitments to make future capital
improvements or provide future services, in connection with
obtaining any authorization, consent, waiver, order or approval
of any governmental authority necessary for the transfer of
control of any Franchise;
(i) (i) grant any material increases in the compensation of
any of its directors, officers or key employees, except in the
ordinary course of business consistent with past practice, (ii)
pay or agree to pay any pension, retirement allowance or other
material employee benefit not required or contemplated by any of
the existing benefit, severance, pension or employment plans,
�- agreements or arrangements as in effect on November 18, 1994 to
I any such director, officer or key employee, whether past or
present, (iii) enter into any new or materially amend any
existing employment agreement with any such director, officer or
key employee, except for employment agreements with new employees
entered into in the ordinary course of business consistent with
past practice, (iv) enter into any new or materially amend any
existing severance agreement with any such director, officer or
key employee or (v) except as may be required to comply with
applicable Law, become obligated under any new pension plan or
arrangement, welfare plan or arrangement, multi-employer plan or
arrangement, employee benefit plan or arrangement, severance plan
or arrangement, benefit plan or arrangement, or similar plan or
arrangement, which was not in existence on November 18, 1994, or
amend any such plan or arrangement in existence on November 18,
1994, if such amendment would have the effect of enhancing or
accelerating any benefits thereunder;
(j) except as set forth on Schedule 6.3(j), enter into any
contract, arrangement or understanding requiring the purchase of
equipment, materials, supplies or services for the expenditure of
greater than $1 million per year, which is not cancelable without
penalty on 30 days or less notice;
(k) except as set forth on Schedule 6.3(k), enter into any
collective bargaining agreement or any successor collective
bargaining agreement to any existing collective bargaining
agreement;
ass
(1) 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 the Company or NPJ contained in
this Agreement untrue or incorrect as of the date when made or as
of the Closing Date, (ii) result in any of the conditions of this
Agreement not being satisfied or (iii) be inconsistent with the
terms of this Agreement or the transactions contemplated hereby.
The Company shall not be deemed to have breached clauses
(ii), (iii) of (iv) of Section 6.3(i) if any such payment,
agreement or amendment prohibited by such clauses is, in the case
of a prohibited payment, paid in its entirety by the Company
prior to the Closing Date or, in the case of a prohibited
agreement or amendment, will not impose continuing obligations on
Acquiror or any of the Cable Subsidiaries after the Effective
Time. The provisions of paragraphs (d) through and including (1)
of this Section 6.3 shall be applicable to and bind the Company
with respect to its operation of the Palmer Systems as if the
Company were a Cable Subsidiary.
6.4 Conduct of Business of Acquiror. Except as
contemplated by this Agreement, during the period from November
18, 1994 to the Effective Time, Acquiror and its Subsidiaries
will conduct their operations according to their ordinary and
usual course of business consistent with past practices, keep
available the services of their current officers and employees
and preserve their relationship with customers, franchising
authorities, suppliers and others having business dealing with
them with the objective that the goodwill and on-going business
of Acquiror and its Subsidiaries shall not be impaired in any
material respect at the Effective Time. Without limiting the
generality of the foregoing, except as otherwise contemplated by
this Agreement, Acquiror will not, without the prior written
consent of the Company:
(a) amend the Acquiror Restated Certificate or the Acquiror
Restated By -Laws;
(b) declare, set aside or pay any dividend or other
distribution (except (i) in the form of shares of capital stock
of Acquiror or (ii) any dividend required to be paid by the terms
of any preferred stock of the Company which is not outstanding on
November 18, 1994 in respect of its capital stock, or redeem or
otherwise acquire any of its equity securities other than (i)
repurchases of up to 667,366 shares of Acquiror Common Stock (as
such quantity shall be increased to give effect to the stock
dividend, split or other action contemplated by Section 6.22(b)
hereof) which are subject to Acquiror's 1998-1999 Share
Repurchase Program, or (ii) other repurchases of shares of
Acquiror Common Stock for an aggregate amount not to exceed
$50,000,000; or
(c) take, or agree in writing or otherwise to take, any of
the foregoing actions or any actions that would (i) subject to
the provisions of Section 6.25 hereof, make any representation or
-50 -
warranty of Acquiror contained in this Agreement untrue or
incorrect as of the date when made or as of the Closing Date,
�- (ii) result in any of the conditions to Closing in Article 7 of
this Agreement not being satisfied or (iii) be inconsistent with
the terms of this Agreement or the transactions contemplated
hereby.
6.5 Access to Information. Between the date of this
Agreement and the Effective Time, the Company 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, warehouses 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, warehouses,
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 the Company, the Cable Subsidiaries, Holding and Broadcasting
or Acquiror and its Subsidiaries, as the case maybe, as the
other party may from time to time reasonably request. All such
access and information obtained by either the Company or Acquiror
and their respective authorized representatives shall be subject
to the terms and conditions of the Confidentiality Agreement. No
investigation pursuant to this Section 6.5 or otherwise shall
- affect any representations or warranties of the parties hereto or
the conditions to the obligations of the parties hereto.
6.6 SEC Filings.
(a) As promptly as practicable after November 18, 1994,
Acquiror and NPJ (with all necessary assistance and cooperation
of each other and the Company) will prepare and file with the SEC
registration statements (collectively, the "Registration
Statements") in connection with, in the, case of Acquiror's
Registration Statement, the registration under the Securities Act
of the Acquiror Merger Securities to be issued pursuant to the
Merger, and, in the case of NPJ's Registration Statement, the
registration under the Securities Act of the NPJ Common Stock to
be distributed pursuant to the Distribution, which Registration
Statements shall contain a preliminary joint proxy statement to
be mailed by the Company and Acquiror to their respective
stockholders in connection with the vote of such stockholders
with respect to, in the case of the Company, the Merger
Transactions, and, in the case of ,Acquiror, the Merger and the
Recapitalization Amendment and a preliminary prospectus of
Acquiror and NPJ in connection with such registration under the
Securities Act (the "Joint Proxy Statement/Prospectus").
(b) The Company, NPJ and Acquiror will thereafter use their
respective best efforts to respond to any comments of the SEC
with respect to the Registration Statements and to have the
Registration Statements declared effective as promptly as
practicable, and also will take any other action required to be
-51 -
taken under federal or state securities laws (including, without
( limitation, the delivery to the Company and Acquiror, as
`-- appropriate, of a letter from each party's independent auditors
in form and substance reasonably satisfactory to the Company or
Acquiror, as the case maybe, and customary in scope and
substance for letters delivered by independent public accountants
in connection with registration statements similar to the
Registration Statements).
(c) As promptly as practicable after November 18, 1994, the
Company, NPJ and Acquiror shall prepare and file any other
filings required to be filed by each under the Securities Act,
the Exchange Act or any other federal or state laws relating to
the Merger Transactions and the transactions contemplated hereby
(collectively "Other Filings") and will use their reasonable best
efforts to respond to any comments of the SEC or any other
appropriate government official with respect thereto..
(d) The Company, NPJ and Acquiror shall cooperate with each
other and provide to each other all information necessary in
order to prepare the. Registration Statement, the Joint Proxy
Statement/Prospectus and the Other Filings, including, without
limitation, a registration statement by Acquiror on Form 8-A
under the Exchange Act with respect to the Acquiror Merger
Securities and the registration statement of Acquiror under the
Securities Act and the Exchange Act in connection with any other
registered public offering (collectively "SEC Filings") and shall
provide promptly to the other parties any information that such
party may obtain that could necessitateamending any such
document.
(e) The Company, NPJ and Acquiror will notify the other
parties promptly of the receipt of any comments from the SEC or
its staff or any other appropriate government official and of any
requests by the SEC or its staff or any other appropriate
government official for amendments or supplements to any of the
SEC Filings or for additional information and will supply the
other parties with copies of all correspondence between the
Company or any of its representatives, NPJ or any of its
representatives, or Acquiror or any of its representatives, as
the case may be, on the one hand, and the SEC or its staff or any
other appropriate governmentofficial, on the other hand, with
respect thereto. If at any time prior to the Effective Time, any
event shall occur that should be set forth in an, amendment of, or
a supplement to, any of the SEC Filings, the Company, NPJ and
Acquiror agree promptly to prepare and file such amendment or
supplement and to distribute such amendment or supplement as
required by applicable Law, including, in the case of an
amendment or supplement to the Joint Proxy Statement/Prospectus,
mailing such supplement or amendment to the Company's
stockholders and, if required, Acquiror's stockholders, as the
case may be.
(f) The information provided and to be provided by the
Company, NPJ and Acquiror for use in SEC Filings shall at all
-52 -
times prior to the Effective Time be true and correct in all
material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such
information not false or misleading, and the Company, NPJ and
Acquiror each agree to correct any such information provided by
it for use in the SEC Filings that shall have become false or
misleading. Each SEC Filing, when filed with the SEC or any
other appropriate government official, shall comply as to form in
all material respects with all applicable Law.
(g) Acquiror shall indemnify, defend and hold harmless the
Company and NPJ, each of their officers and directors and each
other Person, if any, who controls any of the foregoing within
the meaning of the Exchange Act against any Losses and Expenses,
to which any of the foregoing may become subject under the
Securities Act or the Exchange Act or otherwise, insofar as such
Losses and Expenses arise out of or are based upon (i) an untrue
statement or alleged untrue statement of a material fact
contained in any SEC Filing or (ii) the omission or alleged
omission to state 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 that Acquiror was responsible for such misstatement or
omission, and Acquiror shall reimburse, upon request from time to
time, the Company, NPJ and each such officer, director and
controlling Person for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or
defending any such Losses and Expenses.
(h) The Company and, from and after the Effective Time, NPJ
(individually and not jointly with the Company) 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 the Exchange Act against any
Losses and Expenses to which any of the foregoing may become
subject under the Securities Act or the Exchange Act or
otherwise, insofar as such Losses and Expenses arise out of or
are based upon (i) an untrue statement or alleged untrue
statement of a material fact contained in any SEC Filing or (ii)
the omission or alleged omission to state 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 that the Company or NPJ was
responsible for such misstatement or omission, and the Company or
NPJ (as the case may be), upon request from time to time, shall
reimburse Acquiror and each such officer, director and
controlling Person for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or
defending any such Losses and Expenses.
(i) For the purpose of this Section 6.6, the term
"Indemnifying Party" shall mean the party having an obligation-
hereunder
bligationhereunder to indemnify the other party pursuant to this Section
6.6, and the term "Indemnified Party" shall mean the party having
the right to be indemnified pursuant to this Section 6'.6.
-53 -
Whenever any claim shall arise for indemnification under this
Section 6.6, 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 unless such failure materially prejudices
the Indemnifying Party.
(j) After such notice, if the Indemnifying Party undertakes
to defend any such claim, it shall take control of the defense
and investigation with respect to such claim and employ and
engage attorneys of its own choice to handle and defend the same,
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 such settlement (i)
makes no admission or acknowledgment of liability or culpability
with respect to the Indemnified Party, (ii) includes a complete
release of the Indemnified Party and (iii) does not require the
Indemnified Party to make any payment or forego or take any
action. The Indemnified Party shall cooperate in all reasonable
1 respects with the Indemnifying Party and its attorneys in the
investigation, trial and defense of any lawsuit or action with
respect to such claim and any appeal arising therefrom (including
the filing in the Indemnified Party's name of appropriate cross
claims and counterclaims). The Indemnified Party may, at its own
cost, participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any
appeal arising therefrom. If, after receipt of a claim notice
pursuant to Section 6.6(i), 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 resultobtained with respect thereto by the Indemnified
Party (including, without limitation, the settlement thereof
without the consent of the Indemnifying Party). If there are one
or more legal defenses available to the Indemnified Party that
conflict with those available to the Indemnifying Party, the
Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to assume the defense of the lawsuit or
action; provided, however, that the Indemnified Party may not
settle such lawsuit or action without the consent of the
Indemnifying Party, which consent shall not be unreasonably
withheld. 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
J of such claim whereupon such action shall be taken unless the
Indemnified Party determines that the contest should be continued
-54 -
and so notifies the Indemnifying Party in writing within 15 days
of such request from the Indemnifying Party. If the Indemnified
-' Party determines that the contest should be continued, the
Indemnifying Party shall be liable hereunder only to the extent
of the lesser of (i) the amount which the other party(ies) 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 or (ii) such amount for which the
Indemnifying Party may be liable with respect to such claim by
reason of the provisions hereof.
(k) If the indemnification provided for in this Section 6.6
shall for any reason be unavailable to the Indemnified Party in
respect of any loss, claim, damage or liability, or action
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 loss,
claim, damage or liability, or 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 statements or omissions that
resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable
considerations. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement or
omission of a material fact relates 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 loss, claim, damage
or liability, or action in respect thereof, referred to above in
this paragraph shall be deemed to include, for purposes of this
paragraph, 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.
6.7 Reasonable Best Efforts. Each of the parties hereto
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, but not limited to, the consummation of all
conditions to the Merger Transactions and seeking to remove
promptly any injunction or other legal barrier that may prevent
or delay such consummation). Each of the parties shall promptly
notify the other whenever a material consent is obtained and
shall keep the other informed as to the progress in obtaining
such material consents.
-55-
6.8 Public Announcements. No party hereto shall make any
public announcements or otherwise communicate with any news media
with respect to this Agreement or any of the transactions
contemplated hereby without 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 as may,
in its judgment, be required in connection with the execution and
delivery of this Agreement or the consummation of the
transactions contemplated hereby.
6.9 Board Recommendation. The Joint Proxy
Statement/Prospectus shall include (i) the recommendation of the
Company Board of Directors to the Company's stockholders to vote
in favor of the Merger Transactions and (ii) the recommendation
of Acquiror's Board of Directors to Acquiror's stockholders to
vote in favor of the Merger; provided, however, that either the
Company Board of Directors or Acquiror's Board of Directors may
modify or withdraw its recommendation if it determines, with the
written advice of outside counsel, to do so in the exercise of
its fiduciary duties.
6.10 Tax Matters.
(a) NPJ Indemnification obligations.
(i) Company Consolidated Income Taxes. NPJ shall be
liable for, shall pay and shall indemnify and hold Acquiror
and its Subsidiaries harmless against all Company
Consolidated Income Taxes attributable to any taxable period
ending on or before the Closing Date, and any and all
liabilities; losses, damages, costs and expenses (including,
without limitation, court costs and reasonable professional
fees incurred in the investigation, defense or settlement of
any claims covered by this indemnity) attributable to any
such Company Consolidated Income Taxes. For this purpose,
any taxable period for Company Consolidated Income Taxes
that includes but does not end on the Closing Date shall be
treated as ending on the Closing Date, and the income
attributable to the period before and including the Closing
Date shall be determined based on the permanent books and
records maintained for federal income tax purposes. Except
as specifically provided in this Section 6.10, any tax
sharing agreement or policy of the Company Group shall be
terminated at the Effective Time, and the Surviving
Corporation and the Cable Subsidiaries shall have no
obligations under such agreements after the Effective Time.
without limiting the foregoing, NPJ shall be liable for any
Company Consolidated Income Taxes resulting from the failure
of the Contribution and issuance of NPJ Common Stock to the
Company's stockholders to qualify as a tax-free
` reorganization within the meaning of Sections 368(a)(1)(D)
J1 and 355 of the Internal Revenue Code, unless such failure to
-56 -
qualify is the result of Acquiror's breach of Section
( 6.10(i)
(ii) Refunds and Credits of Company Consolidated
Income Taxes. NPJ shall be entitled to (and shall indemnify
and hold harmless Acquiror and its Subsidiaries against any
subsequent disallowance of) any credits or refunds of
Company Consolidated Income Taxes payable with respect to
any taxable period ending on or before the Closing Date.
(iii) Control of Tax Proceedings.
(A) Except as provided in Section 6.10(a)(iii)(C), the
parties agree that NPS shall be designated as the agent for
the Company Group pursuant to Section 1.1502-77(d) of the
Treasury Regulations and any similar provisions of any state
income or franchise tax laws, and NPJ shall have the sole
authority to deal with any matters relating to Company
Consolidated Income Taxes, including but not limited to the
filing of amended returns.
(B) whenever any taxing authority asserts a claim,
makes an assessment, or otherwise disputes the amount of
Company Consolidated Income Taxes for which NPJ is or may be
liable .in whole or in part, under this Agreement, Acquiror
shall promptly inform NPJ. Except as provided in Section
6.10(a)(iii)(C), NPJ, 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; provided, however, that NPJ shall not
have the right to settle any such claim, assessment or
dispute without Acquiror's prior written consent if such
settlement would have a Material Adverse Effect on Acquiror
or any of its Subsidiaries.
(C) If a taxing authority asserts a claim, makes an
assessment or otherwise disputes the amount of the Company
Consolidated Income Taxes attributable to a Cable Subsidiary
(a "Cable Dispute"), Acquiror and NPJ shall immediately
inform each other of the Cable Dispute. Acquiror, at its
cost and expense may, by written notice to NPJ, elect to
control any Cable Dispute and to determine whether and when
to settle any such Cable Dispute, which election shall be
made within 15 days after the later of (1) the date of the
notice transmitted ;by the taxing authority describing the
Cable Dispute, or (2) in the case of a notice transmitted by
the taxing authority to NPJ, the date NPJ informs Acquiror
of such Cable Dispute. If Acquiror duly elects, as provided
herein, to contest a Cable Dispute, itshall have the sole
responsibility to conduct any resulting proceedings, and
shall be responsible for, and shall indemnify NPJ against,
any Taxes ultimately imposed with respect to such Cable
Dispute.
-57-
(b) Other Taxes. Except as otherwise provided in Section
t6.10(a), 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.
(c) Tax Returns.
(i) NPJ shall be responsible for the preparation and
filing of all Company Consolidated Income Tax Returns for
all taxable periods that end on or before the Closing Date,
including Tax Returns of the Company Group for such periods
that are due after the Closing Date, and of all Cable Tax
Returns required to be filed on or before the Closing Date,
and NPJ shall be responsible for the contents of such Tax
Returns and the payment of all Taxes shown to be due
thereon. Within thirty days following the filing of Company
Consolidated Income Tax Returns, NPJ shall furnish Acquiror
with (i) copies of such Tax Returns as if prepared for the
Cable Subsidiaries on a separate company basis, and (ii)
information concerning (a) the tax basis of the assets of
the Cable Subsidiaries as of the Closing Date; (b) the net
operating loss carryover, capital loss carryover and
alternative minimum tax credit carryover available, if any,
to Acquiror and its Subsidiaries as of the Closing Date; and
(c) all elections with respect to Company Consolidated
Income Taxes in effect for the Cable Subsidiaries as of the
Closing Date.
(ii) Acquiror shall be responsible for the preparation
and filing of all Cable Tax Returns (other than Company
Consolidated Income Tax Returns) required to be filed after
the Closing Date_
(d) Cooperation. Acquiror and NPJ shall cooperate with
each other in a timely manner in the preparation and filing of
any Tax Returns, payment of any Taxes in accordance with this
Agreement, and the conduct of any audit or other proceeding.
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 6.10. Each party agrees to notify the
other party of any audit adjustments that do not result in tax
liability but can reasonably be expected to affect Tax Returns of
the other party.
(e) Retention of Records. Acquiror and NPJ 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 completion of the audit of such
returns, and (ii) give to the other reasonable access to such
records, documents, accounting data and other information
(including computer data) and to its personnel (insuring their
cooperation) and premises, for the purpose of the review or audit
of such returns to the extent relevant to an obligation or
liability of a party under this Agreement.
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Payments; Disputes. Except as otherwise provided in
this Section 6,10, any amounts owed by any party ("Indemnitor")
to any other party ("Indemnitee") under this Section 6.10 shall
be paid within ten days of notice from the Indemnitee; provided
that if the Indemnitee has not paid such amounts and such amounts
are being contested before the appropriate governmental
authorities in good faith, the Indemnitor shall not be required
to make payment until it is determined finally by an appropriate
governmental authority that payment is due. If Acquircr and NPJ
cannot agree on any calculation of any liabilities under this
Section 6.10, such calculation shall be made by any independent
Public accounting firm acceptable to both such 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.
(g) Termination of Liabilities. Notwithstanding any other
Provision in this Agreement, the liabilities of NPS for any Tax
under this Section 6.10 shall apply only to Taxes assessed before
the expiration of the applicable statute of limitations for such
Tax or any extension thereof.
(h) Definitions.
(i) "Company Group" means the affiliated group of
corporations, within the meaning of Section 1504(a) of the
Internal Revenue Code, of which the Company or, after the
Dissolution, Broadcasting is the common parent and any
member of such group determined as of the Effective Date,
which shall, in any event, include Copley/Colony, Inc. and
its Subsidiaries_
(ii) "Company Consolidated Income Taxes" means the
federal and state income taxes of the Company Group or any
of its members, whether calculated on a consolidated,
combined, unitary or separate basis, including such income
taxes of a member of the Company Group before such member
became such a member, 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.
(iii) "Tax" (including with correlative meaning, the
terms "Taxes" and "Taxable") means any income, gross
receipts, ad valorem, premium, excise, value-added, sales,
use, transfer, 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.
-59-
any
r(iv)on Tax Return,, mean an port
(statement Y return, re
' Y authority with respect to like required to be statement,
Taxes. filed with
(x "Company Consolidated Income Tax Returns,
any Tax Return of the Company Group With respect to means
Company Consolidated oI any of its members
(vi) Income Taxes.
Cable "Cable Tax Returns^ means
Subsidiary, any Tax
Return of any
(i) Additional
the Closin Covenants.
g Date, without For a period of
the prior written consent
o years after
(I) Acquiror shallof NPJ:
otherwise dispose of anhot sell, transfer,
any shares p' stocksets of the distribute sor
Subsidiaryof °a Ital Cable Subsidiaries or
of Broadcastin of any corporation that was
whether by merger or otherwise, prior to the Merger,
assets and stock in the aggregate
thirty such transferred
Y percent {30°s) b g constitute less
the Cable Subsidiariesy value of the business than
at the time of such and assets of
(ii) transfer;
Acquiror shall not cause or
corporation that was a Subsidiary of Broadcasting
immediatel any
capital stockrior to the Merger
to sell an of
Of such y shares
i' `s y to any Person;
or (111) Acquiror shall not adopt a plan of li
enter into an agreement of merger or other
Pursuant to which the corporate gsaction
would terminate legal transaction
be converted or the Outstanding g existence it Acquiror
into cash, other g stock of Ac
securities of an property Acquiror would
y other issuer; y or the stock or
(iv
Purchase, Acquiror and its Affiliates
make a tender offer, or otherwisel not offer to
agreement to acquire any shares of ca
issued to enter into any
connectio any former shareholder of thetCompany al kinf
NPJ; n with the Merger or any shares Acquiror
and
of capital stock of
(a Acquiror and its Affiliates shall not
any transaction if, the date on which Ac
any On
of prior to engage in
engage in such Acquiror enters into a binding Acquiror tor
that it has rece chtraeaaction, NPJ shall have agreement to
result of an an opinion of le informed Acquiror
issued after Ncontr controlling
legal or gal counsel that as a
administrative precedent
transaction such as the 1994, the consummation of a
create a material contemplated transaction
NPJ Common risk that the Contribution and Would
qualify Stock to the Company,s stockholders would not
Y as a tax- Issuance of
the Internal free reorganization
�) Revenue Code. under Section 3G8 of
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6.11 Notification. Each party hereto 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
promptly to remedy such breach.
6.12 Employee Benefits.
(a) As part of the assumption of liabilities of
Broadcasting by NPS pursuant to Section 2.5 and the Contribution
Agreement, effective as of the Effective Time, NPJ agrees to
accept all past, present and future liabilities and
responsibilities as plan sponsor, within the meaning of Section
3(16)(B) of ERISA, of any Company Employee Plan, and to accept
all past, present and future liabilities and responsibilities as
employer under any other benefit arrangement, including without
limitation: (i) employment and consulting agreements, (ii)
arrangements providing for insurance coverage and workers,
compensation benefits, (iii) incentive bonus and deferred bonus
arrangements, (iv) arrangements providing for termination
allowance, severance, and similar benefits, (v) equity
compensation plans, (vi) deferred compensation plans, and (vii)
compensation policies and practices maintained by the Company or
any ERISA Affiliate covering the Company Employees and their
beneficiaries as of the Effective Time ("Company Benefit
Arrangement"), except as otherwise provided in Section 6.12(c)..
NPJ agrees that Acquiror shall have no liability for any period
with respect to any such plans, except as otherwise provided in
Section 6.12(c).
(b) Acquiror acknowledges that, as a result of the
transactions contemplated by this Agreement, as of the Effective
Time, Acquiror shall become the employer of all employees of the
Cable Subsidiaries as of the Effective Time, including any such
employee who is on an approved leave of absence or short-term
disability leave, as of the Effective Time other than any
corporate, regional or divisional employee which Acquiror has
informed the Company not less than thirty (30) days prior to the
Effective Time it does not wish to employ following the Effective
Time, in which case said employee shall, at the option of the
Company, become an employee of NPJ or shall be discharged by the
Company ("Cable Employees,l); provided, however, that this
paragraph (b) shall in no way obligate Acquiror to continue the
employment of any person..
(c) Acquiror agrees that, upon succeeding as employer of
the Cable Employees effective upon the Effective Time, Acquiror
shall be responsible for payments under (i) the Employee
Continuation Plans for Exempt and Non -Exempt Employees designated
as such on Schedule 4.12(n) respecting matters arising after the
Effective Time, to the extent such payments are owed to system
J� level employees formerly employed by a Cable Subsidiary, and (ii)
those certain Agreements dated as of October 11, 1993 with Eileen
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Martin and Peter Eliason (true, correct and complete copies of
i...,'} which have been delivered to Acquiror) to the extent payments
under such Agreements do not exceed the severance payments
Acquiror would have been liable for in respect of such employees
under the Employee Continuation Plan (it being understood that
NPJ shall be responsible for all liabilities and responsibilities
under such Agreements in excess of what is provided for under the
Employee Continuation Plans). NPJ agrees that it shall be
responsible for any benefits payable under any such Employee
Continuation Plan, or any other severance benefits or payments
which may otherwise be owed, to any corporate, regional and
divisional personnel, or to any other person not described in the
preceding two sentences.
(d) Subject to the rules for qualification of plans under
Section 401(a) of the Code, Acquiror agrees to grant credit to
the Cable Employees for service accrued by such Cable Employees
as employees of the Company and its ERISA Affiliates for purposes
of calculating eligibility and vesting service under the
"employee pension benefit plans" (within the meaning of Section
3(2) of ERISA) of Acquiror and its Subsidiaries that are intended
to be qualified under Section 401(a) of the Code. NPJ agrees
that each such Cable Employee shall, as of the Effective Time,
become fully vested in his accrued benefits (if any) under each
Company Employee Plan that is intended to be qualified under Code
Section 401(a).
(e) Acquiror shall, as soon as practicable after the
Effective Time, establish, to the extent it does not already
maintain, a defined contribution plan that is intended to meet
the qualification requirements of Code Section 401(a), to provide
for elective deferrals under the rules of Code Section 401(k) ("a
401(k) Plan"), and that covers the Cable Employees, subject to
minimum eligibility service requirements permitted under the
Code. NPJ shall cause each Cable Employee to be able to choose
between a distribution to himself of his account balance as of
the Effective Time in any Company or NPJ 401(k) Plan or the
direct transfer of such account balance to the Acquiror 401(k)
Plan described in the preceding sentence. The Acquiror 401(k)
Plan shall accept all such direct transfers, including any such
direct transfer subject to any loan to the Cable Employee who is
a participant, which loan shall thereafter be treated under
Acquiror's 401(k) Plan, except to the extent the terms of such
loan are not compatible with applicable Law, including ERISA.
Prior to any such transfer, each party hereto shall furnish the
other party hereto with a copy of the most recent determination
letter issued by the IRS with respect to the qualification of
each 401(k) plan in which a Cable Employee has an account as of
the Effective Time or may have after the Effective Time.
(f) NPJ or the Company and Broadcasting, as applicable,
agrees to continue coverage of Cable Employees under existing
group health plans through the Effective Time and to reimburse
covered Cable Employees for eligible health care expenses and
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services incurred through the Effective Time in accordance with
( the terms of any such plan.
(g) Subject to Section 6.12(j), effective from and after
the Effective Time, subject to reasonable eligibility
requirements, Acquiror agrees to provide coverage under a
comprehensive group health care plan to all Cable Employees (and
their covered dependents), who are still employed by Broadcasting
at the Effective Time, taking into account for eligibility
purposes under such plan the service accrued by any such Cable
Employee while an employee of the Company or any of its ERISA
Affiliates and Provided, however, that any Cable Employee who
was, as of the Effective Time, eligible under any Company or NPi
Group Health Plan, shall not be subject to such eligibility
requirements for initial coverage. Any such comprehensive group
health care plan shall provide medical, hospitalization,
prescription drug, mental health, substance abuse, employee
assistance program, dental and vision care benefits that are
comparable, as defined in Section 6.12(1) below, to those
provided to such Cable Employee under an existing group health
plan prior to the Closing or comparable to Acquiror's existing
plans, and shall contain no exclusions or limitations for
preexisting conditions applicable to covered Cable Employees or
the covered dependents of such Cable Employees except to the
extent such preexisting condition exclusions or limitations apply
to any such Cable Employee or covered dependent under the
_ applicable group health plan at the Effective Time provided,
however, that the Cable Employees shall not be deemed to be
third -party beneficiaries of this Section 6.12(g). For the
calendar year in which the Effective Time occurs, any Acquiror
group health plan which provides coverage to Cable Employees
shall give credit for deductibles, co -payments and similar
amounts which any such Cable Employee had paid or satisfied for
such year under a Company Group Health Plan.
(h) Subject to reasonable eligibility requirements,
Acquiror agrees to provide coverage under (a) retirement plans
qualified under Code Section 401(a) and (b) welfare benefit
plans, within the meaning of Section 3(1) of ERISA, providing
other than health benefits, including life insurance, vacation,
accidental death and dismemberment insurance, short and long term
disability benefits, to all Cable Employees, taking into account
for eligibility purposes under such plans the service accrued by
any such Cable Employee while an employee of the Company or any
of its ERISA Affiliates. Any such retirement or welfare benefit
plan shall provide benefits that are comparable, as defined in
Section 6.12(i) hereof, to those provided to Cable Employees
prior to the Effective Time or comparable to Acquiror's existing
plans.
(i) "Comparable shall mean benefits that are substantially
similar in type, scope, benefits coverage, eligibility
requirements and employee cost sharing requirements to the
benefits as of the Effective Time under the plan or plans which
are being compared. Acquiror agrees to amend, and to use its
-63 -
best efforts to cause its Subsidiaries to amend, the eligibility
requirements of any welfare benefit plan under which coverage is
`1 extended to Cable Employees pursuant to the provisions of
Sections 6.12(g) and (h), to provide for eligibility effective
from and after the Effective Time for such Cable Employees.
(j) NPS shall assume and be solely responsible for: (i)
payment of all retiree medical benefits to Cable Employees who,
as of the Effective Time, are receiving or who are entitled to
receive retiree medical or life insurance benefits; (ii) the
provision of benefits required under the provisions of COBRA to
any Cable Employees or other qualified beneficiaries, within the
meaning of Section 4980B(f)(3) of the Code, with respect to whom
a qualifying event within the meaning of Section 4980B(f)(3) of
the Code, has occurred prior to the Effective Time; (iii) for the
payment of all long-term disability income benefits to all Cable
Employees who, as of the Effective Time, are receiving long-term
disability benefits or are disabled as of the Effective Time and
as a result of such disability become eligible for long-term
disability income benefits as determined in accordance with long-
term disability coverage provisions that on or prior to the
Effective Time are applicable to the Cable Employees; and (iv)
the provision and payment of: (A) medical and dental benefits for
the period after the Effective Date until such benefits are no
longer required to be made available under COBRA; (B) life and
accidental death benefits for a period of not more than six
months following the Effective Date; and (C) short- and long-term
disability benefits for a period of not more than three months
following the Effective Date; for any Cable Employee who is on a
leave of absence or short-term disabilityleave as of the
Effective Time until such Cable Employee returns to active
employment from such leave; provided, that Acquiror shall from
time to time, within 30 days of receipt by Acquiror of invoices
and other documentation reasonably satisfactory to Acquiror,
reimburse NPJ for the reasonable, direct costs incurred in
providing the benefits referred to in this subparagraph (iv).
(k) Acquiror agrees to cooperate, and agrees to use its
best efforts to cause its Subsidiaries to cooperate, in a
complete, diligent and timely manner to provide NPJ or its ERISA
Affiliates with such compensation, service and other pertinent
census data as may be required by any of them for purposes of
calculating or effecting distribution of benefits to which any
Cable Employees may be entitled under any employee benefit plan,
within the meaning of Section 3(3) of ERISA, established,
maintained or contributed to by any of them.
(1) NPJ agrees to cooperate, and agrees to use its best
efforts to cause its Subsidiaries to cooperate, in a complete,
diligent and timely manner to provide Acquiror or its ERISA
Affiliates with such compensation, service and other pertinent
census data as may be required by any of them for purposes of
f ` calculating or effecting distribution of benefits to which any
{ , Cable Employees may be entitled under any employee benefit plan,
-64 -
within the meaning of Section 3(3) of ERISA, established,
maintained or contributed to by any of them.
6.13 Meeting of Stockholders of the Company; Other
Agreements. The Company shall take all action necessary, in
accordance with applicable Law and its Articles of Incorporation
and By-laws, to duly call, give notice of, convene and hold a
meeting of its stockholders as promptly as practicable to
consider and vote upon the adoption and approval of this
Agreement and the Merger Transactions. The only stockholder
votes required for the adoption and approval of the Merger
Transactions by the Company are the votes required under Section
3.5. Subject to the fiduciary duty of the Company Board of
Directors under applicable Law, as advised in writing by outside
counsel, the Company shall use its reasonable best efforts to
solicit from stockholders proxies in favor of adoption and
approval of the Merger Transactions and to take all other action
necessary to secure the vote of stockholders required by
applicable Law and the Company's Articles of Incorporation to
effect the Merger Transactions. At any such meeting, Acquiror
shall vote, or cause to be voted, all of the shares (if any of
Company Class A Common Stock and Company Class B Common Stock
then owned by Acquiror or any Subsidiary of Acquiror or subject
to proxies held by Acquiror in favor of the Merger Transactions.
6.14 Meeting of Stockholders of Acquiror. Acquiror shall
y..., take all action necessary, in accordance with applicable Law and
Acquiror's Certificate of Incorporation and Acquiror Restated By -
Laws, to duly call, give notice of, convene and hold a meeting of
its stockholders as promptly as practicable to consider and vote
upon the adoption of this Agreement, the Merger Transaction (to
the extent necessary) and the Recapitalization Amendment. The
only stockholder vote required for the adoption and approval of
the Merger Transactions by Acquiror is the vote required under
Section 5.5. Subject to the fiduciary duty of the Acquiror Board
of Directors under applicable Law, as advised in writing by
outside counsel, Acquiror shall use its reasonable best efforts
to solicit from stockholders proxies in favor of adoption and
approval of the Merger Transactions and the Recapitalization
Amendment and to take all other action necessary to secure the
vote of stockholders required by applicable Law and Acquiror's
Certificate of Incorporation to effect the Merger Transactions.
At any such meeting, the Company shall vote, or cause to be
voted, all shares, if any, of Acquiror Common Stock then owned by
the Company or any Subsidiary of the Company or subject to
proxies held by the Company in favor of the adoption and approval
of the Merger Transactions and the Recapitalization Amendment.
6,15 Regulatory and Other Authorizations. (a) Each of
the parties hereto agrees to use its best efforts to obtain all
authorizations, consents, waivers, 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 execution and delivery of, and the performance
�`' of its obligations pursuant to, this Agreement, and will
-65 -
cooperate fully with the other parties in promptly seeking to
obtain all such authorizations, consents, waivers, orders and
approvals. Without limitation, the Company and Acquiror shall
each make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act promptly, and in any event by not later
than February 10, 1995. Each such filing shall request early
termination of the waiting period imposed by the HSR Act.
(b) Any application to any governmental authority for any
authorization, consent, waiver, order or approval necessary for
the transfer of control of any License or Franchise shall be
mutually acceptable to the Company and Acquiror and, if
applicable, shall request that the relevant governmental
authority agree that no further consent, waiver or approval of
such governmental authority will be required if a security
interest is granted in such License or Franchise to any lender.
Without limiting the obligations of the Company, NPJ, Holding,
Broadcasting and Acquiror under Section 6.15`(a), each of the
Company, NPJ, Holding, Broadcasting 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 License or Franchise.
(c) If any authorization, consent, waiver, order or
approval of any governmental authority necessary for the transfer
of control of any License or Franchise shall not have been
( obtained prior to the Effective Time, NPJ and Acquiror shall
cooperate with each other and use their respective best efforts
(i) to restructure the ownership and control of such License or
Franchise from and after the Effective Time in such a manner
that, to the extent feasible, prevents any violation of the terms
of such License or Franchise that would have a Material Adverse
Effect on Acquiror and its Subsidiaries or on NPJ and its
Subsidiaries 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, waiver, order or approval necessary
for the transfer of control of such 'License or Franchise.
(d) If any governmental authority acquires any interest in
any cable television system of the Company or the Cable
Subsidiaries on or prior to the Effective Date, (i) such
governmental authority shall be deemed not to have granted its
consent to transfer the Franchise relating to such system and,
therefore, the Cable Franchise Area relating to such system shall
not be considered a Transferable Franchise Area, (ii) the
proceeds (the "Proceeds") received by the Company or a Cable
Subsidiary, as the case may be, in connection with such
acquisition shall be held in escrow by the Company or such Cable
Subsidiary and, in the event the Company receives the Proceeds,
shall not be contributed to NPJ as part of the, Contribution, and
(iii) the Proceeds shall not be counted as a current asset for
purposes of the definition of Working Capital. Notwithstanding
the foregoing, the Company, NPJ and Acquiror agree to use their
respective best efforts to contest any attempt to so acquire a
cable television system or assets, including, without limitation,
�._.� by commencing and prosecuting such legal actions as may be
necessary to prevent such acquisition in circumstances where such
action is appropriate.
6.16 Further Assurances. Each of the parties hereto shall
execute such documents and other instruments and take such
further actions as may he reasonably required or desirable to
carry out the provisions hereof and consummate and evidence the
transactions contemplated hereby 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 hereof, each of the parties hereto 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.
6.17 Internal Revenue Service Ruling. As promptly as
practicable after November 18, 1994, the Company shall prepare
and submit to the IRS a request for a private letter ruling from
the IRS that the transactions contemplated by the Contribution
Agreement will qualify as a tax-free reorganization within the
meaning of Sections 368(a)(1)(D) and 355 of the Code and that the
�J transactions contemplated by Sections 2.3 and 2.4 hereof will
qualify as tax free reorganizations, liquidations and
dissolutions under the applicable sections of the Code. Such
request (and any subsequent submissions to the IRS) shall be true
and correct in all material respects and all facts material to
the ruling shall be disclosed in such request. The Company shall
afford Acquiror with reasonable opportunity to review and comment
on such request prior to its submission to the IRS, and such
request as filed shall be reasonably acceptable to Acquiror. The
Company shall provide Acquiror with copies of all materials
submitted to the IRS. Acquiror shall participate in all meetings
and conferences with IRS personnel, whether telephonically or in
person, as requested by the Company. Acquiror shall reasonably
cooperate in good faith with the Company in seeking to obtain
such ruling.
6.18 Records Retention.
(a) For a period of five years after the Closing, NPJ shall
retain all books and records relating to the Cable Subsidiaries
currently in the possession of the Company or any of its
Subsidiaries (or which come into the possession of the Company or
any of its Subsidiaries after November 18, 1994) for the period
from ten years prior to the Closing Date to the Closing Date, and
Acquiror 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.
-67-
(b) For a period of five years after the Closing Date,
Acquiror shall retain all of its books and records relating to
the Cable Subsidiaries for periods subsequent to the Closing Date
and NPS 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.
6.19 No Related Party Agreements with NPJ. Except for the
Contribution Agreement, neither NPJ nor any of its Subsidiaries
will at the Effective Time be a party to any material agreement,
arrangement or understanding with the Company, Broadcasting or
any of the Cable Subsidiaries, including, without limitation, any
material contract providing for thefurnishing of services or
rental of real or personal property to or from, or otherwise
relating to the business or operations of, the Company,
Broadcasting or any of the Cable Subsidiaries or pursuant to
which the Company, Broadcasting or any of the Cable Subsidiaries
may have any obligation or liability. After the Effective Time,
none of the Company, Broadcasting or any of the Cable
Subsidiaries will have any liability whatsoever, direct or
indirect, contingent or otherwise, in any way relating to the
business, operations, indebtedness, assets or liabilities of NPJ
or any of its Subsidiaries, except as contemplated by the
Contribution Agreement.
6.20 Company Name,
_! (a) Acquiror acknowledges that (i) the name "Providence
Journal", whether alone or in combination with one or more other
words, is an asset of the Company and, after the Dissolution,
Broadcasting being transferred to NPJ in the Contribution and
(ii) the name "King", whether alone or in combination with one or
more other words, is an asset of Holding and its Subsidiaries
being transferred to NPJ in the Contribution. Promptly after the
Closing Date, Acquiror shall (i) cause all of its affected
Subsidiaries to change their names to delete any reference
therein to "Providence Journal" or "King" and (ii) reasonably
cooperate in assisting NPS to change its name to "The Providence
Journal Company".
(b) Between the consummation of the Contribution and the
Closing (and for as long thereafter as is required for Acquiror
to comply with Section 6.20(a)), the Company and all of the Cable
Subsidiaries shall have a non-exclusive license to use the names
"Providence Journal" and "King".
6.21 Undertakings Relating to a Public Offerin
Registration Rights. (a) Acquiror agrees to use best efforts to
consummate a registered public offering of shares of Acquiror
Class A Common Stock (which, at Acquiror's option, may be a
primary offering and/or a secondary offering) prior to the first
anniversary of the Effective Date for aggregate consideration
~� (before underwriting discounts) of not less than $150,000,000
(the "Offering") provided, however, that (i) Acquiror shall not
WE
be required to consummate the Offering if it has issued, on or
before the first anniversary of the Effective Date, shares of its
capital stock for an aggregate consideration of not less than
$1,000,000,000 pursuant to a binding agreement or agreements (the
"Stock Sale Agreement") and (ii) if Acquiror has failed to enter
into a Stock Sale Agreement by the 180th day following the
Effective Date and Acquiror has failed to commence the Offering
prior to such date, Acquiror shall file a registration statement
with respect to such Offering with the SEC within 60 days of
receipt of the written request of NPJ unless Acquiror's
investment banker shall have advised Acquiror in writing
following receipt of such written request that because of then -
current market conditions it is not advisable for Acquiror to
conduct the Offering at that time, in which case Acquiror's
obligation to use its best efforts to conduct the Offering shall
be extended until such time as such investment banker, or such
other investment banker as Acquiror shall select, advises
Acquiror in writing that market conditions no longer render it
.inadvisable to conduct the Offering.
(b) On or prior to the Closing Date, subject to the receipt
by Acquiror of the consent of any stockholders of Acquiror which
may be necessary to grant the registration rights contemplated by
this paragraph (b) (it being understood that Acquiror shall use
its best efforts to obtain such consents on or prior to the
Closing Date but that Acquiror shall be under no obligation to
_ pay any fee or grant any other accommodation to any such
' stockholder in connection with obtaining such consent), Acquiror
and NPJ hereby agree to enter into a mutually acceptable
registration rights agreement (the "Registration Rights
Agreement") relating to the Acquiror Class A Common Stock to be
issued pursuant to the Merger containing terms and conditions
which are substantially similar to those contained in the
Registration Rights Agreement dated as of July 15, 1992 among
Acquiror, Boston Ventures Limited Partnership, III and certain
other Purchasers defined therein; provided, however, that (i) the
registration rights granted under the Registration Rights
Agreement shall not be available to any former stockholder of the
Company (collectively, the "Rights Holders") to the extent that
shares of Acquiror Class A Common Stock are then freely
transferable by the Rights Holder requesting such registration
rights in the manner in which such Rights Holders propose to sell
such shares without violation of the registration requirements of
the Securities Act; (ii) the Registration Rights Agreement will
provide for two demand registrations and unlimited so-called
"piggyback" registrations with respect to primary public
issuances by Acquiror of Acquiror Class A Common Stock (provided
that Acquiror shall only be required to include shares of
Acquiror Class A Common Stock then held by the Rights Holders to
the extent that, in Acquiror's reasonable judgment, such
registration would not interfere with such offering by Acquiror
or violate or conflict with any registration rights which may
then be held by holders of Acquiror's capital stock); and (iii)
the Rights Holders shall not be entitled to assign their rights
under the Registration Rights Agreement.
6.22 Matters Relating to Shareholders and Liquidity.
(a) Subject to applicable Law, Acquiror agrees to conduct a
shareholder relations program prior to the Closing, in form and
substance reasonably satisfactory to the parties hereto,
informing potential investors about the business and financial
condition of the Surviving Corporation.
(b) Acquiror covenants and agrees that, prior to the
Effective Time, it will effect a stock dividend, split or other
recapitalization of the Acquiror Common Stock in such amount and
in such form as Acquiror, with the advice of its investment
bankers, determines will improve the marketability and liquidity
of the Acquiror Class A Common Stock.
(c) By agreement dated the date hereof, a form of which is
attached hereto as Exhibit C, and pursuant to joinders to such
agreement, certain stockholders of the Company and Acquiror have
agreed to vote, or cause to be voted, all of the shares of
capital stock, whether now owned or hereafter acquired, of the
Company or Acquiror, as the case may be, held by each such
stockholder in favor of the Merger Transactions (the "Voting
Agreement"). The Company agrees to use its best efforts to cause
each director of the Company who is not a party to such Voting
Agreement (either as an original signatory thereto or pursuant to
a joinder thereto) to execute a joinder thereto as soon as
practicable after November 18, 1994.
i
6.23 Acquiror Board of Directors. (a) From November 18,
1994 to the Effective Time, the persons listed on Schedule 1.1
hereto or such other person designated in accordance with Section
1.1 hereof (the "Company Nominees") shall be given copies of all
written consents circulated for approval to Acquiror's Board of
Directors, shall be entitled to notice of and to attend all
meetings of Acquiror's Board of Directors, and shall receive
copies of all materials prepared for and distributed at or prior
to such meetings; provided, however, that each Company Nominee
shall, as a condition to receiving certain of such information
and attending certain of such meetings, first enter into a
confidentiality agreement with Acquiror containing customary
terms.
(b) If, at any such meeting, a resolution is submitted to
Acquiror's Board of Directors for voting thereon, then:
(i) if (A) such resolution is approved by Acquiror's
Board of Directors by a margin of only one vote, and (B)
each Company Nominee states in writing that such Company
Nominee would have voted against such resolution if such
Company Nominee had been a member of Acquiror's Board of
Directors, Acquiror agrees to act upon such resolution as
though it had not been approved by its Board of Directors;
and
_,70_
(ii) if, with respect to an Extraordinary Transaction,
f (A) at least two members of Acquiror's Board Of Directors
J vote against such resolution and (B) each Company Nominee
states in writing that such Company Nominee would have voted
against such resolution if such Company Nominee had been a
member of Acquiror's Board of Directors, then Acquiror
agrees to act upon such resolution as though it had not been
approved by its Board of Directors. For purposes of this
clause (ii), an "Extraordinary Transaction" shall mean (x)
any proposed issuance by Acquiror of Acquiror Class A Common
Stock (other than issuances in connection with the
compensation of Acquiror's employees, including, without
limitation, issuances of stock under Acquiror's restricted
stock purchase plan) at a price per share less than $485.00,
or (y) any proposed acquisition or disposition by Acquiror
or any of its Subsidiaries of assets having a fair market
value of more than $500,000,000 which, in the reasonable
judgment of the Company Nominees and the Company's
investment banker submitted to Acquiror in writing, is
reasonably likely to cause the per share value of the
Acquiror Class A Common Stock to be less than $485.00.
(c) At the expiration of the initial term of the Company
Nominees as members of Acquiror's Board of Directors, such Board
(or any nominating committee of such Board) will exercise all
authority under applicable Law to nominate for membership on such
Board two persons designated by NPJ, for a term which (if such
j persons are elected by Acquiror's stockholders) will commence and
expire together with other members of the Board of the same Class
as that set forth on Schedule 1.1 hereto; provided, however, that
(unless such designees are the Company Nominees) such designees
shall be reasonably satisfactory to Acquiror and its Board of
Directors. In the event that a Company Nominee or any other
person designated as a director by NPJ dies, resigns or ceases to
serve as such for any other reason, the vacancy resulting
therefrom shall be filled by Acquiror's Board of Directors with a
substitute designated by NPJ who is, reasonably satisfactory to
Acquiror and its Board of Directors.
6.24 Effect of Certain Events. If at any time prior to the
approval by the Company's stockholders of the Merger Transactions
(a) Acquiror has elected to issue Acquiror Preferred Stock in
connection with the Merger and (b) the Joint Proxy
Statement/Prospectus has been prepared, then the Company shall
use its best efforts to cause the holders of not less than 50.1°1
of the voting power of each class of Company Common Stock (when
aggregated with the voting power represented by direct
signatories to the Voting Agreement and Persons who have
theretofore executed joinder agreements pursuant to which they
are bound by the Voting Agreement) to execute joinder agreements
pursuant to which such holders shall agree to be bound by the
terms of the Voting Agreement. At such time as (i) the Company
delivers to Acquiror notification that each of the foregoing
l �1 events has occurred and executed originals of such joinder
agreements, and (ii) Acquiror has delivered to the Company an
71 -
executed joinder agreements as a result of which stockholders of
( Acquiror holding not less than two-thirds of the combined voting
-' power of Acquiror Common Stock and Acquiror Series A Preferred
Stock (when aggregated with the voting power represented by
direct signatories to the Voting Agreement) have agreed to be
bound by the terms of the Voting Agreement then, from and after
such date, Sections 8.1(e) and 8.3 of this Agreement shall be
deemed null and void and of no further force and effect,
Provided, however, that if, at any time prior to the approval by
the Company's stockholders of the Merger Transactions, (x) the
enforceability of the obligations under the Voting Agreement of
any of the Company stockholders who are parties thereto, or the
enforceability of any of the joinder agreements executed by
Company stockholders, is challenged in any respect, (y) any
provision of any such agreement is breached in any respect, or
(z) such agreements, taken in the aggregate, cease to represent
the obligations of the holders of at least 50.1°1 of the voting
power of each class of Company Common Stock, then the provisions
of Sections 8.1(e) and 8.3 shall be reinstated ab initio into
this Agreement.
6.25 Acquiror Schedules. Acquiror shall deliver to the
Company from time to time information supplementing or amending
Schedules 5.6 and 5.8 hereto to reflect changes with respect
thereto occurring after November 18, 1994 and prior to the
Closing Date (it being understood by the parties that such
changes may not relate to matters which occurred or were in
existence on or prior to November 18, 1994). Any covenant,
representation or warranty of Acquiror to which any such
supplemented or amended Schedule pertains shall be deemed to have
been so amended as of November 18, 1994.
6.26 Employee Stock Options. Effective upon the
Distribution, (i) NPJ shall assume in their entirety the Units
Plan, the Stock Plan, the Option Plan and the Directors Option
Plan; (ii) each stock option outstanding under the Option Plan
and the Directors Option Plan and each unit outstanding under the
Units Plan that is not exercised for, or converted into, Company
Common Stock shall be assumed by NPJ, and all references in any
such plan to the Company and to Company Common Stock shall be
deemed to refer to NPJ and NPJ Common Stock; and (iii) each
restricted stock award subject to vesting conditions under the
Stock Plan shall be assumed by NPJ and all references in any such
restricted stock award to the Company and to Company Common Stock
shall be deemed to refer to NPJ and NPJ Common Stock. The
Company, Broadcasting and NPJ covenant that as of the
Distribution, there shall be no options or units (or rights with
respect thereto) outstanding under the Option Plan, the Directors
Option Plan or the Units Plan or any unvested stock awards
outstanding under the Stock Plan.
6.27 Rights Plan. The Company agrees that as soon as
/ practicable after the date hereof it will enter into an amendment
to the Rights Agreement in form and substance reasonably
satisfactory to the Company and Acquiror pursuant to which, among
_72_
other things, the Rights Agreement will be amended to provide for
{ the following: (i) that the execution and delivery of this
Agreement, and the consummation of the Merger Transactions
(including, without limitation, the Merger, the Dissolution and
the Distribution) are, not', events which would (x) permit the
holders of Rights to exercise such Rights to acquire shares of
the Company Common Stock, or (y) require the Company, in
accordance with Section,ll(a)(ii) of the Rights Agreement, to
exchange any or all of the outstanding Rights for shares of the
Company Common Stock; (ii) in no event will the provisions of
Sections 11(n) and 13 of the Rights Agreement apply to the Merger
Transactions (including, without limitation, if a Rights
Distribution Date or Stock Acquisition Date has occurred between
the date of the Original Agreement and the Holding Effective
Time); (`iii) that effective upon the Dissolution, the Rights
Agreement will terminate and be of no further force and effect;
and (iv) such other amendments to the Rights Agreement as
Acquiror may reasonably request. In addition, the Company will
not take any action resulting in the application of the Rights
Agreement to the Merger Transactions.
ARTICLE 7;
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
7.1 Closing and Closing Date. As soon as practicable after
the satisfaction or waiver of the conditions set forth herein
( 1 (but no later than ten Business Days thereafter) and prior to the
filing of the Certificate of Merger', a closing of the
transactions contemplated hereby (the "Closing") shall take place
at the offices of Sullivan & Worcester, one 'Post Office Square,
Boston, Massachusetts 02109, or on such other date and at such
other :location as the parties may agree in writing. The date on
which the Closing occurs is referred to as the "Closing Date."
7.2 Conditions to the Obligations of the Comoanv, NPJ
Holding. Broadcasting and Accruiror. The respective obligations
of the Company, NPJ, Holding and Broadcasting, on the one hand,
and Acquiror, on the other hand, to consummate the transactions
contemplated hereby are subject to the satisfaction, on or prior
to the Closing Date, of the following conditions:
(a) The Merger Transactions shall have been approved and
adopted by the stockholders of the Company as contemplated by
Section 6.13;
(b) The Merger Transactions and the Recapitalization
Amendment shall have been approved and adopted by the
stockholders of Acquiror as contemplated by Section 6.14;
(c) The transactions contemplated by Article 2 hereof shall
have been consummated as contemplated herein and in accordance
with applicable Law, and each of the conveyancing instruments,
C liability assumption instruments and other instruments, documents
and agreements executed in connection with such transactions
-73 -
shall be in a form reasonably satisfactory to Acquiror and its
counsel;.
(d) Any waiting period applicable to the consummation of
the transactions contemplated hereby under the HSR Act shall have
expired or been terminated and all notices to, or permits,
consents, waivers, approvals, authorizations and orders of, third
parties which are material to the conduct after the Effective
Time of the business of the Surviving Corporation and its
Subsidiaries and governmental authorities required with respect
to the transactions contemplated hereby shall have been filed or
obtained (without any material modification to the Licenses,
Franchises or agreements to which they pertain as would dilute
the benefits to Acquiror of the transactions contemplated hereby)
and be in full force and effect, and all appeal periods for
challenging any such permit, consent, waiver, approval,
authorization or order shall have expired and no such challenge
shall be pending, provided, however, that this condition shall
not apply with respect to any authorization, consent, waiver,
order or approval necessary for the transfer of control of any
Franchise if the condition in Section 7.4(f) has been satisfied
or waived by Acquiror;
(e) 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
Law, injunction or other order (whether temporary or preliminary
or permanent) which remains in effect and which has the effect of
making the transactions contemplated hereby illegal or otherwise
prohibiting the transactions contemplated by the Transaction
Documents, or which questions the validity or the legality of the
transactions contemplated hereby and which could reasonably be
expected to have a Material Adverse Effect on the business of the
Cable Subsidiaries or Acquiror and its Subsidiaries taken as a
whole;
(f) The Registration Statements shall have been declared
effective under the Securities Act and no stop orders with
respect thereto shall have been issued;
(g) The Company shall have received from (i) the IRS a
private .letter ruling as contemplated by Section 6.17 hereof and
(ii) an opinion of Edwards & Angell to the effect that the Merger
constitutes a tax-free reorganization under Section 368 of the
Code; and
(h) There shall not have occurred and be continuing (i) a
nationwide moratorium on commercial banking activities in the
United States or (ii) any general suspension of trading for more
than one Business Day in securities on any United States national
securities exchange or in the over-the-counter market.
j 7.3 Conditions to the Obligations of the Company, NPJ,
11 Holding and Broadcasting. The obligations of the Company, NPJ,
Holding and Broadcasting to consummate the transactions
-74 -
contemplated hereby (other than the Company's obligation to mail
the Joint Proxy Statement/Prospectus, if required by applicable
�- Law or the Company's Articles of Incorporation) 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 hereto 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 at the Closing Acquiror
shall have delivered to NPJ a certificate to that effect;
(b) Each of the obligations 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
on or before the Closing Date and at the Closing Acquiror shall
have delivered to NPJ a certificate to that effect;
(c) The Company and NPJ shall have received an opinion of
Sullivan & Worcester, counsel for Acquiror; dated as of the
Closing Date, in form and substance reasonably satisfactory to
the Company, NPS and their counsel; and
(d) The Acquiror Class A Common Stock and the Acquiror
Preferred Stock (if any is issued pursuant to the Merger) shall
have been approved for :listing on the National Association of
I Securities Dealers Automated Quotation National Market System or
a national securities exchange, subject to official notice of
issuance.
Anything in this Section 7.3 to the contrary
notwithstanding, the conditions set forth in Section 7.3(a) to
the obligation of the Company, NPS, Holding and Broadcasting to
effect the transactions contemplated hereby shall be deemed
satisfied (a) notwithstanding any failure of any representation
or warranty of Acquiror to be true and correct as of the Closing
Date, if (i) the aggregate amount of Losses and Expenses which
could reasonably be expected to arise as a result of the failure
of such representations and warranties to be true and correct as
of the Closing Date would not exceed $10,000,000 (the "Threshold
Amount") or (ii) in the event such Losses and Expenses exceed the
Threshold Amount but are less than $100,000,000, Acquiror agrees
at or prior to the Effective Time to indemnify and hold harmless
NPJ immediately prior to the Effective Time against any such
Losses and Expenses in excess of the Threshold Amount on terms
and conditions reasonably satisfactory to NPJ and (b)
notwithstanding any failure of any representation or warranty of
Acquiror as it relates to any Subsidiary or cable television
system of Acquiror or any of its Subsidiaries acquired by
Acquiror or any of its Subsidiaries after November 18, 1994 to be
true and correct as of the Closing Date unless such failure,
individually or in the aggregate, would have a Material Adverse
( Effect on Acquiror and its Subsidiaries taken as a whole.
-75-
7.4 Conditions to Obligations of Acouiror. The obligations
of Acquiror to effect the transactions contemplated hereby (other
than the Acquiror's obligation to mail the Joint Proxy
Statement/Prospectus, if required by applicable Law or the
Acquiror Restated Certificate) are subject to the satisfaction,
on or prior to the Closing Date, of the following conditions:
(a) The representations and warranties of the Company and
NPJ contained in this Agreement or in any other document
delivered pursuant hereto 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 at the
Closing NPJ shall have delivered to Acquiror a certificate to
that effect;
(b) Each of the obligations of the Company, NPJ, Holding
and Broadcasting 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 at the Closing NPJ shall have delivered to Acquiror a
certificate to that effect;
(c) Broadcasting shall have no assets except (i) all the
capital stock of the Cable Subsidiaries (either directly or
indirectly), (ii) the contract rights referred to in Section
2.5(a)(ii), (iii) the cash referred to in Section 2.5(a)(iii) to
t the extent such cash has not previously been used to pay other
expenses of the Company, Holding or Broadcasting described
` therein, (iv) the Palmer Systems, the Related Assets and the
assets of Westerly or Colony, as the case may be, to the extent
the transactions contemplated by the last sentence of Section 2.6
hereof shall have been consummated, and (v) assets that in the
aggregate are not material to Broadcasting and its Subsidiaries
(excluding the Cable Subsidiaries) taken as a whole and are
associated with the operation of the cable systems of
Broadcasting and its Subsidiaries;
(d) Immediately prior to the Effective Time (after giving
effect to NPJ's assumption of liabilities pursuant to the
Contribution Agreement), Broadcasting shall have no liabilities
except (i) any liabilities associated with the operations of the
Cable Subsidiaries or the cable operations of Broadcasting, (ii)
the New Company Debt, (iii) the contractual obligations referred
to in Section 2.5(b)(iii), and (iv) the liabilities set forth on
Schedule 2.5(b) hereto;
(e) Acquiror shall have received an opinion of Edwards &
Angell, counsel for the Company and NPJ, dated as of the Closing
Date, in form and substance reasonably satisfactory to Acquiror
and its counsel;
(f) The aggregate number of cable television subscribers in
the Cable Franchise Areas that are Transferable Franchise Areas
0 (as defined below) shall be ninety-five percent (the "Required
Percentage") of the aggregate number of cable television
-76 -
subscribers in all Cable Franchise Areas; Provided, however, that
the condition set forth in this Section 7.4(f) shall not be
`- deemed to be satisfied until the earlier to occur of (x) thirty
(30) days following the date on which the Required Percentage is
obtained, (y) the date on which the condition set forth in this
Section 7.4(f) would be satisfied if the Required Percentage were
one hundred percent or (z) December 31,, 1995, For purposes of
this Section 7.4(f):
(i) A Cable Franchise Area means any of the geographic
areas in which the Company or the Cable Subsidiaries are
authorized to provide cable television service pursuant to a
Franchise or provide cable television service without a
Franchise;
(ii) A Cable Franchise Area is a Transferable
Franchise Area if (a) any authorization, consent, waiver,
order or approval of any governmental authority necessary
for the transfer of control of the Franchise for such Cable
Franchise Area in connection with the consummation of the
transactions contemplated by this Agreement shall have been
obtained; (b) no authorization, consent, waiver, order or
approval of any governmental authority is necessary for the
transfer of control of the Franchise for such Cable
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 Cable Franchise Area;
(iii) If, at any time prior to the Closing Date; any
governmental authority exercises any right 'reserved to it in
a Franchise for any Cable Franchise Area to acquire the
Franchise upon the actual or proposed transfer of control of
such Franchise, then during the pendency of any proceeding
with respect to the acquisition of the Franchise by such
governmental authority, and notwithstanding any other action
taken by the governmental authority, (a) such Franchise
shall be deemed to be one with respect to which consent is
required for the transfer of control of such Franchise in
connection with the consummation of the transactions
contemplated by this Agreement and (b) the governmental
authority shall be deemed not to have granted its consent to
the transfer of control of such Franchise; and
(iv) In calculating the number of cable television
subscribers in a Cable Franchise Area, the number of Basic
Subscribers in such Cable Franchise Area on September 30,
1994 shall be used.
(g) Broadcasting and NPJ shall have entered into a non-
competition agreement with Acquiror in substantially the form
attached hereto as Exhibit D;
(h) NPJ shall have delivered to Acquiror a certificate
signed by the chief executive officer and the chief financial
-77 -
officer of NPS certifying that there are no outstanding options
lto acquire any capital stock of the Company, Holding and
Broadcasting and as to the number of shares of capital stock of
the. Company, Holding and Broadcasting outstanding as of the
Closing Date, indicating the class and series of such shares;. and
(i) Neither Broadcasting nor Acquiror shall, pursuant to
the terms of the Rights Agreement or otherwise, be liable for, or
be required to assume, any obligation or duty of the Company
under the Rights Agreement and the holders of Rights shall not
have any right to acquire any shares of Broadcasting Common Stock
or Acquiror Common Stock pursuant to the exercise of such Rights.
Anything in this Section 7.4 to the contrary
notwithstanding, the conditions set forth in Section 7,4(a) to
the obligation of Acquiror to effect the transactions
contemplated hereby shall be deemed satisfied notwithstanding any
failure of any representation or warranty (other than the
representations and warranties set forth in Sections 3.6 and
4.3(a)) of the Company or NPJ to be true and correct as of the
Closing Date, if (i) the aggregate amount of Losses and Expenses
which could reasonably be expected to arise as a result of the
failure of such representations and warranties to be true and
correct as of the Closing Date would not exceed $5,000,000 (the
"Threshold Amount") or (ii) in the event such Losses and Expenses
exceed the Threshold Amount but are less than $50,000,000, NPJ
f- agrees at or prior to the Effective Time to indemnify and hold
harmless Acquiror and its Subsidiaries against any such Losses
and Expenses in excess of the Threshold Amount on terms and
conditions reasonably satisfactory to Acquiror.
ARTICLE 8.
TERMINATION
8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time
prior to the Closing Date:
(a) by mutual written consent duly authorized by the Boards
of Directors of the Company, NPJ and Acquiror;
(b) by either the Company or Acquiror, (i) if at the
stockholders' meeting of Acquiror referred to in Section 6.14
(including any postponement or adjournment thereof), the Merger
Transactions and the Recapitalization Amendment shall fail to be
approved and adopted by the affirmative vote specified herein,
(ii) if at the stockholders' meeting of the Company referred to
in Section 6.13 (including any postponement or adjournment
thereof), the Merger Transactions shall fail to be approved and
adopted by the affirmative vote specified herein, or (iii) so
long as the terminating party has not breached its obligations
hereunder, after December 31, 1995 (the "Termination Date"), if
the Merger or the transactions contemplated hereby shall not have
been consummated on or before such date;
(c) by the Company, provided ithas not breached any of its
obligations hereunder, if either (A) Acquiror fails to perform
l any covenant in this Agreement when performance thereof is due
and does not cure the failure within 20 Business Days after the
Company delivers written notice thereof, or (B) any condition in
Sections 7_2 and 7.3 of this Agreement is not satisfied or
capable of being satisfied prior to the Termination Date;
(d) by Acquiror, provided it has not breached any of its
obligations hereunder, if either (i) the Company or NPJ fails to
perform any covenant in this Agreement when performance thereof
is due, and does not cure the failure within 20 Business Days
after written notice by Acquiror thereof, (ii) any condition in
Sections 7.2 and 7.4 of this Agreement is not satisfied or
capable of being satisfied prior to the Termination Date, or
(iii) the Company Board of Directors materially modifies or
withdraws the approval, determination or recommendation referred
to in Section 3.4 and Section 6.9; or
(e) by the Company, whether or not the conditions set forth
in Section 7.3 have been satisfied; if the Board of Directors of
the Company determines, with the written advice of counsel
provided to Acquiror, that it may be required to do so in the
exercise of its fiduciary duties.
8.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.1 hereof; this Agreement,
except for the provisions of Section 6,6(e) - (g), Section 8.3
and Section 10.12, shall forthwith become null and void and have
no effect, without any liability on the part of any party or its
directors, officers or stockholders.. Nothing in this Section 8.2
shall relieve any party to this Agreement of liability for breach
of this Agreement.
8.3 Fees and Expenses.
(a) In order to induce Acquiror to, among other things,
enter into this Agreement, the Company agrees as follows: If
this Agreement is terminated (A) by Acquiror pursuant to Section
8.1(d)(iii) hereof, (B) by the Company pursuant to Section 8.1(e)
hereof, or (C) by the Company or Acquiror pursuant to Section
8.1(b)(ii) hereof and the Company Board of Directors shall have
materially modified or withdrawn the approval, determination or
recommendation referred to in Sections 3.4 and 6.9, then the
Company shall promptly pay to Acquiror a fee of $42,000,000, plus
an amount equal to the actual 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 hereby; provided, however, that such
payment for fees and expenses shall in no event exceed
$10,000,000. If this Agreement is terminated by Acquiror
pursuant to Section 8.1(d)(i) or 8.1(d)(ii) hereof, other than as
a result of any condition in Section 7,2 or the condition in
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Section 7.4(f) not being satisfied and not being capable of being
(r satisfied prior to the Termination Date (except if the failure of
the condition in Section 7.4(f) results from the refusal of one
or more governmental authorities to consent to the transfer of
control of one or more Franchises to Acquiror for reasons other
than the qualifications or fitness of Acquiror), then the Company
shall promptly pay to Acquiror an amount equal to the actual
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
hereby; provided, however, that the payment described in this
sentence shall in no event, exceed $10,000,000. The $42,000,000
payment (the "Break -Up Fee Payment") described in the first
sentence of this Section 8.3(a) shall be made in same day funds
no later than five business days after the termination of this
Agreement. The payment for fees and expenses described in the
first and second sentences of this Section 8.3(a) shall be made
in same day funds no later than five business days after receipt
by the Company of detailed written statements describing the fees
and expenses..
(b) In order to induce the Company and NPJ to, among other
things, enter into this Agreement, Acquiror agrees as follows:
If this Agreement is terminated (i) by the Company pursuant to
i-• Section 8.1(c), other than as a result of any condition in
Section 7.2 not being satisfied and not being capable of being
satisfied prior to the Termination Date, or (ii) by Acquiror
pursuant to Section 8.1(d)(ii) as a result of the condition in
Section 7.4(f) not being satisfied and not being capable of being
satisfied prior to the Termination Date (if the failure of the
condition in Section 7.4(f) results from the refusal of one or
more governmental authorities to consent to the transfer of
control of one or more Franchises to Acquiror for reasons
relating to the qualifications or fitness of Acquiror), Acquiror
shall pay promptly to the Company an amount equal to the actual
reasonable fees and expenses paid or payable by or on behalf of
the Company and NPJ 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 $10,000,000.
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.
(c) (i) The Company hereby grants to Acquiror or any
nominee designated by Acquiror (in such capacity, "Buyer")
an irrevocable option (the "Option"), exercisable in
accordance with clause (iii) below, to purchase and acquire,
at a purchase price of $68,500,000 (the "Option Purchase
/ Price"), all of the right; title and interest of the Company
l% and the Cable Subsidiaries (collectively, the "Seller") in
and to the cable television system operated in Palm Springs,
W-1010
California and the surrounding communities previously
identified in writing by the Company to Acquiror as the
"Palm Springs Cluster", together with all accounts
receivable, inventory; supplies, machinery, plant and
equipment, tools, customer lists, contracts, intangible
assets, goodwill and all other assets, tangible or
intangible, used or usable in connection therewith (the
"Palm Springs System"), free and clear of all Liens.
(ii) Such transfer and assignment shall be free and
clear of all liabilities and obligations of Seller, and
Buyer shall be under no obligation to assume or perform, and
shall not assume or perform, any obligation, liability or
indebtedness of Seller. All of the representations and
warranties made by the Company and NPJ herein which are
applicable to the Palm Springs System shall be deemed made
by the Company and Seller in connection with Buyer's
purchase of the Palm Springs System, provided that such
representations and warranties shall not survive beyond the
Option Closing (as defined below) except that the
representations and warranties in Section 4_9 which pertain
to the Seller's title to the Palm Springs System (the "Palm
Springs Title Representation") shall survive indefinitely.
The Company hereby agrees to indemnify, defend and hold
harmless Acquiror and Buyer against any Losses and Expenses
to the extent such Losses and Expenses are based upon or
arise out of any untruthful or inaccurate representation
made by the Company or NPJ in the Palm Springs Title
Representation. Any claim for indemnification in respect of
the transfer and assignment of the Palm Springs System shall
be conducted in accordance with the provisions of Sections
9.6 and 9;7 hereof,
(iii) Acquiror may exercise the Option at any time
within 45 days following the date on which Acquiror becomes
entitled to a Break -Up Fee Payment by notice in writing to
the company (the "Option Notice"). Such Option Notice shall
specify a date not less than 180 days from the date of the
Option Notice for the purchase of the Palm Springs System,
The Company agrees to, and shall cause Seller to, use its
best efforts to obtain all authorizations, consents, orders,
waivers or approvals necessary or desirable for the transfer
of the Palm Springs System to Buyer and to make any filings
required by any governmental authority or applicable Law,
(iv) The closing of the exercise of the Option (the
"Option Closing") shall take place at the offices of
Sullivan & Worcester at the address specified in Section
7.1, on the date specified in the Option Notice, or on such
other date and at such other location as Acquiror and the
Company may agree in writing. At such closing, (A) Acquiror
shall make payment of the OptionPurchasePrice to the
Company, (B) the Company and Seller shall deliver to Buyer
evidence reasonably satisfactory to Buyer and its counsel
�'� that all necessary authorizations, consents, orders, waivers
_81 -
and approvals have been obtained to vest in Buyer all of the
right, title and interest of the Company and Seller in and
to the Palm Springs System, (C) the Company and Seller shall
deliver to Buyer such conveyancing instruments and documents
reasonably necessary or appropriate to vest in Buyer
ownership of Seller as contemplated by this paragraph (c),
which instruments and documents shall be in a form
reasonably satisfactory to Buyer and its counsel, and (D)
the Company and Seller shall deliver to Acquiror all books
and records regarding the operation of the Palm Springs
Systems and such other information and materials as shall
ensure a smooth transition of the operation of the Palm
Springs System from the Seller to Buyer.
(v) The Option shall terminate upon the earlier of the
Effective Time or the termination of this Agreement in
accordance with Section 8.1 (other than a termination
pursuant to which Acquiror becomes entitled to a Break -Up
Fee Payment).
ARTICLE 9.
SURVIVAL; INDEMNIFICATION
9.1 Survival. All representations, warranties, covenants,
agreements and obligations in this Agreement or in any
f certificate required to be delivered by this Agreement shall not
survive beyond the Closing Date except that (i) any covenant,
agreement or obligation to be performed after the Closing Date
shall survive until such covenant, agreement or obligation has
been fully performed, and (ii) the provisions of this Article 9
and the representations and warranties contained in Sections 3.6
and 4.3 of this Agreement shall survive indefinitely.
9..2 Indemnification by NPJ. NPJ hereby agrees to
indemnify, defend and hold harmless Acquiror, each of Acquiror's
Subsidiaries, each of their respective successors -in -interest and
each of their respective past and present officers and directors
against any Losses and Expenses to the extent such Losses and
Expenses (i) arise out of or relate to the Assumed Liabilities or
the Contributed Assets (each as defined in the Contribution
Agreement) or the operations of any of the businesses contributed
to NPJ pursuant to the Contribution Agreement, (ii) are based
upon or arise out of any untruthful or inaccurate representation
made by the Company and NPJ in Section 3.6 or 4,3 hereof, (iii)
are based upon or arise out of any inaccurate information in the
certificate to be delivered by the Company, Holding and
Broadcasting pursuant to Section 7.4(h), or (iv) are based upon
or arise out of the failure of the Company to comply with the
covenant set forth in Section 6.3(g) or 6.26.
9.3 Indemnification by Accuiror. Acquiror hereby agrees to
indemnify and hold harmless NPJ, each of NPJ's Subsidiaries and
their respective successors -in -interest and each of their
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respective past and present officers and directors against
and all Losses and Expenses to the extent such Losses and
`- Expenses are based upon or arise out of any untruthful or
inaccurate representation made by Acquiror in Section 5.6
any
hereof.
9.4 Indemnification by the Company. The Company (and from
and after the Dissolution, Broadcasting) hereby agrees to
indemnify, defend and hold harmless NPJ, each of NPJ's
Subsidiaries and their respective successors -in -interest and each
of their respective past and present officers and directors
against any Losses and Expenses, joint or several, arising out of
or in connection with the business operations of the Cable
Subsidiaries„ the Retained Liabilities or the Retained Assets.
9.5 Additional Indemnification Relating to Certain
Litigation and Claims. (a) The Company and, from and after the
Effective Time, NPS (individually and not jointly with the
Company) and Acquiror each agrees to indemnify and hold harmless
the other against any and all Losses and Expenses to the extent
such Losses and Expenses are based upon or arise out of any suit,
action or proceeding brought by the holders of the Indemnifying
Party's (and, when NPJ is the indemnifying party, the Company's,
Holding's and Broadcasting's) debt or equity securities as a
result of, or in connection with, the execution and delivery of
this Agreement and the transactions contemplated hereby;
provided, however, that the Company or Acquiror; as the case may
be, shall not be entitled to indemnification under this Section
I 9,5 to the extent (i) such Losses and Expenses (or actions in
respect thereof) arise out of or are based upon (A) an untrue
statement or alleged untrue statement of a material fact
contained in any SEC Filing or (B) the omission or alleged
omission to state 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, and
(ii) it was responsible for such misstatement or omission.
(b) The Company and, from and after the Effective Time, NPJ
(individually and not jointly with the Company) agrees to
indemnify and hold harmless Acquiror and its Subsidiaries against
any and all Losses and Expenses to the extent such Losses and
Expenses are based upon or arise out of any action or claim of
any nature whatsoever asserted by (i) any holder listed on
Schedule 4,3 of any of the equity securities of any of the Cable
Subsidiaries, or (ii) any holder listed on Schedule 3.6 of any of
the equity securities of Holding or Broadcasting listed on
Schedule 3.6, including, without limitation, any action or claim
asserted in connection with or relating to the purchase by any
Cable Subsidiary or the Company of the equity securities of any
such holder.
9.6 Notification of Claims. For the purpose of this
Article 9, the term "Indemnifying Party" shall mean the party
having an obligation hereunder to indemnify the other party or
parties) pursuant to this Article 9, and the term "Indemnified
Party" shall mean the party having the right to be indemnified
-83 -
pursuant to this Article 9. whenever any claim shall arise for
indemnification under this Article 9, 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 unless such failure materially
prejudices the Indemnifying Party.
9.7 Indemnification Procedures.
(a) After the notice required by Section 9.6, if the
Indemnifying Party undertakes to defend any such claim, it shall
be required 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 the same, 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 such settlement (i) makes no admission or
acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the
Indemnified Party and (iii) does not require the Indemnified
Party to make any payment or forego or take any action. The
Indemnified Party shall cooperate in all reasonable respects with
the Indemnifying Party and its attorneys in the investigation,
trial and defense of any lawsuit or action with respect to such
claim and any appeal arisingtherefrom (including the filing in
the Indemnified Party's name of appropriate cross claims and
counterclaims). The Indemnified Party may, at its own cost,
participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any
appeal arising therefrom.
(b) If, after receipt of a claim notice pursuant to Section
9.6, 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, without
limitation, the settlement thereof without the consent of the
Indemnifying Party). If there are one or more legal defenses
available to the Indemnified Party that conflict with those
available to the Indemnifying Party, the Indemnified Party shall
have the right, at the expense of the Indemnifying Party, to
assume the defense of the lawsuit or action; provided, however,
that the Indemnified Party may not settle such lawsuit or action
without the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed.
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(c) 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, If the Indemnified
Party determines that the contest should be continued, the
Indemnifying Party shall be ,liable hereunder only to the extent
of the lesser of (i) the amount which the other party(ies) 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 or (ii) such amount for which the
Indemnifying Party may be liable with respect to such claim by
reason of the provisions hereof,
9.8 Working Capital Adjustment.
(a) Immediately prior to the Effective Time (and giving
effect to the Distribution), Broadcasting shall prepare and
deliver to Acquiror a schedule showing Broadcasting's best
estimate of the Working Capital (the "Broadcasting Working
Capital Calculation"). If the Broadcasting Working Capital.
Calculation is greater than zero, Acquiror shall pay the excess
to NPJ in immediately available funds on the Effective Time; if
the Broadcasting Working Capital Calculation is less than zero,
NPJ shall pay the difference to Acquiror in immediately available
funds on the Effective Time.
(b) As promptly as practicable after the Effective Time,
but in any event within 90 days thereafter, Acquiror shall
prepare and deliver to NPJ a schedule showing Acquiror's
determination of the Working Capital as of the Effective Time
(and giving effect to the Distribution) (the "Acquiror Working
Capital Calculation"), If ,NPJ disagrees with the Acquiror
Working Capital Calculation, NPS shall give notice thereof to
Acquiror within 30 days after delivery of the Acquiror Working
Capital Calculation to NPJ.
(c) Acquiror and NPJ shall attempt to settle any such
dispute; any such settlement shall be final and binding upon
Acquiror and NPJ. If, however, Acquiror and NPJ are unable to
settle such dispute within 30 days after receipt of such notice
of dispute by Acquiror, the dispute shall be submitted to an
independent certified public accounting firm mutually acceptable
to Acquiror and NPJ for resolution, and the decision of such
independent certified public accountants shall be final and
binding upon Acquiror and NPJ. All costs incurred in connection
with the resolution of said dispute by such independent public
accountants, including expenses and fees for services rendered,
shall be paid one half by Acquiror and one half by NPJ. Acquiror
and NPJ shall use reasonable efforts to have the dispute resolved
1 within 60 days after such dispute is submitted to said
independent public accountants, but neither Acquiror or NPS shall
_ have any liability to any party hereto if such dispute is not
resolved within such 60 -day period.
(d) Within 10 Business Days following a final determination
of the Working Capital (whether as a result of NPJ failing to
give notice of NPJ's disagreement with Acquiror's determination
within the time period prescribed above, a resolution by Acquiror
and NPJ of any such disagreement, or a determination by an
accounting firm selected pursuant to clause (c) above to .resolve
any disagreement among the parties), Acquiror shall pay to NPJ,
or NPJ will pay to Acquiror, as the case may be, in immediately
available funds, any additional payment to which such party would
have been entitled on the Effective Time under clause (a) of this
Section based on the final determination of the Working Capital.
ARTICLE 10.
MISCELLANEOUS
10.1 Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings with respect
to the subject matter hereof_
10.2 Notices. All notices and other communications
`) hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by telecopy with answerback,
by express or overnight mail delivered by a nationally recognized
air courier (delivery charges prepaid) or by registered or
certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
if to Acquiror:
Continental Cablevision, Inc.
The Pilot House, Lewis Wharf
Boston, MA 02110
Telecopy: (617) 742-0530
Attention: Amos B. Hostetter, Jr.
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attention: Patrick K. Miehe, Esq.
{/ if to the Company, Holding, Broadcasting or NPJ:
The Providence Journal Company
75 Fountain Street
Providence, RI 02902
Telecopy: (401) 277-7889
Attention: Stephen Hamblett and
John L. Hammond, Esq.
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 08903
Telecopy: (401) 276-6611
Attention: Walter G.D. Reed, Esq.
or to such other address as the party to whom notice is given may
have previously furnished to the others in writing in the manner
set forth above. Any notice or communication delivered in person
shall be deemed effective on delivery. Any notice or
communication sent by telecopy or by air courier shall be deemed
effective on the first Business Day at the place from which such
notice or communication is received following the day on which
such notice or communication was sent. Any notice or
communication sent by registered or certified mail shall be
r deemed effective on the fifth Business Day at the place from
which such notice or communication was mailed following the day
in which such notice or communication was mailed.
10..3 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 hereto.
10.4 Descriptive Headings. The descriptive headings herein
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.
10.5 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement except for
Section 6.6 and Article 9 (which are intended to be for the
benefit of the Persons provided for therein, and may be enforced
by such Persons.)
10.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to he an original,
but all of which shall constitute one and the same agreement_
10.7 Expenses. Prior to the Closing Date, the Company,
Holding and Broadcasting shall pay, or make adequate provision
for the payment of, all costs and expenses required to be paid by
them under this Agreement in connection with the transactions
contemplated by this Agreement. All costs and expenses incurred
in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses;
provided, however, that the following fees, costs and expenses
shall be borne one-half by the Company and one-half by Acquiror:
(A) filing fees under the HSR Act; (B) closing fees (including,
without limitation, facility fees, syndication fees and other
arrangement fees, if any) to be paid to the financial
institutions which will extend the New Company Debt (except that
the expenses borne by the Company pursuant to this clause (B)
shall not exceed 40 basis points of the aggregate principal
amount of the New Company Debt); and (C) fees, costs and expenses
to be paid to third parties that the Company and Acquiror
mutually agree to make in connection with obtaining
authorizations, consents, orders, waivers or approvals of any
governmental authority (including, without limitation, the FCC)
necessary for the transfer of control of any Franchise or License
(except that the Company shall be solely responsible for all
costs and expenses which result from the material violation of
the terms of a Franchise by the Company or a Cable Subsidiary and
Acquiror shall be solely responsible for all costs and expenses
which result from material amendments to the terms of a Franchise
made solely at the request of Acquiror).
l 10.8 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 stockholder of
any party hereto or any officer, director, employee, agent,
representative or investor of any party hereto.
10.9 Binding Effect; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective legal representatives and successors. This
Agreement may not be assigned by any party hereto.
10.10 Amendment. This Agreement may not be amended except
by an instrument in writing signed on behalf of all the parties.
Any amendment to this Agreement by a party after the meeting of
its stockholders referred to in Section 6.13 or 6.14, as the case
may be, may be made without seeking the approval of such
stockholders to the extent permissible under applicable Law.
10.11 Extension; Waiver. Any party hereto may (i) extend
the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in
the representations and warranties of any other party contained
herein or in any document, certificate or writing delivered
pursuant hereto by any other party, or (iii) waive compliance
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. No failure
or delay on the part of any party hereto in the exercise of any
IMM
right hereunder shall impair such right or be construed to be a
1 waiver of, or acquiescence in, any breach of any representation,
warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing
under this agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
10.12 Legal Fees; Costs. If any party hereto institutes
any action or proceeding 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.
10.13 Specific Performance. The parties acknowledge that
money damages are not an adequate remedy for violations of this
agreement and that any party may, in its sole discretion, apply
to a court of competent jurisdiction for specific performance or
injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any
violation hereof and, to the extent permitted by applicable law,
each party waives any objection to the imposition of such relief.
10.14 Severability, If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
=' force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
10.15 Further Agreements Relating to the Oricrinal Aareement.
In the event that (i) the private letter ruling contemplated by
Section 6.17 hereof is not received from the IRS within 180 days
of the Company's request therefor or (ii) prior to the date
specified in clause (i), the IRS formally notifies the Company
that it is not willing to issue such ruling, Acquiror, the
Company and NPJ agree promptly to amend and restate this
Agreement so that it is in the form of the original Agreement and
to abide by the provisions of that certain side letter among the
Company, NPJ and Acquiror dated as of even date with this
Agreement.
0
ARTICLE 11.
(' DEFINITIONS
When used in this Agreement, the following terms shall have
the meanings indicated.
"Accumulated Funding Deficiency" means an accumulated
funding deficiency, as defined in Section 302 of ERISA and
Section 412 of the Code.
"Acquiror" has the meaning set forth in the first paragraph
of this Agreement.
"Acquiror Balance Sheet" has the meaning set forth in
Section 5.7.
"Acquiror Benefit Arrangement", "Acquiror Employees",
•"Acquiror Employee Plan" and "Acquiror Plan" have the meanings
set forth in Section 5.15.
"Acquiror Class A Common Stock" means Acquiror's Class A
Common Stock, $.01 par value per share.
"Acquiror Class B Common Stock" means Acquiror's Class B
Common Stock, $.01 par value per share.
1 "Acquiror Common Stock" means, collectively, the Acquiror
Class A Common Stock and the Acquiror Class B Common Stock.
"Acquiror Merger Securities" means the Acquiror Class A
Common Stock and the Acquiror Preferred Stock (if any) to be
issued pursuant to the Merger.
"Acquiror Preferred Stock" has the meaning set forth in
Section 1.2(a).
"Acquiror Restated By -Laws" means the By -Laws of Acquiror,
as amended and restated and in effect as of the Closing Date.
"Acquiror Restated Certificate" means the Certificate of
Incorporation of Acquiror, as amended and restated and in effect
on the Closing Date.
"Acquirer's 1998-1999 Share Repurchase Program" means the
Acquiror Common Stock repurchase program of Acquiror under the
Stock Liquidation Agreement under which Acquiror will offer to
purchase, and certain shareholders of Acquiror will sell to
Acquiror on December 15, 1998 (or January 15, 1999, at the
election of each such shareholder), at a price established
pursuant to a specified formula, up to 667,366 shares of Acquiror
Common Stock.
"Acquiror Series A Preferred Stock" has the definition set
forth in Section 5.6.
("Acquiror Working Capital Calculation" has the meaning set
forth
- , in Section. 9.8(b).
"Affiliate" has the meaning set forth in Rule 12b-2
promulgated by the SEC under the Exchange Act.
"Assumed Liabilities" has the meaning set .forth in the
Contribution Agreement.
"Balance Sheet Date" means September 30, 1994.
"Basic Service" means the level of cable television service
provided by the Company, any Cable Subsidiary, Acquiror or any
Subsidiary of Acquiror (as the case may be) in any Franchise Area
which has the largest number of subscribers (other than the
service level of the Company, any Cable Subsidiary, Acquiror or
any Subsidiary of Acquiror (as the case may be) which consists
primarily of transmissions of local and distant broadcasting
stations).
"Basic Subscriber" means a Person (i) who subscribes to
Basic Service, (ii) who pays the full rate for such service
charged by the Company, any Cable Subsidiary, Acquiror or any
Subsidiary of Acquiror (as the case may be) for detached single
family homes, and (iii) whose accounts receivable owed for such
service are not more than 60 days past due from the date of
invoice; provided, that a hotel, motel, or other multi -living
( unit customer which pays less per living unit than the rates
charged for detached single family homes shall be considered to
be that number of Basic Subscribers which is equal to revenues
from _Basic Service provided to such hotel, motel, or other
customer for the month immediately preceding the month in which
this Agreement is executed and delivered (without regard to
nonrecurring revenues from ancillary services such as
installation fees) divided by the full rate charged for detached
single family homes for such service.
"Benefit Arrangement" has the meaning set forth in Section
432 (q) .
"Break -Up Fee Payment" has the meaning set forth in Section
8.3 (b) .
"Broadcasting" has the meaning set forth in the preambles to
this Agreement.
"Broadcasting Class A Common Stock" means Broadcasting's
Class A Common Stock, $1.00 par value per share.
"Broadcasting Class B Common Stock" means Broadcasting's
Class B Common Stock, $1.00 par value per share.
"Broadcasting Common Stock" means, collectively, the
Broadcasting Class A Common, Stock and the Broadcasting Class B
Common Stock.
-91 -
"Broadcasting Working Capital Calculation" has the meaning
l j
set forth in Section 9.8(a).
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York are
not open for the transaction of business.
"Cable Balance Sheet's has the meaning set forth in Section
4.4.
"Cable Dispute" has the meaning set forth in Section
6.10(a).
"Cable Employees", "Cable Employee Plan", "Cable Plan" and
"Cable Benefit Arrangement" have the meanings set forth in
Section 4.12(q).
"Cable Franchise Areas" has the meaning set forth in Section
7.4 (f) .
"Cable Subsidiaries" means Subsidiaries of the Company that
directly or indirectly own and operate cable television systems
(including, without limitation, Copley/Colony, Inc, and its
Subsidiaries and King Videocable Company and its Subsidiaries);
provided, however, that for purposes of Articles 3 and 4 of this
Agreement, such term includes the Company with respect to its
operation of the Palmer Systems.
"Cable Tax Returns" has the meaning set forth in Section
6.10(h) .
"Certificates" has the meaning set forth in Section 1.6(b).
"Certificate of Merger" has the meaning set forth in Section
1:5.
"Closing" and "Closing Date" have the meanings set forth in
Section 7.1.
"COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, as set forth in Section 4980E of the
Code and Part 6 of Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
"Colony" has the meaning set forth in Section 2.6.
"Common Stock Conversion Number" has the meaning set forth
in Section 1.2(d).
"Communications Act" means the Communications Act of 1934,
the Cable Communications Policy Act of 1984 and the Cable
Television Consumer Protection and Competition Act of 1992, all
as amended to date, and the applicable rules and regulations
thereunder.
-92 -
"Company" has the meaning set forth in the first paragraph
of this Agreement.
"Company Balance Sheet" has the meaning set forth in Section
3.8.
"Company Benefit Arrangement" has the meaning set forth in
Section 4.12(q).
"Company Board of Directors" means the Board of Directors of
the Company.
"Company Class A Common Stock" means the Company's Class A
Common Stock, $2.50 par value per share.
"Company Class B Common Stock" means the Company's Class B
Common Stock, $2.50 par value per share.
"Company Common Stock" means, collectively, the Company
Class A Common Stock and the Company Class B Common Stock.
"Company Consolidated Income Taxes" and Company Consolidated
Income Tax Returns" have the meanings set forth in Section
6.10(h).
"Company Employee Plan" means any Employee Benefit Plan that
f is sponsored or contributed to by the Company, NPJ or any ERISA
Affiliate of either of them covering the employees or former
employees of the Company, NPJ, or any ERISA Affiliate of either
of them.
"Company Group" has the meaning set forth in Section
6.10(h).
"Company/Kelso Agreement" means that certain Stock Purchase
Agreement dated as of January 18, 1995 among the Company and the
Kelso Partnerships pursuant to which the Company has agreed to
purchase from the Kelso Partnerships all of the Kelso Interests.
"Company Nominee" has the meaning set forth in Section 6.23.
"Confidentiality Agreement" means the letter agreement
between the Company and Acquiror dated as of February 16, 1994.
"Contribution" and "Contribution Agreement" have the
meanings set forth in Section 2,.5.
"Contributed Assets" has the meaning set forth in the
Contribution Agreement.
"Controlled Group Liability" means any and all liabilities
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii)
Sections 412 and 4971 of the Code and (iv) the continuation
coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code.
-93 -
"Directors option Plan" means the 1994 Directors Stock
Option Plan described on Schedule 3.6.
\ "Dissenting Shares" and "Dissenting Stockholders" have the
meaning set forth in Section 1.3.
"Dissolution" has the meaning set forth in Section 2.4(b).
"Distribution" has the meaning set forth in Section 2.5(c).
"Effective Date" has the meaning set forth in Section 1.5.
"Effective Time" has the meaning set forth in Section 1,5.
"Employee Benefit Plan" has the meaning given such term in
Section 3(3) of ERISA.
"Enforceability Exceptions" has the meaning set forth in
Section 3.1.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means a Person and/or such Person's
Subsidiaries, or any trade or business (whether or not
incorporated) which is under common control with such entity or
such entity's Subsidiaries or which is treated as a single
employer with such Person or any Subsidiary of such Person under
Section 414(b), (c), (m), or (o) of the Code or Section
4001(b)(1) of ERISA (it being understood that Copley/Colony, Inc,
and its Subsidiaries and Holding and its Subsidiaries are ERISA
Affiliates of the Company),
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" has the meaning set forth in Section
1.6(a).
"FCC" means the Federal Communications Commission.
"FCC Approvals" has the meaning set forth in Section 3.3.
"Franchises" means written "franchises" within the meaning
of Section 602(8) of the Cable Communications Policy Act of 1984
(47 U.S.C. §522(9)).
"GAAP" means United States generally accepted accounting
principles.
"Group 'Health Plan" means any group health plan, as defined
in Section 5000(b)(1) of the Code,
"Holding" has the meaning set forth in the preambles to this
Agreement.
"Holding Contribution" has the meaning set forth in the
". preambles to this Agreement.
"Holding Dissolution" has the meaning set forth in the
preambles to this Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations
thereunder.
"Indemnifying Party" and "Indemnified Party" have the
meanings set forth in Sections 6.6 or 9.6, as the context
requires.
"Indemnitor" and Indemnitee" have the meanings set forth in
Section 6.10 (f) .
"IRS" means the United States Internal Revenue Service_
"Issuer" has the meaning set forth in Section 1.6(d).
"Joint Proxy Statement/Prospectus" has the meaning set forth
in Section 6.6(a).
"Kelso Interests" and "Kelso Partnerships" have the
meanings set forth in Section 2.2.
j "Law" means all federal, state, county and local laws,
statutes, ordinances, rules and regulations.
"Licenses" means approvals, consents, rights, certificates,
orders, franchises, determinations, permissions, licenses,
authorities or grants issued, declared, designated or adopted by
any nation or government, any federal, state, municipal or other
political subdivision thereof or any department, commission,
board, bureau, agency or instrumentality exercising executive,
legislative, judicial, regulatory or administrative functions
pertaining to government; excluding, however, the Franchises.
"Liens" means any lien, claim, charge, restriction, pledge,
mortgage, security interest or other encumbrance.
"Local Approvals" has the meaning set forth in Section 3.3.
"Losses and Expenses" mean any and all damages, liabilities,
obligations, losses, deficiencies, demands, claims, penalties,
assessments, judgements, actions, proceedings and suits of
whatever kind and nature and all costs and expenses relating
thereto (including reasonable attorney's fees and disbursements)..
"Material Adverse Effect" means a material adverse effect on
the business, condition (financial or otherwise) or assets of the
named entity or the named entities taken as a whole. In all
references in this Agreement to a "Material Adverse Effect on the
Company and the Cable Subsidiaries taken as a whole", the Company
-95 -
shall be deemed to have no assets other than the stock of the
/I Cable Subsidiaries and, to the extent appropriate given the
context in which the statement is made, the Palmer Systems and
the Related Assets. In all references in this Agreement to a
"Material Adverse Effect on NPJ and its Subsidiaries taken as a
whole", NPJ shall be deemed to own all of the assets and
Subsidiaries of the Company other than the Retained Assets.
"Material Cable Agreements" has the meaning set forth in
Section 4.8(a).
"Maximum Common Stock Amount" means $645,000,000 or such
lesser amount as shall be calculated in accordance with Section
1.4(b) hereof.
"Merger" has the meaning set forth in Section 1.1.
"Merger Transactions" means, collectively, the transactions
contemplated by (i) the Merger, (ii) this Agreement, (iii) the
Plan of Reorganization, and (iv) the Contribution Agreement.
"Multiemployer Plan" means a multiemployer plan, as defined
in Sections 3(37) and 4001(a)(3) of ERISA.
"New Company Debt" has the meaning set forth in Section 2.1.
"NPJ" has the meaning set forth in the first paragraph of
`) this Agreement..
"NPJ Class A Common Stock" means NPJ's Class A Common Stock,
$1.00 par value per share.
"NPJ Class B Common Stock" means NPJ's Class B Common Stock,
$1.00 par value per share..
"NPJ Common Stock" means, collectively, the NPJ Class A
Common Stock and the NPJ Class B Common Stock.
"Non -Competition Agreement" means the Non -Competition
Agreement among Broadcasting, NPJ and Acquiror in the form
attached hereto as Exhibit D.
"NPJ Debt" has the meaning set forth in Section 2.1.
"NLRB" means the National Labor Relations Board.
"Option Plan" means the Company 1994 Employee Stock Option
Plan described in Schedule 3.6 hereto.
"Original Agreement" has the meaning set forth in the
preambles to this Agreement.
} "Other Filings" has the meaning set forth in Section 6.6(c)_
_ j
M
"Palmer Systems means all cable television systems owned or
loperated by the Company directly„
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means any employer pension benefit plan, as
defined in Section 3(2) of ERISA.
"Person" means any individual, general partnership, limited
partnership, corporation, limited -liability company, joint
venture, trust, business trust, cooperative or association, and
the heirs, executors, administrators, legal representatives,
successors, and assigns of such Person where the context so
requires.
"Plan of Reorganization" means that certain Plan of
Reorganization and Dissolution of the Company relating to the
transactions contemplated by Section 2.3 and 2.4 hereof and in
form and substance reasonably acceptable to Acquiror.
"Preferred Stock Amount" has the meaning set forth in
Section 1.2(f).
"Preferred Stock Conversion Number" has the meaning set
forth in Section 1.2(e).
"Preferred Stock Election" has the meaning set forth in
Section 1.2(g).
"Proceeds" has the meaning set forth in Section 6.15(d).
"Prohibited Transaction" means a transaction that is
prohibited under 4975 of the Code or Section 406 and not exempt
under Section 4975 of the Code or Section 408 of ERISA
respectively.
"Recapitalization Amendment" shall mean an amendment to the
Acquiror Restated Certificate increasing the number of authorized
shares of capital stock of Acquiror to no less than the amounts
set forth in Section 5,6.
"Registration Statements" has the meaning set forth in
Section 6.6(a),
"Related Assets" has the meaning set forth in Section 2.6.
"Reportable Event" means a "reportable event" as defined in
Section 4043 of ERISA to the extent that the reporting of such
event to the PBGC has not been waived.
"Retained Assets" has the meaning set forth in the
Contribution Agreement.
"Retained Liabilities" has the meaning set forth in the
Contribution Agreement..
-97 -
"Rights" has the meaning set forth in the Rights Agreement.
"Rights Agreement" means that certain Rights Agreement dated
as of September 26, 1990 between the Company and The First
National Bank of Boston, a national banking association, as
Rights Agent.
"Rights Distribution Date" has the meaning ascribed to the
term "Distribution Date" in the Rights Agreement.
"SEC" means the Securities and Exchange Commission.
"SEC Filings" has the meaning set forth in Section 6.6(d).
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Stock Acquisition Date" has the meaning set forth in the
Rights Agreement.
"Stock Plan" means the Company Restricted Stock Plan
described in Schedule 3.6 hereto.
"Subsidiary" shall mean as to any Person (i) any corporation
of which such Person owns, either directly or through its
Subsidiaries, 50% or more of the total combined voting power of
all classes of voting securities of such corporation and (ii) any
l \ partnership, association, point venture or other form of business
organization, whether or not it constitutes a legal entity, in
which such Person directly or indirectly through its Subsidiaries
owns 50% or more of the total equity interests.
"Superior Proposal" has the meaning set forth in Section
6.1.
"Surviving Corporation" has the meaning set forth in Section
L. L
"Tax Return" means allreturns, declarations, reports,
estimates, information returns and statements required to be
filed in respect of any Taxes.
"Termination Date" has the meaning set forth in Section
8.1(b).
"Threshold Amount" has the meaning set forth in Section 7.3
or 7.4, as the context requires.
"Transaction Documents" shall have the meaning set forth in
Section 3.1.
"Transaction Securities" means;: collectively, NPJ Common
Stock and Acquiror'Merger Securities.
I"
"Transferable Franchise Area,, has the meaning set forth in
l
Section 7.4(f).
"Units Plan" means the Company Incentive Stock Units Plan
described in Schedule 3.6 hereto.
"Voting Agreement" has the meaning set forth in Section
6.22(c).
"Welfare Plans" means any employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
"Westerly" has the meaning set forth in Section 2.6.
"Withdrawal Liability" has the meaning given such term in
Section 4201 of ERISA.
"Working Capital" means the consolidated current assets
(other than the Proceeds of any disposition of a cable television
system by the Company or a Cable Subsidiary contemplated by
Section 6.15(d)) minus consolidated current liabilities
(including, without limitation, any and all accrued unpaid taxes)
determined in accordance with GAAP of Broadcasting and the Cable
Subsidiaries as of the Effective Time.
- [remainder of this page intentionally left blank]
IN WITNESS WHEREOF, each of the parties has caused this
_.` Agreement to be executed on its behalf by its officer thereunto
duly authorized on the day and year first above written.
PROVIDENCE JOURNAL COMPANY
By: /s/ Tryave E. Myhren
Name: Trygve E. Myhren
Title: President and Chief
Operating Officer
THE PROVIDENCE JOURNAL COMPANY
By: /s/ Stephen Hamblett
Name: Stephen Hamblett
Title: Chairman of the Board
and Chief Executive
Officer
KING HOLDING CORP.
{ By: /s/ Tryaye E. Myhren
Name: Trygve E. Myhren
Title: President and Chief
Operating Officer
KING BROADCASTING COMPANY
By: /s/ Tryave E. Mvhren
Name: Trygve E. Myhren
Title: President and Chief
Operating Officer
CONTINENTAL CABLEVISION, INC.
By: Is/ Amos B. Hostetter, Jr.
Name: Amos B. Hostetter, Jr.
Title: Chairman of the Board
and Chief Executive
Officer
Exhibit A to the
(y j Merger Agreement
CONTINENTAL CABLEVISION, INC.
CERTIFICATE OF DESIGNATION
OF SERIES B CUMULATIVE REDEEMABLE PREFERRED STOCK
SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware, Continental Cablevision, Inc, (the
"Corporation"), a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance
with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board
of Directors of the Corporation by Article FOURTH of the Restated
Certificate of Incorporation of the Corporation (as in effect on
the date hereof and as amended from time to time in accordance
with its terms, the "Restated Certificate of Incorporation"), and
in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors
of the Corporation on , 1995 adopted the following
resolution creating a series of Preferred Stock designated as
Series B Cumulative Preferred Stock:
RESOLVED that, pursuant to the authority vested in the
Board of Directors of the Corporation in accordance with the
provisions of the Restated Certificate of Incorporation, a series
of the class of authorized Preferred Stock, par value $.01 per
share, of the Corporation is hereby created and that the
designation and number of shares thereof and the voting powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof are as
follows:
Section 1. Designation and Number. (a) The shares of
such series shall be designated as "Series B Cumulative
Redeemable Preferred Stock" (the "Series B Preferred Stock").
The number of shares initially constituting the Series B
Preferred Stock shall be 1, which number may be
increased or decreased by the Board of Directors of the
Corporation without a vote of stockholders; provided, however,
' In the Certificate of Designation to be filed with the
/ Secretary of State of Delaware, this number shall equal the shares
of Series B Preferred Stock to be issued by the Corporation.
-2 -
that such number may not be decreased below the number of then
�foutstanding shares of Series B Preferred Stock.
(b) The Series B Preferred Stock shall, with respect
to dividend rights and rights on liquidation, dissolution or
winding up, rank (i) pari passu with the Series A Preferred Stock
(this and other capitalized terms used herein and not otherwise
defined have the meanings given such terms in Section 10 hereof)
and (ii) prior to all classes of the Common Stock.
Section 2. Dividends and Distributions. (a) The
holders of record of shares of Series B Preferred Stock, in
preference to the holders of shares of Common Stock and of any
shares of other capital stock of the Corporation ranking junior
to the Series B Preferred Stock as to payment of dividends, shall
be entitled to receive, when, as and if declared by the Board of
Directors out of assets of the Corporation legally available
therefor, cash dividends at a rate per annum equal to % of the
Stated Amount per share.' Such dividends (i) shall be payable
semi-annually on the first day of June and December in each year
commencing on the first such date to occur after the Issue Date
(provided, that, if any such date is not a Business Day, such
dividend shall be payable on the next succeeding Business Day),
and (ii) shall be cumulative and will begin accruing on each
share of Series B Preferred Stock from the date of issue thereof,
whether or not declared by the Corporation's Board of Directors.
Dividends payable on the Series B Preferred Stock for any period
less than a full six-month period shall be computed on the basis
of the actual number of days elapsed and a 365 -day year.
(b) When dividends on shares of Series B Preferred
Stock and on any other series of Preferred Stock ranking on a
parity as to dividends with the Series B Preferred Stock at the
time payable on such shares have not been paid in full, all
dividends declared upon shares of Series B Preferred Stock and
shares of such other Preferred Stock shall be allocated pro rata
in proportion to the total amount of unpaid dividends then due
and payable on the Series B Preferred Stock and such other series
of Preferred Stock. The Board of Directors shall fix a record
date for the determination of holders of shares of Series B
Preferred Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than sixty
days prior to the date fixed for the payment thereof.
' In the Certificate of Designation to be filed with the
Secretary of State of Delaware, the annual rate shall equal 100
basis points over the average yield on the Corporation's 8-7/8%
Senior Debentures due 2005 for the ten Trading Day period ending
five Trading Days prior to the Effective Time (as defined in the
Merger Agreement); provided, however, that such rate shall equal So
basis points over such average yield if, prior to the Effective
/ Time, the Corporation issues in excess of $1,000,000,000 of capital
�) stock.
-3-
(c) The holders of shares of Series B Preferred Stock
shall not be entitled to receive any dividends or other
distributions except as provided herein.
Section 3. Voting Rights. In addition to any voting
rights provided by law, the holders of shares of Series B
Preferred Stock shall have the following voting rights:
(a) So long as the Series B Preferred Stock is
outstanding, each share of Series B Preferred Stock shall entitle
the holder thereof to vote on all matters voted on by holders of
the Class A Common Stock of the Corporation, voting together as a
single class with the holders of the Class A Common Stock and
with the holders of any other class of capital stock which votes
as a single class with the Class A Common Stock, at all meetings
of the stockholders of the Corporation; provided, however, that
the holders of Series B Preferred Stock shall not be entitled to
vote on any increase or decrease in the number of any authorized
shares of any class or classes of the capital stock of the
Corporation.
(b) Each share of Series B Preferred Stock shall
initially entitle the holder thereof to cast one vote on all such
matters. In the event the Corporation shall at any time or from
time to time after the Issue Date declare or pay any dividend on
the outstanding shares of Class A Common Stock in shares of Class
A Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Class A Common Stock
(by reclassification or otherwise than by payment of a dividend
in shares of Class A Common Stock) into a greater or lesser
number of shares of Class A Common Stock without making an
identical subdivision, combination or consolidation of the
outstanding shares of Series B Preferred Stock, then in each such
case the number of votes to which each share of Series B
Preferred Stock will be entitled immediately after such event
shall be adjusted by multiplying the number of votes to which
each such share was entitled immediately prior to such event by a
fraction, the numerator of which is the number of shares of Class
A Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Class A Common
Stock that were outstanding immediately prior to such event. An
adjustment made pursuant to this paragraph (b) shall become
effective at the close of business on the day upon which such
corporate action becomes effective.. In each case of such an
adjustment, the Corporation at its expense will promptly compute
the adjustment to be made in accordance with this paragraph (b)
to the voting rights of the Series B Preferred Stock and will
promptly mail to each holder of record of Series B Preferred
Stock notice of such adjustment, which notice shall set forth (i)
the computation described above, (ii) the number of vote(s) per
share to which each share of Series B Preferred Stock was
entitled before giving effect to such adjustment, and (iii) the
number of vote(s) per share to which each share of Series B
(� Preferred Stock will be entitled after giving effect to such
l adjustment.
-4-
(c) The affirmative vote of the holders of at least a
majority of the outstanding shares of Series B Preferred Stock,
voting together as a class, in person or by proxy, at a special
or annual meeting of stockholders called for the purpose, shall
be necessary to authorize, adopt or approve an amendment to the
Restated Certificate of Incorporation of the Corporation which
would alter or change the powers, preferences or special rights
of the shares of Series B Preferred Stock so as to affect such
shares of Series B Preferred Stock adversely; provided, however,
if such amendment would also alter or change the powers,
preferences or special rights of any other series of Preferred
Stock in a similar fashion ("Affected Preferred Stock"), for
purposes of this paragraph (c), such amendment shall require the
affirmative vote of the holders of a majority of the voting power
represented by the outstanding shares of Series B Preferred Stock
and the Affected Preferred Stock, voting together as a single
class,
(d) If on any date dividends or distributions payable
on all series of Preferred Stock shall have been in arrears and
not paid in full for three consecutive semi-annual periods, then
the number of directors constituting the Board of Directors of
the Corporation shall, without further action, be increased by
two (provided, however, that if such directors would represent
more than 25; of the total number of directors of the
Corporation, then the number of directors constituting the Board
of Directors of the Corporation shall, without further action, be
increased by one) and the holders of shares of Series B Preferred
�l Stock shall have, in addition to the other voting rights set
forth herein, the exclusive right, voting separately as a single
class or as a class with the holders of shares of any Parity
Stock, if such holders are then entitled to elect additional
directors pursuant to any provision of the Certificate of
Designation for such stock that is similar to this paragraph (d)
("Defaulted Preferred Stock"), to elect, by (i) the vote of the
holders of a majority of the voting power represented by the
Series B Preferred Stock present in person or represented by
proxy and voting thereon, (ii) written consent of the holders of
at least a majority of the voting power represented by the
outstanding shares of Series B Preferred Stock, (iii) the vote of
the holders of a majority of the voting power represented by the
Series B Preferred Stock and Defaulted Preferred Stock present in
person or represented by proxy and voting thereon, or (iv)
written consent of the holders of at least a majority of the
voting power represented by the outstanding shares of Series B
Preferred Stock and Defaulted Preferred Stock, as the case may be
(and in the manner set forth in paragraph (e) of this Section 3),
the director(s) of the Corporation to fill such newly created
directorship(s), the remaining directors to be elected by the
other classes of stock entitled to vote therefor (including the
Series B Preferred Stock in accordance with paragraph (a) of this
Section 3), at each meeting of stockholders held for the purpose
of electing directors. Such additional director(s) shall
} continue as director(s) and such additional voting right shall
continue until such time as all cumulative dividends payable on
the Series B Preferred Stock and on all other series of Defaulted
Preferred Stock shall have been paid in full or declared and set
t aside for payment, at which time such additional director(s)
shall cease to be director(s) and such additional voting right of
the holders of Series B Preferred Stock shall terminate subject
to revesting in the event of each and every subsequent event of
the character indicated above.
(e) (i) The foregoing rights of holders of shares of
Series B Preferred Stock to take any actions as provided in
paragraphs (c) and (d) of this Section 3 may be exercised at any
annual or special meeting of stockholders or at a special meeting
of holders of Series B Preferred Stock held for such purpose as
hereinafter provided or at any adjournment thereof, or by the
written consent, delivered to the Secretary of the Corporation,
of the holders of the minimum number of shares of Preferred Stock
required to take such action. So long as such right to vote
continues (and unless such right has been exercised by written
consent of the minimum number of shares required to take such
action), the Chairman of the Board of the Corporation may call,
and upon the written request of holders of record of 20% of the
voting power represented by the outstanding shares of Series B
Preferred Stock, if the holders of Series B Preferred Stock are
to vote separately as a single class, or the holders of record of
20, of the voting power represented by the outstanding shares of
Series B Preferred Stock and Affected Preferred Stock or
Defaulted Preferred Stock, as the case may be, if the holders of
shares of Series B Preferred Stock are to vote as a class with
l_ the holders of shares of any such other Preferred Stock,
addressed to the Secretary of the Corporation at the principal
office of the Corporation, shall call, a special meeting of the
holders of shares entitled to vote as provided herein. Such
meeting shall be held within 30 days after delivery of such
request to the Secretary, at the place and upon the notice
provided by law and in the by-laws of the Corporation for the
holding of meetings of stockholders..
(ii) At each meeting of stockholders at which the
holders of shares of Series B Preferred Stock shall have the
right, voting separately as a single class or as a class with the
holders of shares of any such other Preferred Stock, to elect di-
rectors of the Corporation as provided in this Section 3 or to
take any other action, the presence in person or by proxy of the
holders of record of one-third of the voting power represented by
the total number of shares of Series B Preferred Stock, if the
holders of shares of Series B Preferred Stock are to vote
separately as a single class, or the holders of record of one-
third of the voting power represented by the total number of
shares of Series B Preferred Stock and Affected Preferred Stock
or Defaulted Preferred Stock, as the 'case may be, if the holders
of shares of Series B Preferred Stock are to vote as a class with
the holders of shares of any such other Preferred Stock, then
outstanding and entitled to vote on the matter shall be necessary
and sufficient to constitute a quorum. At any such meeting or at
any adjournment thereof:
-6-
(A) the absence of a quorum of the holders of shares
of Series B Preferred Stock, if the holders of Series B
Preferred Stock are to vote separately as a single class, or
the holders of shares of Series B Preferred Stock and
Affected Preferred Stock or Defaulted Preferred Stock, as
the case may be, if the holders of shares of Series B
Preferred Stock are to vote as a class with the holders of
shares of any such other Preferred Stock, shall not prevent
the election of directors other than those to be elected by
the holders of shares of Series B Preferred Stock or the
holders of shares of Series B Preferred Stock and Defaulted
Preferred Stock, as the case may be, and the absence of a
quorum of the holders of shares of any other class or series
of capital stock shall not prevent the election of directors
to be elected by the holders of shares of Series B Preferred
Stock or the holders of shares of Series B Preferred Stock
and Affected Preferred Stock or Defaulted Preferred Stock,
as the case may be, or the taking of any action as provided
in this Section 3; and
(B) in the absence of a quorum of the holders of
shares of Series B Preferred Stock, if the holders of Series
B Preferred Stock are to vote separately as a single class,
or the holders of shares of Series B Preferred Stock and
Affected Preferred Stock or Defaulted Preferred Stock, as
the case may be, if the holders of Series B Preferred Stock
are to vote as a class with the holders of shares of any
/-` such other Preferred Stock, the holders of a majority of the
voting power represented by such shares present in person or
by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Series B
Preferred Stock or the holders of shares of Series B
Preferred Stock and Affected Preferred Stock or Defaulted
Preferred Stock, as the case may be, from time to time and
place to place without notice other than announcement at the
meeting until a quorum shall be present.
For the taking of any action as provided in paragraphs
(c) and (d) of this Section 3 by the holders of shares of Series
B Preferred Stock or the holders of shares of Series B Preferred
Stock and Affected Preferred Stock or Defaulted Preferred Stock,
as the case may be, (i) each holder of Series B Preferred Stock
and each holder of shares of any other series of Affected
Preferred Stock or Defaulted Preferred Stock which is not
convertible into Common Stock shall have the right to cast one
vote per share and (ii) each other holder of Affected Preferred
Stock or Defaulted Preferred Stock shall have the right to cast
such number of votes as may be cast by the holder of the number
of shares of Common Stock into which such Affected Preferred
Stock or Defaulted Preferred Stock, as the case may be, is then
convertible as of any record date fixed for such purpose or, if
no such date be fixed, at the close of business on the Business
Day next preceding the day on which notice is given, or if notice
is waived, at the close of business on the Business Day next
preceding the day on which the meeting is held.
-7 -
Each director elected by the holders of shares of
Series B Preferred Stock or the holders of shares of Series B
Preferred Stock and Defaulted Preferred Stock, as the case may
be, as provided in paragraph (d) of this Section 3 shall, unless
such director's term shall expire earlier or be terminated in ac-
cordance with paragraph (d) of this Section 3, hold office until
the annual meeting of stockholders next succeeding such
director's election or until such director's successor, if any,
is elected and qualified.
In case any vacancy shall occur among the directors
elected by the holders of shares of Series B Preferred Stock or
the holders of shares of Series B Preferred Stock and Defaulted
Preferred Stock, as the case may be, as provided in paragraph (d)
of this Section 3, such vacancy may be filled for the unexpired
portion of the term by vote of the remaining director theretofore
elected by such holders (if there is a remaining director), or
such director's successor in office. If any such vacancy is not
so filled within 20 days after the creation thereof, or (if
applicable) if both directors so elected by the holders of Series
B Preferred Stock or the holders of Series B Preferred Stock and
Defaulted Preferred Stock, as the case may be, shall cease to
serve as directors before their terms shall expire, the holders
of the Series B Preferred Stock or the holders of Series B
Preferred Stock and Defaulted Preferred Stock, as the case may
be, then outstanding and entitled to vote for such directors may,
by written consent as herein provided, or at a special meeting of
r' such holders called as provided herein, elect successors to hold
l office for the unexpired terms of the directors whose places
shall be vacant.
Any director elected by the holders of shares of Series
B Preferred Stock voting separately as a single class or the
holders of shares of Series B Preferred Stock voting as a class
with the holders of shares of Defaulted Preferred Stock may be
removed from office with or without cause by the vote or written
consent of the holders of at least a majority of the voting power
represented by the outstanding shares of Series B Preferred Stock
or a majority of the voting power represented by the outstanding
shares of Series B Preferred Stock and Defaulted Preferred Stock,
as the case may be. A special meeting of the holders of shares
of Series B Preferred Stock or the holders of shares of Series B
Preferred Stock and Defaulted Preferred Stock, as the case may
be, may be called in accordance with the procedures set forth in
subparagraph (e)(i) of this Section 3.
Section 4. Certain Restrictions. (a) Whenever
dividends or distributions payable on shares of Series B
Preferred Stock as provided in Section 2 are not paid in full,
thereafter and until all such unpaid dividends or distributions,
whether or not declared, on the outstanding shares of Series B
Preferred Stock shall have been paid in full or declared and set
apart for payment, the Corporation shall not, without the consent
/~ of (i) the holders of not less than a majority of the shares of
j Series B Preferred Stock outstanding or (ii) (A) if dividends or
IF=
distributions payable on shares of any other series of Preferred
Stock are not then paid in full and (B) the consent of the
( holders of shares of such Preferred Stock is required for the
Corporation to take the actions contemplated by this Section 4,
the holders of shares representing a majority of the voting power
represented by outstanding shares of Series B Preferred Stock and
such other Preferred Stock: (I) declare or pay dividends, or make
any other distributions, on any shares of Junior Stock or Parity
Stock, other than dividends or distributions (x) payable in
respect of Parity Stock in accordance with Section 2(b) hereof or
(y) payable in Common Stock or in other capital stock of the
Corporation ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) to the Series B Preferred
Stock; or (II) redeem, purchase or otherwise acquire for
consideration any shares of Junior Stock or Parity Stock pursuant
to any mandatory redemption, put, sinking fund or other similar
obligation, provided, that, the Corporation may at any time (x)
redeem, purchase or otherwise acquire shares of Junior Stock or
Parity Stock in exchange for any shares of Common Stock or for
other capital stock of the Corporation ranking junior (both as to
dividends and upon liquidation, dissolution or winding up) to the
Series B Preferred Stock, and (y) accept shares of any Parity
Stock or Junior Stock for conversion.
(b) The Corporation shall not permit any Subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation
unless the Corporation could, pursuant to paragraph (a) of this
C Section 4, purchase such shares at such time and in such manner.
Section 5. Redemption. (a) (i) At any time after
the fifth anniversary of the Issue Date, by written notification
delivered to the record holders of the Series B Preferred Stock
in accordance with the procedures set forth in subparagraph (d)
of this Section 5, the Corporation, at its sole option, may elect
to redeem, in whole or from time to time in part, the shares of
Series B Preferred Stock held by such holders at a price per
share equal to the Redemption Price plus, if applicable, the
Optional Redemption Premium. If at any time less than all of the
shares of Series B Preferred Stock then outstanding are to be
redeemed, the shares so to be redeemed may be selected (A) by
lot, (B) on a pro rata basis among the holders of all such
shares, or (C) in such other manner as the Board of Directors of
the Corporation in its sole discretion may determine to be fair
and equitable.
(ii) Not more than 60 nor less than 30 Trading Days
prior to (A) the tenth anniversary of the Issue Date and (B) each
anniversary of the Issue Date thereafter so long as any shares of
Series B Preferred Stock are outstanding, the Corporation shall
give notice to each record holder of shares of Series B Preferred
Stock, at such holder's address as it appears on the transfer
books of the Corporation, that each holder has the right to
require the Corporation to redeem any or all shares of Series B
`-_ Preferred Stock held by such holder at a price per share equal to
WIi
the Redemption Price. The notice shall also specify the redemp-
tion date (which date shall be not more than 60, nor less than
45, days from the date of such notice) and the procedures to be
followed by such holder in exercising his right to cause such
redemption and to receive payment of the Redemption Price (if
such holder elects to cause such redemption). Failure by the
Corporation to give the notice prescribed by the preceding
sentences, or the formal insufficiency of any such notice, shall
not prejudice the rights of any holder of shares of Series B
Preferred Stock to cause the Corporation to redeem any such
shares held by such holder. If a record holder of shares of
Series B Preferred Stock shall elect to require the Corporation
to redeem any or all such shares of Series B Preferred Stock in
the manner provided in this subparagraph (ii), such holder shall
deliver, within 30 days of the mailing to such holder of the
Corporation's notice described in this subparagraph (a)(ii), or,
if no notice is given, within 30 days following the last day the
Corporation was required to give notice in accordance with this
subparagraph (a)(ii) (in which case the date of redemption shall
be the date which is 45 Business Days following the last day the
Corporation was required to give notice in accordance with this
subparagraph (a)(ii)), a written notice, in the form specified by
the Corporation (if the Corporation did in fact give the notice
required by this subparagraph (a)(ii)), to the Corporation
stating such election and specifying the number of shares to be
redeemed pursuant to this paragraph (a). The Corporation shall
redeem the number of shares so specified on the date fixed for
�- redemption in accordance with the provisions of this Certificate
of Designation.
(iii) The Corporation may satisfy its obligation under
subparagraphs (a)(i) and (a)(ii) to pay the Redemption Price and,
if applicable, the Optional Redemption Premium, by paying, at the
option of the Corporation, cash and/or shares of Class A Common
Stock as provided in paragraph (b) of this Section 5.
(b) The Corporation, at its sole option, may elect to
satisfy its obligation to pay all or any portion of the
Redemption Price and, if applicable, the Optional Redemption
Premium in respect of each share of Series B Preferred Stock to
be redeemed pursuant to paragraph (a) of this Section 5 by making
an election on or prior to the date set for redemption to issue
shares of Class A Common Stock in respect of all or any portion
of the Redemption Price and, if applicable, the Optional
Redemption Premium. Such election shall be set forth in a
certificate signed on behalf of the Corporation by the Chairman
of the Board, the Vice Chairman of the Board, the President or
any Vice President of the Corporation and delivered to the
Secretary of the Corporation and shall be deemed to have been
made on the date such certificate is delivered to the Secretary.
Notice of such election and of the portion of the Redemption
Price and, if applicable, the Optional Redemption Premium, as to
which such election was made shall be given to the holders of the
Series B Preferred Stock by the Corporation promptly upon making
�� such election. The number of shares of Class A Common Stock to
-10 -
be issued pursuant to this paragraph (b) shall be determined by
dividing the Redemption Price and, if applicable, the Optional
L
Redemption Premium, per share of Series B Preferred Stock through
the date of redemption (or portion thereof to be paid in shares
of Class A Common Stock) by the Base Price of a share of Class A
Common Stock.
In connection with any such redemption, unless, in the
reasonable determination of the Corporation, the exchange of
shares of Class A Common Stock for Series B Preferred Stock is
exempt from the registration requirements of the Securities Act,
the Corporation shall register such exchange under such Act, and
such exchange shall not be completed until such registration is
effective.
(c) (i) If shares of Class A Common Stock to be
issued in exchange for any shares of Series B Preferred Stock
pursuant to paragraph (b) of this Section 5 are to be issued in a
name or names other than that of the holder of record of such
shares of Series B Preferred Stock, no such issuance shall be
made (A) until the holder requesting such issuance has paid to
the Corporation all issue, stamp, transfer and documentation
taxes payable upon the issuance of shares of Class A Common Stock
in such name or names and (B) unless such issuance is registered
under the Securities Act and all applicable state securities
laws, the holder of the applicable shares of Series B Preferred
Stock which are to be exchanged for Class A Common Stock here-
under shall have furnished to the Corporation evidence satis-
factory to it that such issuance is exempt from registration
under the Securities Act and all applicable state securities
laws. Other than the taxes specified in clause (A) above, the
Corporation will pay any and all issue, stamp, transfer,
documentation and other taxes (other than taxes based on gross or
net income) that may be payable in respect of any issue or
delivery of shares of Class A Common Stock in exchange for shares
of Series B Preferred Stock pursuant hereto.
(ii) No fractions of shares of Class A Common Stock
shall be issued upon any exchange of shares of Series B Preferred
Stock pursuant to paragraph (b) of this Section S. In lieu
thereof, the Corporation shall pay a cash adjustment equal to
such fractional interest multiplied by the Base Price. If more
than one share of Series B Preferred Stock shall be surrendered
for exchange by the same holder, the number of full shares of
Common Stock issuable on exchange thereof shall be computed on
the basis of the total number of shares of Series B Preferred
Stock so surrendered.
(iii) In case the Corporation shall at any time or
from time to time after the Issue Date effect a capital
reorganization, reclassification, subdivision, combination or
consolidation of outstanding shares of Common Stock (other than
by payment of a dividend in shares of Common Stock) so that,
�} after giving effect to such capital reorganization,
_/ reclassification, subdivision, combination or consolidation, the
-11 -
Corporation shall no longer have authorized shares of Class A
Common Stock, the Corporation shall be entitled, at its sole
option and in lieu of shares of Class A Common Stock, to issue
shares of voting Common Stock of the Corporation which, at such
time, have the fewest votes per share as compared to other
classes of the Corporation's voting Common Stock in payment of
all or any portion of the Redemption Price and, if applicable,
the Optional Redemption Premium. In any such event, the
remaining provisions of this Section 5 which pertain to the Class
A Common Stock (including, without limitation, those provisions
relating to the registration of such shares under the Securities
Act, the calculation of the Base Price and the giving of notices)
shall continue to be applicable to such replacement class of
Common Stock.
(d) Notice of the redemption of shares of Series B
Preferred Stock pursuant to subparagraph (a)(i) of this Section 5
shall be mailed at least 30, but not more than 60, Trading Days
prior to the date fixed for redemption to each record holder of
shares of Series B Preferred Stock to be redeemed, at such
holder's address as it appears on the transfer books of the
Corporation.
(e) On the date of any redemption being made pursuant
to this Section 5, the Corporation shall, and at any time before
the date of redemption, may: (i) deposit for the benefit of the
holders of shares of Series B Preferred Stock to be redeemed the
funds and/or shares of Class A Common Stock, as applicable,
lj necessary for such redemption with a bank or trust company in the
Borough of Manhattan, The City of New York, or in the City of
Boston, in either case having a capital and surplus of at least
$50,000;000; or (ii) if the Corporation so elects, segregate and
hold in trust for the benefit of the holders of shares of Series
B Preferred Stock to be redeemed the funds and/or shares of Class
A Common Stock, as applicable, necessary for such redemption.
Any moneys and/or shares so deposited or segregated and held in
trust by the Corporation and unclaimed at the end of two years
from the date designated for such redemption shall be released
from any such deposit or trust and revert to the general funds of
the Corporation. After such reversion, any such bank or trust
company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall
be relieved of all responsibility in respect thereof and any
holder of shares of Series B Preferred Stock to be redeemed shall
look only to the Corporation for the payment of the Redemption
Price (and, if applicable, the Optional Redemption Premium)_ Any
interest and/or shares accrued on funds and/or shares deposited
pursuant to this paragraph (e) shall be paid from time to time to
the Corporation for its own account.
(f) Upon the deposit or segregation in trust of funds
and/or shares pursuant to paragraph (e) in respect of shares of
Series B Preferred Stock to be redeemed pursuant to this Section
(µl� 5, notwithstanding that any certificates for such shares shall
\` not have been surrendered for cancellation, from and after the
_12_
date of redemption designated in the notice of redemption (or, if
r no such notice is given pursuant to subparagraph (a)(ii) of this
j Section 5, the date of redemption determined pursuant to the
provisions of such subparagraph) (i) the shares represented
thereby shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue and (iii) all
rights of the holders of shares of Series B Preferred Stock to be
redeemed shall cease and terminate, excepting only the right to
receive the Redemption Price (and, if applicable, the Optional
Redemption Premium) therefor.
Section 6. Reacquired Shares. Any shares of Series B
Preferred Stock redeemed, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares
of Series B Preferred Stock shall upon their cancellation, and
upon the filing of an appropriate certificate with the Secretary
of State of the State of Delaware, become authorized but unissued
shares of Preferred Stock and may be reissued as part of another
series of Preferred Stock subject to the conditions or
restrictions on issuance set forth herein.
Section 7. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of
shares of Junior Stock upon liquidation, dissolution or winding
up unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received the Liquidation Preference
with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on all such
Parity Stock and the Series B Preferred Stock in proportion to
the total amounts to which the holders of all shares of such
Parity Stock and the Series B Preferred Stock are entitled upon
such liquidation, dissolution or winding up. Upon any such
liquidation, dissolution or winding up of the Corporation, after
the holders of the Series B Preferred Stock shall have been paid
in full the amounts to which they shall be entitled, the
remaining net assets of the Corporation shall be distributed to
the holders of Junior Stock, and the holders of Series B
Preferred Stock shall not be entitled to participate in such
distribution.
(b) Neither the consolidation, merger or other
business combination of the Corporation with or into any other
Person or Persons nor the sale of all or substantially all the
assets of the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this
Section 7.
Section 8. Certain Covenants. Any registered holder
of Series B Preferred Stock may proceed to protect and enforce
its rights and the rights of such holders by any available remedy
by proceeding at law or in equity to protect and enforce any such
f rights, whether for the specific enforcement of any provision in
-13 -
this Certificate of Designation or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 9 Merger or Sale of the Corporation. If at
any time there shall be (a) a merger or consolidation of the
Corporation with or into another Person, such that the
Corporation is not the surviving corporation upon consummation
thereof, or (b) a sale of all or substantially all of the
Corporation's assets to any other Person (either, an
"Extraordinary Transaction"), then, as part of such Extraordinary
Transaction, provision shall be made so that, at the election of
the Corporation, either:
(i) the successor Person resulting from such
Extraordinary Transaction shall, contemporaneously with the
consummation of, and as part of the consideration for, such
Extraordinary Transaction, either (A) issue to each holder
of Series B Preferred Stock in exchange for such holder's
certificates representing the Series B Preferred Stock,
certificates representing shares of preferred stock of the
successor Person of a class or series having substantially
similar terms to those set forth herein; or (B) issue or
deliver to such holders such shares of stock, securities or
other assets of the successor Person to which such holders
would have been entitled pursuant to the Extraordinary
Transaction if, immediately prior thereto, each such
holder's shares of Series B Preferred Stock had been
redeemed in the manner provided in subparagraph (a)(i) of
Section 5 hereof and shares of Class A Common Stock had been
issued in consideration therefor in the manner set forth in
paragraph (b) of Section 5 hereof; or
(ii) immediately prior to the consummation of such
Extraordinary Transaction, the Corporation shall redeem all,
but not less than all, of the shares of Series B Preferred
Stock then outstanding in the manner provided in
subparagraph (a)(i) of Section S hereof.
Section 10. Definitions. For the purposes of this
Certificate of Designation of Series B Preferred Stock, the
following terms shall have the meanings indicated:
"Affected Preferred Stock" shall have the meaning given
such term in paragraph (b) of Section 3 hereof.
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
"Base Price", when used with reference to shares of
Class A Common Stock, shall mean the Current Market Price valued,
if the Class A Common Stock is not publicly traded, on the date
of redemption or, if the Class A Common Stock is publicly traded,
for the pericd.of 15 Trading Days ending two Trading Days prior
J to the date of redemption.
-14 -
"Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in The
} Commonwealth of Massachusetts are authorized or obligated by law
or executive order to close_
"Class A Common Stock" and "Common Stock" each shall
have the meaning assigned to such term in the Corporation's
Restated Certificate of Incorporation.
"Current Market Price", when used with reference to
shares of Class A Common Stock or other securities on any date,
shall mean the closing price per share of Class A Common Stock or
such other securities on such date and, when used with reference
to shares of Class A Common Stock or other securities for any
period shall mean the average of the daily closing prices per
share of Class A Common Stock or such other securities for such
period. The closing price for each day shall be the last sale
price, regular way, or, in case 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 with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Class A Common Stock or such other securities are not listed or
admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities
exchange on which the Class A Common Stock or such other
1 securities are listed or admitted to trading or, if the Class A
Common Stock or such other securities are not listed or admitted
to trading on any national securities exchange, the last quoted
sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if on any
such date the Class A Common Stock or such other securities are
not quoted by any such organization, the average of the closing
bid and asked prices as furnished by the primary professional
market maker making a market in the Class A Common Stock or such
other securities selected by the Board of Directors of the
Corporation. If the Class A Common Stock is not publicly held or
so listed or publicly traded, "Current Market Price", shall mean
the amount as determined by investment bankers mutually agreeable
to the Corporation and the holders of a majority of the voting
power represented by the outstanding shares of Series B Preferred
Stock (the fees and expenses of which shall be paid by the
Corporation) equal to the net proceeds that would be expected to
be received by a stockholder of the Corporation from the sale of
such shares of Class A Common Stock in an underwritten public
offering after being reduced by pro forma expenses and
underwriting discounts. If securities other than Class A Common
Stock are not publicly held or so listed or publicly traded,
"Current Market Price" shall mean the Fair Market Value per share
of such other securities as determined by an independent
r 1 investment banking firm mutually agreeable to the Corporation and
\:_Y/ the holders of a majority of the voting power represented by the
-15 -
outstanding shares of Series B Preferred Stock (the fees and ex-
penses of which shall be paid by the Corporation).
'-J "Defaulted Preferred Stock" shall have the meaning
given such term in paragraph (c) of Section 3 hereof.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Fair Market Value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
"Issue Date" shall mean the date on which shares of
Series B Preferred Stock are issued in accordance with the terms
and conditions of the Merger Agreement.
"Junior Stock" shall mean any capital stock of the
Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred
Stock, including; without limitation, the Common Stock.
"Liquidation Preference" with respect to a share of
Series B Preferred Stock shall mean the Stated Amount, plus an
amount per share equal to all unpaid dividends thereon, whether
or not declared, to the date of such liquidation, dissolution or
winding up.
"Merger Agreement" shall mean that certain Amended and
Restated Agreement and Plan of Merger by and among Providence
Journal Company, The Providence Journal Company, King Holding
Corp., King Broadcasting Company and the Corporation dated as of
November 18, 1994, as the same may from time to time be amended,
modified or supplemented.
"Optional Redemption Premium" shall mean a premium,
expressed as a percentage of the Stated Amount, equal to (i) 2%
if any shares of Series B Preferred Stock are redeemed prior to
the sixth anniversary of the Issue Date; (ii) 1% if redeemed on
or after the sixth anniversary of the Issue Date and prior to the
seventh anniversary date of the Issue Date; and (iii) 0% on or
after the seventh anniversary of the Issue Date.
"Parity Stock" shall mean any capital stock of the
Corporation ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B
Preferred Stock, including, without limitation, the Series A
Preferred Stock.
"Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Stock" shall have the meaning assigned to
�— such term in the Corporation's Restated Certificate of
-16 -
Incorporation and shall include, without limitation, the Series A
Preferred Stock and the Series B Preferred Stock.
"Redemption Price" in respect of a share of Series B
Preferred Stock shall mean the Stated Amount per share as of the
date of redemption, plus an amount per share equal to all unpaid
dividends thereon, whether or not declared, to the date of
redemption.
"Securities Act" shall mean the Securities Act of 1933.
"Series A Preferred Stock" shall have the meaning
assigned to such term in the Corporation's Certificate of
Designation relating thereto and filed with the Secretary of
State of the State of Delaware on April 27, 1992_
"Stated Amount" with respect to a share of Series B
Preferred Stock shall mean $ .3 -
"Subsidiary" of any Person means any corporation or
other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or
indirectly, by such Person.
"Trading Day" means a day on which the principal
national securities exchange on which the Class A Common Stock is
listed or admitted to trading is open for the transaction of
"`• business or, if the Class A Common Stock is not listed or
J admitted to trading on any national securities exchange, a
Business Day.
IN WITNESS WHEREOF, Continental Cablevision, Inc. has
caused this Certificate to be duly executed in its corporate name
as of this day of , 1995.
CONTINENTAL CABLEVISION, INC.
M -
Attest:
F:\EZ$\CC1136\CERt E58.C5:01/33/95
3 In the Certificate of Designation to be filed with the
Secretary of State of Delaware, the Stated Amount shall be the
} quotient obtained by dividing (a) $96,750,000 by (b) the shares of
% Series B Preferred Stock to be issued.
Exhibit B to the
Merger Ag- eement
CONTRIBUTION AND ASSUMPTION AGREEMENT
This Contribution and Assumption Agreement (this
"Agreement"), dated as of 1995, is made by and
between King Broadcasting Company, a Washington corporation
("KBC"), and The Providence Journal Company, a Delaware
corporation and a wholly owned subsidiary of KBC ("NPJ").
RECITALS
WHEREAS, KBC, NPJ and Continental Cablevision, Inc., a
Delaware corporation ("Acquiror") (together with Providence
Journal Company, a Rhode Island corporation (the "Company"), and
King Holding Corp., a Delaware corporation), are parties to that
certain Amended and Restated Agreement and Plan of Merger dated
as of November 18, 1994 (the "Merger Agreement") pursuant to
which, among other things, KBC has agreed to contribute to NPJ
all of the assets of KBC (except as otherwise set forth herein or
in the Merger Agreement) as one step in a series of transactions
as a result of which (i) Acquiror will acquire the cable
television businesses of the KBC and its Cable Subsidiaries (this
and other capitalized terms used and not defined herein shall
have the meanings given to such terms in the Merger Agreement) by
merging KBC with and into Acquiror, and (ii) NPJ will conduct the
business conducted by KBC and its Subsidiaries prior to giving
effect to the Contribution (as defined in Section 1.1 hereof)
other than their cable television operations; and
WHEREAS, in accordance with Section 2.4 of the Merger
Agreement, the Company has heretofore contributed to KBC all of
the Company's businesses and assets in exchange for shares of
common stock of KBC and the assumption by KBC of all of the
obligations and liabilities of the Company.
NOW, THEREFORE, in consideration of the foregoing and the
agreements set forth below, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
CONTRIBUTION AND ASSUMPTION
1.1 Contribution of Assets.
(a) Subject to Section 1.1(b), KBC hereby contributes,
grants, conveys, assigns, transfers and delivers to NPJ without
recourse (the "Contribution") all of KBC's right, title and
interest in and to any and all assets of KBC, whether tangible or
intangible and whether fixed, contingent or otherwise, including,
without limitation, the capital stock of all Subsidiaries of KBC,
the real property more particularly described on Schedule 1.1(a)
-2 -
hereto and any and all furniture, fixtures, equipment, tools,
vehicles, supplies, buildings, improvements, accounts receivable, ! notes, prepaid expenses, securities, trademarks, trade names,
leases and contract rights, wherever located (collectively, the
"Contributed Assets").
(b) Notwithstanding Section 1.1(a), KBC hereby retains and
does not contribute, grant, convey, assign, transfer or deliver
to NPJ (i) the issued and outstanding capital stock of each Cable
Subsidiary, (ii) KBC's rights created pursuant to this Agreement,
(iii) cash in the amount of $ and (iv) the Palmer
Systems, the Related Assets and the assets of Westerly or Colony,
as the case may be, to the extent the transactions contemplated
by the last sentence of Section 2.6 of the Merger Agreement shall
have been consummated (collectively, the "Retained Assets").
(c) Notwithstanding anything contained in this Agreement or
in the Merger Agreement to the contrary, NPJ acknowledges and
agrees that KBC makes and has made no warranty, either express or
implied, including without limitation warranties of
merchantability or fitness for a particular purpose, with respect
to any Contributed Assets.
1.2 Assumption of Liabilities.
(a) Subject to Sections 1.2(b) and 1,5 hereof, NPJ, in
partial consideration for the Contribution, hereby
1 1 unconditionally assumes and agrees to pay, satisfy and discharge,
any and all liabilities of KBC, whether contingent or otherwise,
including, without limitation (if applicable), the NPJ Debt (the
"Assumed Liabilities").
(b) Notwithstanding Section 1.2(a), KBC hereby retains, and
NPJ does not assume and will have no liability with respect to,
(i) the New Company Debt, (ii) the debts, liabilities and
obligations associated with the business operations of the Cable
Subsidiaries and the cable operations of KBC, (iii) KBC's
obligations created pursuant to this Agreement, and (iv) the
liabilities set forth on Schedule 2.5(b) to the Merger Agreement
(collectively, the "Retained Liabilities").
(c) It is expressly agreed by the parties hereto that all
of the obligations of NPJ under the Merger Agreement shall be
treated as Assumed Liabilities and not as Retained Liabilities
under this Agreement.
1.3 Employee Benefits. All plans and arrangements for the
benefit of KBC's employees (including stock option plans) in
place as of the Effective Time are subject to the terms of
Sections 6.12 and 6.26 of the Merger Agreement. Obligations of
NPJ under such Sections shall be treated as Assumed Liabilities
and not as Retained Liabilities under this Agreement.
1.4 Further Assurances. Each of the parties hereto
-` promptly shall execute such documents and other instruments and
-S-
take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and to consummate
the transactions contemplated hereby.
1.5 Tax Matters. Notwithstanding anything to the contrary
in this Agreement, liabilities of the parties for Taxes that are
associated with the business operations of the Cable Subsidiaries
are subject to the terms of Section 6.10 of the Merger Agreement,
and all obligations of NPJ under Section 6.10 of the Merger
Agreement shall be treated as Assumed Liabilities and not as
Retained Liabilities under this Agreement. The transactions
contemplated by the Merger Agreement are intended to qualify as
tax-free reorganizations, liquidations and dissolutions under the
applicable sections of the Code.
1.6 Remedies. Except as otherwise expressly set forth
herein, all remedies of the parties hereunder shall be governed
exclusively by Article 9 of the Merger Agreement.
1.7 Cooperation. The parties agree to cooperate with each
other in all reasonable respects to ensure the smooth transfer of
the Contributed Assets, the Assumed Liabilities and the business
related thereto, including, without limitation, entering into any
service or other sharing agreements that may be necessary.
ARTICLE 2
l
MISCELLANEOUS
2.1 Entire Aareement. This Agreement, together with the
Merger Agreement, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes
all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter
hereof.
2.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
regardless of conflict of law principles.
2.3 Descriptive Headings. The descriptive headings herein
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.
2.4 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 with answerback,
by express or overnight mail delivered by a nationally recognized
air courier (delivery charges prepaid) or by registered or
certified mail (postage prepaid, return receipt requested) to the
/ respective parties as follows:
1,
s�
if to KBC
=` c/o Continental Cablevision, Inc.
The Pilot House, Lewis Wharf
Boston, MA 02110
Telecopy: (617) 742-0530
Attention: Amos B. Hostetter, Jr.
with a copy to:
Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attention: Patrick K. Miehe, Esq.
if to NPJ:
The Providence Journal Company
75 Fountain Street.
Providence, RI 02902
Telecopy: (401) 277-7889
Attention: Stephen Hamblett and
John L. Hammond, Esq.
/ with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 08903
Telecopy: (401) 276-6611
Attention: Walter G.D. Reed, Esq_
or to such other address as the party to whom notice is given may
have previously furnished to the others in writing in the manner
set forth above. Any notice or communication delivered in person
shall be deemed effective on delivery. Any notice or
communication sent by telecopy or by air courier shall be deemed
effective on the first business day at the place at which such
notice or communication is received following the day on which
such notice or communication was sent. Any notice or
communication sent by registered or certified mail shall be
deemed effective on the fifth business day at the place from
which such notice or communication was mailed following the day
in which such notice or communication was mailed.
2.5 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, 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 as
provided in Sections 2.7 and 2.8 (which are intended to be for
the benefit of the Persons provided for therein, and may be
1 enforced by such Persons).
-5-
2.6 Counterparts. This Agreement may be executed in
(� counterparts, each of which shall be deemed to be an original,
' but all of which shall constitute one and the same agreement.
2.7 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 stockholder of
any party hereto or any officer, director, employee, agent,
representative or investor of any party hereto.
2.8 Binding Effect; Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and
their respective legal representatives and successors, including
Acquiror as the surviving corporation in the Merger. This
Agreement may not be assigned by any party hereto.
2.9 Certain Transfers of Assets by NPJ. For a period of
four years from the date hereof, NPJ agrees that it will not (i)
sell, transfer, assign or otherwise dispose of any material
assets or (ii) declare, set aside or pay any dividend or other
distribution (other than a dividend or distribution payable in
capital stock) in respect of its capital stock, or redeem or
otherwise acquire any of its capital stock, if, as a result of
and after giving effect to any such transaction and the
application of any proceeds received therefrom, NPJ would have a
fair market value (determined as a sale on a private market going
�. concern basis, free and clear of all liabilities) of less than:
(x) for the period from the date hereof to the first anniversary
of the Effective Date, $200,000,000, (y) for the period from such
first anniversary to the second anniversary of the Effective
Date, $150,000,000 and (z) for the period from such second
anniversary to the fourth anniversary of the Effective Date,
$50,000,000, provided, however, Acquiror agrees that NPJ may
proceed with and consummate any transaction which would otherwise
be prohibited by this Section 2,9 if NPS provides security in
form and amount reasonably acceptable to Acquiror.
2.10 Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of all the parties.
2.11 Legal Fees; Costs. If any party hereto institutes any
action or proceeding 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.
2.12 Jurisdiction. The parties accept, generally and
unconditionally, the exclusive jurisdiction of the State of. Rhode
Island or the Commonwealth of Massachusetts in any action, suit
or proceeding of any kind which arises out of or by reason of
this Agreement or any agreements contemplated hereby.
2.13 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are
fulfilled to the fullest extent possible.
2.14 Failure or Indulgence Not Waiver: Remedies Cumulative.
No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
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.
f:%=$\CC1121\C0NTRIH2.: RST:01/33/95
(D
KING BROADCASTING COMPANY
By.
Name:
Title:
THE PROVIDENCE JOURNAL COMPANY
By:
Name:
Title:
Exhibit C to the
Merger Agreement
VOTING AGREEMENT
This Voting Agreement, dated as of November 18, 1994
(this "Agreement"), is by and among Continental Cablevision, Inc.,
a Delaware corporation ("Acquiror"), Providence Journal Company, a
Rhode Island corporation (the "Company"), each person or entity
listed as an "Acquiror Stockholder" on the signature pages hereof
(each, an "Acquiror Stockholder") and each person or entity listed
as a "Providence Journal Company Stockholder" on the signature
pages hereof (each, a "PJC Stockholder").
WHEREAS, each Acquiror Stockholder owns the number of
shares of (i) Class A Common Stock, par value $.01 per share, of
Acquiror ("Acquiror Class A Common Stock"), (ii) Class B Common
Stock, par value $.01 per share, of Acquiror ("Acquiror Class B
Common Stock") and (iii) Series A Convertible Preferred Stock, par
value $.01 per share, of Acquiror ("Acquiror Preferred Stock") set
forth opposite such Acquiror Stockholder's name on Exhibit A hereto
(all shares of Acquiror Class A Common Stock, Acquiror Class B
Common Stock and Acquiror Preferred Stock now owned and which may
hereafter be acquired by the Acquiror Stockholders prior to the
termination of this Agreement shall be referred to herein as the
"Acquiror Shares");
WHEREAS, each PJC Stockholder owns the number of shares
of (i) Class A Common Stock, par value $2.50 per share, of the
Company ("Providence Journal Class A Common Stock") and (ii) Class
B Common Stock, par value $2.50 per share, of the Company
("Providence Journal Class B Common Stock") set forth opposite such
PJC Stockholder's name on Exhibit B hereto (all shares of
Providence Journal Class A Common Stock and Providence Journal
Class B Common Stock now owned and which may hereafter be acquired
by the PJC Stockholders prior to the termination of this Agreement,
shall be referred to herein as the "Providence Journal Shares");
WHEREAS, the Company and Acquiror propose to enter into
an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, that the
Company will merge with Acquiror pursuant to the Merger (this and
other capitalized terms used and not defined herein shall have the
meanings given to such terms in the Merger Agreement) contemplated
by the Merger Agreement;
WHEREAS, it is a condition to the willingness of Acquiror
to enter into the Merger Agreement that each PJC Stockholder agree,
and in order to induce Acquiror to enter into the Merger Agreement,
each PJC Stockholder has agreed, to enter into this Agreement; and
WHEREAS, it is a condition to the willingness of the
1 Company to enter into the Merger Agreement that each Acquiror
Stockholder agree, and in order to induce the Company to enter into
-z -
the Merger Agreement, each Acquiror Stockholder has agreed, to
enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending to
be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE1
VOTING OF PROVIDENCE JOURNAL SHARES AND ACOUIROR SHARES
SECTION 1.1. Voting Agreement. (a) Each PJC Stockholder
hereby agrees that during the time this Agreement is in effect; at
any meeting of the stockholders of the Company, however called, and
in any action by consent of the stockholders of the Company, such
PJC Stockholder shall vote his, her or its Providence Journal
Shares: (i) in favor of the Merger, the Merger Agreement (as
amended from time to time) and the other transactions contemplated
by the Merger Agreement, the Preemptive Rights Waiver Amendment
and, if applicable, the Alternate Merger Agreement (as amended from
time to time), and the transactions contemplated by the Alternate
Merger Agreement, (ii) against any proposal for any
recapitalization, merger, sale of assets or other business
combination between the Company or any of its Cable Subsidiaries
and any person or entity other than Acquiror, or any other action
or agreement, that would result in a breach of any covenant,
1 representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or the Alternate Merger
Agreement, as the case may be, or that would result in any of the
conditions to the obligations of the Company under the Merger
Agreement or the Alternate Merger Agreement, as the case may be,
not being fulfilled, and (iii) in favor of any other matter
relating to the consummation of the transactions contemplated by
the Merger Agreement or the Alternate Merger Agreement, as the case
may be. 'Each PJC Stockholder acknowledges receipt and review of a
copy of the Merger Agreement (which contains a copy of the
Alternate Merger Agreement).
(b) Each Acquiror Stockholder hereby agrees that during
the time this Agreement is in effect, at any meeting of the
stockholders of Acquiror, however called, and in any action by
consent of the stockholders of Acquiror, such Acquiror Stockholder
shall vote his, her or its Acquiror Shares: (i) in favor of the
Merger, the Recapitalization Amendment, the Merger Agreement (as
amended from time to time) and the transactions contemplated by the
Merger Agreement, and, if applicable, the Alternate Merger
Agreement and the other transactions contemplated by the Alternate
Merger Agreement, (ii) against any action or agreement that would
result in a breach of any covenant, representation or warranty or
any other obligation or agreement of Acquiror under the Merger
Agreement or the Alternate Merger Agreement, as the case may be, or
that would result in any of the conditions to the obligations of
Acquiror under the Merger Agreement or the Alternate Merger
Agreement, as the case may be, not being fulfilled and (iii) in
-3 -
favor of any other matter relating to the consummation of the
r transactions contemplated by the Merger Agreement and the Alternate
+. Merger Agreement, as the case may be. Each Acquiror Stockholder
acknowledges receipt and review of a copy of the Merger Agreement
(which contains a copy of the Alternate Merger Agreement).
(c) Anything herein to the contrary notwithstanding, the
parties hereto acknowledge and agree that nothing contained in this
Agreement shall be deemed to require an Acquiror Stockholder who is
a director of Acquiror or a PJC Stockholder who is a director of
the Company to take any action or refrain from taking any action in
his or her capacity as such.
ARTICLE 2
REPRESENTATION AND WARRANTIES OF THE PJC STOCKHOLDERS
Each PSC Stockholder hereby represents and warrants to
Acquiror as follows:
SECTION 2.1. Authority Relative to This Agreement. Such
PJC Stockholder has all necessary power and authority to execute
and deliver this Agreement, to perform his, her or its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution- and delivery of this Agreement by such PJC
Stockholder and the consummation by such PJC Stockholder of the
transactions contemplated hereby have been duly and validly
authorized by such PJC Stockholder, and no other proceedings on the
part of such PJC Stockholder are necessary to authorize the
execution and delivery of this Agreement or to consummate such
transactions. This Agreement has been duly and validly executed
and delivered by such PJC Stockholder and, assuming the due
authorization, execution and delivery hereof by each other party
hereto, constitutes a legal, valid and binding obligation of such
PJC Stockholder, enforceable against. such PSC Stockholder in
accordance with its terms.
SECTION 2.2. No Conflict.
(a) The execution and delivery of this Agreement by such
PJC Stockholder do not, and the performance of this Agreement by
such PJC Stockholder shall not, (i) conflict with or violate any
trust agreement, charter, by-laws or other instrument or
organizational document of such PJC Stockholder (if any),
(ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such PJC Stockholder or by which
such PJC Stockholder's Providence Journal Shares are bound or
affected or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the
r creation of a lien or encumbrance on any of such PJC Stockholder's
(. Providence Journal Shares pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which such PJC Stockholder is
a party or by which such PJC Stockholder or such PJC Stockholder's
Providence Journal Shares are bound or affected, except, in the
case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or
delay the performance by such Stockholder of such PJC Stockholder's
obligations under this Agreement.
(b) The execution and delivery of this Agreement by such
PJC Stockholder do not, and the performance of this Agreement by
such PJC Stockholder shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
federal, state, local or foreign regulatory body, except where the
failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not
prevent or delay the performance by such PJC Stockholder of such
PJC Stockholder's obligations under this Agreement.
SECTION 2.3. Title to the Providence Journal Shares.
Such PJC Stockholder is the owner of the Providence Journal Shares
set forth opposite his, her or its name on Exhibit B free and clear
of all security interests, liens, claims, pledges, options, rights
of first refusal, agreements, limitations on voting rights, charges
and other encumbrances of any nature whatsoever. Such PJC
Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to such
Providence Journal Shares. Such PJC Stockholder has sole voting
power with respect to such Providence Journal Shares, and the
person(s) executing this Agreement have the power to direct the
voting of such Providence Journal Shares.
ARTICLE 3
REPRESENTATION AND WARRANTIES OF THE ACOUIROR STOCKHOLDERS
Each Acquiror Stockholder hereby represents and warrants
to the Company as follows:
SECTION 3.1. Authority Relative to This Agreement. Such
Acquiror Stockholder has all necessary power and authority to
execute and deliver this Agreement, to perform his, her or its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
by such Acquiror Stockholder and the consummation by such Acquiror
Stockholder of the transactions contemplated hereby have been duly
and validly authorized by such Acquiror Stockholder, and no other
proceedings on the part of such Acquiror Stockholder are necessary
to authorize the execution and delivery of this Agreement or to
consummate such transactions. This Agreement has been duly and
validly executed and delivered by such Acquiror Stockholder and,
assuming the due authorization, execution and delivery hereof by
each other party hereto, constitutes a legal, valid and binding
obligation of such Acquiror Stockholder enforceable against such
Acquiror Stockholder in accordance with its terms.
-5 -
SECTION 3.2. No Conflict.
(a) The execution and delivery of this Agreement by such
�-
Acquiror Stockholder do not, and the
qu performance of this Agreement
by such Acquiror Stockholder shall not, (i) conflict with or
violate any trust agreement, charter, by-laws or other instrument
or organizational document of such Acquiror Stockholder (if any),
(ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such Acquiror Stockholder or by
which such Acquiror Stockholder's Acquiror Shares are bound or
affected or (iii) result in any breach of or 'constitute a default
(or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of such Acquiror
Stockholder's Acquiror Shares pursuant to, any note, bond,
mortgage, indenture contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which such Acquiror
Stockholder is a party or by which such Acquiror Stockholder or by
which such Acquiror Stockholder's Acquiror Shares are bound or
affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences
which would not prevent or delay the performance by such Acquiror
Stockholder of such Acquiror Stockholder's obligations under this
Agreement.
(b) The execution and delivery of this Agreement by such
Acquiror Stockholder do not, and the performance of this Agreement
by such Acquiror Stockholder shall not, require any consent,
approval, authorization or permit of, or filing with or
notification to, any federal, state, local or foreign regulatory
body, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not prevent or delay the performance by such
Acquiror Stockholder of such Acquiror Stockholder's obligations
under this Agreement.
SECTION 3.3. Title to the Acoruiror Shares. Such
Acquiror Stockholder is the owner of the Acquiror Shares set forth
opposite his, her or its name on Exhibit A. Such Acquiror
Stockholder has sole voting power with respect to such Acquiror
Shares or has the power to direct the voting of such Acquiror
Shares.
ARTICLE 4
COVENANTS OF THE PJC STOCKHOLDERS
SECTION 4.1. No Inconsistent Agreement. Each PJC
Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement, such PJC Stockholder shall not
enter into any voting agreement or grant a proxy or power of
attorney with respect to such PJC Stockholder's Providence Journal
Shares which is inconsistent with this Agreement.
WE
SECTION 4.2. Transfer of Title. Each PJC Stockholder
hereby covenants and agrees that such PJC Stockholder shall not
transfer ownership of any of its Providence Journal Shares unless
the transferee agrees in writing to be bound by the terms and
conditions of this Agreement..
ARTICLE 5
COVENANTS OF THE ACOUIROR STOCKHOLDERS
SECTION 5.1. No Inconsistent Agreement. Each Acquiror
Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement, such Acquiror Stockholder shall not
enter into any voting agreement or grant a proxy or power of
attorney with respect to such Acquiror Stockholder's Acquiror
Shares which is inconsistent with this Agreement.
SECTION 5.2. Transfer of Title. Each Acquiror
Stockholder hereby covenants and agrees that such Acquiror
Stockholder shall not transfer ownership of more than 100 of such
Acquiror Stockholder's Acquiror Shares unless the transferee agrees
in writing to be bound by the terms and conditions of this
Agreement; provided, however, from and after the date on which the
holders of at least 50.15(the "Required Percentage") of the
combined voting power of the Acquiror Common Stock and the Acquiror
Series A Preferred Stock have become parties to this Agreement, no
_ Acquiror Stockholder shall transfer ownership of any of such
Acquiror Stockholder's Acquiror Shares if, after giving effect to
\_.. such transfer, the Required Percentage of Acquiror Stockholders
would no longer be bound by the terms of this Agreement.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1. Termination. This Agreement shall
terminate on the earlier to occur of (i) the consummation of the
Merger, Transactions, (ii) December 31, 1995 and (iii) the
termination of the Merger Agreement (or, if applicable, the
Alternate Merger Agreement).
SECTION 6.2. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at
law or in equity.
SECTION 6.3. Entire Agreement. This Agreement
constitutes the entire agreement between the parties and supersedes
all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
C�
-7 -
SECTION 6.4. Amendment. This Agreement may not be
amended except by an instrument in writing signed by all of the
parties hereto.
SECTION 6.5, Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal
or incapable or being enforced, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 6.6. 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 law applicable hereto.
SECTION 6.7. Descriptive Headings. The descriptive
headings herein 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.
SECTION 6.8. Jurisdiction. The parties accept,
generally and unconditionally, the exclusive jurisdiction of the
State of Rhode Island or the Commonwealth of Massachusetts in any
action, suit or proceeding of any kind which arises out of or by
reason of this Agreement or any agreements contemplated hereby.
SECTION 6.9. 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.
SECTION 6.10 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 with
answerback, by express or overnight mail delivered by a nationally
recognized air courier (delivery charges prepaid) or by registered
or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows: (a) if to any PJC Stockholder or
Acquiror Stockholder, to him, her or it at the location listed
below such PJC Stockholder's or Acquiror Stockholder's name on the
signature pages hereof, (ii) if to Acquiror, to it at The Pilot
House, Lewis Wharf, Boston, MA 02110, telecopy (617) 742-0530,
attention: Amos B. Hostetter, Jr., and (iii) if to the Company, to
it at 75 Fountain Street, Providence, RI 02902, telecopy (401) 277-
7889, attention: Stephen Hamblett and John L. Hammond, Esq., or to
such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set
forth above. Any notice or communication delivered in person shall
be deemed effective on delivery. Any notice or communication sent
by telecopy or by air courier shall be deemed effective on the
first business day at the place at which such notice or
communication is received following the day an which such notice or
communication was sent. Any notice or communication sent by
registered or certified mail shall be deemed effective on the fifth
business day at the place from which such notice or communication
was mailed following the day in which such notice or communication
was mailed.
SECTION 6.11 Assignment. This Agreement shall not be
assigned by operation of law or otherwise.
SECTION 6.12 Parties in Interest. This Agreement shall
be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any person any right, benefit or
remedy of any nature whatsoever under or by reason of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the date first written above.
CONTINENTAL CABLEVISION, INC.
zz
Name:
Title:
PROVIDENCE JOURNAL COMPANY
M
Name:
Title:
ACQUIROR STOCKHOLDERS:
Amos B. Hostetter, Jr., not in his
individual capacity but solely in
his capacity as Trustee of the Amos
B. Hostetter, Jr. 1989 Trust
r Address for notices:
l I
The Pilot House, Lewis Wharf
Boston, MA 02110
Attn: Amos B. Hostetter, Jr.
Timothy P. Neher, not in his
individual capacity but solely in
his capacity as Trustee of the Amos
B. Hostetter, Jr. 1989 Trust
Address for notices:
The Pilot House, Lewis Wharf
Boston, MA 02110
Attn: Amos B. Hostetter, Jr.
PROVIDENCE JOURNAL COMPANY
STOCKHOLDERS:
}
John A.
Bowers
Address
for notices:
2 Maryland Drive
West Warwick, RI 02893
Harry Dyson
Address for notices:
24 Metcalf Drive
Cumberland, RI 02864
Stephen Hamblett
Address for notices:
35 Benefit Street
Providence, RI 02906
\...ir
-10-
Trygve E. Myrhen
Address for notices:
30 Apple Tree Lane
Barrington, RI 02806
James F. Stack
Address for notices;
5 Highridge Drive
Lincoln, RI 02865
Joel N. Stark
Address for notices:
137 Briarcliff Avenue
Warwick, RI 02889
James V. Wyman
Address for notices:
6 Barway Lane
Cumberland, RI 02864
Exhibit A to Voting Agreement
Acquiror
Class A
Common Stock
Amos B. Hostetter, Jr.,
not in his individual
capacity but solely in
his capacity as Trustee
of the Amos B. Hostetter,
Jr. 1989 Trust
Acquiror
Class B
Common Stock
1,713,742
Acquiror
Preferred
Stock
Exhibit B to Voting Agreement
-"" F:\EZS\CCI126\VOTING-C4
Providence
Journal
Class B
Ccamon Stock
148
Providence
�.'
Journal
Class A
Common Stock
John A. Bowers
1
Harry Dyson
4
Stephen Hamblett
156
Trygve Myhren
3
James Stack
2
Joel Stark
3
James Wyman
6
-"" F:\EZS\CCI126\VOTING-C4
Providence
Journal
Class B
Ccamon Stock
148
Exhibit D to the
Merger Agreement
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement"), dated as
of , 1995, is made by and among King Broadcasting
Company, a Washington corporation (11KBC"), The Providence Journal
Company, a Delaware corporation ("NPJ"), and Continental
Cablevision, Inc., a Delaware corporation ("Acouircr").
RECITALS
WHEREAS, KBC, NPJ and Acquiror (together with Providence
Journal Company, a Rhode Island corporation ("PJC"), and King
Holding Corp., a Delaware corporation) are parties to that
certain Amended and Restated Agreement and Plan of Merger dated
as of November 18, 1994 (the "Merger Agreement") pursuant to
which, among other things, PJC has agreed to contribute all of
its assets to KBC in exchange for shares of common stock of KBC
and the assumption by KBC of all of the liabilities of PJC, and
KBC, in turn; has agreed to contribute to NPJ all of the assets
of KBC (except as otherwise set forth in the Merger Agreement)
i pursuant to the terms of the Contribution Agreement (this and
other capitalized terms used and not defined herein shall have
the meanings given to such terms in the Merger Agreement); and
WHEREAS, the Contribution is one step in a series of
transactions as a result of which (i) Acquiror will acquire the
cable businesses of KBC and its Cable Subsidiaries (a portion of
which was transferred to KBC as a result of the Dissolution) by
merging KBC with and into Acquiror, and (ii) NPJ will acquire and
conduct the business previously conducted by KBC and its
Subsidiaries (other than their cable television operations).
NOW, THEREFORE, in of the foregoing and the
agreements set forth below, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
NONCOMPETITION COVENANTS
1.1 Noncompetition Covenants. NPJ acknowledges that (i)
it, on its own and through its Subsidiaries and their respective
officers, employees and other representatives, has specialized
knowledge and experience in the operation of cable television
systems (as defined in the Cable Communications Policy Act of
t 1984, as amended) providing the services provided by KBC or PJC,
-2 -
as the case may be, and the Cables Subsidiaries on the date prior
to the date the Contribution is effected (the "Restricted
Business"; provided that the term "Restricted Business" shall not
be construed to include the business of developing or creating
programming), (ii) its reputation and contacts within the
Restricted Business and those of its Subsidiaries are considered
of great value to KBC and Acquiror and (iii) if such knowledge,
experience, reputation or contacts were used to compete with
Acquiror, serious harm to Acquiror could result. Thus, NPJ
agrees that, for a period of three (3) years after the Closing
Date, neither it nor any of its Subsidiaries shall, directly or
indirectly, on its own behalf or in the service or on behalf of
others;
(a) actively solicit for employment (including as an
independent contractor), interfere with or endeavor to entice
away (or attempt to do any of the foregoing) (x) any of the
directors, officers, employees or agents of Acquiror or any of
its Subsidiaries, whether holding such position prior to or after
the Closing Date, or (y) any person who at any time on or after
January 1, 1994, was an officer or employee of PJC, KBC or any of
their Subsidiaries engaged on behalf of either of them in the
Restricted Business and whom Acquiror employs effective upon the
Closing;
(b) own, manage, operate, finance, join, control or
participate in the'ownership, management, operation, financing or
control of, or be connected as a stockholder, partner, principal,
agent, representative, consultant or otherwise with any business
or enterprise engaged in the Restricted Business in the franchise
areas served by KBC or Acquiror, or any of their respective
Subsidiaries, at the date hereof (the "Restricted Area"); or
(c) use or permit PJC's, KBC's or NPJ's name to be used in
connection with any business or enterprise engaged in the
Restricted Business in the Restricted Area; provided; however,
that the provisions of this Section 1.1 shall not be construed to
prohibit the ownership by NPJ or any Subsidiary of NPJ, as a
passive investor, of not more than 51 of any class of securities
registered pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of any corporation which is engaged
in the Restricted Business, or passive investments in
partnerships or joint ventures representing not more than 51 of
any class of any equity interests therein.
1.2 Reasonableness of Covenants. Etc. In the event that
the provisions of Section 1.1 should ever be adjudicated to
exceed the time, geographic or service limitations permitted by
applicable Law in any jurisdiction, then such provisions shall be
deemed reformed in such jurisdiction to the maximum time,
geographic or service limitations permitted by applicable Law.
NPJ agrees that its covenants set forth in Section 1.1 (the
"Noncompetition Covenants") are appropriate and reasonable when
considered in light of the nature and extent of the Restricted
Business and the transactions contemplated by the Merger
Agreement, including, without limitation, the assets being
�,. contributed to NPJ by KBC pursuant to the Contribution Agreement.
-3 -
Without limiting the generality of the foregoing, NPJ
specifically agrees that prohibitions on the active solicitation,
l" interference or enticement of officers, directors, employees or
agents of Acquiror or any of its Subsidiaries, as set forth in
Section 1.1, are appropriate and reasonable in all respects. NPJ
agrees that the Noncompetition Covenants are of the essence of
this Agreement and the Merger Agreement; that each such
Noncompetition Covenant is reasonable and necessary to protect
and preserve the interests and properties of Acquiror and its
Subsidiaries and the Restricted Business of Acquiror and its
Subsidiaries; that irreparable loss and damage will be suffered
by Acquiror should NPJ or any of its Subsidiaries breach any such
Noncompetition Covenant; that each of such covenants is separate,
distinct and severable not only from the other of such covenants
but also from the other and remaining provisions of this
Agreement and the Merger Agreement; that the unenforceability of
all or any of the Noncompetition Covenants shall not affect the
validity or enforceability of any other such covenants; that, in
addition to other remedies available to it, Acquiror shall be
entitled to both temporary and permanent injunctions to prevent a
breach or contemplated breach by NPJ of any of the Noncompetition
Covenants; and that NPJ hereby waives any requirements for the
posting of a bond or any other security by Acquiror in connection
therewith.
1,3 Specific Performance• Other Remedies. NPJ recognizes
that the Noncompetition Covenants are unique and, accordingly,
Acquiror shall, in addition to such other remedies as may be
available to it at law or in equity, have the right to enforce
its rights under Section 1.1 by actions for injunctive relief and
specific performance to the extent permitted by law.
ARTICLE 2
MISCELLANEOUS
2.1 Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the specific
subject matter hereof and supersedes all prior written and oral
and all contemporaneous oral agreements and understandings with
respect to the specific subject matter hereof.
2.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
regardless of conflict of law principles.
2.3 Descriptive Headings. The descriptive headings herein
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.
2.4 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 with answerback,
by express or overnight mail delivered by a nationally recognized
air courier (delivery charges prepaid) or by registered or
certified mail (postage prepaid, return receipt requested) to the
respective parties as follows_
if to NPJ:
The Providence Journal Company
75 Fountain Street
Providence, RI 02902
Telecopy: (401) 277-7889
Attention: Stephen B. Hamblett and
John L. Hammond, Esq.
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Telecopy: (401) 276-6611
Attention Walter G.D. Reed, Esq.
if to KBC or Acquiror:
Continental Cablevision, Inc.
The Pilot House
Lewis wharf
Boston, MA 02109
Telecopy: (617) 742-0530
Attention: Amos B. Hostetter, Jr.
wi th a copy to.-
Sullivan
o.Sullivan & Worcester
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
Attention:. Patrick K. Miehe, Esq.
or to such other address as the party to whom notice is given may
have previously furnished to the others in writing in the manner
set forth above. Any notice or communication delivered in person
shall be deemed effective on delivery. Any notice or
communication sent by telecopy or by air courier shall be deemed
effective on the first business day at the place at which such
notice or communication is received following the day on which
such notice or communication was sent. Any notice or
communication sent by registered or certified mail shall be
deemed effective on the fifth business day at the place from
which such notice or communication was mailed following the day
in which such notice or communication was mailed.
2.5 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this ,Agreement except for
Sections 2.7 and 2.8 (which are intended to be for the benefit of
the Persons provided for therein, and may be enforced by such
C_ Persons)_
-5-
2.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original,
Cbut all of which shall constitute one and the same agreement.,
2.7 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 stockholder of
any party hereto or any officer, -director, employee, agent,
representative or investor of any party hereto,
2..8 Binding Effect; Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and
their respective legal representatives and successors, including
Acquiror as the surviving corporation in the Merger. This
Agreement may not be assigned by any party hereto.
2.9 Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of all the parties.
2.10 Legal Fees; Costs. If any party hereto institutes any
action or proceeding 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.
2.11 Jurisdiction. The parties accept, generally and
unconditionally, the exclusive jurisdiction of the State of Rhode
(. Island or the Commonwealth of Massachusetts in any action, suit,
or proceeding of any kind which arises out of or by reason of
this Agreement or any agreements contemplated hereby.
2.12 Failure or Indulgence Not Waiver• Remedies Cumulative.
No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
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.
KING BROADCASTING COMPANY
By:
Name:
Title:
M
F:\225\CC2126\NONCONP2.RS :01/23/95
THE PROVIDENCE JOURNAL COMPANY
By:_
Name:
Title:
CONTINENTAL CABLEVISION, INC.
By.
Name:
Title:
EXHIBIT 3
Transferee Continental Cablevision, Inc. does not currently have any plans to
change the service and operations of the system as a consequence of this transaction.
However, Continental may, after it has an opportunity to familiarize itself with the
system's operations, determine that such changes are desirable or necessary.
EXHIBIT 4
Continental Cablevision, Inc. ("Continental' or Transferee") is a holding
company duly qualified to transact business in the States or jurisdiction where the
nature of its business requires such qualification, and duly qualified to own shares of
each of its operating subsidiaries. Continental will become the sole ultimate owner of
the current Franchisee, which is formed under the laws of or is duly qualified to
transact business in the State in which the system operates and will continue to
operate the system after the consummation of the Merger.
0
EXHIBIT 5
There are no documents, instruments, agreements or understandings for the
pledge of stock of Continental as security for loans or contractual performance.
< ` . EXHIBIT 6
Transferee Financial Qualifications
Unaudited Consolidated Financial Statements of Transferee Continental
Cablevision, Inc. and Subsidiaries for the nine months ended September 30, 1994.
Consolidated Financial Statements and Supplemental Schedules of
Consolidating Information for Transferee Continental Cablevision, Inc. and
Subsidiaries for the year ended December 31, 1993 and Independent Auditors Report.
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, SEPTEMBER 30. 1994
(Dollars In Thousands)
ASSETS
Cash and Cash Equivalents
$ 28,824
Accounts Receivable - net
47,414
Prepaid Expenses and Other
8,037
Supplies
48,821
Marketable Equity Securities
144,558
Investments
305,725
Property, Plant and Equipment - net
1,273,748
Other Assets - net
472.224
TOTAL
$ 2,329,351
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Accounts Payable
$ 45,717
Accrued Interest
62,849
Accrued and Other Liabilities
185,712
Debt
3,310,520
Deferred Income Taxes
152,110
Minority Interest in Subsidiaries
2,913
Redeemable Common Stock, $.01 par value;
667,366 shares outstanding
227,844
Shareholders' Equity (Deficiency):
Preferred Stock, $.01 par value; 1,557,142 shares
authorized; none outstanding
-
Series A Convertible Preferred Stock, $-01 par value;
1,142,858 shares authorized and outstanding;
liquidation preference - $478,301,000
11
Class A Common Stock, $.01 par value; 7,500,000
shares authorized; 280,279 shares outstanding
3
Class B Common Stock, $.01 par value; 7,500,000
shares authorized; 3,611,910 shares outstanding
36
Additional Paid -In Capital
557,424
Unearned Compensation
(14,912)
Net Unrealized Holding Gain on Marketable Equity Securities
60,526
Deficit
(2,261,402)
Shareholders' Equity (Deficiency)
(1.658,314)
TOTAL
$ 2.329.351
Prepared from the Companies' records without audit.
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED LOSS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1.99.4.. _
(In Thousands)
Revenues
Costs and Expenses:
Operating
Selling, General and Administrative
Restricted Stock Purchase Program
Depreciation and Amortization
Total
Operating Income
Other (Income) Expense:
Interest
Equity in Net Loss of Affiliates
Gain on Sale of Marketable Equity Securities
Minority Interest in Net Loss of Subsidiaries
r 1 Dividend Income
Other
Total
Loss Before Income Taxes
Income Tax Benefit
Net Loss
0
Prepared from the Companies` records without audit.
$ 885,636
300,077
195,901
8,502
210,728
715,208
170.428
223,580
14,413
(1,204)
(83)
(676)
258)
235.772
(65,344)
(24,752)
!-(4 0 592
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(In Thousands)
OPERATING ACTIVITIES:
Net Loss
$ (40,592)
Adjustments to Reconcile Net Loss to Net
Cash Provided from Operating Activities:
Depreciation and Amortization
210,728
Restricted Stock Purchase Program
8,502
Equity in Net Loss of Affiliates
14,413
Gain on Sale of Marketable Equity Securities
(1,204)
Minority Interest in Net Loss of Subsidiaries
(83)
Deferred Income Taxes
(26,456)
Accrued Interest
(9,575)
Accounts Payable, Accrued and Other Liabilities
15,045
Other Working Capital Changes
21 694
NET CASH PROVIDED FROM OPERATING ACTIVITIES
149.084
FINANCING ACTIVITIES:
Proceeds from Borrowings
291,750
Repayment of Borrowings
(158,408)
Increase in Minority Interests
779
Repurchase of Common Stock
(4,755)
NET CASH PROVIDED FROM FINANCING ACTIVITIES
129.366
INVESTING ACTIVITIES
Acquisition, Net of Cash Acquired (47,990)
Property, Plant and Equipment (183,818)
Investments (157,587)
Other Assets (424)
Proceeds from Sale of Marketable Equity Securities 17,553
NET CASH USED FOR INVESTING ACTIVITIES (372,266)
NET DECREASE IN CASH AND CASH EQUIVALENTS (93,816)
BALANCE AT BEGINNING OF PERIOD 122.640
BALANCE AT END OF PERIOD 28 824
Prepared from the Companies' records without audit.
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
�- NOTES TO CONSOLIDATED -FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Continental Cablevision, Inc. (the Company) and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Supplies and Property. Plant and Equipment
Supplies are stated at the lower of cost (first -in, first -out method) or market.
Property, plant and equipment are stated at cost and include $1,260,000 of interest
(. } capitalized during the period. Depreciation is provided using the straight-line group method
over estimated useful lives as follows: buildings, 25 to 40 years; reception and distribution
facilities, 3 to 15 years; and equipment and fixtures, 4 to 12-1/2 years. (See Note 6)
Other Assets
Other assets are principally composed
financing costs and loans to employees (see
allocated to franchises in various acquisitions
successful franchise applications. Franchise
related franchises, generally 10 to 15 years.
Company's purchase price over the fair value
transactions, and is amortized over 40 years.
$692,094,000 at September 30, 1994.
Investments
of franchise costs, goodwill, deferred
Note 9). Franchise costs represent amounts
and costs deferred in connection with
costs are amortized over the lives of the
Goodwill represents the excess of the
of identifiable assets acquired in various
Accumulated amortization aggregated
Investments in 20-50% owned affiliates are generally accounted for using the equity
method_ Investments in less than 20% owned companies are generally accounted for
using the cost method. (See Note 5)
Marketable Equity Securities and Debt Securities
trJ The Company implemented Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS 115) as of January 1,
1994. In accordance with SFAS 115, prior period financial statements have not been
restated to reflect the change in accounting principle. (See Notes 4 and 9)
Marketable equity securities are classified as available for sale and stated at fair
value, with the unrealized gains or losses, net of tax, reported as a separate component of
shareholders' equity (deficiency). Realized gains and losses are included in results of
operations.
Income Taxes
Deferred tax liabilities and assets are recognized for the future tax consequences of
temporary differences between the financial reporting and tax bases of existing assets and
liabilities. In addition, future tax benefits, such as net operating loss and investment tax
credit carryforwards, are recognized to the extent realization of such benefits is more likely
than not.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The following represents non-cash investing and financing activities and cash paid
for interest and income taxes during the nine months ended September 30, 1994
(in thousands):
Accretion of Redeemable Common Stock $ 15,377
Accretion of Series A Convertible Preferred Stock $ 27,325
Cash Paid During the Period for Interest 5236.41 1
Cash Paid During the Period for Income Taxes 2 342
3. ACQUISITIONS
On June 30, 1994, the Company purchased a cable television system for
approximately $47,990,000, subject to post -closing adjustments. The accompanying
financial statements reflect the results of operations for this system commencing on the
acquisition date.
In November, the Company purchased several cable television systems for
approximately $67,000,000, subject to post -closing adjustments, and entered into a
purchase and sale agreement to purchase several cable television systems for
approximately $155,000,000. This transaction is expected to close in 1995..
In October, the Company entered into a $2,200,000,000 unsecured reducing
revolving credit agreement (Reducing Revolver). Borrowings under the Reducing Revolver
.1 were utilized to prepay and terminate both the Term Loan and the Credit Agreement.
Credit availability under the Reducing Revolver will decrease annually commencing
December 31, 1997 with a final maturity in October 2003. Borrowings under the Reducing
Revolver bear interest at a rate between the agent bank's prime rate and prime plus 1/2%,
depending on certain financial tests. At the Company's option, borrowings may bear
interest at spreads over LIBOR. The Company's obligations under the Reducing Revolver
are guaranteed by substantially all of the Restricted Subsidiaries, which represent the
Company's owned and operated cable systems. Prepayments are required from the
proceeds of certain sales of Restricted Subsidiaries' assets.
The Insurance Company Notes are unsecured, bear interest at 10.12%, require
increasing semi-annual repayments through July 1, 1999 and rank pari passu in right of
payment with the Reducing Revolver.
The Company's unsecured Senior Notes and Debentures rank pari passu in right of
payment with the Insurance Company Notes and Reducing Revolver (collectively, Senior
Debt) and are non -redeemable prior to maturity, except for the 9-1/2% Senior Debentures..
The 9-1/2% Senior Debentures are redeemable at the Company's option at par plus
declining premiums beginning in 2005. In addition, at any time prior to August 1996, the
Company may redeem a portion of the 9-1/2% Senior Debentures at a premium with the
proceeds from any offering by the Company of its capital stock. No sinking fund is
required for any of the Senior Notes and Debentures. At. September 30, 1994, the Senior
Notes and Debentures consist of (in thousands):
8-1/2% Senior Notes,
Due September 15, 2001
S 200,000
8-5/8% Senior Notes,
Due August 15, 2003
100,000
8-7/8% Senior Debentures,
Due September 15, 2005
275,000
9% Senior Debentures,
Due September 1, 2008
300,000
9-1/2% Senior Debentures,
Due August 1, 2013
525.000
Total $1:400,000
The Company's Senior Debt limits the Restricted Subsidiaries with respect to,
among other things, dividends, the repurchase of capital stock, the creation of liens and
additional indebtedness, property dispositions, investments and leases, and requires
certain minimum ratios of debt to cash flow and cash flow to related fixed charges.
4. MARKETABLE EQUITY SECURITIES
Marketable equity securities are classified as available for sale. As of September
30, 1994, these securities are carried at a fair value of $144,558,000 and have an
aggregate cost basis of $42,161,000. During the period, the company recognized a gross
unrealized holding loss of $38,687,000 and a gross realized gain of $1,204,000.
5. INVESTMENTS
The Company has invested $66,020,000 for a 20% interest in Teleport
Communications Group, Inc. (TCG) and TCG Partners, a related partnership. The
Company has made commitments to TCG to loan up to $46,800,000 through 2003, of
which $24,000,000 was outstanding as of September 30, 1994. In addition, the Company
has invested $39,168,000 in various partnerships with TCG Partners. TCG and its
affiliates are telecommunications companies which operate fiber optic networks in the
United States. The Company accounts for these investments under the equity method,
The Company has invested $15,945,000 in PrimeStar Partners, L.P. (PrimeStar), a
limited partnership that provides direct broadcast satellite services. This investment is
accounted for under the equity method. A wholly owned subsidiary of the Company has
issued a standby letter of credit of $38,750,000 on behalf of PrimeStar, which guarantees
a portion of the financing PrimeStar incurred to construct a successor satellite system_
The letter of credit is secured by certain marketable equity securities with a fair value of
$75,271,000 as of September 30, 1994.
The Company has advanced $108,300,000 in cash and has recorded commitments
of $26,365,000 to a company which owns and operates cable television systems in
Argentina. All advances are convertible into approximately a 50% equity interest in this
company,
The Company also has various investments in cable television companies which
are not individually material to the Company. The Company has approximately a one-third
ownership interest in these companies and therefore accounts for these investments using
the equity method.
The major components of these companies' combined financial position at
September 30, 1994 and results of operations for the period then ended are as follows
(reflects the Company's proportionate share only for the period of ownership, in
thousands):
Total Assets $412,000
Total Liabilities 330,000
Equity 82,000
Revenues 99,000
Depreciation and Amortization 23,000
Operating Loss (300)
Net Loss (15.000)
In September, the Company made an initial equity investment in Singapore -
-- Cablevision Private Limited (SCV), which will construct, own and operate a cable television
system in Singapore. Capital contributions for this 25% ownership interest will be
approximately $42,000,000 to be paid through 1996. In addition, the Company has made
commitments to SCV to loan up to approximately $42,000,000, if third -party debt financing
cannot be obtained by SCV.
6. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at September 30, 1994 are as
follows (in thousands):
Land and Buildings $ 54,498
Reception and Distribution Facilities 2,041,162
Equipment and Fixtures 276,160
Total 2,371,820
Less -Accumulated Depreciation 1,098,072
Property, Plant and Equipment -net $ 1,273,748
7. DEBT
Total debt outstanding at September 30, 1994 is as follows (in thousands):
Bank Indebtedness $ 909,400
Insurance Company Notes 150,000
Senior Notes and Debentures 1,400,000
Subordinated Debt 825,000
Other 26.120
Total $ 3 310,520
The Company's Bank Indebtedness includes the Term Loan and the Credit
Agreement. The Term Loan of $722,650,000 bears interest at a rate between the agent
bank's prime rate and prime plus 1%, depending on certain financial tests. The Credit
Agreement consists of a $497,750,000 revolving credit facility, of which $186,750,000 is
outstanding at September 30, 1994. Borrowings under the Credit Agreement bear interest
at a rate between the agent bank's prime rate plus 1/2% and prime plus 1-1/4%,
1 depending on certain financial tests.
The Company's Subordinated Debt is redeemable at the Company's option at par
.` plus declining premiums at various dates, and is subordinated to the Company's Senior
Debt. Subordinated Debt at September 30, 1994 consists of (in thousands):
10-5/8% Senior Subordinated Notes,
Due June 15, 2002 $100,000
12-7/8% Senior Subordinated Debentures,
Due November 1, 2004 325,000
Senior Subordinated Floating Rate
Debentures, Due November 1, 2004 100,000
11% Senior Subordinated Debentures,
Due June 1, 2007 300.000
Total 18K.0-00
The Company has called the 12 7/8% Senior Subordinated Debentures for
redemption on November 16, 1994.
The Senior Subordinated Floating Rate Debentures bear interest at LIBOR plus 3%
through November 1996, increasing to LIBOR plus 6.5% through maturity.
The Company currently has Interest Rate Exchange Agreements (Swaps) pursuant
` to which it pays fixed interest rates averaging 9.1% on notional amounts of $800,000,000
(expiring 1995 through 2000) and variable interest rates on notional amounts of
$1,575,000,000 (expiring 1998 through 2003). The variable interest rates are based on six
month LIBOR, which currently is approximately 6%. In addition, the Company has
$700,000,000 of Interest Rate Cap Agreements expiring in 1995 and 1996, which limit six
month LIBOR to approximately 7%. The Company's exposure, if the other parties fail to
perform under these agreements, would be limited to the impact of variable interest rate
fluctuations and the periodic settlement of amounts due under these agreements.
8. REDEEMABLE COMMON STOCK
Pursuant to a Stock Liquidation Agreement with certain shareholders (the Selling
Shareholders), the Company has committed to repurchase 667,366 shares of its common
stock (Redeemable Common Stock) in December 1998 or January 1999 at a defined
purchase price (Purchase Price). The Purchase Price is the greater of the estimated
amount of net proceeds per share from an underwritten public offering of the Company's
common stock or, the net proceeds per share from the liquidation of the Company less a
22.5% discount.
The initial estimated repurchase cost for the Redeemable Common Stock has been
adjusted by periodic accretions through the repurchase dates, based on the interest
method, of the difference between the initial estimate and the subsequent estimates of the
Purchase Price.
In the event the Company is unable to meet its commitments under the Stock
-.- Liquidation Agreement, the Selling Shareholders may cause the sale of all or substantially
1 all of the assets of the Company.
9. SHAREHOLDERS' EQUITY (DEFICIENCY)
At September 30, 1994, there were 282,463 and 4,277,092 Class A and Class B
shares of common stock outstanding, respectively. Shareholders' Equity (Deficiency)
reflects only 280,279 and 3,611,910 Class A and Class B shares of common stock
outstanding, respectively, due to the classification of 667,366 shares as Redeemable
Common Stock_ Class A Common Stock has one vote per share and Class B Common
Stock has ten votes per share.
Each share of Series A Convertible Preferred stock (Convertible Preferred) is
entitled to ten votes per share, shares equally with each common share in all dividends
and distributions, and is convertible into one share of common stock, at any time, at the
option of the holder. The Convertible Preferred stockholders have the right, at any time
after the third anniversary of the purchase date, to sell their shares in a public offering by
causing the Company to register such shares under the Securities Act of 1933. Certain
other shareholders of the Company have similar registration rights.
The Convertible Preferred has a liquidation preference equal to the greater of its
Accreted Value or the amount which would be distributed to common stockholders
- assuming conversion of the Convertible Preferred. The Accreted Value assumes a yield
of 8% per annum, compounded semi-annually in arrears on the $350 purchase price per
share. During the period, the carrying value of the Convertible Preferred has been
increased by $27,325,000 to reflect the Accreted Value of $478,301,000 as of
September 30, 1994.
After the fifth anniversary of the purchase date, if the value of the common stock is
greater than 137.5% of the then Accreted Value, the Company will have the right to convert
each outstanding share of Convertible Preferred into one share of common stock.
On the tenth anniversary of the purchase date, each outstanding share of Convertible
Preferred may be converted at the option of the holder or the Company into a number of
common shares which will have a value equal to the Accreted Value. The Company may, at
its sole option, purchase for cash at the Accreted Value all or part of the Convertible
Preferred instead of accepting or requiring conversion.
The Company maintains a Restricted Stock Purchase Program under which certain
employees of the Company are permitted to buy shares of the Company's common stock at
the par value of one cent per share. For financial statement presentation, the difference
between the purchase price and the fair market value at the date of issuance is recorded as
additional paid -in capital and unearned compensation, and charged to operations through
i 1996 as the shares vest. At September 30, 1994, 58,806 shares were not yet vested. In
connection with the Restricted Stock Purchase Program, a wholly-owned subsidiary of the
Company has loaned approximately $13,541,000 to the participating employees to fund their
individual tax liabilities. These loans are due through 1996 and are included in Other Assets
in the accompanying financial statements.
The beginning balance of shareholders' equity (deficiency) was increased by
---, $84,650,000 (which is net of $56,434,000 in deferred income taxes) to reflect the net
( ? unrealized holding gain on marketable equity securities, which were previously carried at
the lower of aggregate cost or market. Changes during the period ended September 30,
1994 were as follows (in thousands):
Series A
Net Unrealized
Convertible
Common Stock
Additional
Holding Gain on
Preferred
Class Class
Paid -In
Unearned
Marketable Equity
Stock
A B
Capital
Compensation
Securities Deficit
January 1, 1994 $11
$2 $37
$577,249
$(23,577)
$ 84,650 $(2,220,810)
Net Loss -
- -
-
- (40,592)
Accretion of Redeemable
Common Stock -
-
(15,377)
-
Restricted Stock Purchase
Program:
Stock Vested -
-
-
8.502
Stock Forfeited -
-
(163)
163
Stock Exchanged for
Loans -
(611)
-
Conversion of Class B to
Class A Common Stock -
1 (1)
-
Stock Repurchased -
-
(3,674)
-
Change in Unrealized Gain,
net of income taxes
of $14,563 _ — = (24,124
September 30, 1994 $11 $3 $36 $557424 $ 14.912 $ 60,526 $(2.261,402)
10. Legislation and Regulation
Pursuant to the Cable Television Consumer Protection and Competition Act of 1992,
the FCC in April 1993 promulgated rate regulations that establish maximum allowable rates
for cable television services, except for services offered on a per -channel or per -program
basis. On February 22, 1994 the FCC adopted a revised regulatory scheme which
included, among other things, interim cost -of -service standards and a new benchmark
formula. In creating the new benchmark formula, the FCC authorized a further reduction in
rates for certain regulated services. As a result, rates for certain regulated services may
now be reduced as much as 17% below their September 30, 1992 level if they exceed the
new per -channel benchmark. The FCC's regulations require rates for equipment and
installations to be cost -based, and require reasonable rates for regulated cable television
}} services to be established based on, at the election of the cable television operator, either
CrJ application of the FCC's benchmarks or a cost -of -service showing pursuant to interim
standards adopted by the FCC.
Under current FCC regulations, a rate complaint or certification of a local franchising
authority is required to regulate a system. As a result of such actions, the Company's
basic service, equipment, and installation rates are currently regulated in systems serving
C approximately 45% of its basic subscribers. In accordance with the regulations, the
Company elected to follow the FCC's benchmark methodology to determine service rates
for approximately 50% of these subscribers, reducing rates in September 1993 and again
in July 1994. The rates for the remaining 50% of the subscribers served by the regulated
systems are supported by cost -of -service showings. Since the interim cost -of -service
regulations published by the FCC are not consistent with certain positions taken by the
Company in its cost -of -service filings, the Company has recorded a $10,500,000 revenue
reserve as of September 30, 1994.
If the Company is not successful in its current and future cost -of -service showings,
the FCC rate regulations could have a material adverse impact on the Company's results of
operations.
�_J
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF LOSS BY GROUPS FOR THE NINE MONTHS ENDED SEPTEMBER 30 1994
•
UNRESTRICTED GROUP
RESTRICTED
GROUP
OTHER
ELIMINATIONS
CONSOLIDATED
Basic Subscribers at September 30, 1994
2 869 605
137,702
3,027,307
(In Thousands)
Revenues
$. 881,774
$ 3,862
$ -
$ 885,636
Costs and Expenses:
Operating
298,237
1,840
300,077
Selling, General and Administrative
191,494
4,407
-
195,901
Restricted Stock Purchase Program
8,502
-
-
8,502
Depreciation and Amortization
209,226
1,502
210,728
Total
707.459.
7,749
715,208
Operating Income (Loss)
174,315
,(3,887)
170,428
Other (Income) Expense:
Interest
199,606
23,974
223,580
Equity In Net (Income) Loss of Affiliates
(255)
14,668
-
14,413
Gain on Sale of Marketable Equity Securities
-
(1,204)
(1,204)
Minority Interest in Net Income (Loss) of Subsidiaries
178
-
(261)
(83)
Dividend Income
(379)
(297)
-
(676)
Other
(259)
1
—(258)
Total
198,891
37,142
(261)
235.772
Income (Loss) Before Income, Taxes
(24,576)
(41,029)
261
(65,344)
Income Tax Expense (Benefit)
(24,796)
44
(24,752)
Net Income (Loss)
220
$ 4( 1 073)
L=2=611
40 592)
'�,` Prepared from the COMIL> records without audit. �:'
CONTINENTAL CABLEVISION, INC.. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET BY GROUPS SEPTEMBER 30 1994
ASSETS
Cash and Cash Equivalents
Accounts Receivable - net
Prepaid Expenses and Other
Supplies
Marketable Equity Securities
Investments
Property, Plant and Equipment - net
Other Assets - net
TOTAL
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Accounts Payable
Accrued Interest
Accrued and Other Liabilities
Debt
Advances from Parent
Deferred Income Taxes
Minority Interest In Subsidiaries
Redeemable Common Stock
Shareholders' Equity (Deficiency):.
Preferred Stock
Series A Convertible Preferred Stock
Class A Common Stock
Class B Common Stock
Subsidiaries' Stock
Additional Paid -In Capital
Unearned Compensation
Net Unrealized Holding Gain on Marketable Equity Securities
Deficit
Shareholders' Equity (Deficiency)
TOTAL
0
UNRESTRICTED GROUP
RESTRICTED
GROUP OTHER ELIMINATIONS
(In Thousands)
CONSOLIDATED
$ 11,872
$ 16,952 $
$ 28,824
39,284
8,130 -
47,414
7,913
124 -
8,037
48,339
482 -
48,821
-
144,558 -
144,558
532,579
308,285 (535,139)
305,725
1,249,218
24,530
1,273,748
453,547
18,677
472.224
$ 2,342,752
$ 521 738 $ i535,139)
2$ ,329,351
$ 42,895
$ 2,822
$ -
$ 45,717
62,849
62,849
157,424
28,288
185,712
3,284,718
25,602
-
3,310,520
-
,520,577
(520,577)
-
110,240
41,870
-
152,110
668
-
2,245
2,913
227,844
-
227,844
11
11
3
3
36
-
36
2
(2)
557,424
17,306
(17,308)
557,424
(14,912)
-(14.912)
601526
60,526
(2,080,448)
(175,45 1
503
(2,261,402)
(1,543,886)
(97,621)
(16,807)
(1,658,314)
$ 2 342 752
$ 521,738
$ 53139)
$ 2,329,351
Prepared from the Comp( +-
-records without. audit.
``-,
CONTINENTAL CABLEVISION, INC. AND SU13SIOIARILS
CONSOLIDATING STATEMENT OF CASH FLOWS BY GROUPS FOR THE NINE MONTHS ENDED SEPTEMBER 30 1994
OPERATING ACTIVITIES:.
Net Income (Loss)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided from (Used for) Operating Activities:
Depreciation and Amortization
Restricted Stock Purchase Program
Equity In Net (Income) Loss of Affiliates
Gain on Sale of Marketable Equity Securities
Minority Interest In Net Income (Loss) of Subsidiaries
Deferred Income Taxes
Accrued Interest
Accounts Payable, Accrued and Other Liabilities
Other Working Capital Changes
NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES
FINANCING ACTIVITIES:.
Proceeds from Borrowings
Repayment of Borrowings
Advances from Parent
Increase In Minority Interests
Repurchase of Stock
I
NET CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES
I
INVESTING ACTIVITIES:.
Acquisition, Net of Cash Acquired
Property, Plant and Equipment
Investments
Other Assets
Proceeds from Sale of Marketable Equity Securities
NET CASH PROVIDED FROM. (USED FOR) INVESTING ACTIVITIES
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
BALANCE AT BEGINNING OF PERIOD
BALANCE AT END OF PERIOD
UNRESTRICTED GROUP
RESTRICTED
GROUP OTHER ELIMINATIONS CONSOLIDATED
(In Thousands)
$ 220
$ (41,073)
$ 261.
$ (40,592)
209,226
1,502
-
210,728
8,502
-
-
8,502
(255)
14,668
-
14,413
•
(1,204)
(1,204)
178
(261)
(83)
(26,456)
-
(26,456)
(9,559)
(16)
(9,575)
20,566
(5,521)
15,045
(16,313)
(531)
(21,694)
186,109
(37,025)
149,084
291,750
-
-
291,750
(158,408)
-
(158,408)
-
207,499
(207,499)
-
3,391.
(2,612)
779
(4,755)
(4,755)
128,587
210,890
21( 0,111)
129,366
(47,990)
-
-
(47,990)
(171,163)
(12,655)
-
(183,818)
(207,933)
(159,765)
210,111
(157,587)
2,493
(2,917)
-
(424)
17,553
17,553
(424,593)
1157,784)
2141113(
72,266)
(109,897)
16,081
-
(93,816),
121,769
871
122,640
$ 11872
$ 16.952
$
$ 28,824
Prepared from the Ct audit.
omp''. records withou
Deloitte &
Cl
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CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES OF CONSOLIDATING INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1993
AND
INDEPENDENT AUDITORS' REPORT
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Deloitte &
Touche
INDEPENDENT AUDITORS' REPORT
Continental Cablevision, Inc.:
125 Summer Street Telephone: (617) 261-8000
Boston, Massachusetts 02110-1617 Facsimile: (617) 261.-8111
We have audited the accompanying consolidated balance sheet of Continental Cablevision,
Inc. and its subsidiaries as of December 31, 1993 and the related statements of consolidated
loss and consolidated cash flows for the year then ended. These financial statements and
supplemental schedules discussed below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements of Continental Cablevision, Inc. and its
subsidiaries present fairly, in all material respects, the financial position of the companies at
December 31, 1993 and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
As discussed in Note to the financial statements, the Company changed its method of
accounting for income taxes in 1993.
Our audit was made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplemental consolidating information is presented for
purposes of additional analysis of the 1993 basic consolidated financial statements rather than
to present the financial position, results of operations, and cash flows of the individual groups.
Such supplemental consolidating information has been subjected to the auditing procedures
applied in our audit of the 1993 basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to the consolidated financial
statements taken as a whole.
February 10, 1994
(March 9, 1994 as to
Notes 4 and 13 to the consolidated
financial statements)
Del ittiibuche
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CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, DECEMBER 31. 1993
(Dollars In Thousands)
ASSETS
Cash and Cash Equivalents
$ 122,640
Accounts Receivable - net
44,530
Prepaid Expenses and Other
4,800
Supplies
31,638
Marketable Equity Securities
58,676
Investments
136,186
Property, Plant and Equipment - net
1,211,507
Other Assets - net
481,876
TOTAL
12.091.853
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Accounts Payable
$ 43,342
1 Accrued Interest
72,424
Accrued and Other Liabilities
145,191
Debt
3,177,178
Deferred Income Taxes
105,041
Minority Interest in Subsidiaries
2,217
Redeemable Common Stock, $.01 par value;
670,682 shares outstanding
213,548
Shareholders' Equity (Deficiency):
Preferred Stock, $.01 par value; 1,557,142 shares
authorized; none outstanding
-
Series A Convertible Preferred Stock, $.01 par value;
1,142,858 shares authorized and outstanding;
liquidation preference - $450,976,000
11
Class A Common Stock, $.01 par value; 7,500,000
shares authorized; 248,060 shares outstanding
2
Class B Common Stock, $,01 par value; 7,500,000
shares authorized; 3,652,420 shares outstanding
37
Additional Paid-In Capital
577,249
Unearned Compensation
(23,577)
Deficit
(2.220.810)
Shareholders' Equity (Deficiency)
(1.667.088)
TOTAL
j2,091.85 3
See Notes to Consolidated Financial Statements.
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED LOSS
._,,. FOR THE YEAR ENDED DECEMBER 31, 1993
(In Thousands)
Revenues $1,177,163
Costs and Expenses:
Operating 382,195
Selling, General and Administrative 267,376
Restricted Stock Purchase Program 11,004
Depreciation and Amortization 284,563
Total 945.138
Operating Income 232.025
Other (Income) Expense:
Interest
276,698
Equity in Net Loss of Affiliates
12,827
Gain on Sale of Marketable Equity Securities
(4,322)
// Gain on Sale of Investments
(17,067)
Partnership Litigation
(2,325)
Minority Interest in Net Income of Subsidiaries
184
Dividend Income
(650)
Other
375
Total 265.720
Loss Before Income Taxes and Cumulative
Effect of Change in Accounting for Income Taxes (33,695)
Income Tax Benefit (7.921)
Loss Before Cumulative Effect of
Change in Accounting for Income Taxes (25,774)
Cumulative Effect of Change in
Accounting for Income Taxes (184,996)
Net Loss 210 770
See Notes to Consolidated Financial Statements.
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
(In Thousands)
OPERATING ACTIVITIES:
Net Loss
$ (210,770)
Adjustments to Reconcile Net Loss to Net
(1,369,341)
Cash Provided from Operating Activities:
(2,580)
Cumulative Effect of Change in Accounting
46,500
for Income Taxes
184,996
Depreciation and Amortization
284,563
Restricted Stock Purchase Program
11,004
Equity in Net Loss of Affiliates
12,827
Gain on Sale of Marketable Equity Securities
(4,322)
Gain on Sale of Investments
(17,067)
Minority Interest in Net Income of Subsidiaries
184
Deferred Income Taxes
(9,788)
Accrued Interest
15,787
Accounts Payable, Accrued and Other Liabilities
(3,633)
Other Working Capital Changes
(13,277)
NET CASH PROVIDED FROM OPERATING ACTIVITIES 250,504
FINANCING ACTIVITIES
Proceeds from Borrowings
1,534,850
Repayment of Borrowings
(1,369,341)
Decrease in Minority Interests
(2,580)
Issuance of Common Stock
46,500
Repurchase of Common Stock
(31,232)
NET CASH PROVIDED FROM FINANCING ACTIVITIES
178,197
INVESTING ACTIVITIES:
Property, Plant and Equipment (185,691)
Investments (106,819)
Other Assets (39,728)
Purchase of Marketable Equity Securities (8,042)
Proceeds from Sale of Marketable Equity Securities 5,719
Proceeds from Sale of Investment 1,148
NET CASH USED FOR INVESTING ACTIVITIES (333,413)
}} NET INCREASE IN CASH AND CASH EQUIVALENTS 95,268
BALANCE AT BEGINNING OF YEAR 27,352
BALANCE AT END OF YEAR $ 122,640
See Notes to Consolidated Financial Statements.
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Continental Cablevision, Inc. (the Company) and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. The carrying amount of cash and cash
equivalents approximates fair value due to the short maturity of these instruments.
Supplies and Property, Plant and Equipment
r Supplies are stated at the lower of cost (first -in,
Property, plant and equipment are stated at cost an
capitalized during the year. Depreciation is provided
over estimated useful lives as follows: buildings, 25 t
facilities, 3 to 15 years; and equipment and fixtures,
Other Assets
first -out method) or market.
d include $908,000 of interest
using the straight-line group method
o 40 years; reception and distribution
4 to 12-1/2 years. (See Note 5)
Other assets are principally composed of franchise costs, goodwill, deferred financing
costs and loans to employees (see Note 8). Franchise costs represent amounts allocated
to franchises in various acquisitions and costs deferred in connection with successful
franchise applications. Franchise costs are amortized over the lives of the related
franchises, generally 10 to 15 years. Goodwill represents the excess of the Company's
purchase price over the fair value of identifiable assets acquired in various transactions,
and is amortized over 40 years. Accumulated amortization aggregated $622,453,000 at
December 31, 1993..
Investments
Investments in 20-50% owned affiliates are generally accounted for using the equity
method. Investments in less than 20% owned companies are generally accounted for
using the cost method. (See Note 4)
Income Taxes
The Company implemented Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109) as of January 1, 1993. SFAS 109 requires the
recognition of deferred tax liabilities and assets for the future tax consequences of
temporary differences between the financial reporting and tax bases of existing assets and
liabilities. In addition, future tax benefits, such as net operating loss and investment tax
credit carryforwards are recognized to the extent realization of such benefits is more likely
than not. (See Note 9)
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.. The use of
different market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts. The fair value estimates presented herein are based
on pertinent information available to management as of December 31, 1993. Although
management is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein. (See Notes 3, 4, 6 and 7)
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The following represents non-cash investing and financing activities and cash paid for
interest and income taxes during the year ended December 31, 1993 (in thousands):
Dispositions:
Paid
Gain on Sale of Investment (See Note 4)
$ 15,919
Deferred Gain on Sale of Investment
165
Bases of Assets Sold
429
Gain on Sale of Marketable Equity Securities
3,471
Bases of Property Received1�)
Proceeds Received from Dispositions
Accretion of Redeemable Common Stock L14766
Accretion of Series A Convertible Preferred Stock 34115
Cash
Paid
During the
Year for Interest
261 846
Cash
Paid
During the
Year for Income Taxes
2 370
3. MARKETABLE EQUITY SECURITIES
....:' Marketable equity securities are carried at cost and have an aggregate market value
of $199,596,000 at December 31, 1993.
4. INVESTMENTS
In October, the Company exchanged its equity interest in Insight Communications
Company U.K., L.P. for stock representing less than a 5% interest in International
CableTel, Incorporated (CableTel), a telecommunications company operating in the United
Kingdom. The Company has accounted for the investment in CableTel as a marketable
equity security and recorded a gain of $15,919,000.
In May, the Company purchased a 20% interest in Teleport Communications Group
Inc. (TCG) for $60,020,000 and has contributed $6,000,000 for a 20% interest in TCG
Partners, a related partnership. In addition, the Company has made commitments to TCG
to loan up to $17,300,000 through 1997, of which $5,000,000 was borrowed as of
December 31, 1993. The Company also has invested $19,640,000 in various partnerships
with TCG Partners. TCG and its affiliates are telecommunications companieswhich
operate fiber optic networks in the United States..
The Company also has various investments in cable television companies which are
not individually material to the Company, The Company has approximately a one-third
') ownership interest in these companies and therefore accounts for these investments using
the equity method.
The major components of these companies' combined financial position at
December 31, 1993 and the results of operations for the year then ended are as follows
(reflects the Company's proportionate share for the period which the investments are
owned, in thousands):
Total Assets $253,000
Total Liabilities 196,000
Equity 57,000
Revenues
Depreciation and Amortization
Operating Loss
Net Loss
63,000
22,000
(5,000)
(19,000)
At December 31, 1993, the Company has $10,626,000 of investments and
$8,895,000 of advances in Primestar Partners, L.P. (Primestar), a limited partnership that
provides direct broadcast satellite services. This investment represents approximately a
10% interest, is carried at cost and quoted market prices are not available. Due to the
excessive cost involved in performing alternative valuation methodologies it was not
practicable to estimate the fair value of the investment as of December 31, 1993.
Subsequent to December 31, 1993, Primestar repaid the outstanding advances and a
.� wholly owned subsidiary of the Company issued a standby letter of credit of $34,375,000
on behalf of Primestar, which guaranteed a portion of the financing received for the
construction of a successor satellite system.. The letter of credit is secured by certain
marketable equity securities with a market value of $89,709,000 as of December 31, 1993.
Other investments, none of which were individually material to the Company; were
carried at an aggregate cost of $27,741,000 at December 31, 1993. These other
investments are valued by management at $40,543,000 primarily based on recent private
transactions or other valuation methods.
Subsequent to December 31, 1993, the Company advanced $80,000,000 as a loan,
convertible into a 50% equity interest in a company which owns and operates cable
systems.
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at December 31, 1993 are as
follows (in thousands):
Land and Buildings $ 50,040
Reception and Distribution Facilities 1,893,925
Equipment and Fixtures 249.192
Total 2,193,157
Less -Accumulated Depreciation 981.650
Property, Plant and Equipment -net $1,211.507
6. DEBT
i )
Total debt outstanding at December 31, 1993 is as follows (in thousands):
Bank Indebtedness $ 754,550
Insurance Company Notes 171,500
Senior Notes and Debentures 1,400,000
Subordinated Debt 825,000
Other 26.128
Total $3.177.178
The Company's Bank Indebtedness includes the Term Loan and the Credit
Agreement. The Term Loan of $754,550,000 bears interest at a rate between the agent
bank's prime rate and prime plus 1%, depending on certain financial tests. The Term
Loan requires increasing quarterly installments through 2000. Prepayments are required if
the Restricted Group sells assets, incurs certain indebtedness, or has excess cash flow,
as defined in the Term Loan. The Credit Agreement consists of a $500,000,000 revolving
credit facility, of which none is outstanding at December 31, 1993. Credit availability
under the revolving credit facility will decrease quarterly commencing April 1994, with a
final maturity in December 2000. Borrowings under the Credit Agreement bear interest at
a rate between the agent bank's prime rate plus 1/2% and prime plus 1-1/4%, depending
on certain financial tests. At the Company's option, the interest rates under the Term
Loan and Credit Agreement may be fixed at a spread over certain money market rates for
various terms up to five years.
The Insurance Company Notes bear interest at 10,12%, require increasing
semi-annual repayments through July 1, 1999 and rank pari passu in right of payment with
�..._.i the Company's Bank Indebtedness (collectively, Senior Secured Debt). The stock of the
Company's Restricted Subsidiaries is pledged as collateral for the Senior Secured Debt.
The Company's unsecured Senior Notes and Debentures (Senior Unsecured Debt)
rank pari passu in right of payment with the Senior Secured Debt and are non -redeemable
prior to maturity, except for the 9-1/2% Senior Debentures. The 9-1/2% Senior
Debentures are redeemable at the Company's option at par plus declining premiums
beginning in 2005. In addition, at any time prior to August 1996, the Company may
redeem a portion of the 9-1/2% Senior Debentures at a premium with the proceeds from
any offering by the Company of its capital stock. No sinking fund is required for any of the
Senior Unsecured Debt. At December 31, 1993, the Senior Unsecured Debt consists of
(in thousands):
8-1/2% Senior Notes,
Due September 15, 2001
$ 200,000
8-5/8% Senior Notes,
Due August 15, 2003
100,000
8-7/8% Senior Debentures,
Due September 15, 2005
275,000
9% Senior Debentures,
Due September 1, 2008
300,000
9-1/2% Senior Debentures,
Due August 1, 2013
l
525.000
Total
$1,400.000
The Company's Senior Unsecured Debt and Senior Secured Debt (collectively,
Senior Debt) limit the Restricted Group with respect to, among other things, dividends, the
repurchase of capital stock and subordinated debt, the creation of liens and additional
indebtedness, property dispositions, investments and leases, and require certain minimum
ratios of cash flow to debt and to related fixed charges.
The Company's Subordinated Debt is redeemable at the Company's option at par
plus declining premiums at various dates, and is subordinated to the Company's Senior
Debt. Subordinated Debt at December 31, 1993 consists of (in thousands):
10-5/8% Senior Subordinated Notes,
Due June 15, 2002 $ 100,000
12-7/8% Senior Subordinated
Debentures, Due November 1, 2004 325,000
Senior Subordinated Floating Rate
Debentures, Due November 1, 2004 100,000
11% Senior Subordinated
Debentures, Due June 1, 2007 300.000
t Total825 000
The 12-7/8% Senior Subordinated Debentures have mandatory annual sinking fund
payments on November 1, 2002 and 2003 which will retire 50% of such debentures prior
to maturity. In December, the Company repurchased $25,000,000 of these debentures at
a premium of $3,075,000, which was recorded as interest expense.
The Senior Subordinated Floating Rate Debentures bear interest at LIBOR plus 3%
through November 1996, increasing to LIBOR plus 6.5% through maturity.
The Company currently has Interest Rate Exchange Agreements (Swaps) pursuant
to which it pays fixed interest rates averaging 8.1% on notional amounts of
$1,100,000,000 (expiring 1994 through 2000) and variable interest rates on notional
amounts of $1,775,000,000 (expiring 1994 through 2003). The variable interest rates
currently range from 3.4% to 3.5%. In addition, the Company has $300,000,000 of
Interest Rate Cap Agreements (Caps) which limit six month LIBOR to 8% and expire in
1995. The Company's exposure, if the other parties fail to perform under these
agreements, would be limited to the impact of variable interest rate fluctuations and the
periodic settlement of amounts due under these agreements. Subsequent to December
31, 1993, the Company entered into additional Caps of $100,000,000 and $200,000,000
which limit six month LIBOR to 8% and 5.15%, respectively, and expire in 1996 and 1995,
respectively.
The fair value of total debt is estimated to be $3,510,020,000 as of December 31,
1993. The fair value is based on recent trades and dealer quotes, adjusted for an
unrealized loss of $94,547,000 which represents the fair value of interest rate exchange
agreements based on estimates from dealers.
Annual maturities of debt for the five years subsequent to December 31, 1993, are
as follows (in thousands):
1994
$ 65,626
1995
92,550
1996
99,350
1997
145,250
1998
175,350
Thereafter
2,599,052
$3.177,178
7. REDEEMABLE COMMON STOCK
Pursuant to a Stock Liquidation Agreement with certain shareholders (the Selling
Shareholders), the Company has committed to repurchase 670,682 shares of its common
stock (Redeemable Common Stock) in December 1998 or January 1999 at a defined
purchase price (Purchase Price). The Purchase Price is the greater of the estimated
amount of net proceeds per share from an underwritten public offering of the Company's
common stock or, the net proceeds per share from the liquidation of the Company less a
22.5% discount.
The initial estimated repurchase cost for the Redeemable Common Stock has been
adjusted by periodic accretions through the repurchase dates, based on the interest
method, of the difference between the initial estimate and the subsequent estimates of the
Purchase Price. The fair value of the Redeemable Common Stock is estimated at
$339,365,000 as of December 31, 1993 based on the estimate of the Purchase Price of
$506 per share, as determined by the Company's investment banker.
In the event the Company is unable to meet its commitments under the Stock
Liquidation Agreement, the Selling Shareholders may cause the sale of all or substantially
all of the assets of the Company.
In December, the Company repurchased 64,176 shares of Redeemable Common
Stock for approximately $31,125,000. This transaction, together with an agreement with a
certain shareholder to withdraw from the 1998-1999 Share Repurchase, reduced the
number of shares of Redeemable Common Stock to 670,682 shares. The effect of these
transactions on certain accounts is as follows (in thousands):
B. SHAREHOLDERS' EQUITY (DEFICIENCY)
During the year, the Company sold 95,876 shares of Class A Common Stock for
approximately $46,500,000.
At December 31, 1993, there were 250,244 and 4,320,918 Class A and Class B
shares of common stock outstanding, respectively.. Shareholders' Equity (Deficiency)
reflects only 248,060 and 3,652,420 Class A and Class B shares of common stock
outstanding, respectively, due to the classification of 670,682 shares as Redeemable
Common Stock. Class A Common Stock has one vote per share and Class B Common
Stock has ten votes per share.
Each share of Series A Convertible Preferred stock (Convertible Preferred) is entitled
to ten votes per share, shares equally with each common share in all dividends and
distributions, and is convertible into one share of common stock, at any time, at the option
of the holder. The Convertible Preferred stockholders have the right, at any time after the
third anniversary of the purchase date, to sell their shares in a public offering by causing
the Company to register such shares under the Securities Act of 1933. Certain other
shareholders of the Company have similar registration rights.
Redeemable
Additional
Common
Common
Paid -in
Stock
Stock
Capital
Repurchase of 64,176
Redeemable Shares
$ (19,848)
$
$(11,277)
m,. Reclassification of 16,447
l 1 Shares to Common Stock
l
(5,085)
5.085
Total
24 933
$
6 192)
B. SHAREHOLDERS' EQUITY (DEFICIENCY)
During the year, the Company sold 95,876 shares of Class A Common Stock for
approximately $46,500,000.
At December 31, 1993, there were 250,244 and 4,320,918 Class A and Class B
shares of common stock outstanding, respectively.. Shareholders' Equity (Deficiency)
reflects only 248,060 and 3,652,420 Class A and Class B shares of common stock
outstanding, respectively, due to the classification of 670,682 shares as Redeemable
Common Stock. Class A Common Stock has one vote per share and Class B Common
Stock has ten votes per share.
Each share of Series A Convertible Preferred stock (Convertible Preferred) is entitled
to ten votes per share, shares equally with each common share in all dividends and
distributions, and is convertible into one share of common stock, at any time, at the option
of the holder. The Convertible Preferred stockholders have the right, at any time after the
third anniversary of the purchase date, to sell their shares in a public offering by causing
the Company to register such shares under the Securities Act of 1933. Certain other
shareholders of the Company have similar registration rights.
The Convertible Preferred has a liquidation preference equal to the greater of its
Accreted Value or the amount which would be distributed to common stockholders
assuming conversion of the Convertible Preferred. The Accreted Value assumes a yield
of 8% per annum, compounded semi-annually in arrears on the $350 purchase price per
share. During the year ended December 31, 1993, the carrying value of the Convertible
Preferred has been increased by $34,115,000 to reflect the Accreted Value of
$450,976,000 as of December 31, 1993.
After the fifth anniversary of the purchase date, if the value of the common stock is
greater than 137.5% of the then Accreted Value, the Company will have the right to convert
each outstanding share of Convertible Preferred into one share of common stock.
On the tenth anniversary of the purchase date, each outstanding share of Convertible
Preferred may be converted at the option of the holder or the Company into a number of
common shares which will have a value equal to the Accreted Value. The Company may, at
its sole option, purchase for cash at the Accreted Value all or part of the Convertible
Preferred instead of accepting or requiring conversion.
The Company maintains a Restricted Stock Purchase Program under which certain
employees of the Company are permitted to buy shares of the Company's common stock at.
the par value of one cent per share.. For financial statement presentation, the difference
between the purchase price and the fair market value at the date of issuance is recorded as
additional paid -in capital and unearned compensation, and charged to operations through
1996 as the shares vest. During the year the Company sold 1,600 shares of common stock
under this program. At December 31, 1993, 78,327 shares were not yet vested. In
connection with the Restricted Stock Purchase Program, a wholly-owned subsidiary of the
Company has loaned approximately $14,035,000 to the participating employees to fund their
individual tax liabilities. These loans are due through 1996 and are included in Other Assets
in the accompanying financial statements.
Changes in Shareholders' Equity (Deficiency) during the year ended December 31,
1993 were as follows (in thousands):
Series A
Convertible Common Stock
Preferred Class Class
Stock A B
January 1, 1993
Net Loss
Accretion of Redeemable
Common Stock
Issuance of Class A
Common Stock
Reclassification of
Redeemable Common
Stock to Class A
Common Stock
Restricted Stock Purchase
Program:
Stock Issued (Class B)
Stock Vested
Stock Forfeited
Stock Exchanged for
Loans
Stock Repurchased
December 31, 1993
9. INCOME TAXES
Additional
Paid -in Unearned
Capital Compensation
$11 $ 1 $ 37 $ 558,679
(14,766)
$ (34,919)
1 46,499
5,085 -
544 (544)
- 11,004
(882) 882
Deficit
$ (2,010,040)
(210,770)
- (6,526)
(11,384
$11 $2 37 577 249 $ 23 577 $ (2.220,810)
At December 31, 1993, the Company and its subsidiaries have net operating loss
carryforwards of approximately $959,000,000 for federal income tax purposes, expiring
through 2008, and investment tax credit carryforwards of approximately $60,000,000
expiring through 2005.
Effective January 1, 1993, the Company implemented the provisions of SFAS 109
and recognized an additional charge of $184,996,000 for deferred income taxes. Such
amount has been reflected in the consolidated financial statements as the cumulative
effect of change in accounting for income taxes.
During the year, the Company revised its estimated annual effective tax rate to
reflect a change in the federal statutory rate from 34% to 35%. The income tax benefit for
the year was decreased approximately $4,182,000 as a result of applying the newly
enacted federal tax rates to deferred tax balances as of January 1, 1993.
1 J
The provision for income taxes is comprised of (in thousands):
�.� Current:
490,499
Federal
$ 647
State
1,220
Deferred:
(157,471)
Federal
(7,968)
State
(1,82 )
Total 7 921
The difference between the effective income tax rate and the federal statutory rate is
primarily due to applying the newly enacted federal tax rates to deferred tax balances as
of January 1, 1993.
The tax effects of temporary differences and carryforwards that give rise to significant
portions of deferred tax assets and liabilities consist of the following (in thousands):
Deferred Tax Liabilities:
Depreciation and Amortization $(533,242)
Other (14,989)
Deferred Tax Assets:
Net Operating Loss Carryforwards
490,499
Tax Credit Carryforwards
60,304
Other
49,858
Valuation Allowance
(157,471)
Net Deferred Tax Liability
105 041)
Valuation allowances have been established for uncertainties in realizing transitional
investment tax credit carryforwards and the tax benefit of certain limited use net operating
losses for federal and state income tax purposes. If in future periods the realization of tax
credit and net operating loss carryforwards acquired as a result of business combinations
becomes more likely than not, $27,000,000 of the valuation allowance will be allocated to
reduce goodwill and other intangible assets. The net change of the valuation allowance
from the beginning of the year was an increase of $34,971,000 relating to current state net
operating loss carryforwards that are not expected to be realized.
A recently affirmed tax court decision affecting the cable television industry ratified
the deductibility of certain franchise cost amortization. As a result, the Company revised
the estimated tax bases of certain intangible assets. This resulted in the Company
adjusting the carrying values of goodwill, franchise costs and deferred tax relating to
specific acquisitions by $16,287,000, $54,506,000 and $70,793,000, respectively.
10. RETIREMENT AND MATCHED SAVINGS PLANS
,) The Company has a non-contributory defined benefit plan covering substantially all
employees. Benefits under the plan are determined based on formulas which reflect
employees' years of service and the average of the five consecutive years of highest
compensation. The Company's policy is to make contributions sufficient to meet the
minimum funding requirements of ERISA.
The components of net periodic pension expense for 1993 are as follows
(in thousands):
Service Cost -Benefits Earned During the Year $2,584
Interest Cost on Projected Benefit Obligations 1,336
Actual Return on Plan Assets (136)
Other Items 615
Total 169
The following table sets forth the funded status and amounts recognized in the
Company's balance sheet at December 31, 1993 (in thousands):
Actuarial Present Value of:
Vested Benefit Obligation
$ (8,384)
Non -Vested Benefit Obligation
(1,647)
Accumulated Benefit Obligation
(10,031)
Effect of Projected Salary Increases
(10,553)
Projected Benefit Obligation
(20,584)
Plan Assets at Market Value
11.350
Funded Status (9,234)
Deferred Transition Loss 1,264
Unrecognized Prior Service Cost (89)
Unrecognized Net Loss 1,884
Accrued Pension Cost 6 175
The assumed discount rate and the expected long-term rate of return on pension
assets are 7.75% and 9.00%, respectively. The assumed rate of increase in future salary
levels is 4.75°/x. At December 31, 1993 plan assets consist of equity and debt securities,
U.S. Government obligations and cash equivalents.
The Company sponsors a defined contribution Matched Savings Plan covering
substantially all of its employees. The Company's contribution for this plan is based on a
percentage of each participant's salary. Total costs for 1993 were approximately
$2,550,000.
0
11. COMMITMENTS
The Company and its subsidiaries have entered into various operating lease
agreements, with total commitments of $37,463,000 as of December 31, 1993.
Commitments under such agreements for the years 1994-1998 approximate $8,191,000,
$7,403,000, $6,538,000, $4,315,000 and $3,519,000, respectively. The Company and its
subsidiaries also rent pole space from various companies under agreements which are
generally terminable on short notice. Lease and rental costs charged to operations during
the year ended December 31, 1993 aggregated $18,378,000.
The Company has entered into a purchase and sale agreement to purchase a cable
television system for approximately $55,000,000. This transaction is expected to close in
the second quarter of 1994.
12. CONTINGENCIES
On March 18, 1993, the Company received a favorable jury verdict in federal district
court in Massachusetts determining that the Company properly discharged its fiduciary
duties in connection with the redemption of the limited partnership interests in the four
limited partnerships acquired in 1989 for an aggregate purchase price of approximately
$380,000,000. The plaintiff limited partners had alleged that the Company had acquired
the partnership interests at unfairly low prices. The jury also found that the Company had
not misrepresented any fact or opinion in making the offers to acquire the partnership
interests. An unspecified fact, however, was found to have been omitted. The Company
(' entered into a settlement agreement on May 14, 1993, settling all claims and
counterclaims in the suit, which was subsequently approved by the court. Pursuant to the
settlement agreement, the Company has contributed to a settlement fund of $6,158,554.
The Company is subject to legal proceedings and claims which arise in the ordinary
course of business. In the opinion of management, the ultimate resolution of such legal
proceedings and claims will not have a material effect on the consolidated financial
position and results of operations of the Company.
13. LEGISLATION AND REGULATION
On October 5, 1992, Congress passed the Cable Television Consumer Protection
and Competition Act of 1992 (the 01992 Cable Act") which, among other things, authorizes
the Federal Communications Commission (FCC) to set standards for government
authorities to regulate the rates for certain cable television services and equipment, and
gives local broadcast stations the option to elect mandatory carriage or require
retransmission consent.
Pursuant to authority granted under the 1992 Cable Act, the FCC in April 1993,
promulgated rate regulations that establish maximum allowable rates for cable television
services, except for services offered on a per -channel or per -program basis. On February
22, 1994 the FCC adopted a revised regulatory scheme which included, among other
things, interim cost -of -service standards and a new benchmark formula. In creating the
new benchmark formula, the FCC authorized a further reduction in rates for certain
regulated services. As a result, rates for certain regulated services in effect on September
30, 1992 may now be reduced by up to 17% H they exceed the new per -channel
benchmark. The old benchmark formula called for a reduction of up to 10%. As part of
the implementation of these regulations, the FCC has frozen rates for regulated services
from April 1, 1993 through May 15, 1994.
The FCC's regulations require rates for equipment to be cost -based, and require
reasonable rates for regulated cable television services to be established based on, at the
election of the cable television operator, either application of the FCC's benchmarks or a
cost -of -service showing pursuant to standards adopted by the FCC.
To the extent that a cable television system's rates are found to exceed the
reasonable rate determined by the methodology selected by the cable television operator,
the rates will be subject to "rollbacks' and, in some cases, refunds. In addition, if a cable
television system's rates for regulated services do not need to be reduced by 17% in order
to reach the new benchmark adopted on February 22, 1994, such rates may nonetheless
be subject to further reduction, up to a maximum reduction of 17% from the rates in effect
on September 30, 1992, based upon the results of a pending FCC study of the operating
costs of such cable television systems. The timing and amount of such rollbacks, refunds
and further reductions, if any, for any system will depend on a number of factors, including
the method of rate determination selected by the cable television operator, further
clarification of the benchmark and cost -of -service methodologies adopted on February 22,
1994, the capacity of the FCC to efficiently process cost -of -service showings submitted by
cable television operators, the success on the merits of such cost -of -service showings and
the outcome of pending litigation challenging various aspects of the 1992 Cable Act.
In complying with the original FCC rate regulations promulgated on April 1, 1993
(which remain in effect until the new regulations become effective), the Company made
permitted rate adjustments according to the original FCC benchmarks for regulated
services in systems serving a majority of the Company's basic subscribers using the
benchmark methodology. Substantially all of the remaining systems have chosen a cost -
of -service methodology to justify current rates. The Company believes that resolution of
pending rate cases filed pursuant to the FCC's regulations will not have a material effect
on the Company's operations for the year ended December 31, 1993.
The final text of the rules adopted by the FCC on February 22, 1994 has not been
released. In addition, such rules relating to cost -of -service showings may be subject to
further revisions.. As a result, it is impossible to predict the exact impact of the rate
regulations upon existing and future rates charged by the Company for its regulated tiers
of service. It is, however, possible that such rate regulation could have a material adverse
impact upon the future results of operations of the Company.
CONTINENTAL CABLEVISION, INC.
AND SUBSIDIARIES
{
INDEX TO CONSOLIDATING INFORMATION
Supplemental Consolidating Information as of December 31, 1993 and for the year then
ended:
I. Balance Sheet
II. Schedule of Loss
III. Schedule of Cash Flows
ASSETS
Cash and Cash Equivalents
Accounts Receivable -not
Prepaid Expenses and Other
Supplies
Marketable Equity Securities
Investments
Property, Plant and Equipment - net
Other Assets - net
TOTAL
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Accounts Payable
Accrued Interest
Accrued and Other Liabilities
Debt
Advances from Parent
Deferred Income Taxes
Minority Interest In Subsidiaries
Redeemable Common Stock
Shareholders' Equity (Deficiency):
Preferred Stock
Series A Convertible Preferred Stock
Class A Common Stock
Class B Common Stock
Subsldlarles' Stock
Additional Paid -in Capital
Unearned Compensation
Deficit
Shareholders' Equity (Deficiency)
TOTAL
CONTINENTAL CABLEVIE�- INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET INFOh_,ATION, BY GROUPS, DECEMBER 31, 1993
UNRESTRICTED GROUP
RESTRICTED
GROUP OTHER ELIMINATIONS
(In Thousands)
$ 121,769
$ 871 $ -
$ 122,640
41,359
3,171 -
44,530
4,782
18
4,800
31,472
166 -
31,638
-
58,676 -
58,676.
325,498
136,213 (325,525)
136,186
1,198,398
13,109
1,211,507
464,728
17,148
401,876
$ 2,188,006
$ 229,372 325 525)
2091 853
$ 34,530
$ 8,812
$
$ 43,342
72,408
16
72,424
143,572
1,619
145,191
3,151,376
25,802
3,177,178
•
313,574
(313,574)
-
105,041
-
•
105,041
490
-
1,727
2,217
213,548.
-
-
213,548
11
-
•
it
2
2
37
37
3
(3)
577,249
13,917
(13,917)
577,249
(23,577)
(23,577)
(2,086,681)
(134,371)
242
(2,220,810)
(1,532,959)1f
20,451)
(13,678)
(1,667,088)
$ 2,188,006
LRLS 525)
2 091 853
T
n
N
CLC
C
9
Basic Subscribers at December 31, 1993
Revenues
Costs and Expensas:
Operating
Selling, General and Administrative
Restricted Stock Purchase Program
Depreciation and Amortization
Total
Operating Income
Other (Income) Expense:
Interest
Equity In Net (Income) Loss of Affiliates
Gain on Sale of Marketable Equity Securities
Gain on Sale of Investments
Partnership Litigation
Minority Interest In Net Income (Loss) of Subsidiaries
Dividend Income
Other
Total
Income (Loss) Before Income Taxes and Cumulative Effect
of Change in Accounting for Income Taxes
Income Tax Expense (Benefit)
Loss Before Cumulative Effect of Change In
Accounting for Income Taxes
Cumulative Effect of Change In Accounting
for Income Taxes
Net Loss
CONTINENTAL CABLEVI^ \ INC. AND SUBSIDIARIES
380,188
263,886
11,004
283.721
938,799
235.600
254,436
(434)
(2,325)
426
(257)
376
252.222
(16,622)
(7,932)
(8,690)
(184,996)
$ (193,686)
2,007
3,490
842
6.339
(3,575)
22,262
13,261
(4,322)
(17,067)
(393)
(1)
13,740
(17,315)
11
(17,326)
17 326)
(242)
(242)
242
242
242
CONSOLIDATED
2,914,789
$1,177,163
382,195
267,376
11,004
284.563
945.138
232.025
276,698
12,827
(4,322)
(17,067)
(2,325)
184
(650)
375
265.720
(33,695)
(7,921)
(25,774)
1�)
210 770)
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UNRESTRICTED GROUP
RESTRICTED
GROUP
OTHER
ELIMINATIONS
2.783,018
1316771
e
(In Thousands)
$ 1,174,399
$ 2,764
$ -
380,188
263,886
11,004
283.721
938,799
235.600
254,436
(434)
(2,325)
426
(257)
376
252.222
(16,622)
(7,932)
(8,690)
(184,996)
$ (193,686)
2,007
3,490
842
6.339
(3,575)
22,262
13,261
(4,322)
(17,067)
(393)
(1)
13,740
(17,315)
11
(17,326)
17 326)
(242)
(242)
242
242
242
CONSOLIDATED
2,914,789
$1,177,163
382,195
267,376
11,004
284.563
945.138
232.025
276,698
12,827
(4,322)
(17,067)
(2,325)
184
(650)
375
265.720
(33,695)
(7,921)
(25,774)
1�)
210 770)
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,^ CONTINENTAL CABLEVISIC,.,INC. AND SUBSIDIARIES
CONSOLIDATING SCHEDULE OF CASH FLOWS, BY`, -e{1PS. FOR THE YEAR El,
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UNRESTRICTED
GROUP
RESTRICTED
GROUP
OTHER
ELIMINATIONS
CONSOLIDATED
(In Thousands)
OPERATING ACTIVITIES:
$ (193,686)
$ (17,326)
$ 242
$ (210,770)
Net Loss
Adjustments to Reconcile Net Loss to
Net Cash Provided from (Used for) Operating Activities:
-
184,998
Cumulative Effect of Change In Accounting for Income Taxes
184,996
Depreciation and Amortization
283,721.
842
-
284,563
11'004
Restricted Stock Purchase Program
11,004
-
13,261
12,827
Equity in Net (Income) Loss of Affiliates
(434)
-
(4,322)
(4,322)
Gain on Sale of Marketable Equity Securities
-
(17,067)
(17'067)
Gain on Sale of Investments
426
-
(242)
184
Minority Interest In Net Income (Loss) of Subsidiaries
Deferred Income Taxes
(9,788)
-
-
(9,788)
15,787
Accrued Interest
15,771
(6,211)
16
2,578
-
-
(3,633)
Accounts Payable, Accrued and Other Liabilities
(10.282)
(2,995)
(13.277)
Other Working Capital Changes
NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES
275,517
(25,013)
250.504
FINANCING. ACTIVITIES:'.
1,534,850
-
-
1,534,850
Proceeds from Borrowings
(1,369,341)
-
-
(1,369-341)
Repayment of Borrowings
-
133,903
(133,903)
Increase (Decrease) In Advances from Parent
(2,831)
3,425
(3,174)
(2,580)
Capital Distributions and Minority Interests
46,500
issuance of Stock
46,500
(31,232)
-
(31,232)
Repurchase of Stock
NET CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES
177,946
137,328
if 37.077)
178.197
INVESTING ACTIVITIES:
(179,901)
(5,790)
(185,691)
Property, Plant and Equipment
(140,481)
(103,415)
137,077
(106,819)
Investments
(38,215)
(1,513)
-
(39,728)
Other Assets
Purchase of Marketable Equity Securities
-
(8,042)
(8,042)
5,719
Proceeds from Sale of Marketable Equity Securities
5,719
-
1.148
Proceeds from Sale of Investment
1,148
NET CASH PROVIDED FROM (USED FOR) INVESTING ACTIVITIES
(358,597)
1_ 111,893)
137,077
(333,413)
NET INCREASE IN CASH AND CASH EQUIVALENTS
94,866
422
-
95,288
BALANCE AT BEGINNING OF YEAR
26.903
449
27,352
BALANCE AT END OF YEAR
121,769
$ 871
$ 122,640
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(- EXHIBIT 7
l 1
Narrative of Transferee's Technical Qualifications, Experience, and
Expertise Regarding Cable Television Systems
Continental Cablevision, Inc. (`Continental") is the third largest cable television
system operator in the United States based on its number of basic subscribers and
that of its affiliates as of September 30, 1994. Continental operates 125 cable
television systems in 16 states, located principally in suburban areas and mid-sized
cities. As of September 30, 1994, Continental's systems and those of its domestic
affiliates passed approximately 5,311,000 homes and provided basic service to
approximately 3,027,000 basic subscribers. In addition, Continental is an approximate
50% owner of one of the largest cable television system operators in Argentina, with
550,000 basic subscribers, and has an investment in a joint venture in Singapore to
construct,: own and operate a cable television system serving Singapore's
approximately 820,000 households. Continental also has numerous investments in
the United States in the telecommunications and technology industries, including
i companies involved in the competitive access telephony business and direct
broadcast satellite service, as well as cable television programming. Continental has
managed its operations and investments so as to derive benefits from its existing
physical plant in the United States and to maximize the value of its operational and
technical expertise both domestically and internationally.
Continental's objective is to identify, acquire and retain customers both
domestically and internationally that will subscribe to a broad range of video and
telecommunications services. This objective is achieved through the following key
operating principles:
Development of Locally Responsive Management Amos B. Hostetter, Jr., the
Chairman and Chief Executive Officer, co-founded Continental in 1963. Under his
leadership, Continental has developed a decentralized and locally responsive
management structure that brings significant management experience and stability to
each region and allows Continental to effectively respond to the specific needs of the
0 1
communities it serves. Broad operating authority has been delegated to the Senior
Vice President managing each region, who has on average 13 years of experience
with Continental and 16 years of cable industry experience. Continental believes that
the experience, stability and commitment of its regional management is integral to its
ability to provide superior customer service, maintain strong community relations and
maximize revenue growth.
Deployment of Technologically Advanced Systems: Continental strives to
maintain the highest technical standards and by continually upgrading its systems by
deploying fiber optic cable and addressable technology in its network, Continental is
creating a foundation from which to provide a broad range of video and
telecommunications services. These system upgrades also increase channel
capacity, enhance picture quality and signal reliability, reduce operating costs, and
improve overall customer satisfaction. Through its continuous deployment of
technology, Continental has become one of the most technologically advanced cable
companies in the U.S., providing 54 or more channels of video to more than 80% of its
subscriber base. In addition to upgrading its networks, Continental is in the process of
deploying an integrated information technology system, which will enable it to
communicate more effectively with its customers, significantly enhancing its customer
service, billing, marketing, and other service -delivery functions, and creating additional
revenue opportunities.
Commitment to Customer Service and Community Relations: Continental's
locally responsive management and emphasis on customer service has enabled it to
foster and sustain strong relationships with the communities it serves. With 20 Beacon
Awards in the past two years, Continental has won more public service awards during
that period from the Cable Television Public Affairs Association ("CTPAA") than any
other cable company. Continental co-founded Cable in the Classroom, which
provides commercial -free educational programs to thousands of schools in its systems
throughout the country. In addition, Continental has never had a franchise revoked,
and to date, all of its franchises have been renewed or extended, at or prior to their
stated expirations, frequently on modified but satisfactory terms.
Commitment to Operating Scale: At a time of emerging consolidation in the
cable industry, Continental is committed to preserving and further expanding its
relative industry position, as measured by the number of homes passed through
growth and strategic acquisitions. Continental believes that the continued expansion
of its operating scale increases its ability to develop and deploy new technologies and
services, improves operating margins, and enhances its competitive position. As of
December 31, 1994, Continental's systems passed over 5.3 million homes.
Since the mid -1980's, Continental has augmented its growth through strategic
acquisitions of cable systems in the United States. To date, Continental has sought to
acquire cable television systems in close proximity to existing systems, thereby
capitalizing on operating efficiencies resulting from large system clusters.
Management believes that the cable industry has entered a period of consolidation
and that Continental is well positioned to enhance its industry position given its large
system clusters, its management experience and stability, its strong relationships
within the cable industry and its reputation for customer service and strong community
relations.
Continental has also pursued investments which are complimentary to its core
domestic cable business, including investments in certain emerging businesses and
markets, such as telecommunications and technology, international video and
telephony and programming.
Continental significant investments in telecommunications and technology
include a 10% ownership interest in PrimeStar Partners ('PrimeStar"). PrimeStar
currently provides medium -powered 77 -channel Direct Broadcast Satellite ("DBS")
service to over 117,000 customers nationwide. In addition, Continental has made
investments in certain programming companies, such as Turner Broadcasting
Services, E! Entertainment Television, New England Cable News, QVC, Home
Shopping Network, the Golf Channel and the TV Food Network.
K,
JAttached is summary information about regional management personnel that
will be involved in the system's management and operations.
Ell
James H. (Trey) Smith, 111
Senior Vice President
Continental Cablevision Western Region
Prior to assuming responsibility for the Western Region, Mr. Smith was with
Times Mirror Cable Television, Inc. as its Executive Vice President, Operations. He
originally joined TMCT in 1982 as Vice President, Western Division, and served as
Senior Vice President, Group Operations before becoming Senior Vice President,
Operations in 1988. Prior to joining TMCT, Mr. Smith was Vice President and General
Manager of Cox Cable's San Diego system, where he was also Vice President
Operations, Controller/Business Manager, Western Division, and a Senior Internal
Auditor for Cox Broadcasting in Atlanta. Prior to that, Mr. Smith was an accountant
with Haskins & Sells for five years.
Mr. Smith is a former chairman of the California Cable Television Association
and a winner of the National Cable Television Association's Vanguard Leadership
Award. He is a founding board member of Cable in the Classroom. Mr. Smith holds
a B.B.A. degree in Accounting and a M.B.A. from Georgia State University, and is a
Certified Public Accountant.
0
Stephen A. Martin
Senior Vice President, Operations
Continental Cablevision Western Region
Prior to taking on the position of Senior Vice President, Operations, Stephen
Martin served as Senior Vice President for Continental Cablevision's Sierra region. Mr.
Martin joined Continental Cablevision in 1983 and was soon appointed General
Manager of the Madison Heights/Hazel Park cable system in southeastern Michigan.
After being named as District Manager of the company's Central Illinois district in
1986, Mr. Martin returned to Michigan as Vice President and District Manager of
Continental's suburban Detroit systems in 1988. He was named Senior Vice President
of the Sierra region in April 1991. Mr. Martin is a member of the Executive
Committee of the California Cable Television Association. He is a also a member of
The California Channel Board of Directors and a past Board member of the Michigan
chapter of the Cable Television Administration and Marketing Society. Mr. Martin
received a Bachelor's Degree in Telecommunications from Michigan State University
and his Masters of Business Administration from the University of Michigan.
Jeremy H. Stern
Vice President, Corporate and Legal Affairs
Continental Cablevision Western Region
As Vice President of Corporate and Legal Affairs, Jeremy Stern is responsible
for Continental Cablevision's Western Region legal and regulatory affairs. Prior to this
appointment, Mr. Stern was Vice President/Corporate Counsel for Continental
Cablevision's Sierra region. Mr. Stern began his career in cable television as a door-to-
door sales representative in one of Continental Cablevision's suburban Detroit cable
systems. He was promoted to Market Development Coordinator in Continental's
franchising department a few months later, and by 1983, was promoted to the
position of Director of Corporate Development for Continental's Michigan region. In
that capacity, he was responsible for the company's franchising efforts, and later, as
the Director for Corporate Affairs, for government relations. Mr. Stern left Continental
in 1986 to go to Washington, D.C. where he worked for the National Cablevision
Television Association and later the law firm of Hogan & Hartson as a communications
lawyer in 1988. in 1993 Mr. Stern re -joined Continental Cablevision as Vice President
& Corporate Counsel for the Sierra region.
Mr. Stern received his B.A. degree in Communications from the University of
Michigan in 1981, and his law degree from Georgetown University Law Center in
1988.
Raymond V. Johnson
Vice President, Finance
Continental Cablevision Western Region
A 15 year veteran of Continental Cablevision, Ray Johnson joined the company
as Controller of Continental Cablevision of Virginia. In 1989, Ray relocated to the
Southern California region as Controller responsible for accounting, budgeting, and
financial controls throughout the Southern California Region in a department of 25
employees. In his capacity as Vice President, Finance, Ray will oversee a department
of 50 employees that will cover the accounting, budgeting and all financial aspects for
the Western Region. Prior to joining Continental, Ray Johnson was an internal auditor
for Media General, Inc.
A Certified Public Accountant, Ray received his B.S. degree from Virginia State
University.
James M. Matusoff
Vice President Marketing and Programming
Continental Cablevision Western Region
Jim is responsible for marketing, programming, and advertising sales throughout
the region. He has been with Continental Cablevision for nearly 15 years with previous
stints in Minnesota and several locations in Ohio prior to relocating to Southern
California in July 1992. Over the years, Jim has been responsible for marketing and
programming operations that have won numerous CTAM advertising and case study
awards and ACE awards. He holds an undergraduate degree from Kent State
University.
Marwan Fawaz
Vice President, Engineering
Continental Cablevision Western Region
Prior to assuming the position of Vice President, Engineering at Continental,
Mr. Fawaz was with Times Mirror Cable Television. Originally joining TMCT as a
Design Engineer in 1985, he was promoted to Manager of Engineering Operations in
1989 and to Director, Engineering in 1991. Mr. Fawaz held Corporate level
responsibility for all aspects of engineering in technical operations in all Times Mirror
systems, encompassing network planning and design, service quality and reliability,
operational productivity and system maintenance. Prior to joining Times Mirror Cable
Television, he held a Network Engineer position as a graduate assistant at California
State University Long Beach where he set up local area networks and maintained
computer systems.
Marwan Fawaz has a BSEE and MA in Electrical Engineering from California State
University Long Beach. He is an active member of SCTE and IEEE. He also is an active
participant in several Cablelabs committees.
Perry C. Parks, III
Vice President Government and Public Affairs
Continental Cablevision Western Region
As Vice President of Government and Public Affairs, Perry Parks is responsible
for public policy development and liaison with government and elected officials at the
city, state and federal levels of government. A 13 year veteran of the cable television
industry, Perry Parks has had extensive experience in the management, construction
and operation of cable systems in Southern California.
He received a B.A. degree from California State University, Los Angeles and a
M.B.A. degree from Pepperdine University. He is President of the Los Angeles Cable
Operators Association, and a Board member of the California Cable Television
Association, Community Partners and Challengers Boys Club.
Deborah Nicholson
District Vice President/General Manger, Greater Los Angeles System
Continental Cablevision Western Region
As District Vice President/General Manager of the Greater Los Angeles System,
Deborah Nicholson is responsible for system operations serving 280,000 customers
throughout the Los Angeles area. She originally joined Continental Cablevision in
1991 as General Manager of the Hollywood system and has been involved in the
consolidation of the various Los Angeles area systems over the past two years. Prior
to joining Continental Cablevision, Ms. Nicholson served as General Manager with
several Los Angeles area MSO's including United Artists Cable, Choice Television and
Group W Cable. Deborah began her cable career in 1982 with Times Mirror Cable
Television, first as Director of Marketing for the Southwest Region and, later, as Vice
President of Sales.
Ms. Nicholson holds a B.A. degree from Wellesley College and an M.A. degree
1 from the University of Chicago.
Karen Munro
Regional Vice President
Continental Cablevision Western Region
Karen Munro serves as a Regional Vice President for Continental Cablevision's
Northern California systems. Ms. Munro joined Continental Cablevision (at that time
Big Valley Cablevision) in 1980 and served as Systems Manager before being named
Assistant General Manager in November of 1983. Ms. Munro was appointed Vice
President/District Manager in January 1988, responsible for overseeing the operations
of the Company's systems located in Reno, NV, Yuba City, Stockton and Manteca,
California. Ms. Munro was named Regional Vice President in May 1993. Her
responsibilities include human resources, training, payroll, advertising sales, and public
and government relations for the Northern California systems. Ms. Munro is currently
the Chairman of the Board for Goodwill Industries and President Elect for the Stockton
Rotary Club. (She will be the first woman President of this club of over 300 members.)
l She serves on the Advisory Board for University of the Pacific's School of Business
Administration, and has served on numerous boards of directors for human service
agencies and the arts. She was the 1990 recipient of the Athena award for Stockton's
businesswoman of the year. Ms. Munro received her education at the University of
California, Davis.
Bob Hargrove
Regional Vice President of Operations
Continental Cablevision Western Region
Bob Hargrove serves as the Regional Vice President of Operations for
Continental Cablevision's Northern California cable systems. Mr. Hargrove joined
Continental Cablevision in 1984 as Construction Supervisor in the company's St. Paul,
Minnesota system. He was soon promoted to Field Operations Manager and was later
named Manager of Operations in St. Paul. In 1987, Mr. Hargrove moved to California
and took the position of District Manager in Continental's Sierra region, responsible
for overseeing the operations of the region's Central district systems located in
Fresno, Tulare and Hanford, California. He was named Vice President and District
Manager in 1988. In May 1993, Hargrove was appointed to his current position of
Regional Vice President of Operations.
C)
CERTIFICATION OF COMPLIANCE
WrrH 47 C.F.R SECTION 76.502 WrM RESPECT TO
KING VIDEOCABLE COMPANY AND ITS SUBSIDIARIES
1. This Certification is provided pursuant to Section 617 of the 1992 Cable Act (47
U.S.C. Section 537), and the implementing rules of the Federal Communications Commission
(FCC) (47 C.F.R. Section 76.502). Pursuant to Section 76.502(d) of the FCC rules, "[c]able
operators seeking to assign or transfer control of a cable system are required to certify to the local
franchise authority that the proposed assignment or transfer of control of such cable system will
not violate the three-year holding requirement [of Section 617 of the 1992 Cable Act and Section
76.502 of the FCC rules]." Both Section 617 of the 1992 Cable Act and Section 76.502 of the
FCC rules prohibit the sale, assignment or transfer of S controlling interest in a cable system
unless it has been owned for at least three years prior to such sale, assignment, or transfer or
unless the transaction qualifies for an exemption or waiver.
2. Providence Journal Company has entered into an agreement under which
Continental Cablevision, Inc. will acquire Providence Journal Company's cable television
operations, including Colony Communications, Colony Cablevision, Copley/Colony, and King
Videocable Company. In a multi -step, non-cash merger transaction, Providence Journal Company
stockholders will become stockholders of Continental Cablevision, Inc. A step in the transaction
will include the acquisition by Providence Journal Company of the 50% interest in King Holding
Corp., which it does not already own, from affiliates of Kelso & Company, Inc. (Kelso). King
i ) Holding Corp. owns 100% of the stock of King Broadcasting Company, which owns 100% of the
stock of King Videocable Company, As part of this transaction, Providence Journal Company's
non -cable assets will be transferred to a new company which will be spun off to the current
Providence Journal Company stockholders.
3. The merger transaction described in paragraph 2 above will not violate Section
617 of the 1992 Cable Act or Section 76.502 of the FCC rules because by the closing, Providence
Journal Company and Kelso will have owned King Holding Corp. for more than three years, and
King Videocable Company and its subsidiaries will have owned their respective cable television
systems for more than three years.
4. Providence Journal Company hereby certifies to you that, on the basis of the
foregoing, its merger with Continental Cablevision, Inc. complies with Section 617 of the 1992
Cable Act and Section 76.502 of the FCC rules.
PROVIDENCE JOURNAL COMPANY
By:
;i
HAMDyson
Its:: Secretary
Date: December 21. 1994
RESOLUTION NO.
RESOLUTION OF THE CITY OF SANTA CLARITA
APPROVING THE MERGER AND RELATED TRANSACTIONS
BETWEEN PROVIDENCE JOURNAL COMPANY AND
CONTINENTAL CABLEVISION, INC.
WHEREAS, King Videocable Company ("Franchisee") is the duly authorized holder
of a franchise (as amended to date, the "Franchise") authorizing the operation and
maintenance of a cable television system and authorizing Franchisee to serve the
City of Santa Clarita ("Franchise Authority"); and
WHEREAS, Providence Journal Company ("PJC"), King Holding Corp. ("KHC"),
King Broadcasting Company ("KBC") and Continental Cablevision, Inc.
("Continental") have entered into an Amended and Restated Agreement and Plan of
Merger dated as of November 18, 1994 (the "Agreement"), subject to, among
other considerations, any required approval of the Franchise Authority with respect
thereto; and
WHEREAS, in connection with the merger and the other transactions (the
"Transaction") contemplated by the Agreement, PJC will purchase the 50%
interest in KHC held by affiliates of Kelso & Company, Inc. ("Kelso"), as a result of
I _ which KHC will become a wholly owned subsidiary of PJC; and
` WHEREAS, KHC is the 100% owner of KBC, which is the 100% owner of King
Videocable Company; and
WHEREAS, in connection with the Transaction, the stock of King Videocable
Company will be contributed by KBC to Colony Communications, Inc., a wholly
owned subsidiary of PJC which, as part of the Transaction, will become a wholly
owned subsidiary of Continental; and
WHEREAS, as a result of the Transaction, the ultimate control of the Franchisee
will shift from PJC and affiliates of Kelso to Continental; and
WHEREAS, to the extent the franchise requires, Continental and PJC now seek
approval of the Transaction; and
WHEREAS, the Transaction is deemed to be in the best interests of the residents of
the City of Santa Clarita;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY OF SANTA CLARITA AS
FOLLOWS:
SECTION 1. The Franchise Authority hereby consents to the Transaction, which
includes the transfer of ultimate control of the Franchisee from PJC and affiliates of
Kelso to Continental, to the extent that the consent of the Franchise Authority is
_ required by the terms of the Franchise and applicable law, with such consent to be
effective as of the closing date of the Transaction.
SECTION 2. The consent herein granted does not constitute and shall not be
construed to constitute a waiver of any obligations of Franchisee under the
Franchise.
SECTION 3. This Resolution shall have the force of a continuing agreement among
Franchisee, Continental and the Franchise Authority, and the Franchise Authority
shall not amend or otherwise alter this Resolution without the consent of
Franchisee and Continental.
PASSED, ADOPTED AND APPROVED this day of 1995.
ATTEST:
Clerk
•■#i at►iai ra
I, the undersigned, being duly appointed, qualified and acting Clerk of the City of
Santa Clarita, hereby certify that the foregoing Resolution No. is a true,
correct and accurate copy as duly and lawfully passed and adopted by the
governing body of the City of Santa Clarita on the day of 1995.
King
—0
Clerk
Continental Cablevision, Inc.
t..- A Short History
Roots.
Of the many benchmark years in the early history of television, the year 1964
stands out like no other. Until that year, television for most American families meant a
large console with a ghostly black and white image or a bulky portable with protruding
rabbit ears. Only three in a hundred families owned a color set, and most programs,
were still broadcast in black and white.
Nearly everything about television seemed to be changing in 1964.. After a
decade of promise, color television was finally becoming a reality. And for the first time,
satellites were being used regularly to send programs to Europe and Asia, to
photograph the moon and to help forecast the weather on earth.
In a year of nearly continuous technological breakthroughs and programming
firsts, television came of age. But one television milestone went largely unnoticed in
1964 as two young Harvard Business School graduates formed a company that offered
10 channels of cable television in the quiet Midwestern community of Tiffin, Ohio. Their
storefront office, a former paint store, served as a combination sales office, payment
center and "corporate headquarters."
}
That summer, residents and potential customers curious about the new venture
packed picnic lunches and drove out to watch as the company's 520 -foot antenna tower
slowly rose over a corn field on the outskirts of Bascom, Ohio. Although they initially
served an area of less than five square miles, founders Amos B. Hostetter, Jr. and H.I.
Grousbeck named their new company Continental Cablevision. As business school
graduates; Continental's founders understood the value of careful planning. So to direct
the new company's growth, they prepared a comprehensive business plan that, read
today, demonstrates remarkable foresight.
Their plan predicted, among other things, the creation of special cable -delivered
program networks, an all -sports channel and addressable converters for yet -to -be -
created pay-per-view events. Continental's ultimate objective, they wrote, was nothing
less than to become one of the leading companies in the fledgling cable business;
"Whether the company can achieve its objective will in large part depend on our ability
to locate promising markets, win franchise awards, create and use capital sources, and
rapidly realize a given area's subscriber potential." In demonstration of their faith and
conviction at the time, they committed their young company to signing up 20,000
subscribers within a decade. During Christmas week, 1974, exactly 10 years after the
company connected its first customers, Continental Cablevision installed cable service
to its 117,OOth.
Past is prologue.
Today, Continental Cablevision is the third-largest multiple system operator
(MSO) in the United States, serving over 3 million customers in more than 650
communities nationwide.
Continental's systems are the most technologically advanced of any large cable
company. And the number of Continental subscribers being served by computer -
addressable technology is approaching 90%.
Beyond this, Continental Cablevision is emerging as an important international
provider of cable television and other communications services. Community -driven and
with a growing audience worldwide, Continental got an early jump on the 'think globally,
act locally" concept adopted by many successful companies today.
Although communication technologies have changed dramatically since our
beginnings in Ohio more than 30 years ago, Continental's core philosophy hasn't. We're
still committed to providing local communities with the highest quality cable television
services.
The whole picture.
Through its continuous deployment of technology, Continental has become one
of the most technologically advanced cable companies in the U.S., providing 54 or more
channels of video to more than 80% of its subscriber base. Continental recently
announced an agreement with GTE to provide its MainStreet interactive television
service to 540,000 of the company's subscribers, making Continental the largest
provider of interactive television in the U.S. Continental has also initiated a program to
provide residential and commercial customers with high-speed access to the global
Internet, a worldwide network of computer databases, at speeds up to 300 times faster
than phone lines.
Continental played a major role in the development of several leading
programming services including helping found the Cable -Satellite Public Affairs Network
(C -SPAN). Continental is also an investor in Turner Broadcasting System (CNN, TNT,
WTBS, Cartoon Channel), E!, Entertainment Television and Viewers Choice, the
nation's leading pay-per-view service. In addition, Continental and the Hearst
Corporation created and co-own New England Cable News; an award-winning 24-hour
regional news network now seen in more than 1 million New England homes.
Continental is also a partner in PrimeStar, the nation's first direct broadcast
satellite (DBS) service. PrimeStar uses highly advanced digital compression technology
to transmit 77 channels of laser -disc quality video programming directly from space to
2
l mini dishes in areas uneconomical to serve by cable TV. PrimeStar is readying two new
high-power satellites for launch that will use even smaller dishes and deliver more than
150 channels of digitally compressed video programming.
Thinking Globally. Acting Locally.
Today, Continental Cablevision has emerged not only as a leading provider of
communications services in the United States, but increasingly, in other parts of the
world as well. For example, Continental is a partner in a joint venture in Singapore and
is a 50% owner of the largest cable television company in Argentina.
Notwithstanding our increasingly global presence, Continental operates as a
local communications company, wherever it happens to be. Our corporate structure is
highly decentralized with regional offices located across the country and around the
world, whose managers are empowered to make their own decisions, taking into
consideration local needs, cultures and customs. In human terms, this allows our
managers and employees (who largely come from the local workforce) to interact very
closely with our customers.
Supported by more than 8,000 employees worldwide, local management in each
of our operations is entrusted to make their own decisions about the specific
entertainment, cultural, educational, business and public service needs of each
( individual community that we serve.
In fact, for all of our technological prowess, our real expertise is in people skills.
Continental is known throughout the industry as being °close to the customer," and our
customer service delivery is considered second to none. So is our training. With six
regional training centers strategically located throughout the U.S., Continental operates
the most extensive (and most expensive) employee training program in the cable
industry. On average we invest $2,000 per employee each year just to train people in
technical and customer service disciplines.
Continental even developed its own highly advanced data processing system to
handle billing and customer services such as scheduling repairs and installations. It's
called SAM (Subscriber Account Management), and it not only does SAM work for us,
it's also now being used by other leading cable companies.
Over the years, these innovations and investments have yielded many satisfying
returns, and they have won for Continental every major industry award for customer
service, overall management excellence, marketing and financial acumen. In fact,
Continental was chosen as "Cable Operator of the Year" three years in a row by the
readers of CableVision magazine, a leading communications industry publication.
_ Equally rewarding is what we return to the communities we serve. Right now,
Continental systems across America are bringing students the world through Cable in
3
C)
the Classroom . Co -f ounded by Continental, Cable in the Classroom provides quality
commercial -free educational programs that teachers can use to enhance and enliven
learning. This service is provided at no cost to schools in communities served by
Continental.
As an outgrowth of our highly regarded Cable in the Classroom program,
Continental has launched a national media literacy effort. Our goal is to improve
children's TV viewing habits by providing teachers with resources to help schools start
media literacy programs and to help parents take charge of their family's TV viewing.
Continental believes that teaching children how to use TV must be a national priority,
leading to a society that is literate not only in the printed word, but also in the use of
electronic media.
In a recent issue of Business Week, the magazine noted that nContinental has
always been a model citizen. It leads in customer service and promoting community -
affairs programming." Indeed, for the past 30 years, customers, franchising authorities
and those in the cable industry alike have been quick to recognize Continental
Cablevision for not only its sense of responsibility to the community, but also its
responsiveness to the local needs of people everywhere -- a reputation we're proud of
and work to keep every day.
M
1 9 9 ? G R Y S T A L
B E A G O' A W a R D
Amos MosfeNer
Chei
Confinanfal Cablevision
Amos Hostetter sounds two notes
whenever an award comes his way, sincere
gratitude for the recognition, followed in
short order by' an equally sincere desire to
share the praise with his employees. So it is
with the latest special industry honor going
to Continental Cablevision's co-founder
and chairman: CTPAA's 1992 Crystal.
Beacon Award for personal as well as
comorate commitment to public affairs.
"I'm personally flattered." says. Hostetter.
"However, this award is nor earned by me.. but by my company. I say
that because I believe that. The strength and talent of this company lits
with its oeook. You can't _get community support if you don': have
people doing a quality job."
The community support Hostetter and co-founder H.I. Grousbec's
first. cultivated through cable television in Tiffin. Ohio. 28 vears ago
now rests with more than 8.000 employees working at 600 franchises in
16 states.: But under Hostetter's leadership. Continental's :work force
operates in a fashion that consistently wins admiration from some 2.8
million lovai customers and NISOslndusavwide. Indeed, from 1988-
90, Continental earned Cablevision's Operator of the Year Award.
based on a poll of operators who scored the Boston-based MSO first in
customer service, community service and quality of management. (In
1991 the magazine did not conduct an operator roll to determine its
winnenj
For Hostetter. public affairs means demonstrating respect for
subscribers and [he communities being served. In an opening letter to
Continental's new corporate brochure,. Hostetter notes that in the time
it takes to read the entire niece. 1.600 subscribers will have their
telephone calls answered bycus[omer
service rens: 100 new customerswill be
installed. and eight hours of original .local
programming will be created. "Its all one
fabric." Hostetter says.
Continental often takes a leading role in
industry initiatives. Eighty percent of the
companv's systems offer local program-
ming services.. More than a quarter of
Continental "general managers have gone
through the 'Essential Skills" public affairs course conducted by the
Community Antenna Television Association:. the rest will attend
before the end of the year. The company will bring on at least four
Walter Kaitz Foundation fellows in 1992. And. 135 system employees
coordinate activities. for Cable in the Classroom. the nationwide
educational outreach Hostc!ter chairs.
Despite the progress Continental and other MSCs are. making in
public affairs. the industry still faces legislative actions and a degree of
consumer distrust that can'[ go unchallenged, Hostetterobserves. "Our
imageproblems didn't .happen overnight and the solutions wont
happen overnight." he says. "Last year will go down as a wa¢rshed.
.when people stared to devote substancal resources to public relations.
But this is a forever commitment. We must be open and candid to the
public about how' our business works. There's no point trying to speak
half-truths. or not speak at all. because in this case, the truth is. very
much to our advantage. Were an industry with some extraordinary
accomplishments to be proud of." -.
Three Times
A Winner
Decen traliza tion
and community
service add up to
Continental's
formula for success
By Kathy Hale}'
A?00 -year-old brick building bear -
mg the. name. Pilot House. hugs
t edge. of Boston Harbor in a
section of the city's waterfront called
Lewis Wharf. Before the days of
tugboats, the building's large; Ro-
manesque windows served as look-
outs for pilotmen, who made their
living helping .ship. captains guide
their vessels into port. Today it is
headquarters for Continental Ca-
blevision, the fourth-largest multiple
system operatorand winner, for the
third consecutive year, of CableVision
magazine'sBill Daniels Operator of
the: Year Award.
Presented each fall at the:. .Atlantic
Cable Show, the award recognizes a
company's quality of management,.
customer service, communkv serv-
ice, financial expertiseand quality
of work. environment. Cablel-ision's
readers choose the winner through a
poll conducted by the magazine in
.August.
Inside Pilot. House,. evidence of
why the company repeatedly reaps
theaward—and numerous others—
becomes apparent. Sun -filled offices
with exposed -brick "'ills and .high
ceilings flank a short halhvav .that
ends with a s iew of the bay and sky
It'i the kind of work environment
most people only get to imagine..
The three floors of Pilot House
occupied by Continental house about
54 people—a lean home office for a
company that owns cable systems in
650 communities. But decentraliza-
tion is key to company founder and
chairman .Amos Hostetter Jr.'s man-
agement philosophy..
AA 're constantly forcing deci-
sions down closer to the person
dealing, with the customer," Hostet-
ter told a television interviewer two
years ago.. "You get a muchbetter
decision from someone if he knows
vou're counting on him than if he
knows you'll second-guess him."
Decentralization. Hostetter contin-
ued, "is the: pervasive culture at
Continental. It is. an empowering
concept."
.Beneficiaries of that empower-
ment include Phil Ripa,. GM of
Continental's system in Cambridge..
Mass., whose trainingat Continental
included a company course on chal-
lenging the system..'ANe were taught
not to take anything at face value—
to question everything and try to
come. up: with better ways of doing
things," Ripa says..
A large part of managing a Conti-
nental .system, Ripa continues, lies
in empowering. a staff to become
involved in decision-making and let
them come up with solutions, "One
of our newer policies that camefrom
customer service reps, ``Call First."
allows customers who worknear
their homes to receive a call from
our technician when he's about 10
minutes from arriving at their home,
Ripa says. "That means rhes don't
have to wait for us for half a day,
missing work."
The idea for "Call First' "came
from customers who asked for it,"
Ripa says, "Our customer senice
people brought it up during one: of
our weckl% meetings and now we're
putting it into effect:
But decentralization isn't the only
idea pen is veto 0munental'i com-
pany culture Another is Hostetter's
maxim regarding a corporation's place
in the community: "Do good and
you will do well."
Not far from Lewis Wharf, the
president of New England Medical
Center's Childrens. Hospital triggers
the play button on a VCR, launching
a fund-raising pitch to potentially
important. corporate donors. The
camera travels around the hospital,
showing rooms for long-term. pa-
bents decorated as lavishly as they
would be at home and many other
scenes that make. up life in the
hospital. Cntinental Cablevisionpro-
duced the video.
"Continental. doesn't have sys-
tems: in the, city of Boston. Our
systems are .all out in the suburbs,"
says Nancy Agne, senior VP and
treasurer at the companv.. "But I'm
involved in the hospital and when I
asked Continental cc make thevideo.
it was no problem. Communiy serv-
ice isn't done to impress local fran-
chising authorities. It's done because
it's the right. thing to do."
A similar attitude governs Conti-
nental's approach to customer serv-
ice, long an area in which the
company has ranked among cable's
leaders.
"In 1989, we spent more than
$2,000 per employee on training
programs," says Tim Neher, presi-
dent and COO of Continental. "Re
now have training centers in more
than half of our 10 regions. People
who are trained properly tend to like
their jobs.. so they do thembetter
and are less likely to turn over es'ery
year; year and a half."
Investing so. much in training—as
Piloting Continental from Boston's Pilot
House: chairman Amos Hostetter (left) and
president Tim Neher; (inset) Hostetter
accepts the
. -
Operator Of The
Year award
from CV editor-
in-chief Kathy
Haley at the
Atlantic Show
Cablevision'
well as customer service and local
programming—leaves Continental
with a slightly lower operating mar-
gin rhan what most NISOs are able to
achieve (about 42-43 percent, com-
pared with a norm of 45-4S percent,
according to Neher). But considcring
the company's widespread reputa-
tion for good customer sen ice. the
money can hardic be .saidto be.
poorly spent.
In Neher's mind, most ocher cable
operators will soon be investing simi-
lar amounts in training and customer
service. It will be the. key, he main-
tains, to competing effectively- with
new multichannel TV suppliers.
True to its reputation, Cononen
cal's highest score in Cab/elision's
Operator of the Year poll camein the
area of customer service. All told,
the company captured 356 of the
Loral 875 votes cast by readers. Of
those.. 77 cotes placed Continental
first in customer. service. It captured
another 74 votes for community
service, 74 for quality� of manage-
ment, 69 for quality of work enciron-
mentand 62 for financial expertise..
Comcast came in second in the
overall. vote. count. followed bvTele-
Communications Inc., Telecable,
TCA Group, Newhouse Broadcast-
ing, Century. American Television
& Communications and Jones Inter-
cable. Adelphia Communicationsand
Cooke Cablevision tied for loch.
A few miles away from Continen-
tal's Boston headquarters, at the
company's Cambridge sNstem, direc-
tor of
irector'of local programming Steve Marx
gets read% for a busy day. It is
primary election day and close gu,
bernacorial and congressional races
promise to keep many local citizens
looking fork ore counts until late into
the night.
Continental Cambrld,q will offer
live election coverage all day, carry-
ing a feed produced by local NBC
affiliate WBZ chat will include hourly,
10 -minute cut -ins from Continental
anchors stationed at Harvard Square
where the votecounting takes place.
"No matter what time of day viewers
decide they want an update on the
election, they'll be able to find it on
our local origination channel," Marx
says.
Accepting the Operator of the
Year Award at the opening general
session of the Atlantic Show last
week, Hostetter paid tribute to job
performances like Marx's. "I'm sorry
the people- who won this award
couldn't be here today," Hostetter
said. "The winners—and there are
nearly 3,000 of themcoulddt be
here today because they are answer-
ing phones at customer service cen-
rers, installing drops, producing local
programs, engineering rebuilds; mar -
kering new customers and participat-
ing in communist events. If they
were here, I am sure theg would
want to say how proud they are to
have been so honored.
"The Operator of the Year Award
means a grear deal to our employees
because it recognizes their hard
work, long hours and dedication to
providing quality customer. service,"
Hostetter continued..
"I also want to take this opportu-
nity to recognize the contributions
of the person for whom this award is
named: Bill Daniels. From the vert
beginning of cable, Bill has insisted
that this industry' contribute to our
communities in ways other than just
providing cable service. So it is
fining and proper that this award is
named after him.
"Bill's recent project. "Cable
Cares." is just one of his many
contributions to the industry and
shows what cable companies all
across .America aredoing to be good
corporate citizens. So again, on be-
half of Continental's 8,000 employ-
ees. %%e thank you for this tribute." s
•• •`
Y Y
11 � II it �\�' NTA L , ll
CONTINENTAL'S
Continental presented the awards on May
in Washington, concluding a nation -
�lJ VV Ji ll V A S Jld �i'
wi o
wide search for teachers, media specialists or
the
school administrators who have developed
innovative and effective classroom uses of
C LAS SROO M
cable television. The contest also marks the
first year of Continental's Cable in the
,fy
Classroom program.. The initiative, launched in
April, 1989, provides a comprehensive educa-
tional package to every junior and senior high
school in the communities Continental serves.
N�
^
The package includes free cable wiring, educa-
�
tional tional programming, CONNECT magazine and
3•/1
an education services coordinator at each
7 r �
Contin;B%l�!lL Cah7e '?SZC ? YCz.val^f',
regional cable system. "Continental developed
Cable in the Classroom to assist teachers by
C4"E%ii]ii'c lii2 C1"C LiZLS it 18C
making our educational programs and services
- -
more accessible to schools," said Nancy
Larkin, Continental's vice president for com-
munity programs. "The annual awards encour-
age and challenge teachers to use our free edu-
canonal programs effectively"
The contest sought out teachers in each of
BY BARBARA ANN RICHMAN
Continental's twelve regional systems.
Education services coordinators spread word of
the contest, and educators responded by sub-
..--
A SCHOOL'S CABLE DROP DOESN'T DELIVER
roomoutl.iE the ways they
use cable in the classroom. Enaies in each
use cage in the classroom.
iti )
region were judged by a panel of educators and
LEARNING. IT TRANSMITS RAW MATERIALS
educational programming experts, including
members of the New York State Board of
THAT CONCERNED EDUCATORS WILL, WITH A
Regents for Education and Pegg Charren of
Action for Children's Television. The twelve
DASH OF DARING AND A SPLASH OF CREATIVITY,
washers received an all-expense-paidrth acceper trip to
Washington, DC, where they accepted [heir
awards at a reception in the Capitol attended
TRANSFORM INTO LEARNING EXPERIENCES.
by Representative Augustus Hawkins,
Chairman of the House Education and Labor
CONTINENTAL CABLEVISION CELEBRATES
Committee. The educators also toured the
White House and Capitol, C -SPAN and CNN
TWELVE INNOVATIVE EDUCATORS WITH THE
studios, met CNN anchor Bernard Shaw, were
audience members on The Larry King Live
FIRST ANNUAL CABLE IN THE CLASSROOM
show and posed for photos with their
Congressmen.
The award-winning educators aren't the
EDUCATOR AWARDS. THE WINNERS HAIL FROM
only ones to benefit from their innovative
efforts; teachers evervwhere will have access to
MINNESOTA TO NEW HAMPSHIRE AND TEACH
the educators' ideas via a resource guide. The
guidewill include the teacher -tested lesson
plans,projects,assignmentsandconcepts
EVERYTHING FROM JUNIOR HIGH GEOGRAPHY
the twelve winning educators,. as well as those
of the other finalists.. "The guidewill bring
TO SPECIAL EDUCATION, YET THEY HAVE AT
together the award-winning ideas of 20-25out-
standing educators," said Larkin. Sample les -
LEAST ONE THING IN COMMON: A COMMIT-
son plans will include using A&E program-
ming to. bring meaning to the Constitution,
HENT TO THE CREATIVE USE,OF EDUCATIONAL
supplementing the use of.V r swM4 with CNN
Newsroom as a social studies text, and video
production plans to help students create every -
CABLE PROGRAMMING IN THE CLASSROOM.
thing from news segments to a homework
8• C 0 N N E C i • YUIY/AUG U S 1 1994
help -line for latchkey children. Continental
originally conceived of the guide as a resource
to offer teachers within its systems, However,
CNN was so impressed with the winners that
thev asked to collaborate with Continental to
produce the guide and make it available to all
educators. The resource, to be completed in
August, will be distributed free to educators
within Continental's systems, and available to
others at a nominal cost.
�, ward -winner. Lorraine Palkert, an eighth
�' and twelfth grade teacher in
South Saint Paul, Minnesota, has certainly
done her share of creating innovative program-
ming -based lesson plans. A 26 -year teaching
veteran, Palkert first tested cable's waters this
fall. She welcomed a cable drop and X*PRESS
/X•Change computer service into her class-
room, and, in October, dove head first into the
resources they delivered. She and her students
have been immersed in the materials ever since.
Using her traditional geography text only
as an occasional reference, Palkert builds her
entire eighth -grade geography curriculum on
CNNNewsroom's curtent events, maps and
graphs,. supplemented by worldwide news-
agency reports, "Today in History" charts, pro-
nunciation keys and .Newsroom's study guide,
all printed off the X'Change system. A video-
tape of the day's Newsroom program, taped by
the school's A/V director, awaits her 7am arrival
each morning. Palkert previews the tape and
structures a lesson plan around it, often incor-
porating resources such as transparencies and
maps she's developed over years of teaching.
With Newsroom as a base, her multi -media
approach asks students — not a text or teacher
— to be the source of information. Each day,
students bring their homework Eo class in the
form of newspaper clippings, :Nero=ek articles,
political cartoons and verbal summaries of the
nightly newscasts. The students' resources
supplement the Xe sroom and X'Change
BOTTOM PHOTO BY PAULA DAVIS FORE
information, and feed the games, crossword
puzzles, group projects and writing assign-
ments Palkert creates. The result? Learning
that's not only active, but continually propelled
by student input "It's not work for them,"
explains Palkert, referring to the students'
responsibilities. "It's power. It allows themto
feel that`I can be as important as an adult.'
And what could be more wonderful for an.
eighth grader!" She continues, "Xewsroom has
empowered students with information using a
technology with which they are comfortable.
With this new found confidence, they are pur-
suing more information using their own
resources."
As her students scramble to keep abreast
of the world around them, Palkert has watched
their self-esteem soar and the number of As
and Bs double.. While learning geography and
current events, her eighth graders are also real-
izing the value of their own thoughts and
words, developing critical thinking skills, hon-
ing their ability to work in a group and learning
how to use television as an active, constructive
tool (see pages 4142 for a study guide based
on her approach). Now as experienced with
cable television as she is enthusiastic, Palkert
plans to expand her curriculum next year to
include even more programming so Ehat she
can create, quoting Peter Drucker in The New
Realities, even more of "a learning technology
rather than a reaching technology."
(Above)
Award winner
Lorraine Palkert
(second from left)
participates in
a CNN
teleconference
held in
St. Paul, MN
(left)
Award winners
Alary Weinrich,
Barbara Stnith
and Lorraine
Palkert, with
Craig Heiting
of Continental
Cablevision,
during their lour
of Washington
IUIY(AUGUST 1990 • C O N N E C T • 9
(Above)
Award winning
educators
(left to right)
Ann D. Smith,
Nancy Fair,
David R.
Clarridge, Susan
Bechtold, Dennis
Bechtold, Tom
Snyder, Mary
Weinrich, Myrna
K. Layman,.
Richard Benz,
Barbara Smith,
Lorraine Palkert,
Cheryl Blau and
Nancy Galante
(Right)
The educators
share ideas
during a :work-
shop in
Washington
he support of an audio-visual director is
indispensable in implementing CNN
Newsroom," Palkert wrote on her awards appli-
cation. Fellow educators would no doubt agree:
an enthusiastic AN director or media specialist
is a major asset to an effective cable in the
classroom program. Award -winner Nancy Fair
is a shining example. A media specialist at
Granby Memorial Middle and High Schools in
Granby, Connecticut, Fair was the driving force
in bringing cable's possibilities to the teachers
and over 700 students she serves. Last fall, Fair
participated in a Continental -sponsored trip. to
Boston, where the cable company introduced
teachers to its Cable in the Classroom program.
Impressed with the program's potential, Fair
returned to Granby and presented a cable pro-
posal to the school's principal. Not only did she
sell him on the idea, she arranged to have the
school designated one of Continental's pilot
schools. As a pilot school, Continental provided
Granby Memorial with an additional cable drop
and VCR, and money for videotapes and the
modem necessary to retrieve CMV Newsroom's
study guide.
Almost immediately, says Fair, taping
requests skyrocketed, bringing a new dimen-
sion to her role. She set up a system whereby
she copies and distributes educational program-
ming information (obtained from CONNECT
and The Discovery Channel Magazine) to each
department, nearly all of whom have requested
programming to be taped. With the school's
two cable drops located in the media center,
taping isn't a problem, but it is time consuming-
even
onsumingeven with the help of another media specialist
and four half-time aides, taping consumes a
large part of Fair's day. "I think as schools
become more involved with cable, staffing will
become a problem. But the service is certainly
well worth the time and energy I spend on ic,
she commented.
Once programs are taped, teachers may
check them our and sign up to use one of the
school's ten VCRs. Fair maintains a library of
10 * CONNECT * JULY/AUGUST 1990
capes and includes the copyright codes provid-
ed by CONNECT. The library currently houses
over 80 tapes teachers have used since January.
Fair will expand on her program next year,but
cites copyright restrictions and her school's lim-
ited equipment as the major hindrances to fur-
ther tapping of cable's educational potential.
Myma Layman; another award-winning
media specialist, brought similar enthusiam to
Paxon Senior High School in Jacksonville,
Florida. Early last fall, Layman began taping
C.VNNewsroom's early -morning broadcast and
showing it in the library before school.
Intrigued by this new type of "TV at school,"
students came in early to watch the program
and teachers began asking what it was. that had
so fascinated their students. Layman respond-
ed with an organized effort to make teachers
aware ofNeartroom's educational potential, as
well as chat of C -SPAN, The Discovery
Channel, Arts & Entertainment and The
Weather Channel programming.
Every weekday morning, Layman pro-
grams the media center's VCR to tape
.Newsroom, retrieves the accompanying study
guide from X*PRESS/X*Change and makes
the materials available to anv teacher. Social
studies teachers were so enthusiastic that
Myrna asked Continental for a second cable
drop directly into their department, allowing
them to tape the program on their own. Much
like Fair, Layman tapes programs per teachers'
requests. Once capes are returned to her, she
includes them in an extensive library, complete
with copyright information. She, too, sees the
role of media specialists as shifting dramatically,
but welcomes the change, along with the
acceptance of cable in the classroom: "Students
are really positive about it, and teachers are
thrilled with its effectiveness." 0
To request information on the EducatorAwardr
Resource Guide, send a postcard (include address
and phone number) to Paula Fiore, Continental
Cabletdsion, The Pilot House, Lewis Wharf, Boston,
MA 02110.
PHOTOS BY PAULA DAVIS FIORE
ha
f `
A
a
-
irtCllu
(Above)
Award winning
educators
(left to right)
Ann D. Smith,
Nancy Fair,
David R.
Clarridge, Susan
Bechtold, Dennis
Bechtold, Tom
Snyder, Mary
Weinrich, Myrna
K. Layman,.
Richard Benz,
Barbara Smith,
Lorraine Palkert,
Cheryl Blau and
Nancy Galante
(Right)
The educators
share ideas
during a :work-
shop in
Washington
he support of an audio-visual director is
indispensable in implementing CNN
Newsroom," Palkert wrote on her awards appli-
cation. Fellow educators would no doubt agree:
an enthusiastic AN director or media specialist
is a major asset to an effective cable in the
classroom program. Award -winner Nancy Fair
is a shining example. A media specialist at
Granby Memorial Middle and High Schools in
Granby, Connecticut, Fair was the driving force
in bringing cable's possibilities to the teachers
and over 700 students she serves. Last fall, Fair
participated in a Continental -sponsored trip. to
Boston, where the cable company introduced
teachers to its Cable in the Classroom program.
Impressed with the program's potential, Fair
returned to Granby and presented a cable pro-
posal to the school's principal. Not only did she
sell him on the idea, she arranged to have the
school designated one of Continental's pilot
schools. As a pilot school, Continental provided
Granby Memorial with an additional cable drop
and VCR, and money for videotapes and the
modem necessary to retrieve CMV Newsroom's
study guide.
Almost immediately, says Fair, taping
requests skyrocketed, bringing a new dimen-
sion to her role. She set up a system whereby
she copies and distributes educational program-
ming information (obtained from CONNECT
and The Discovery Channel Magazine) to each
department, nearly all of whom have requested
programming to be taped. With the school's
two cable drops located in the media center,
taping isn't a problem, but it is time consuming-
even
onsumingeven with the help of another media specialist
and four half-time aides, taping consumes a
large part of Fair's day. "I think as schools
become more involved with cable, staffing will
become a problem. But the service is certainly
well worth the time and energy I spend on ic,
she commented.
Once programs are taped, teachers may
check them our and sign up to use one of the
school's ten VCRs. Fair maintains a library of
10 * CONNECT * JULY/AUGUST 1990
capes and includes the copyright codes provid-
ed by CONNECT. The library currently houses
over 80 tapes teachers have used since January.
Fair will expand on her program next year,but
cites copyright restrictions and her school's lim-
ited equipment as the major hindrances to fur-
ther tapping of cable's educational potential.
Myma Layman; another award-winning
media specialist, brought similar enthusiam to
Paxon Senior High School in Jacksonville,
Florida. Early last fall, Layman began taping
C.VNNewsroom's early -morning broadcast and
showing it in the library before school.
Intrigued by this new type of "TV at school,"
students came in early to watch the program
and teachers began asking what it was. that had
so fascinated their students. Layman respond-
ed with an organized effort to make teachers
aware ofNeartroom's educational potential, as
well as chat of C -SPAN, The Discovery
Channel, Arts & Entertainment and The
Weather Channel programming.
Every weekday morning, Layman pro-
grams the media center's VCR to tape
.Newsroom, retrieves the accompanying study
guide from X*PRESS/X*Change and makes
the materials available to anv teacher. Social
studies teachers were so enthusiastic that
Myrna asked Continental for a second cable
drop directly into their department, allowing
them to tape the program on their own. Much
like Fair, Layman tapes programs per teachers'
requests. Once capes are returned to her, she
includes them in an extensive library, complete
with copyright information. She, too, sees the
role of media specialists as shifting dramatically,
but welcomes the change, along with the
acceptance of cable in the classroom: "Students
are really positive about it, and teachers are
thrilled with its effectiveness." 0
To request information on the EducatorAwardr
Resource Guide, send a postcard (include address
and phone number) to Paula Fiore, Continental
Cabletdsion, The Pilot House, Lewis Wharf, Boston,
MA 02110.
PHOTOS BY PAULA DAVIS FIORE
For the second year in a
row, Continental Ca-
blevision has been
chosen Cablel,ision maga-
zine's Operator of the Year,
an annual award presented
to the industn_'s most re-
spected cable operator as
selected by the magazine's
readers.
In. a related development.
the :award itself has been
renamed the "Bill Daniels
Asvard''to reco; nize the long-
standing
ongistanding contribution char
Daniels has made in: adNanc-
ing the cable celcvisionindus-
M .
The award recognizes an
operator'sattention to qual-
ity of management. work
em ronment,communirsen-
ice:. financial savyv and cus-
tomer service—disciplines
that Bill Daniels has accentu-
ated in operating cablesys-
tems throughout the nation—
and actino" ledges the opera-
ror's contributions to the in
ditsm,
"When an operator is i oted
number one by his peers by
as wide a margin as Continen-
tal was, that's a Strong state-
ment about its reputation in the
indusm'," said Bill McGorr•, pub-
lisher of Cablel'ision magazine. "Con-
tinental is very deserving and we
congratulate them."
The Bill Daniels .award recipient
is chosen by cable operators through
a ballot included in Cablel'ision. The
ballot asks readers to choose the
OPERATOR OF THE YEAR
Readers select Continental
to receive Bill Daniels Award
as industry's top operator
Operator of the Year Amos S. Hostetter Jr. (top) ,
chairman and CEO of Continental Cablevision. Above,
Bill Daniels,. the 'father of the cable television
business' in whose honor the award now is named.
U
operator who best exemplifies the
operator of the tear, based on the
five categories.
Continental, based in Boston.
serves nearly 2.5 million subscribers
through 170 systems in 500 commu-
nities in 15. states. It was cited as the
indusrr's best operator on roughly
44 percent of the appro.Nimatety
1,220 votes cast. American
Television & Communications
Corp. received the second
highest number of votes. and
Comcast Cable Communica-
rions received the third.larg-
csr.
The. Bill Daniels award will
be presented to Hostetter duo-
ing ceremonies Oct. 3 at the
:Atlantic Cable Shore in .Atlan-
tic Cic% immediateh preced-
ing the convention ke}motc.
address by Bill Daniels..
"We are Nen- pleased to
have been chosen be the read-
ers of Cablel'ision for this
award," said Continental Chair-
man and CEO Amos B. Hos-
tetter Jr., whose company re-
cendv marked its 25th rear in
the cable business. "The credit
for this honor belongs to our
7.000 emploNces They are
the ones who have repeatedk
demonstrated that good cus-
tomer sen ice and good commu-
nin- relations translate into
good financial results:''
Glenn Jones, this year's w in-
ner of thecop award presented
b%. the Cable Television Ad-
ministration and Marketing So-
ciety,: applauded the choice,
"Continental and .Amos Hostetter
are certainly deserving of the award."
Jones said. -It has. been an operation
that has inspired other operators and
led the w av in several areas..
Hostetter also commended Ca-
blel'ision for its decision to rename
the. award in honor of Daniels, the
man who has been called the "father
of the cable television industry" and
who recently exited the system
operations business when he sold his
systems as partof a merger with
United ,-mists Entertainment.
"Bill Daniels is one of the true
pioneers of this industry," Hostetter
said. "In view of the enormous
contribution Bill has made to our
industry over the vears, I can think
of no one better to associate with
this award.
Receiving the award as the indus-
cr 's top operator climaxes a year of
celebration and recognition for Hos-
tetter. In April Continentalmarked
its. 25th %ear in the cable business
by hosting parties for employees at
23 locations around the counts'. all
linked b}satellite. He was pre-
sented with a patchwork quilt made
from stencilled squares designed by
employees from the company's '23
OPERATOR OF THE YEAR
`The credit for this honor
belongs to our 7,000
employees. They are the
ones who have
repeatedly demonstrated
that good customer
service and good
community relations
translate into good
financial results.'
— Continental Chairman
Amos B. Hostetter, Jr.,
regions.
Executives at other MSOs say that
Continental has achieved success b}
focusing on the fundament...
dependable TC pictures, quala%
programming and customer service.
The company works hard to train
and motivate its employees (its New
England Regional Training Center
was the first of its kind in the
industry), and it has won more local
programming awards than any other
cable company..
Hostetter, who has served almost
continuously on the \CTA board
since the early'70s, was its youngest.
chairman ever when he held the post
in 1973. Heco-founded the Ohio
Cable TV Association, served on the
Corporation for Public Broadcasting
board from 1975-80, has served on
the. board and chaired the Walter
Kaitz Foundation and is this year's
chairman of the C -SPAN board, an
organization he has supported from
its inception_.
Commenting at the time on Conti -
rental's anniversary, Heritages James
Cownie said Hostetter "is the quin-
tessential operator's operator." ■
Reprinted with permission, CableVision Magazine, October 9, 1989
C�
EXECUTIVE OF THE YEAR
s
Co-founder of the nation's third largest MSO,
Amos Hostetter Jr. is universally respected for
his integrity and ability to discover and challenge
talented people.
By Jill Marks
Editor
[ s highly appropriate that Amos
Hostetter Jr. ischairing the Walter
Kaitz Foundation this year. Asone. of
its early sponsors, his Continental
Cablevision has a tradition of support
to uphold. For example, Continental
has committed; along with HBO and
Times Mirror, to hire six Kaitz fellows
over the next three years.
But his chairmanship is especially
apropos because in the course of his
25 -year cable career, Hostetter hasin-
spired a whole generation of cable.
leaders.
"Bud is really a role model for
most of us in the industry;" says Bob
Clasen, president of Comcast Cablevi-
sion.. "He is an entrepreneur and a
manager — and you don't always find
those two traits walking hand-in-hand
so well:' Clasen was hired by Con-
tinental's senior vice president of
operations Chuck Younger to work in
the Findlay, Ohio, system early in his
career.
Hostetter's business philosophies
made a lasting impression on Clasen.
"My most often -quoted phrase is one
I heard him say first: `You have to
makedecisions as close to the cus-
tomer as possible."`
Barry Lemieux has come full circle,.
Hostetter gave him his first manage-
ment opportunity in the early '70s;.
now Hostetter is acquiring American
Cablesystems,, where as president
Lemieux has applied many of the
management principles he learned at
Continental.
"We're really pleased at American
to be ableto merge our people with
his people," says Lemieux, "because.:
we have similar philosophies and ap-
proaches. We both focus on quality."
Hostetter's reputation for integrity
has opened doors for him throughout
his career, but it was central in the
American acquisition. `Another reason
wemade the decision to merge with
Continental," says Lemieux, "was that
we knew that Bud would do whathe
said he was going to do."
Famous grads
Other famous Continental grads in-
clude Jim Robbins, now president. of
Cox. Cable Communications; Pat Con-
ley of Multi -Channel TV Cable; Ray
Joslin, president of Hearst Cablevi-
sion; and Peter Kendrick, who found-
ed Home Theater Network. It's no
coincidence that theseachievers landed
at Continental and stayed long enough
to learn something. For Hostetter, the
key to a good organization is getting
good people. "It's far more critical
that you recruit well than manage
well;' he asserts.
He looks for "high-energy, com-
petitive individuals with people. skills:'
he says. "As a manager, you can't do
it all yourself, so you've got to be a
good motivator."
And how does he keep them? "We
give 'em all plenty to do:' he says,
joking:: "I'm fundamentally lazy; so
I'm a very good delegator."
High standards and ready praise. are
Hostetter hallmarks.. He talks at length
about the quality of his staff, in-
cluding Younger; John Rakoske, another
senior vice president of operations;. a
top-notch cadre of regional vice presi-
dents; and the small corporate staff.
He has an able president in Tim
Neher, a banker introduced to Hostet-
ter by another Continental alumnus.
Rod MacLeod.
That nearly all of them came from
outside the cable industry in the '70s.
was a necessary strategy for Hostetter
— and the business in general. "At
that point in time the industry was
growing so fast and there. were so few
qualified people. there was a lot of
Peter Principle going on — people go-
ing beyond their natural level of com-
petence:' he recalls.
Hostetter's involvement with the
Walter Kaitz Foundation will bring
more new blood into the industry.
"It's been very successful in the quali-
ty
uadty of people its attracted and the per-
manency of the placements. Ninety
percent of the Kaitz fellows are still in
the industry," he says.. "But classes of
six, eight or 10 don't justify the enter-
prise. There have got to be classes of
18, 20, 25:' With industry consolida-
tion resulting in fewer. companies, "it
isn't good enough to take just one
fellow. Hostetter was a great fan of
the late Walter Kaitz. And Kaitz' son,
Spencer, president of the California
Cable Television Association, is an
admirer of Hostetter. "I have had the
privilege. to workwith two or three,
people inmy life who I'd consider
brilliant," says Kaitz. "Amos Hostetter
is one of them."
Hostetter himself came to thein-
dustry while working for Cambridge
Capital in 1962. His first contact:
pioneer Bill Daniels, who was broker-
ing a deal in Keene, N.H.
"Narragansett Capital wanted to buy
it, but needed another $50,000 to do
the deal. I recommended to Cam-
bridge Capital that they do it," Hostet-
ter recalls. For piping up, he got a
spot on the board to keep an eye on
Cambridge's investment; and became
so intrigued by cable that he con-
vinced Harvard schoolmate H.I.
Grousbeck to join him in a cable
venture.
In May 1963, the two pooled $3,000
and sat down on a living room floor
with a set of maps, looking for areas
underserved by television.
They found some in Ohio, and man-
aged to get franchises in Tiffin and
Fostoria. "But it took us too long."
Hostetter says. "We were. overbuilt in
Tiffin because it took us a year to get
funding.
A local radio station got a second
franchise and began building against
Continental. "That was almost the end
of Continental Cablevision;' Hostetter
remembers. The opponents. were..
backed by an SBIC, Texas Capital,
and Hostetter and Grousbeck were
backed by another SBIC, Boston
Capital. When the two firms realized
they were about to ruin each other,
"they locked us up in adjoining rooms
in an office," says Hostetter. "Even-
tually, we paid the huge sum of.
$80,000 to buy the overbuilders out."
Today, Hostetter has a lingering
distaste for the whole idea. of over-
builds. "It's gotto be avoided at. all
costs. The economies don't. support
two systems, and in thelong run the
subscriber ends up paying the green-
mail."
While Hostetter and Grousbeck.
wore many hats, they weren't alone;:.
their efforts were aided. by Janet
Stewart, who's still with the company,
and Janet Striff Thayer,. who now
works for Shearson Lehman Bros.
Continental's strategy focused on
franchising classic and later, suburban
systems.. Acquisitions were not a
significant part of Continental's growth
until recently. Nor were excessive
,franchise giveaways or unproven tech-
nologies: Hostetter's pragmatic in-
stincts usually prevail against the.. spirit
of the times.
The one industry which. briefly drew
Continental away from its "knitting"
was the cellular telephone business.
But last year the MSO traded its
cellular systems away to Colony.
"Everyone agrees that in the year
2010, cellular's going to bea major
business," he. states. "The trouble is
the value of it got there too fast."
With. cellular properties selling at 15
times sales, Hostetter can'tsee getting
back in thatmarket soon.
Continental has made strategic in-
vestments in program suppliers such
as Turner, Home Premiere TV and
some home shopping services.. Cau-
tion held Hostetter back on The
Discovery Channel deal,. however. "I
was a little bit jaded because of my
experience on the CPB (Corporation
for Public Broadcasting) board," he
recalls_. I know how hard the quality
programming business is." Calling the
CPB "byzantine" and "tragically
underfunded, Hostetter prefers work-
in- with the Children's Television
Workshop board, "which is not so
politically arcane:.'
Hostetter hasn't shirked industry or
community service, however. He's
served on the NOTA board,. with only
one two-year break, since 1965, and
was its youngest. chairman.
Hostetter applies the sameorganiza-
tional principles to the association that
he does tohis systems. "The NOTA
executive committee has developed an
effective listof goals and objectives,"
he explains. "Jim Mooney is very or-
ganized in pursuit of those. There's
not a whole lot of input that he
needs."
Priority issues
Pridrity issues include telco involve-
ment in cable; operators' ability to
protect their proprietary programming;
cable's copyright status and relations
with the film industry.
But while Hostetter is considered a
team player, he stands his ground
when his philosophy diverges from
other operators'.. For example, he says,
"I'm not looking for a. First Amend-
ment hook to renege on any franchis-
ing promises we made:'
He's not anxious to pump up rates,
nor does he thinkmanyof his col-
leagues are. `As they say in the stock
market, thebears make money and
the bulls make money Only the pigs
go hungry.
l J
Hostetter has reason to be cautious:
having 2 million subs is a weighty
responsibility. Itincludes a proactive
stance on technology, which Continen-
tal has taken by joining the R & D
Committee with TCI and ATC. "We're
ready to put someserious money up
for that, he states.
"He has a definite point of view,
particularly about matters touching on
social responsibility," explains NCTA
president Jim Mooney, "But so long
as things get done, he prefers not to
be in the limelight."
His capabilities shine through never-
theless: his first manager Ray Joslin
says Hostetter "typifies the best in
American drive, diligence and ingenui-
ty" and appreciates the fact that Con-
tinental has committeditself to being
a long-term player in the communities
it serves and not given to selling
systems.
As General Instruments' Frank
Drendel says of Hostetter: "His belief
has always been that we're only on the
threshold of what we can be, and he
proved that by continuing to reinvest
in the industry."
Mooney admires Hostetter's facility
with numbers and says the terms "nat-
ural leader" and "team player" apply
equally to him. Continental alumnus
Jim Robbins agrees. "He's a fine guy
with fabulous principles, and a terrific:
developer of people," he says, adding
with a laugh, "The only thine Hostet-
ter doesn't do well is golf. He needs
to work on that" CTB
Dossier
Name: Amos Hostetter Jr.
Title: Chairman, CEO, Continental
Cablevision, Inc.
Born: January 12, 1937, New York
City
Educated: New Jersey day schools.
Amherst College (B.A., 1958)
Harvard School of Business
(M.B.A., 1961)
Mlitary service: U.S. Army
Reserves
Pre -cable experience: Financial
analyst, American & Foreign Power
Co. (1958)
Cambridge Capital (1962)
Achievements, Co -Founded Con-
tinental Cablevision, 1963
Larry Boggs Award (NCJA)
Industry service: NCJA board
member since 1965; chairman in
1973-74
NCFA Executive Committee (cur-
rent)
Co-founder, Ohio Cable TV As-
sociation
Corporation for Public Broad-
casting board, 1975-80
Children's Television Workshop
board (current)
C -SPAN Board (current)
Chairman; Walter Kaitz Founda-
tion. (current)
Community service: Amherst
College Alumni Association
New England Medical Society
Nantucket Conservation Founda-
tion
Family: Wife, Barbara, and one
daughter, Caroline, B .
Hobbies: Tennis, golf, surfcastin&
antiques, woodworking.
CONTINENTAL CABLEVISION
...� IN SOUTHERN CALIFORNIA
A Local History
Continental Cablevision systems in Southern California pass
over 1 million homes and serve over 300,000 customers in
the communities of Los Angeles, Culver City, Bellflower,
Maywood, Covina, Corona, Tustin, South Central, Downey,
La Mirada, Santa Fe Springs, Lynwood, Paramount, Bell
Gardens, Compton, South EI Monte, Hawaiian Gardens,
Pomona, Carson and Inglewood.
History.
Our story began when American Cablesystems arrived in Greater Los Angeles
in 1986 and consolidated ownership of the former CommuniCom, Jack Barry, Rogers,
Heritage, TCI and South Central Los Angeles cable television franchises. American's
acquisitions and consolidations were completed in late 1987. Shortly thereafter,
American announced its merger with Continental Cablevision.
Continental Cablevision commenced full operation of the cable systems in
February, 1988 and began one of the great turnabout and success stories in Southern
California's business history. Indeed, we arrived in Los Angeles with much work to be
done. Each of the cable systems which preceded American's consolidation was either
a substandard performer or downright distressed.
CommuniCom
The largest predecessor company was CommuniCom which served much of the
City of Los Angeles plus Culver City, Bellflower, Maywood, Covina, Corona and
Tustin. In May of 1986, the LA Weekly called CommuniCom "The Worst Run Cable
System in the Country". At the beginning of 1987, CommuniCom had about 38,000
customers. A mere 12% of the potential market. Company officials reported receiving
complaints at an astonishing rate of one out of every five customers. Each Week!
CommuniCom filed a bankruptcy petition and languished in bankruptcy proceedings
through late 1987. See Increased Penetration chart attached.
( i
South Central Los Angeles
Matters were even worse in South Central Los Angeles. At the beginning of
1988, there was no cable television service at all in South Central Los Angeles. Not
one single customer.
Jack Barry Cable
Despite the proliferation of available programming, Jack Barry Cable, the
predecessor company operating in Westchester was offering its customers a mere 29
channels of basic programming. And most of those channels were already available
from over -the -air broadcast stations.
Rogers Cablesystems
In Downey, La Mirada, Santa Fe Springs, Lynwood, Paramount and Bell
Gardens, the Rogers Cablesystems operations were plagued by a troublesome service
record, declining customer base, centralized operations from Orange County, and a
poorly positioned product offering.
Heritage
The Heritage system serving Compton, South EI Monte and Hawaiian Gardens
was troubled as well. Its relative small size and remoteness from other Heritage
operations left customers with little attention and substandard service.
The systems serving Pomona, Carson and Inglewood suffered from many of the
same difficulties of the Heritage systems.
CONTINENTAL'S INVESTMENT AND GROWTH.
With American's consolidation of ownership and Continental's strong financial
backing and operational experience, change began immediately in 1988. Since that
time, Continental Cablevision has made extensive capital improvements - investing
nearly $165 million in system development, upgrades, and improvements.
New system offices have been constructed at a cost of over $10 million in
Hollywood, Westchester, South Central Los Angeles, Compton and Corona. Our
computerized head -end transmission facilities in urban Los Angeles and Downey have
undergone extensive upgrades, renovation and consolidation. We have also expanded
our physical plant to reach over 350,000 additional homes including the construction
of 800 miles of cable plant in South Central Los Angeles.
j By the end of 1998, Continental Cablevision will have completely modernized
its existing infrastructure as part of a plan to reinvest and compete in Greater Los
Angeles. The plan represents a total additional capital investment by Continental
Cablevision of over $50 million.
Continental Cablevision's plan to modernize its existing infrastructure in Greater
Los Angeles is creating a "superhighway" which will deploy "fiber to the feeder"
architecture and will put Continental Cablevision systems at the forefront of
telecommunications systems development.
The infrastructure upgrade will mean that there will be a vast new capacity for
one way and two way signals, status monitoring will ease system troubleshooting,
system outages will be reduced, and reliability will be enhanced as the optical fiber
trunk system is backed up by a redundant and auxiliary coaxial trunk.
Continental Cablevision's philosophy is to give customers options second to
none in the video information and entertainment marketplace.
Operating Improvements
In addition to the capital investments, the systems have undergone a complete
operating overhaul. We have invested substantially to train our talented neighborhood
work force, added an average of seventeen additional channels to our service offering,
and developed a comprehensive customer -oriented program of policies and
procedures.
Customer Growth
The results of our investment and efforts have been dramatic. We have more
than doubled our number of customers. Focus groups and surveys demonstrate that
our customers are more satisfied than ever. Relations with our host communities are
strong, we are in compliance with all franchise obligations and Continental Cablevision
is positioned for continued improvement and growth through the balance of the
decade. See Customer Growth chart attached.
CONTINENTAL'S PHILOSOPHY OF QUALITY PROGRAMMING AND SERVICE.
At Continental Cablevision we recognize that cable television customers want
high quality programming and great customer service. We have invested in both.
Y� 3
More Cable Programming
Since 1988, we have added, on average, more than seventeen additional
channels to our service offering. Quality programming services such as Prime Ticket,
The Discovery Channel, Nickelodeon, TNT, Court TV and Headline News. See More
Programming chart attached.
More Premium Programming Value
We have also enhanced our premium service offerings. HBO is now available
in Spanish and in many systems it is multiplexed onto several channels so that
programming appears at staggered times. This allows popular programming to fit even
the busiest customer's schedule. We have also introduced value packages offering
several premium channels as a package at reduced prices.
Affordable Prices
Quality programming costs money. Continental Cablevision has been able to
provide quality programming at reasonable prices. Since early 1988, the average per
channel price of basic and standard cable service in our Los Angeles County cable
television systems has increased less than 26% even though the consumer price index
for the same period has increased 29%. Continental Cablevision's rates are well below
the average of all other cable operators in Los Angeles County. See Great Value chart
attached.
While increasing the standard service offerings, Continental has remained
sensitive to those families who either do not want or cannot afford over 40 channels
of programming. To serve their needs, Continental Cablevision offers a Basic
Broadcast Service of approximately 22 channels at a lower price.
Successful Customer Transactions
Our top priority is service to our customers. To that end, approximately 89%
of our employees are directly involved in customer contact and support jobs. See
customer oriented workforce chart attached.
Our cable television systems in Los Angeles County conduct nearly 4 million
customer transactions each year including lobby visits, installations, disconnections,
service calls, pay -per view orders and other telephone calls. Fewer than three
one -hundredths of one percent (.0003) of all transactions currently trigger a complaint
4
or inquiry to the local government - less than one complaint for every 3,200
transactions. A far cry from reports that CommuniCom received complaints at a
- weekly rate of one out of every five customers. See Great Service chart attached.
Telephone Response
The most critical component of great customer service is telephone response.
Overthepast five years, Continental Cablevision has invested $1.6 million in
telephone equipment. We have also expanded full service telephone and office hours
to evenings and weekends in order that customers can contact us at their
convenience. Nearly 300 employees answer telephone inquiries as their primary
responsibility. These employees, assisted by telephone systems equipped with
sophisticated computerized routing, measurement, and analytical capabilities, get the
job done.
CONTINENTAL'S WORKFORCE.
At Continental Cablevision we are proud of our record of providing opportunities
and giving our employees the training they need to provide excellent customer service
and enjoy professional development.
Increased Payroll
Since early 1988, our Los Angeles area payroll has increased dramatically. From
750 employees and a payroll of $15 million, Continental has built a work force of over
1000 people, with a current annual payroll and benefits of over $30 million.
Local Job Opportunities
Continental Cablevision's overarching philosophy of giving back to the
community we serve means that most of the jobs we create go to people who live in
our service areas.
Diversity of Work Force and Management
We are committed to building a work force which reflects the diversity of the
community. More than 50% of our managers are women and over 75% of our
employees are of minority race.
A motivated and diverse work force does not just happen. Special recruiting
programs assure a work force representative of all of the various communities within
Greater Los Angeles. As a result of these efforts, Continental Cablevision was
recognized by the Korean Youth Center as their 1992 nominee for Outstanding
Employer recognition by the Private Industry Council of the City of Los Angeles.
Continental Cablevision was also named "1992 Employer of the Year" by the
Downtown Los Angeles based Chrysalis Homeless Assistance Agency.
Continental Cablevision recognizes that a well trained work force is vital to our
success. To that end, Continental Cablevision has invested over $ 6 million in training
since early 1988.
The Training Institute
In addition to on-site training at the cable system, many Continental Cablevision
employees spend approximately two weeks each year improving their skills at the
Continental Cablevision Training Institute located in Los Angeles. This facility features
training rooms, workshops, and simulated fieldwork environments. Courses include
pole climbing, installer technician training, basic customer service, professional
customer relations, telephone etiquette, supervisory skills, cable technology, and direct
sales. Continental Cablevision's annual training expenditures exceed $1,000 per
employee.
CONTINENTAL'S TECHNOLOGY.
Continental Cablevision customers value great television pictures. To that end,
we have invested over $65 million since early 1988 to directly improve the inferior
technical standards, reliability and picture quality of our predecessors. Continental
Cablevision not only meets all legal and customer -driven technical standards, but our
investment in technology positions Continental Cablevision for the future
telecommunications and video entertainment revolution.
The impact of Continental's technological investment has been dramatic. For
example, Continental Cablevision today experiences signal outages at a rate of less
than 10% of the 1988 experience. Continental's customers rarely, if ever, lose signal
today unless there is an unusual event such as a power outage, earthquake, or fire.
See Fewer Outages graph attached.
We have deployed standby power units throughout 80% of our cable plant,
thereby substantially increasing reliability and reducing power related outages. Soon
we will have standby power throughout all of our systems.
Perhaps the most important technological enhancement is the deployment of
6
optical fiber throughout our cable systems. To date we have constructed nearly 207
miles of multi -fiber cable throughout our systems. The result has been a dramatic
improvement in plant reliability. Over the next five years, we plan continued fiber optic
deployment which will continue to improve reliability and enable Continental
Cablevision to offer new telecommunications and video entertainment opportunities
to customers.
Continental Cablevision has deployed state-of-the-art computer addressable
converters virtually throughout our Greater Los Angeles systems. These converters are
technologically secured to prevent unauthorized signal reception. By combining
sophisticated technology with our aggressive theft of service awareness, investigation
and prosecution effort we are also able to contain costs for paying customers.
CONTINENTAL CABLEVISION AS A COMMUNITY BUILDER.
Through high quality, committed local management and employees, significant
investment, community programming, and such efforts as our Cable in the Classroom
program, Continental Cablevision has developed a reputation of good corporate
citizenship in each of our communities.
- Franchise Fees
( i
Continental Cablevision pays up to 5% of our gross revenues to the local
governments as a franchise fee. Our significant customer growth has resulted in a
substantial increase in the franchise fees we pay to support the government services.
In the last five years, Continental Cablevision has paid local governments in Greater
Los Angeles over 940 million in franchise fees.
Economic Impact
In addition to franchise fees, Continental Cablevision's economic impact in
Greater Los Angeles is dramatic. Our 950 million capital investment to construct the
South Central Los Angeles cable television system is the second largest private
investment in South Central Los Angeles since World War II. Our cable system
activities, payroll and benefits result in a direct economic impact of over 960 million
each year in Greater Los Angeles.
Community Programming
Continental Cablevision has invested over 96 million in community programming
/ studios and equipment since 1988. Our programming staff is well recognized for our
weekly news and public affairs programs which cover the events, issues and people
of our distinct communities and which are often ignored by the larger Los Angeles
media. Our cable television systems have received hundreds of regional and national
local programming awards and nominations including the prestigious EMMY and ACE
awards for television programming excellence. Continental systems hold the honor of
having received more "Diamond Awards" for excellence in community programming
than any other Southern California cable operator since 1988. Our studios and
production facilities have truly become community centers.
Cable in the Classroom
Continental has become a national leader in encouraging the use of cable
television programming and technology in the educational process.
Through our Cable in the Classroom efforts we have provided cable service to
most public schools and regularly provide course materials and teaching aids to
educators at all levels. Each year Continental Cablevision recognizes one Greater Los
Angeles area teacher as Continental's "Educator of the Year". The winner of this
award joins other Continental Educator Award winners in Washington D.C. for an
event -filled week of meetings with legislators, C -SPAN events and networking with
other top educators.
r `
CONTINENTAL'S PERFORMANCE IS RECOGNIZED.
Since 1988, Cablevision Magazine has named Continental Cablevision its "Cable
Operator of the Year" three times. This prestigious award, given to the best cable
company in the nation, is a tribute to our philosophy of local management, local
decision making, commitment to customer service, quality television programming,
and just plain hard work.
"For years, cable television service didn't exist in large parts of Los Angeles.
Thanks to Continental Cablevision cable is now widely available in Los Angeles"
Ted Turner
Chairman of the Board/President
Turner Broadcast System, Inc.
"Continental deserves recognition for sensitivity in serving the community in
Central L.A. "
Mike Hernandez
Councilman
City of Los Angeles
"Continental gives the Jewish community a voice"
Jay Sanderson
Executive Director
Jewish Television Network
"Continental is invaluable in the delivery of critical information to our citizenry"
Paul Richards
Mayor, City of Lynwood
"We've invested in the black community for the long haul. We're proud of
Continental Cablevision because they've done the same"
r..__. Bob Johnson
1 President
Black Entertainment Television
"Continental Cablevision brought cable television to Watts, South Central and
Downtown L.A. and guaranteed that C -SPAN would be on the system so that these
families could keep an eye on Washington -so far away"
Brian Lamb
President/CEO C -SPAN
"Continental Cablevision, with its excellent staff and management has done an
outstanding job of providing quality service to the people of Los Angeles. Continental
Cablevision over the years has shown its commitment to the communities in which
it serves by consistently becoming involved with the activities of that community"
Rudy Svorinich
Councilman
City of Los Angeles
C_�
9
Customer Growth
326,373
March 1988 December 31,
(Acquisition) 1994
Continental has doubled its
(y number of customers since early 1988.
Continental Cablevision Southern California /December, 1994
330
300
270
240
210
180
() ISO
120
90
GO
30
0
C)
Fewer Outages
88 94
Continental has reduced system
signal outages tenfold since 1988
Continental Cablevision Southern California /December, 1994
Great Service
0003
Local governments receive
less than 1 complaint per
3200 Continental transactions
Continental Cablevision Southern California /December, 1994
Great Value
29%
Continental per L.A. County
channel price increase rate of inflation
Continental's per channel prices for
basic plus standard service increased
approximately 3% less than the rate of
inflation from early 1988 through
December 31, 1994
Continental Cablevision Southern California /December, 1994
Increased Penetration
k'°°'.
er
Only 12% of CommuniCom area families
chose to purchase cable service
before Continental's arrival in 1985. By December, 1994,
45% of the same area families
subscribed to Continental's service.
Continental Cablevision Southern California /December, 1994
More Programming
49
Channels
March December
1988 1994
Continental has added an average
of 17 channels to Los Angeles
area systems since 1988
Continental Cablevision Southern California /December, 1994
Customer Oriented Work Force
Sales Personnel
Community Programming
Technicians/Service
Installers
Customer Service
89% of Continental's employees serve in
direct customer contact jobs
Continental Cablevision Southern California /December, 1994
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