AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ORION NETWORK SYSTEMS, INC.
LORAL SPACE & COMMUNICATIONS LTD.
AND
LORAL SATELLITE CORPORATION
DATED AS OF OCTOBER 7, 1997
TABLE OF CONTENTS
THE MERGER
ARTICLE I. THE MERGER Page
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SECTION 1.1. The Merger........................................................1
SECTION 1.2. Effective Time....................................................1
SECTION 1.3. Effect of the Merger..............................................2
SECTION 1.4. Certificate of Incorporation; Bylaws..............................2
SECTION 1.5. Directors and Officers............................................2
SECTION 1.6. Closing...........................................................2
SECTION 1.7. Subsequent Actions................................................2
ARTICLE II. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. Conversion of Securities..........................................3
SECTION 2.2. Payment...........................................................6
SECTION 2.3. Company Options; Stock Purchase Plan; Warrants....................7
SECTION 2.4. Stock Transfer Books.............................................10
SECTION 2.5. Certain Adjustments..............................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1. Organization and Qualification; Subsidiaries.....................10
SECTION 3.2. Certificate of Incorporation and Bylaws..........................11
SECTION 3.3. Capitalization...................................................12
SECTION 3.4. Authority........................................................13
SECTION 3.5. No Conflict; Required Filings and Consents.......................14
SECTION 3.6. SEC Filings; Financial Statements................................15
SECTION 3.7. Absence of Certain Changes or Events.............................15
SECTION 3.8. Absence of Litigation............................................16
SECTION 3.9. Licenses and Permits; Compliance with Laws.......................16
SECTION 3.10. Taxes...........................................................20
SECTION 3.11. Intellectual Property...........................................21
SECTION 3.12. Material Contracts..............................................22
SECTION 3.13. Employee Benefit Plans..........................................23
SECTION 3.14. Properties; Assets..............................................24
SECTION 3.15. Labor Relations.................................................26
SECTION 3.16. Environmental Matters...........................................26
SECTION 3.17. Insurance. .....................................................28
SECTION 3.18. Board Approval; Vote Required...................................28
SECTION 3.19. Opinion of Financial Advisor....................................28
SECTION 3.20. Brokers. .......................................................28
SECTION 3.21. Takeover Provisions Inapplicable................................29
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF MERGER SUB
SECTION 4.1. Organization and Qualification...................................29
SECTION 4.2. Certificate of Incorporation and Bylaws..........................29
SECTION 4.3. Authority. ......................................................29
SECTION 4.4. No Conflict; Required Filings and Consents.......................30
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF ACQUIROR
SECTION 5.1. Organization and Qualification; Subsidiaries.....................31
SECTION 5.2. Certificate of Incorporation and Bylaws..........................31
SECTION 5.3. Capitalization...................................................31
SECTION 5.4. Authority. ......................................................32
SECTION 5.5. No Conflict; Required Filings and Consents.......................33
SECTION 5.6. SEC Filings; Financial Statements................................34
SECTION 5.7. Absence of Certain Changes or Events.............................34
SECTION 5.8. Absence of Litigation............................................35
SECTION 5.9. Licenses and Permits; Compliance with Laws.......................35
SECTION 5.10. Taxes. .........................................................36
SECTION 5.11. Intellectual Property...........................................37
SECTION 5.12. Material Contracts..............................................37
SECTION 5.13. Employee Benefit Plans..........................................38
SECTION 5.14. Qualification of Acquiror.......................................38
SECTION 5.15. Brokers. .......................................................39
ARTICLE VI. COVENANTS
SECTION 6.1. Affirmative Covenants of the Company.............................39
SECTION 6.2. Negative Covenants of the Company................................40
ARTICLE VII. ADDITIONAL AGREEMENTS
SECTION 7.1. Access and Information...........................................43
SECTION 7.2. Confidentiality..................................................44
SECTION 7.3. Proxy Registration Statement; Board Recommendation and
Stockholder Vote.................................................44
SECTION 7.4. FCC Application..................................................45
SECTION 7.5. HSR Act Matters..................................................46
SECTION 7.6. Public Announcements.............................................46
SECTION 7.7. Indemnification; Directors' and Officers' Insurance..............46
SECTION 7.8. Employee Benefits Matters........................................48
SECTION 7.9. Further Action; Commercially Reasonable Efforts..................48
SECTION 7.10. Negotiation With Others.........................................49
SECTION 7.11. Stock Merger Listing............................................50
SECTION 7.12. Blue Sky. ......................................................50
SECTION 7.13. Affiliate Agreements............................................51
SECTION 7.14. Consent Solicitation and Supplemental Indenture.................51
SECTION 7.15. The Exchange Offer..............................................52
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SECTION 7.16. Control of Acquiror and the Company.............................56
SECTION 7.17. Private Letter Ruling...........................................56
ARTICLE VIII. CLOSING CONDITIONS
SECTION 8.1. Conditions to Obligations of Acquiror, Merger Sub and
the Company to Effect the Merger.................................56
SECTION 8.2. Additional Conditions to Obligations of Acquiror and
Merger Sub.......................................................57
SECTION 8.3. Additional Conditions to Obligations of the Company..............59
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination......................................................60
SECTION 9.2. Effect of Termination............................................61
SECTION 9.3. Expenses.........................................................61
SECTION 9.4. Amendment........................................................62
SECTION 9.5. Waiver...........................................................62
ARTICLE X. GENERAL PROVISIONS
SECTION 10.1. Nonsurvival of Representations, Warranties and
Agreements......................................................63
SECTION 10.2. Notices.........................................................63
SECTION 10.3. Certain Definitions.............................................64
SECTION 10.4. Headings........................................................65
SECTION 10.5. Severability....................................................65
SECTION 10.6. Entire Agreement................................................65
SECTION 10.7. Specific Performance............................................66
SECTION 10.8. Assignment......................................................66
SECTION 10.9. Third Party Beneficiaries.......................................66
SECTION 10.10. Governing Law..................................................66
SECTION 10.11. Counterparts...................................................66
EXHIBITS
Exhibit A Affiliate Agreement
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INDEX OF DEFINED TERMS
----------------------
Section
Acquiror............................................... PREAMBLE
Acquiror Benefit Plans................................. 5.13(a)
Acquiror Commonly Controlled Entity.................... 5.13(a)
Acquiror Election...................................... 7.14(b)
Acquiror ERISA Plan.................................... 5.13(b)
Acquiror Ground Stations............................... 5.9
Acquiror Intellectual Property......................... 5.11
Acquiror Material Adverse Effect....................... 5.1
Acquiror Material Contracts............................ 5.12
Acquiror Permits....................................... 5.9
Acquiror Rights Plan................................... 2.1(h)
Acquiror Satellites.................................... 5.9(a)
Acquiror SEC Reports................................... 5.6(a)
Acquiror Series A Preferred............................ 5.3
Acquiror Series C Preferred............................ 5.3
Acquiror Shares........................................ 2.1(a)
Acquiror Subsidiary and Acquiror Subsidiaries.......... 5.1
Acquisition Proposal................................... 7.10(a)
affiliate.............................................. 10.3(a)
Affiliate Agreements................................... 7.13
Agreement.............................................. PREAMBLE
Averaging Period....................................... 2.1(a)
Backlog................................................ 3.12(c)
beneficial owner....................................... 10.3(b)
benefit liabilities.................................... 3.13(c)
Benefit Plans.......................................... 3.13(a)
Blue Sky Laws.......................................... 3.5(b)
business day........................................... 10.3(c)
Capital Stock.......................................... 2.1(b)
Certificate and Certificates........................... 2.2(b)
Certificate of Merger.................................. 1.2
Claim.................................................. 7.7(b)
Closing................................................ 1.6
Closing Date........................................... 1.6
Code................................................... 2.3
Common Stock........................................... 2.1(a)
Communications Act..................................... 3.5(b)
Company................................................ PREAMBLE
Company Balance Sheet.................................. 3.14(a)
Company Benefit Plans.................................. 3.13(a)
Company Commonly Controlled Entity..................... 3.13(a)
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Company ERISA Plan..................................... 3.13(a)
Company Ground Stations................................ 3.9(a)
Company Intellectual Property.......................... 3.11
Company Material Adverse Effect........................ 3.1(a)
Company Material Contracts............................. 3.12(a)
Company Negative Vote.................................. 9.3(a)(iii)
Company Satellites..................................... 3.9(a)
Company SEC Reports.................................... 3.6(a)
Company Stock Option Plans............................. 2.3(a)
Company Subsidiary and Company Subsidiaries............ 3.1(a)
Company Termination Fee................................ 9.3(a)
Confidentiality Agreement.............................. 7.2
Consent Solicitation................................... 7.14(a)
control, controlled by, under common control with...... 10.3(d)
Convertible Debentures................................. 3.3
Delaware Law........................................... PREAMBLE
Determination Price.................................... 2.1(a)
Effective Time......................................... 1.2
Employee Stock Purchase Plan........................... 2.3(b)
Encumbrances........................................... 3.3
Environmental Claim.................................... 3.16(d)(i)
Environmental Laws..................................... 3.16(d)(ii)
Environmental Permits.................................. 3.16(a)
ERISA.................................................. 3.13(a)
Exchange Act........................................... 3.5(b)
Exchange Agent......................................... 2.2(a)
Exchange Consideration................................. 7.15
Exchange Fund.......................................... 2.2(a)
Exchange Offer......................................... 7.15(a)
Exchange Offer Conditions.............................. 7.15(a)
Exchange Offer Documents............................... 7.15(b)
Exchange Ratio......................................... 2.1(a)
Exchange Registration Statement........................ 7.15(b)
FCC.................................................... 3.5(b)
FCC Application........................................ 7.4(a)
FCC Rules.............................................. 3.9(a)
Final Order............................................ 8.2(c)
Governmental Entity.................................... 3.5(b)
Hazardous Materials.................................... 3.16(d)(iii)
HSR Act................................................ 3.5(b)
IGO Determinations..................................... 3.9(c)
Indemnified Parties.................................... 7.7(b)
Indentures............................................. 7.14(a)
Interim Period......................................... 7.1
Key Applications....................................... 3.9(a)
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Key Company Permits.................................... 3.9(a)
Major Station.......................................... 3.14(b)
Merger................................................. 1.1
Merger Consideration................................... 2.2(b)
Merger Consideration Value............................. 6.3(d)(i)
Merger Sub............................................. PREAMBLE
Multiemployer Plan..................................... 3.13(d)
NASD................................................... 3.5(b)
Nasdaq................................................. 3.5(b)
NYSE................................................... 2.1(a)
Offer to Exchange...................................... 7.15(b)
Oldco.................................................. 3.6(a)
Option................................................. 2.3(a)
Other Permits.......................................... 3.9(a)
Per Share Amount....................................... 2.1(b)
person................................................. 10.3(e)
Preferred Stock........................................ 2.1(b)
Principal Stockholder Agreement........................ PREAMBLE
Proxy Registration Statement........................... 7.3(a)
qualified.............................................. 3.13(b)
reasonable efforts..................................... 10.3(f)
Receiving Party........................................ 7.2
Requisite Consents..................................... 7.14(a)
Schedule 14D-1......................................... 7.15(c)
Schedule 14D-9......................................... 7.15(d)
SEC.................................................... 3.6(a)
Securities Act......................................... 3.5(b)
Senior Notes........................................... 7.14(a)
Series A Preferred Stock............................... 2.1(b)
Series B Preferred Stock............................... 2.1(b)
Series C Preferred Stock............................... 2.1(b)
Solicitation Termination Date.......................... 7.14(b)
Stockholders' Meeting.................................. 7.3(b)
Subsidiary............................................. 3.1(b)
Surviving Corporation.................................. 1.1
Tax, Taxable and Taxes................................. 3.10
Termination Date....................................... 9.1(e)
Trading Day............................................ 2.1(a)
unfunded current liability............................. 3.13(c)
VSAT Stations.......................................... 3.14(b)
Volume Weighted Average Trading Price.................. 2.1(a)
Warrant................................................ 2.3(c)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
this 7th day of October, 1997, by and among ORION NETWORK SYSTEMS, INC., a
Delaware corporation ("Company"), LORAL SPACE & COMMUNICATIONS LTD., a Bermuda
company ("Acquiror"), and LORAL SATELLITE CORPORATION, a Delaware corporation
("Merger Sub").
WHEREAS, the Boards of Directors of the Company, Acquiror and Merger
Sub have each determined that it is fair to, and in the best interests of, their
respective stockholders that Merger Sub, a wholly-owned subsidiary of Acquiror,
be merged with and into the Company, pursuant to and subject to the terms and
conditions of this Agreement and the Delaware General Corporation Law ("Delaware
Law"); and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Acquiror to enter into this Agreement, certain stockholders have
entered into an agreement with Acquiror (the "Principal Stockholder Agreement")
pursuant to which, among other things, such stockholders have agreed to vote
their shares of stock of the Company in favor of this Agreement, the Merger (as
defined below) and the other transactions contemplated by this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with Delaware Law, at the Effective Time (as
defined in Section 1.2) Merger Sub shall be merged with and into the Company
(the "Merger"). As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (sometimes referred to herein as the "Surviving
Corporation") and a wholly-owned subsidiary of Acquiror. The name of the
Surviving Corporation shall be Loral Orion Network Systems, Inc.
SECTION 1.2. EFFECTIVE TIME.
As promptly as practicable on the Closing Date (as defined in Section
1.6), the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the
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State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, Delaware Law and in such form as approved by the
Company and Acquiror prior to such filing (the time of the filing of the
Certificate of Merger or the time specified therein being the "Effective Time").
SECTION 1.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the rights, privileges, powers and franchises of Merger Sub
and the Company shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Merger Sub and the Company shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
At the Effective Time, (a) the certificate of incorporation of Merger
Sub, as, in effect immediately prior to the Effective Time and as amended by the
Certificate of Merger, shall be the certificate of incorporation of the
Surviving Corporation, and (b) the bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation.
SECTION 1.5. DIRECTORS AND OFFICERS.
The directors of Merger Sub (or such other or additional individuals
as Acquiror may designate prior to Closing) shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation; and the
officers of Merger Sub (or such other or additional individuals as Acquiror may
designate prior to Closing) shall be the officers of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.6. CLOSING.
Subject to the terms and conditions of this Agreement, the closing of
the Merger (the "Closing") will take place as promptly as practicable after
satisfaction of the latest to occur or, if permissible, waiver of the conditions
set forth in Article VIII hereof (the "Closing Date"), at the offices of Xxxxxxx
Xxxx & Xxxxxxxxx, One Citicorp Center, 000 Xxxx 00xx Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, unless another date or place is agreed to in writing by the parties
hereto.
SECTION 1.7. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or
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any other actions or things are necessary or desirable to continue in, vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties,
privileges, franchises or assets of either of its constituent corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of such
constituent corporations, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties, privileges, franchises or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any action
on the part of Acquiror, Merger Sub, the Company or the holders of any of the
following securities:
(a) Common Stock. Each share of common stock, par value $.01 per
share, of the Company ("Common Stock") (excluding any shares described in
Sections 2.1(c) and (d)) issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive the number of fully paid and nonassessable
shares of common stock, par value $0.01 per share, of Acquiror ("Acquiror
Shares") equal to the Exchange Ratio defined below. All such shares of Common
Stock shall cease to be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each certificate previously evidencing any
such shares shall thereafter represent only the right to receive the Merger
Consideration as described below. The holders of certificates previously
evidencing such shares of Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Common Stock, except as otherwise provided herein or by law. Each such
certificate previously evidencing such shares of Common Stock shall be exchanged
for the number of shares previously evidenced by the canceled certificate upon
the surrender of such certificate in accordance with the provisions of Section
2.2, multiplied by the Exchange Ratio.
The Exchange Ratio shall be as follows:
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(i) if the Determination Price shall be less than $24.458 but greater
than $16.305, the Exchange Ratio shall be the quotient obtained by
dividing $17.50 by the Determination Price,
(ii) if the Determination Price shall be equal to or greater than
$24.458, the Exchange Ratio shall be 0.71553 and
(iii) if the Determination Price shall be equal to or less than
$16.305, the Exchange Ratio shall be 1.07329.
"Determination Price" shall mean the average of the Volume-Weighted
Average Trading Prices of Acquiror Shares for the twenty (20) consecutive
trading days on which trading of Acquiror Shares occurs (each a "Trading Day")
(the "Averaging Period") ending on the tenth trading day immediately prior to
the Closing Date for the Merger, rounded to the nearest one-hundred thousandth
(or if there shall not be a nearest one-hundred thousandth, to the next higher
one-hundred thousandth). "Volume-Weighted Average Trading Price" means, for any
Trading Day, an amount equal to (i) the cumulative sum, for each trade of
Acquiror Shares during such Trading Day on the New York Stock Exchange, Inc.
(the "NYSE") (or, if such security is not listed on the NYSE, such other
principal exchange or over-the-counter market on which such security is listed),
of the product of: (x) the sale price times (y) the number of Acquiror Shares
sold at such price, divided by (ii) the total number of Acquiror Shares so
traded during the Trading Day.
(b) Company Preferred Stock. Subject to the other provisions of this
Section 2.1, each share of preferred stock, par value $.01 per share, of the
Company ("Preferred Stock"), issued and outstanding immediately prior to the
Effective Time (excluding any shares described in Sections 2.1(c) and (d)),
shall be converted into the right to receive the number of fully paid and
nonassessable Acquiror Shares equal to the Exchange Ratio multiplied by the
number of shares of Common Stock into which such share of Preferred Stock was
convertible immediately prior to the Effective Time. The Company's Series A 8%
Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), Series B 8%
Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") and Series C
6% Cumulative Redeemable Preferred Stock ("Series C Preferred Stock"), shall be
referred to herein collectively as the "Preferred Stock." The Exchange Ratio
multiplied by the number of Acquiror Shares into which a share of each series of
the Company's Preferred Stock shall be converted in the Merger shall be referred
to herein collectively as the "Per Share Amounts" and individually as a "Per
Share Amount." The Common Stock and Preferred Stock shall be referred to herein
collectively as the "Capital Stock."
All such shares of Preferred Stock shall cease to be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares shall thereafter represent
only the
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right to receive the Merger Consideration as described below. The holders of
certificates previously evidencing such shares of Preferred Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Preferred Stock, except as otherwise provided herein
or by law. Each such certificate previously evidencing such shares of Preferred
Stock shall be exchanged for the applicable Per Share Amount multiplied by the
number of shares previously evidenced by the canceled certificate upon the
surrender of such certificate in accordance with the provisions of Section 2.3,
without interest.
(c) Acquiror-Owned Shares. All shares of capital stock of the Company
owned, directly or indirectly, by Acquiror, Merger Sub or any other Acquiror
Subsidiary (as defined in Section 5.1) shall be canceled and extinguished
without any conversion thereof and no amount shall be delivered or deliverable
in exchange therefor;
(d) Treasury Stock. All shares of capital stock of the Company held in
the treasury of the Company immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof and no amount shall be
delivered or deliverable in exchange therefor;
(e) Merger Sub Stock. Each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one (1) duly and validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation;
and
(f) No Fractional Shares. No certificate or scrip representing a
fractional share of Acquiror Shares shall be issued pursuant to this Section
2.1, and such fractional interests shall not entitle the owner thereof to any
rights as a security holder of Acquiror. All holders entitled to receive a
fractional share of Acquiror Shares shall be entitled to receive, in lieu
thereof, cash (without interest) in an amount equal to the product of (i) such
fractional part of Acquiror Shares multiplied by (ii) the last sales price per
Acquiror Share on the NYSE Composite Transactions reporting system for the
Closing Date. As promptly as possible after the determination of the amount of
cash, if any, to be paid to holders of fractional interests, the Exchange Agent
shall so notify Acquiror, and Acquiror shall cause the Surviving Corporation to
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
(g) Interest and Dividend Shares. To the extent that any interest
accrued or payable with respect to the Company's 8.75% Convertible Junior
Subordinated Debentures due 2012 or any dividends accrued or payable with
respect to the Series C Preferred Stock, in each case which are payable in the
form of Common Stock, have not been paid as of the Closing Date, such interest
and dividends shall be converted into the right to receive the number of fully
paid and
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nonassessable Acquiror Shares equal to the Exchange Ratio multiplied by the
number of shares of Common Stock that would have been issued if such interest or
dividends had been paid immediately prior to the Effective Time or, to the
extent such interest or dividends cannot be so converted under the terms of
their governing instruments, such interest and dividends shall be paid in Common
Stock immediately prior to the Effective Time and converted pursuant to Section
2.1(a).
(h) Rights. Pursuant to the Acquiror's Rights Agreement dated as of
March 27, 1996 between Acquiror and The Bank of New York, as Rights Agent (the
"Acquiror Rights Plan"), the issuance of each Acquiror Share hereunder (or under
the Exchange Offer) shall be accompanied by the associated right under the
Acquiror Rights Plan.
(i) No Liens or Calls on Acquiror Shares. Prior to the issuance of any
Acquiror Shares pursuant to this Agreement, the Principal Stockholder Agreement
or the Exchange Offer, the Board of Directors of the Acquiror shall, to the
extent permitted by Bermuda law, (i) irrevocably waive any lien that has arisen
or may arise on any such Acquiror Shares under Bermuda law; (ii) irrevocably
declare exempt from Section 14 of Acquiror's bye-laws all such Acquiror Shares;
and (iii) irrevocably declare that the Acquiror shall not make any calls on any
such Acquiror Shares pursuant to Section 17 of Acquiror's bye-laws.
SECTION 2.2. PAYMENT.
(a) Exchange Agent. As of the Effective Time, Acquiror shall, on
behalf of Merger Sub, deposit with an exchange agent theretofore designated by
the Company and Acquiror (the "Exchange Agent"), for the benefit of the holders
of shares of Capital Stock (excluding any shares described in Sections 2.1(c)
and (d)), for payment in accordance with this Article II, through the Exchange
Agent, the Acquiror Shares issuable pursuant to Sections 2.1(a) and (b) plus
from time to time as necessary cash in an amount sufficient to make payment for
fractional shares under Section 2.1(f) (such Acquiror Shares and cash being
hereinafter referred to as the "Exchange Fund"). Acquiror shall cause the
Exchange Agent, pursuant to irrevocable instructions, to deliver the Acquiror
Shares (and cash for fractional shares) contemplated to be paid pursuant to
Sections 2.1(a), (b) and (f) out of the Exchange Fund. The Exchange Fund shall
not be used for any other purpose.
(b) Payment Procedures. Promptly after the Effective Time, but in no
event later than five (5) business days thereafter, Acquiror shall cause the
Exchange Agent to mail to each record holder, as of the Effective Time, an
outstanding certificate (each a "Certificate" and collectively, the
"Certificates") that immediately prior to the Effective Time evidenced
outstanding shares of Capital Stock (excluding any shares described in Sections
2.1(c) and (d)); a form letter of transmittal and instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon surrender
to the Exchange Agent of a Certificate, together
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with such letter of transmittalduly executed, and any other required documents,
the holder of such Certificate shall be entitled to receive in exchange therefor
the applicable consideration set forth in Section 2.1 (the "Merger
Consideration"), and such Certificate shall forthwith be canceled. Until
surrendered in accordance with the provisions of this Section 2.2, each
Certificate shall represent for all purposes only the right to receive the
applicable consideration set forth in Section 2.1, without any interest thereon.
Acquiror or the Surviving Corporation shall pay any transfer or other similar
taxes required by reason of the issuance and receipt by the former stockholders
of the Company of Acquiror Shares pursuant to the provisions of this Article II.
(c) No Further Rights in Stock. All Acquiror Shares paid upon
conversion of the shares of Capital Stock in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to such shares of Capital Stock.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Capital Stock for one hundred
eighty (180) days after the Effective Time shall be delivered to Acquiror, upon
demand, and any holders of Capital Stock that have not theretofore complied with
this Article II shall thereafter look only to the Surviving Corporation and
Acquiror for the Merger Consideration to which they are entitled.
(e) No Liability. Neither Acquiror nor the Surviving Corporation shall
be liable to any holder of shares of Capital Stock for any Acquiror Shares or
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate evidencing shares of Capital Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit setting forth that fact by the person
claiming such lost, stolen or destroyed Certificate and the granting of a
reasonable indemnity against any claim that may be made against Acquiror or the
Exchange Agent with respect to such Certificate, Acquiror shall cause the
Exchange Agent to pay to such person the Merger Consideration with respect to
such lost, stolen or destroyed Certificate.
SECTION 2.3. COMPANY OPTIONS; STOCK PURCHASE PLAN; WARRANTS.
(a) Company Options. As of the Effective Time, each outstanding stock
option (an "Option") to purchase shares of Common Stock, including without
limitation those granted under the Company's 1986 Stock Option Plan, 1997 Stock
Option Plan and Non-Employee Directors' Stock Option Plan, each as amended to
the date of this Agreement (collectively, the "Company Stock Option Plans"),
shall be converted into an option to acquire Acquiror Shares, as provided in
this Section. Following the Effective Time, each Option shall continue to have,
and shall be
7
subject to, the terms and conditions of each agreement pursuant to which such
Option was subject immediately prior to the Effective Time (including, in the
case of each Option granted under the Company Stock Option Plans, the terms and
conditions of the Company Stock Option Plans), except that (A) each Option shall
be exercisable for that number of Acquiror Shares equal to the product of (1)
the aggregate number of shares of Common Stock for which such Option was
exercisable multiplied by (2) the Exchange Ratio, provided, however, that no
Option shall be exercisable for a fractional Acquiror Share, and the holder of
an Option exercisable for a fractional Acquiror Share shall be entitled to
receive, upon exercise thereof, an offset against the aggregate exercise price
of the Option being exercised therewith, such offset to be determined by
multiplying the fraction of a Acquiror Share to which a holder of an Option
would be entitled to receive times the excess of the closing price of the
Acquiror Share as reported on the NYSE on the date of exercise over the exercise
price of such Option; (B) the exercise price per share of Acquiror Shares
issuable pursuant to each Option shall be equal to the aggregate exercise price
of such Option at the Effective Time divided by the number of shares of Acquiror
Shares for which such Option shall be exercisable as determined in accordance
with the preceding clause (A), rounded to the next highest whole cent, if
necessary; and (C) each outstanding Option shall accelerate and be exercisable,
if not vested and exercisable at such time to the extent, and only to the
extent, provided in Schedule 2.3. Except as set forth herein, the assumption and
substitution of options as provided herein shall not give the holders of such
options additional benefits or additional vesting rights which they did not have
immediately prior to the Effective Time or relieve the holders of any
obligations or restrictions applicable to their options or the shares obtainable
upon exercise of the options. The adjustment provided herein with respect to any
Options that are "incentive stock options" as defined in the Internal Revenue
Code of 1986, as amended (the "Code") shall be and is intended to be effected in
a manner that is consistent with continued treatment of such Options as
"incentive stock options" under of the Code. The Company Stock Option Plans
shall be assumed by Acquiror with respect to all outstanding Options, and no
further options shall be granted under the Company Stock Option Plans after the
Effective Time.
Acquiror shall (i) file one or more registration statements on Form
S-8 (or amend existing registration statements on Form S-8) to become effective
as soon as practicable after the Effective Time with respect to the Acquiror
Shares subject to Options granted under the Company Stock Option Plans; (ii) use
all reasonable efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding; and (iii)
promptly prepare and submit to the NYSE applications covering the Acquiror
Shares subject to such Options and use commercially reasonable efforts to cause
such securities to be approved for listing on or prior to the Effective Time,
subject to official notice of issuance.
8
Acquiror shall, on behalf of Merger Sub, take such other actions as
are reasonably necessary to revise and adjust each Option as provided in this
Section, including providing the holder of each Option as soon as practicable
after the Effective Time with an appropriate option agreement or amendment to
existing option agreement. Acquiror shall take all corporate action reasonably
necessary to reserve for issuance a sufficient number of Acquiror Shares for
delivery upon the exercise of Options. To the extent that the provisions of this
Section 2.3(a) require amendments to the Company Stock Option Plans, the Company
shall take all actions necessary to make such amendments to allow for the
treatment of Options as provided for in this Section 2.3(a).
(b) Employee Stock Purchase Plan. Effective as of the last trading day
of the Common Stock prior to the Effective Time, the then applicable Payroll
Deduction Period, as defined in the Company's 1996 Employee Stock Purchase Plan
(the "Employee Stock Purchase Plan"), shall be terminated and shall be deemed to
have ended on the last day of the last payroll period ending prior to the
Effective Time; and the rights of each participating employee shall be deemed to
be automatically exercised as of such last trading day of the Common Stock, as
provided in Sections 10 and 26(c) of the Employee Stock Purchase Plan.
(c) Warrants. As of the Effective Time, each outstanding warrant (a
"Warrant") to purchase shares of Common Stock shall be converted into a warrant
to acquire Acquiror Shares, as provided in this Section. Following the Effective
Time, each Warrant shall continue to have, and shall be subject to, the terms
and conditions of each agreement pursuant to which such Warrant was subject
immediately prior to the Effective Time, except as set forth in this Section and
except that (A) each such Warrant shall be exercisable for that number of whole
Acquiror Shares equal to the product of (x) the aggregate number of shares of
Common Stock for which such Warrant was exercisable multiplied by (y) the
Exchange Ratio; provided, however, that no Warrant shall be exercisable for a
fractional Acquiror Share, and the holder of a Warrant exercisable for a
fractional Acquiror Share shall be entitled to receive, upon exercise thereof,
an offset against the aggregate exercise price of the Warrant being exercised
therewith, such offset to be determined by multiplying the fraction of an
Acquiror Share to which a holder of a Warrant would be entitled to receive times
the excess of the closing price of the Acquiror Share as reported on the NYSE on
the date of exercise over the exercise price of such Warrant, and (B) the
exercise price per Acquiror Share issuable pursuant to such Warrant shall be
equal to the aggregate exercise price of such Warrant at the Effective Time
divided by the number of Acquiror Shares for which such Warrant shall be
exercisable as determined in accordance with the preceding clause (A), rounded
to the next highest whole cent, if necessary.
Acquiror shall, on behalf of Merger Sub, take such other actions as
are reasonably necessary to revise and adjust each Warrant as provided in this
Section, including providing the holder of each Warrant as soon as practicable
after the
9
Effective Time with an appropriate warrant agreement or amendment to existing
warrant agreement. Acquiror shall take all corporate action reasonably necessary
to reserve for issuance a sufficient number of Acquiror Shares for delivery upon
the exercise of Warrants.
SECTION 2.4. STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company with
respect to all shares of capital stock of the Company shall be closed and no
further registration of transfers of such shares of capital stock shall
thereafter be made on the records of the Company. On or after the Effective
Time, if any Certificates for shares of Capital Stock (excluding any shares
described in Sections 2.1(c) and (d)) are presented to the Exchange Agent, the
Surviving Corporation or Acquiror for any reason, such Certificates shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
SECTION 2.5. CERTAIN ADJUSTMENTS.
If between the date hereof and the Effective Time, the outstanding
shares of Capital Stock or of Acquiror Shares shall be changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, the
Exchange Ratio shall be adjusted accordingly to provide to the holders of
Capital Stock the same economic effect as contemplated by this Agreement prior
to such reclassification, recapitalization, split-up, combination, exchange or
dividend; provided, however, that in the event that, prior to the Effective
Time, Acquiror consummates any merger, amalgamation or consolidation as a result
of which Acquiror Shares being issued hereunder are neither registered with the
SEC pursuant to Section 12(b) or 12(g) of the Exchange Act (as defined below)
nor converted into the right to receive securities so registered, the Exchange
Ratio shall be determined assuming that the Volume-Weighted Average Trading
Price was equal to the per share amount of consideration a common stockholder of
Acquiror received on the date of consummation of such transaction.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and Merger Sub
as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company and each Subsidiary (as defined below) of the Company
(each a "Company Subsidiary" and collectively, the "Company
10
Subsidiaries") is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization. The
Company and each Company Subsidiary is duly qualified to conduct its business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures which would not in the
aggregate have a Company Material Adverse Effect (as defined below). The Company
and each Company Subsidiary has the requisite corporate or partnership power and
authority and any necessary governmental authority, franchise, license or permit
to own, operate, lease and otherwise to hold and operate its assets and
properties and to carry on its businesses as now being conducted, except for
such failures which would not have a Company Material Adverse Effect. The
Company has no Subsidiaries (as defined below) or any equity or similar interest
in any entity other than those listed in Schedule 3.1. Except as set forth in
Schedule 3.1, each Company Subsidiary is a wholly-owned direct or indirect
subsidiary of the Company. As used herein, the term "Company Material Adverse
Effect" means any material adverse effect on the business (where "business"
shall be deemed to include the Orion 1 satellite and the proposed Orion 2
satellite and Orion 3 satellite), assets or condition (financial or otherwise),
liabilities or operations of the Company and the Company Subsidiaries taken as a
whole.
(b) For purposes of this Agreement, a "Subsidiary" of any person means
any corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other Subsidiary) (i) owns,
directly or indirectly, fifty percent (50%) or more of the capital stock,
partnership interests or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation, partnership, joint venture or other legal
entity; or (ii) possesses, directly or indirectly, control over the direction of
management or policies of such corporation, partnership, joint venture or other
legal entity (whether through ownership of voting securities, by agreement or
otherwise).
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company has heretofore delivered to Acquiror a complete and
correct copy of the certificate or articles of incorporation and the bylaws of
the Company and each Company Subsidiary that is a corporation, and a correct
copy of the partnership agreement for each Company Subsidiary that is a
partnership, each as amended to date. Each such certificate or articles of
incorporation, bylaws and partnership agreement is in full force and effect.
Neither the Company nor any Company Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
partnership agreement.
11
SECTION 3.3. CAPITALIZATION.
The authorized capital stock of the Company consists, as of September
30, 1997, of: (a) 40,000,000 shares of Common Stock, of which 11,675,436 shares
are issued and 11,406,162 shares are outstanding; and (b) 1,000,000 shares of
Preferred Stock, of which 15,000 shares have been designated as Series A
Preferred Stock, 5,000 shares have been designated as Series B Preferred Stock
and 150,000 shares have been designated as Series C Preferred Stock, with 13,845
shares of Series A Preferred Stock, 4,295 shares of Series B Preferred Stock and
123,172 shares of Series C Preferred Stock being issued and outstanding.
As of September 30, 1997, (i) 2,022,573 shares of Common Stock were
reserved for issuance upon the exercise of Options outstanding under the Company
Stock Option Plans, 500,000 shares of Common Stock were reserved for issuance
under the Company's 1996 Employee Stock Purchase Plan and 100,000 shares of
Common Stock were reserved for issuance under the Company's 401(k) Plan; (ii)
9,088,300 shares of Common Stock were reserved for purposes of effecting
conversions of Preferred Stock into Common Stock; (iii) 4,285,714 shares of
Common Stock were reserved for purposes of effecting conversions of the
Company's Convertible Junior Subordinated Debentures due February 1, 2012 (the
"Convertible Debentures") into Common Stock; and (iv) 961,238 shares were
issuable (and were reserved for issuance) upon the exercise of outstanding
warrants and options other than those referred to in clauses (i) and (ii) above.
In addition, Common Stock has been reserved for issuance in payment of interest
on Convertible Debentures and dividends on Series C Preferred Stock.
As of the date hereof, there are no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which the Company's
stockholders may vote issued or outstanding.
Since June 30, 1997, no shares of Capital Stock have been issued,
except for shares of Common Stock issued upon the exercise of options granted
under the Company's Stock Option Plans, shares of Common Stock issued pursuant
to the Company's Employee Stock Purchase Plan or 401(k) Plan and shares of
Common Stock issued upon conversion of Preferred Stock and in payment of
interest on Preferred Stock and the Convertible Debentures. Other than as set
forth above, except as set forth in Schedule 3.3, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to issue, deliver
or sell any shares of capital stock of, or other equity interests, in the
Company or any Company Subsidiary. Set forth on Schedule 3.3 is a list of all
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the
12
issued or unissued capital stock of the Company or any Company Subsidiary
granted by the Company or any Company Subsidiary since June 30, 1997.
Except as set forth in Schedule 3.3, there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock. All of the issued and outstanding
shares of Capital Stock have been duly authorized and validly issued and are
fully paid and nonassessable and not subject to preemptive rights. Except as set
forth in Schedule 3.3, all of the outstanding shares of capital stock of each
Company Subsidiary that is a corporation have been duly authorized and validly
issued and are fully paid and nonassessable, and all of the partnership
interests of each Company Subsidiary that is a partnership have been duly
authorized and validly issued and, except pursuant to provisions of the
applicable partnership agreement, are fully paid. With respect to each Company
Subsidiary that is a partnership, all of the partnership interests owned by the
Company, and with respect to each Company Subsidiary that is a corporation, all
of the outstanding shares of capital stock owned by the Company, are owned by
the Company free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances (collectively, the "Encumbrances").
SECTION 3.4. AUTHORITY.
The Company has the necessary corporate power and authority to enter
into this Agreement and the Principal Stockholder Agreement and, subject to
obtaining any necessary stockholder approval of the Merger, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Except for the approval of this Agreement by
the stockholders of the Company in accordance with Delaware Law, the execution
and delivery of this Agreement and the Principal Stockholder Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement and the Principal Stockholder
Agreement or to consummate the transactions contemplated hereby and thereby.
Each of this Agreement and the Principal Stockholder Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Acquiror and Merger Sub, constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
13
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Principal
Stockholder Agreement by the Company do not, and the performance by the Company
of its obligations under this Agreement and the Principal Stockholder Agreement
will not, (i) conflict with or violate the certificate or articles of
incorporation, bylaws or partnership agreement of the Company or any Company
Subsidiary, (ii) subject to obtaining the approvals and compliance with the
requirements set forth in Section 3.5(b), conflict with or violate any law,
statute, ordinance, rule, regulation, order, judgment or decree applicable to
the Company or any Company Subsidiary or by which any of their respective
properties is bound or affected, or (iii) except as set forth in Schedule 3.5,
result in any breach of or constitute a default (or an event which with or
without 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 an Encumbrance on any of the properties or assets
of the Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company, any Company Subsidiary or any of their respective
properties or assets is bound or affected, except, in the case of clauses (ii)
and (iii) above, for any such conflicts, violations, breaches, defaults or other
alterations or occurrences that would not prevent or delay consummation of the
Merger in any material respect, or otherwise prevent the Company from performing
its obligations under this Agreement in any material respect, and would not have
a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity"), by or with respect to the Company except (i) for (A)
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), state securities or "blue sky" laws ("Blue Sky Laws"), state
takeover laws, the National Association of Securities Dealers, Inc. (the "NASD")
or the Nasdaq National Market ("Nasdaq"), the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Communications Act of
1934, as amended (the "Communications Act"), the Federal Communications
Commission (the "FCC"), Telekommunikationsgesetz (TKG) and the German
Telecommunications Installations Act, (B) applicable requirements, if any, of
the consents, approvals, authorizations or permits described in Schedule 3.5,
and (C) filing and recordation of appropriate merger documents as required by
Delaware Law and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent the Company from performing
14
its obligations under this Agreement in any material respect, and would not have
a Company Material Adverse Effect.
SECTION 3.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company (or its predecessor, Constellation Oldco Services,
Inc., now a 100% owned Company Subsidiary ("Oldco")) has filed all forms,
reports, statements and other documents required to be filed with the Securities
and Exchange Commission (the "SEC") since August 4, 1995, the date of Oldco's
initial public offering, and has heretofore furnished to Acquiror, in the form
filed with the SEC since such date, together with any amendments thereto, its
(i) Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii)
all proxy statements relating to meetings of stockholders (whether annual or
special), (iv) all reports on Form 8-K, and (v) all other reports or
registration statements filed by the Company (collectively, the "Company SEC
Reports"). As of their respective filing dates, the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act, and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The audited consolidated financial statements and unaudited
interim financial statements of the Company included in the Company SEC Reports
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The financial statements, including all related notes and
schedules, contained in the Company SEC Reports (or incorporated by reference
therein) present fairly in all material respects the consolidated financial
position of the Company (or Oldco, as the case may be) and the Company
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of the Company (or Oldco, as the case may be) and the
Company Subsidiaries for the periods indicated, in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be noted therein) and subject in the case of
interim financial statements to normal year-end adjustments.
SECTION 3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in Schedule 3.7, since June 30, 1997, the Company
and the Company Subsidiaries have not incurred any material liability, except in
the ordinary course of business consistent with their past practices, and the
Company and the Company Subsidiaries have conducted their respective businesses
in the ordinary course consistent with their past practices. Except as set forth
in Schedule 3.7, since June 30, 1997, there has not been any change in the
business (where "business" shall be deemed to include the Orion 1 satellite and
the proposed
15
Orion 2 satellite and Orion 3 satellite), condition (financial or otherwise) or
results of operations of the Company and the Company Subsidiaries, including any
transaction, commitment, dispute, damage, destruction or loss, whether or not
covered by insurance, or other event of any character (whether or not in the
ordinary course of business) individually or in the aggregate, which has had, or
is reasonably likely to have, a Company Material Adverse Effect, other than (i)
any change arising out of matters of a general economic nature, or (ii) any
change arising out of matters affecting the satellite industry, either
international or national, generally (including, but not limited to, competition
from other satellite systems or service providers and legislation, rulemaking,
regulation or regulatory practice by any governmental agency or international
rulemaking body such as the International Telecommunication Union).
SECTION 3.8. ABSENCE OF LITIGATION.
Except as set forth in Schedule 3.8, as of the date hereof there are
(a) no claims, actions, suits, investigations, or proceedings pending or, to the
Company's knowledge, threatened against the Company or any of the Company
Subsidiaries before any court, administrative, governmental, arbitral, mediation
or regulatory authority or body, domestic or foreign, that would be reasonably
likely to have a Company Material Adverse Effect, or that challenge or seek to
prevent, enjoin, alter or materially delay the transactions contemplated hereby,
and (b) no judgments, decrees, injunctions or orders of any Governmental Entity
or arbitrator outstanding against the Company or any Company Subsidiary that
would reasonably be likely to have a Company Material Adverse Effect.
SECTION 3.9. LICENSES AND PERMITS; COMPLIANCE WITH LAWS.
Except as set forth in Schedule 3.9:
(a) Set forth on Schedule 3.9(a) is a true and complete list of all
permits, licenses and approvals (none of which has been modified or rescinded
and all of which are in full force and effect) from all Governmental Entities
held by the Company ("Company Permits"), except in each case for Company Permits
whose absence or revocation would not individually or in the aggregate have a
Company Material Adverse Effect (all of the foregoing, which are denoted by an
asterisk on Schedule 3.9(a), being referred to herein collectively as the "Key
Company Permits"); provided, however, that Schedule 3.9(a) shall not be required
to include a list of Company Permits for Very Small Aperture Terminals (VSATs).
The Key Company Permits listed on Schedule 3.9(a) include, without limitation,
all Key Company Permits (i) issued by the FCC to the Company or any Company
Subsidiary, (ii) authorizing the construction, launch or operation in their
assigned orbital locations of Company Satellites (as defined below) or
construction and operation of Company Ground Stations (as defined below),
including without limitation the agreement with the Republic of the Xxxxxxxx
Islands and the license
16
granted by the Federal Republic of Germany, and (iii) issued to the Company or
any Company Subsidiary by Governmental Entities that regulate broadcasting or
communications services, authorizing the Company or the Company Subsidiaries to
provide broadcasting or communications services. The parties acknowledge that
(i) the approval for the Orion 2 satellite is a conditional approval subject to
the conditions described in the orders and agreements relating thereto and (ii)
the approval for the Orion 3 satellite results from an agreement with the
Republic of the Xxxxxxxx Islands (and no further regulatory approvals from the
Republic of the Xxxxxxxx Islands are necessary for such construction, launch and
operation of the Orion 3 satellite).
Schedule 3.9(a) also sets forth a true and complete list of all
Company Permits issued by the FCC, the Xxxxxxxx Islands or the Federal Republic
of Germany (including applications therefor) which are not Key Company Permits
or VSATs ("Other Permits"). To the best of the Company's knowledge, the Other
Permits are in full force and effect or, in the case of applications therefor,
the Company knows of no reason why the same should not be granted. Schedule
3.9(a) also sets forth a true and complete list of all pending applications for
Company Permits that would be Key Company Permits required to be listed in such
Schedule if issued or granted and if the satellites which they relate were owned
by the Company, all pending applications by the Company or any Company
Subsidiary with the FCC and all pending applications by the Company or any
Company Subsidiary for modification, extension or renewal of Key Company Permits
(the "Key Applications").
The Key Company Permits held by the Company or Company Subsidiaries
and listed on Schedule 3.9(a) include all permits, licenses and approvals from
all Governmental Entities which are necessary for the Company and the Company
Subsidiaries to (i) operate the Orion 1 satellite in its present orbital
location and provide communications services (and broadcast services, if any are
provided by the Company or Company Subsidiaries) therefrom, operate ground
stations communicating therewith, including, without limitation, the related
broadcasting facility assets consisting of land, building, fixtures, equipment,
improvements (if any) and telemetry, tracking and control equipment that is
owned or leased by the Company or a Company Subsidiary (each a "Company Ground
Station" and collectively the "Company Ground Stations"), and own, lease and
operate their properties and to carry on their business as currently conducted
using the Orion 1 satellite, and (ii) construct, launch and operate, at their
assigned orbital locations, the proposed Orion 2 and Orion 3 satellites
(collectively with the Orion 1 satellite, the "Company Satellites"), except as
set forth in the last sentence of the first paragraph of this subsection (a) and
in each case for permits, licenses and approvals whose absence or revocation
would not individually or in the aggregate have a Company Material Adverse
Effect (without giving effect to any limitation as of "materiality" or "Company
Material Adverse Effect" in the definition of Key Company Permits).
17
Each of the Company and the Company Subsidiaries has fulfilled and
complied in all material respects with its obligations under each of the Key
Company Permits and the Key Applications owned, held or possessed by it, and no
event has occurred or condition or state of facts exists which constitutes or,
after notice or lapse of time or both, would constitute a breach or default
under any Key Company Permit or Key Applications and which permits or, after
notice or lapse of time or both, would permit revocation or termination of any
such Key Company Permit or Key Application, and neither the Company nor any
Company Subsidiary has received or has knowledge of any written notice of
cancellation or default or of any dispute concerning any Key Company Permit or
Key Application, or of any such event, condition or state of facts that would
constitute a default the effect of which would be revocation or termination of
such Key Company Permit or Key Application, except, in each case, any of the
foregoing which individually or in the aggregate would not have a Company
Material Adverse Effect. Each of the Key Company Permits is validly held by the
entities listed on Schedule 3.9(a), is in full force and effect in all material
respects, is free and clear of all liens (other than permitted liens), is
unimpaired in any material respect by acts or omissions of the Company or its
employees, partners or affiliates, will expire on the date shown on Schedule
3.9(a), is valid for the balance of its current term, and is not subject to any
restriction or condition that limits in any material respect the full operation
of the Company's and Company Subsidiaries' business as now operated.
The Company has not received any complaint that any of the Company
Satellites or Company Ground Stations is causing objectionable interference to
the transmissions or reception of any other radio communications facility, and
to the Company's best knowledge, no other radio communications facility is
causing objectionable interference to the transmissions from or the receipt of
signals by any Company Satellite or Company Ground Station. None of the Key
Company Permits issued prior to the date hereof is the subject of any pending
renewal application; no renewal of any Key Company Permit issued by the FCC
would constitute a major environmental action under the rules and regulations
promulgated by the FCC (the "FCC Rules"), excluding the impact of the FCC's new
RF radiation rules adopted by the FCC in the ET Docket No. 93-62 on August 1,
1996; and the Company is not aware of any reason why the Key Company Permits
will not be renewed in the ordinary course or why any of the Key Company Permits
might be revoked. The Company knows of the existence of no fact that, under any
Key Company Permits and present law relating thereto, would disqualify the
Company from consummating the Merger within the time contemplated herein (other
than matters disclosed on Schedule 5.14).
All information contained in any pending Key Application is true,
correct and complete in all material respects. The Company has duly filed or
caused to be filed with the FCC or any other Governmental Entity all required
material reports, statements, documents, registrations, filings or submissions
with respect to the operations of the business of the Company and the Company
18
Subsidiaries, the Key Company Permits, the Company's and Company Subsidiaries'
ownership of their assets and the pending applications by the Company or any
Company Subsidiary for Key Company Permits or for modification, extension or
renewal of Company Permits, in each case as required by the FCC or any other
Governmental Entity. All such filings complied in all material respects with
applicable laws when made and no material deficiencies have been asserted with
respect to any such filings.
Except for rulemaking proceedings affecting the satellite industry in
general, no judgment, decree, order or notice of violation has been issued by
the FCC (or other Governmental Entity) which permits or contemplates revocation,
modification or termination or any of the Key Company Permits or which would
result in any material impairment of any rights thereunder. The business of the
Company and the Company Subsidiaries (where "business" shall be deemed to
include the Orion 1 satellite and the proposed Orion 2 satellite and Orion 3
satellite), is not being conducted in violation of any applicable law, statute,
ordinance, regulation or judgment or any Key Company Permit, order, decree,
concession, grant or other authorization of any Governmental Entity, in each
case except for violations that, individually or in the aggregate, would not be
reasonably likely to have a Company Material Adverse Effect. Except for
rulemaking proceedings affecting the satellite industry in general, no
complaints, proceedings or applications are pending, or to the Company's best
knowledge, threatened, at the FCC or any other Governmental Entity, that would
result in the revocation, forfeiture, adverse modification, non-renewal or
suspension of any of the Key Company Permits, the denial of any pending Key
Application, the issuance against the Company or any Company Subsidiary of a
cease and desist order, or the imposition of any administrative actions by the
FCC or any other Governmental Entity with respect to the Key Company Permits, in
each case that would have, whether individually or in the aggregate, a Company
Material Adverse Effect.
(b) Neither the Company nor any Company Subsidiary or affiliate has
taken, is taking or will take, or has allowed or will allow on its behalf to be
taken, any action which would have violated or would violate the United States
Foreign Corrupt Practices Act of 1977, the US Export Administration Act, as
amended, or any laws to which such party or persons is subject, relating in each
case to payments for the purpose of influencing an act or decision of a
Governmental Entity or government official, except for violations that
individually or in the aggregate would not have a Company Material Adverse
Effect; provided, however, that nothing in this sentence shall be deemed to
subject any party or person to any law to which such party or person would not
otherwise be subject. Each of the Company and the Company Subsidiaries is in
material compliance with all domestic and, to the knowledge of the Company,
foreign laws restricting or regulating the export of technology to foreign
countries, except for violations that individually or in the aggregate would not
have a Company Material Adverse Effect.
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(c) Schedule 3.9(c) contains a list of all consultations and similar
arrangements that have been effectuated with INTELSTAT, EUTELSAT and other
similar intergovernmental entities (collectively the "IGO Determinations") with
respect to the Company Satellites that are needed to operate the business of the
Company and the Company Subsidiaries as it is now being conducted. Except as set
forth on such schedule, the Company is not aware of any material difficulties in
obtaining any other determinations from such entities with respect to any
satellite now operated by the Company or any Company Subsidiary or for which the
Company or any Company Subsidiary has applied for a Company Permit, except for
those that individually or in the aggregate would not have a Company Material
Adverse Effect.
SECTION 3.10. TAXES.
Except as set forth in Schedule 3.10, the Company and the Company
Subsidiaries have prepared and filed on a timely basis with all appropriate
Governmental Entities all material returns, reports, information statements and
other documentation in respect of Taxes that they are required to file on or
prior to the Closing Date or by the date therefor including extensions, and all
such returns, reports, information statements and other documentation are
correct and complete in all material respects. Except as set forth in Schedule
3.10, the Company and the Company Subsidiaries have paid in full all Taxes
(other than Taxes, the failure to pay which would not, individually or in the
aggregate, have a Company Material Adverse Effect) due on or before the Closing
Date and, in the case of material Taxes accruing on or before the Closing Date
that are not due on or before the Closing Date, the Company has made adequate
provisions in its books and records and financial statements for such payment.
Except as set forth in Schedule 3.10, the Company and the Company Subsidiaries
have withheld from payments made to its present or former employees,
contractors, officers and directors, creditor or other third party, all amounts
required by law to be withheld except where the liability would not,
individually or in the aggregate, have a Company Material Adverse Effect, and
has, where required, remitted such amounts within the applicable periods to the
appropriate Governmental Entities. In addition, except as set forth in Schedule
3.10, (a) there are no assessments of, or claims against, the Company or the
Company Subsidiaries with respect to Taxes, the liability for which would,
individually or in the aggregate, have a Company Material Adverse Effect, that
are outstanding; (b) no Governmental Entity is conducting an examination or
audit of the Company or any Company Subsidiary in respect of Taxes and neither
the Company nor any Company Subsidiary has received notice of any such
examination or audit from any Governmental Entity; and (c) neither the Company
nor any Company Subsidiary has executed or filed any agreement extending the
period of assessment or collection of any Taxes which remain in effect. For the
purpose of this Agreement, the term "Tax" (including, with correlative meaning,
the terms "Taxes" and "Taxable") shall include, except where the context
otherwise requires, all federal, state, local and foreign income, profits,
franchise, gross receipts, payroll,
20
sales, employment, use, property, withholding, excise, occupancy and other
taxes, duties or assessments or claims of any nature whatsoever, together with
all interest, penalties and additions imposed with respect to such amounts.
SECTION 3.11. INTELLECTUAL PROPERTY.
Schedule 3.11 sets forth a listing and description of all material
domestic, foreign, common law, registered and pending applications for patents,
trademarks, service marks, logos, slogans, designs, copyrights, trade names, and
all material intellectual property licenses running to or from the Company or
any Company Subsidiary relating to the Company's or any Company Subsidiaries'
businesses or owned by the Company or any Company Subsidiary. Unless expressly
set forth otherwise on Schedule 3.11, the Company and the Company Subsidiaries
own (or where indicated on Schedule 3.11, have a right to use), free and clear
of any liens, security interests, encumbrances or claims of others, all patents,
trademarks, service marks, logos, slogans, designs, copyrights, tradenames,
design registrations, and other intellectual property listed on Schedule 3.11
and any trade secrets, know-how, confidential information, material computer
programs (including any source code), documentation, engineering and technical
drawings, processes, methodologies, trade dress, mask works and technology, in
each case material to the conduct of the business of the Company and the Company
Subsidiaries taken as a whole (all of the foregoing items collectively referred
to as the "Company Intellectual Property"). Except as set forth on Schedule
3.11, (a) no proceedings are pending or, to the Company's knowledge, threatened
in writing, which challenge the validity of the ownership by the Company and/or
any Company Subsidiary of the Company Intellectual Property; (b) the Company has
no knowledge of any infringement or infringing use of any of the Company
Intellectual Property or licenses by any person or entity, and the Company and
the Company Subsidiaries have, and as of the Closing Date will have, good and
valid title to all of the Company Intellectual Property owned by the Company or
Company Subsidiaries and their licenses and other rights to use will be adequate
for conducting the businesses of the Company and the Company Subsidiaries and
enforceable in accordance with their terms; (c) to the Company's knowledge, no
infringement of any material intellectual property right or other proprietary
right of any third party has occurred or will result in any way from the signing
and execution of this Agreement or the consummation of any or all of the
transactions contemplated hereby, and no written claim has been made by any
third party based upon an allegation of any such infringement; (d) the material
Company Intellectual Property is valid and in full force and effect and no
aspect thereof is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative agency; and (e)
there are no restrictions on the direct or indirect transfer of any license, or
any interest therein, held by the Company or any Company Subsidiary in respect
of the Company Intellectual Property.
21
SECTION 3.12. MATERIAL CONTRACTS.
(a) Schedule 3.12(a) sets forth a complete and correct list, as of the
date of this Agreement, of all agreements of the following type to which the
Company or a Company Subsidiary is a party or may be bound (collectively, the
"Company Material Contracts"): (i) agreements filed as an exhibit to the Company
SEC Reports and each agreement that would have been required to be filed as an
exhibit to the Company SEC Reports if such agreement had been entered into as of
the date of filing any such Company SEC Report; (ii) employment, severance,
termination, consulting and retirement agreements; (iii) loan agreements,
indentures, letters of credit, mortgages, notes and other debt instruments
evidencing indebtedness in excess of five hundred thousand dollars ($500,000),
other than those relating to intercompany debt among the Company and the Company
Subsidiaries; (iv) agreements that require aggregate future payments of more
than five hundred thousand dollars ($500,000) (other than purchase orders and
sales contracts entered into in the ordinary course of business); (v) agreements
involving payments in excess of two hundred fifty thousand dollars ($250,000)
concerning any provisions with respect to a "change in control"; (vi) material
agreements with any key employee, director, officer or beneficial owner (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 5% or
more of the Company's Common Stock; and (vii) agreements for a remaining term of
five (5) years or more with any customer of the Company or any Company
Subsidiary.
(b) Except as set forth in Schedule 3.12(b), all the Company Material
Contracts are valid and in full force and effect on the date hereof except to
the extent they have previously expired in accordance with their terms, and
neither the Company nor any Company Subsidiary has (or has any knowledge that
any party thereto has) violated any provision of, or committed or failed to
perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Company Material Contract,
except for defaults which, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. True and
complete copies of all Company Material Contracts have been delivered to
Acquiror or made available for inspection by Acquiror.
(c) As of August 31, 1997, the contracts, agreements, commitments,
arrangements, leases (including with respect to personal property) that
represent obligations of third parties to make payments to the Company or any
Company Subsidiary, as the case may be, in exchange for the sale or lease of
transponder capacity, have an aggregate stated amount of unpaid payments owing
to the Company or any Company Subsidiary, as the case may be, of approximately
$263 million over the remaining stated term of such contracts (the "Backlog")
(prior to any reserve for doubtful accounts or other similar allowances or
deductions). The Backlog represents amounts that, assuming the due performance
by each party of
22
its obligations under each contract and the occurrence of no event that would
permit termination of a contract without liability to the terminating party,
will be due for, and will arise out of, bona fide sales and delivery of goods,
performance of services and other business transactions, unless the underlying
contract thereto is properly terminated in accordance with the terms thereof.
Except as set forth on Schedule 3.12(c), neither the Company nor any Company
Subsidiary is, or has received any notice or has any knowledge that any other
party is, in default in any material respect under any contract representing any
material portion of the Backlog, other than (i) payment defaults under
transponder lease agreements which are not more than 90 days past due and (ii)
defaults or terminations under transponder lease agreements that are promptly
replaced by contracts providing for reasonably equivalent or superior backlog
payments.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.13 sets forth a list of all of the material pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation or bonus plans or agreements or other
material incentive plans or agreements, all other material written employee
programs, arrangements or agreements and all other material employee benefit
plans or fringe benefit plans, including, without limitation, all "employee
benefit plans" as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (collectively,
"Benefit Plans"), currently adopted, maintained by, sponsored in whole or in
part by, or contributed to by the Company or any entity required to be
aggregated with the Company which is a member of the "controlled group of
corporations" which includes the Company within the meaning of Section 414(b) or
(c) of the Code (each, a "Company Commonly Controlled Entity") for the benefit
of present and former employees or directors of the Company and of each Company
Subsidiary or their beneficiaries, or providing benefits to such persons in
respect of services provided to any such entity (collectively, the "Company
Benefit Plans"). Any Company Benefit Plan which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "Company ERISA Plan."
(b) Each of the Company Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified and, to the Company's knowledge, no
circumstances exist that could reasonably be expected by the Company to result
in the revocation of any such determination. Each of the Company Benefit Plans
is in compliance with the applicable terms of ERISA and the Code and any other
applicable laws, rules and regulations the breach or violation of which could
result in a material liability to the Company or any Company Commonly Controlled
Entity.
23
(c) No Company ERISA Plan which is a defined benefit pension plan has
any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan equals or exceeds the plan's "benefit liabilities," as that term is
defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors
that would apply if the plan terminated in accordance with all applicable legal
requirements.
(d) Except as disclosed in Schedule 3.13, no Company Benefit Plan is
or has been a multiemployer plan within the meaning of Section 3(37) of ERISA (a
"Multiemployer Plan"). Neither the Company nor any Company Commonly Controlled
Entity has completely or partially withdrawn from any Multiemployer Plan. No
termination liability to the Pension Benefit Guaranty Corporation or withdrawal
liability to any Multiemployer Plan that is material in the aggregate has been
or is reasonably expected to be incurred with respect to any Multiemployer Plan
by the Company or any Company Commonly Controlled Entity.
(e) The Company has furnished to Acquiror complete copies, as of the
date hereof, of all of the Company Benefit Plans that have been reduced to
writing, together with all documents establishing or constituting any related
trust, annuity contract, insurance contract or other funding instrument. The
Company has furnished to Acquiror complete copies of all existing current plan
summaries, employee booklets, personnel manuals and other material documents or
written materials concerning the Company Benefit Plans.
(f) Except as set forth on Schedule 3.13, there are no Company
Benefit Plans which provide for payments which would not be deductible for
Federal income tax purposes by reason of Section 280G of the Code.
SECTION 3.14. PROPERTIES; ASSETS.
(a) Except as set forth in Schedule 3.14(a), the Company or one of the
Company Subsidiaries (a) has good and marketable title to all the properties and
assets reflected in the consolidated balance sheet of the Company dated as of
June 30, 1997 (the "Company Balance Sheet") as being owned by the Company or one
of the Company Subsidiaries (except properties sold or otherwise disposed of
since the date thereof in the ordinary course of business), or acquired after
the date thereof which are material to the Company's business on a consolidated
basis, free and clear of all Encumbrances except (i) statutory liens securing
payments not yet due, and (ii) such imperfections or irregularities of title,
claims, liens, charges, security interests or encumbrances as do not materially
affect the use of the properties or assets subject thereto or affected thereby
or otherwise materially impair business operations at such properties, and (b)
is the lessee of all leasehold estates reflected in the Company Balance Sheet
(except for leases that have expired by their terms since the date thereof) or
acquired after the date thereof which are material to its business on a
consolidated basis and is in possession of the
24
properties purported to be leased thereunder, and, to the knowledge of the
Company, each such lease is valid without default thereunder by the lessee. The
assets and properties of the Company and the Company Subsidiaries, taken as a
whole, are in good operating condition and repair (ordinary wear and tear
excepted), and constitute all of the assets and properties which are required
for the businesses and operations of the Company and the Company Subsidiaries as
presently conducted.
(b) Each Company Ground Station other than Very Small Aperture
Terminal (VSAT) earth stations (the "VSAT Stations") now operated by the Company
or a Company Subsidiary (a "Major Station") is listed on Schedule 3.14(b), and,
except as set forth on such schedule, with respect to each such Major Station,
the improvements thereto and all components used in connection therewith are (i)
in good operating condition and repair and are suitable for their intended
purposes and (ii) supported by a back-up, fuel-powered electricity generator
capable of generating power sufficient to meet the requirements of the
operations conducted at the Major Station. The transmission/reception systems
and programming and data broadcasting systems at each such Major Station have
the redundancies that are set forth on Schedule 3.14(b). The VSAT Stations,
taken as a whole, are in good operating condition and repair, ordinary wear and
tear excepted, and are suitable for their intended purposes.
(c) Set forth on Schedule 3.14(c) are the following: (i) a complete
and accurate list, by orbital location, of each Company Satellite, (ii) a true
and correct copy of a satellite loading chart listing each transponder on the
Satellite, along with the type of transponder and the customer or group of
related customers that have purchased services utilizing capacity on such
transponder and the amount of such capacity allocated to such customer(s), and
(iii) the most recent "Health Status Report," summarizing all spacecraft related
incidents and anomalies known to the Company as well as the current status, to
the best knowledge of the Company, of the subsystems on the Company Satellites.
(d) Except as set forth on Schedule 3.14(d), to the best knowledge of
the Company the equipment to provide tracking, telemetry and control services
related to each Satellite is (i) in good operating condition and repair,
ordinary wear and tear excepted, and (ii) not in need of maintenance or repairs
except for ordinary, routine maintenance and repairs.
(e) Except as set forth on Schedule 3.14(e), to the best knowledge of
the Company, no person or entity has asserted that it has rights to operate a
spacecraft in a manner that would result in interference with respect to any
satellite now operated by the Company or any Company Subsidiary or for which the
Company or any Company Subsidiary has applied for a permit. Schedule 3.14(e)
contains a list of all satellite coordination agreements to which the Company or
any Company Subsidiary are a party, a summary of all operational or technical
25
limitations set forth therein, and a summary of all coordination discussions in
which the Company or the Company Subsidiaries has been engaged in the past three
(3) years with other persons or entities with regard to any Satellite now
operated by the Company or any Company Subsidiary or for which the Company or
any Company Subsidiary has applied for a permit.
(f) Schedule 3.14(f) contains a summary, by orbital location, of the
status of frequency registration at the International Telecommunication Union,
for each Satellite operated, or proposed to be operated during the next three
(3) years, by the Company or any Company Subsidiary, including the identity of
the sponsoring administration and frequency bands covered.
SECTION 3.15. LABOR RELATIONS.
Except as set forth in Schedule 3.15, Neither the Company nor any
Company Subsidiary is a party to any collective bargaining agreement or other
contract or agreement with any labor organization or other representative of any
of the employees of the Company or any Company Subsidiary. Except as set forth
in Schedule 3.15, the Company and each Company Subsidiary is in compliance in
all material respects with all laws relating to the employment or the workplace,
including, without limitation, provisions relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration and the withholding of income taxes, unemployment compensation,
worker's compensation, employee privacy and right to know and social security
contributions.
SECTION 3.16. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 3.16 and except for matters which
would not have a Company Material Adverse Effect, (i) the Company and each
Company Subsidiary is in compliance with all applicable Environmental Laws (as
defined below) in effect on the date hereof; (ii) neither the Company nor any
Company Subsidiary has received any written communication that alleges that the
Company or any Company Subsidiary is not in compliance in all material respects
with all applicable Environmental Laws in effect on the date hereof; (iii) all
material permits and other governmental authorizations currently held by the
Company and each Company Subsidiary pursuant to the Environmental Laws
("Environmental Permits") are in full force and effect, the Company and each
Company Subsidiary is in compliance with all of the terms of such Environmental
Permits and authorizations, and no other Environmental Permits or authorizations
are required by the Company or any Company Subsidiary for the conduct of their
respective businesses on the date hereof; and (iv) the management, handling,
storage, transportation, treatment, and disposal by the Company and each Company
Subsidiary of any Hazardous Materials (as defined below) has been in compliance
with all applicable Environmental Laws.
26
(b) Except as set forth in Schedule 3.16 and except for Environmental
Claims (as defined below) which would not have a Company Material Adverse
Effect, there is no Environmental Claim pending or, to the knowledge of the
Company, threatened against or involving the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries has or may
have retained or assumed either contractually or by operation of law.
(c) Except as set forth in Schedule 3.16 and except for matters which
would not have a Company Material Adverse Effect, to the knowledge of the
Company, there are no past or present actions or activities by the Company or
any Company Subsidiary involving the storage, treatment, release, emission,
discharge, disposal or arrangement for disposal of any Hazardous Materials, that
could reasonably form the basis of any Environmental Claim against the Company
or any Company Subsidiary or against any person or entity whose liability for
any Environmental Claim the Company or any Company Subsidiary may have retained
or assumed either contractually or by operation of law.
(d) As used herein, these terms shall have the following meanings:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any person or governmental authority alleging
potential liability arising out of, based on or resulting from the
presence, or release or threatened release into the environment, or any
exposure to, of any Hazardous Materials at any property or location owned
or leased by the Company or any Company Subsidiary (for purposes of this
Section 3.16) or other circumstances forming the basis of any violation or
alleged violation of any Environmental Law.
(ii) "Environmental Laws" means all applicable foreign, federal, state
and local laws (including the common law), rules, requirements and
regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials or relating to management of asbestos in
buildings.
(iii) "Hazardous Materials" means wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants under any Environmental Laws, including,
27
without limitation, substances defined as "hazardous substances," "toxic
substances," "radioactive materials, including sources of ionizing and
nonionizing radiation," "petroleum products or wastes," or other similar
designations in, or otherwise subject to regulation under, any
Environmental Law.
SECTION 3.17. INSURANCE.
Schedule 3.17 contains a list of all insurance policies of title,
property, fire, casualty, liability, life, workmen's compensation, libel and
slander, and other forms of insurance in force at the date thereof with respect
to the Company and the Company Subsidiaries. All such insurance policies: (a)
insure against such risks, and are in such amounts, as are appropriate and
reasonable, in the judgment of the Company's Board of Directors, considering the
Company and the Company Subsidiaries' properties, businesses and operations; (b)
are in full force and effect; and (c) are valid, outstanding, and enforceable.
Neither the Company nor any of the Company Subsidiaries has received or given
notice of cancellation with respect to any of the material insurance policies.
The Company is in compliance with the provisions of the Indentures (as defined
below) regarding insurance.
SECTION 3.18. BOARD APPROVAL; VOTE REQUIRED.
The Board of Directors of the Company has determined that the
transactions contemplated by this Agreement are in the best interests of the
Company and its stockholders and has resolved to recommend to such stockholders
that they vote in favor thereof.
SECTION 3.19. OPINION OF FINANCIAL ADVISOR.
The Company's Board of Directors has received the written opinion of
Xxxxxx Xxxxxxx & Co. Incorporated that, as of the date of this Agreement, the
consideration to be received pursuant to the Agreement is fair from a financial
point of view to the holders of shares of Common Stock (other than Acquiror and
its affiliates) and, assuming the conversion of Preferred Stock into Common
Stock in accordance with its terms, to the holders of Preferred Stock. A copy of
such opinion has been delivered to Acquiror, and such opinion has not been
withdrawn or modified in any material respect.
SECTION 3.20. BROKERS.
Except for Xxxxxx Xxxxxxx & Co. Incorporated, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
28
SECTION 3.21. TAKEOVER PROVISIONS INAPPLICABLE.
Assuming Acquiror and its "associates" and "affiliates" (as defined in
Section 203 of the Delaware Law in effect as of the date hereof) collectively
beneficially own and have beneficially owned at all times during the three year
period prior to the date hereof less than fifteen percent (15%) of the Common
Stock outstanding (other than the Common Stock subject to the Principal
Stockholder Agreement), Section 203 of the Delaware Law is, and shall be,
inapplicable to the Merger and the transactions contemplated by this Agreement,
including the Principal Stockholder Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Acquiror and Merger Sub jointly and severally represent and warrant to
the Company as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION.
Merger Sub is a corporation duly organized, validly existing and in
good standing under Delaware Law. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement. As of the date
of this Agreement, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement, Merger Sub has not incurred, directly or indirectly, any obligations
or liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Merger Sub has heretofore made available to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Merger Sub,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Merger Sub is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
SECTION 4.3. AUTHORITY.
Merger Sub has the necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This
29
Agreement has been duly executed and delivered by Merger Sub and, assuming the
due authorization, execution and delivery of this Agreement by the Company and
Acquiror, constitutes a legal, valid and binding obligation of Merger Sub,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub do not,
and the performance by Merger Sub of its obligations under this Agreement will
not, (i) conflict with or violate the certificate of incorporation or bylaws of
Merger Sub, (ii) subject to compliance with the requirements set forth in
Section 4.4(b) below, conflict with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree applicable to Merger Sub or by which
any of its properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which 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 any
Encumbrance on any of the properties or assets of Merger Sub pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Merger Sub is a party or by
which Merger Sub or any of its properties or assets is bound or affected,
except, in the case of clauses (ii) and (iii) above, for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Merger Sub from performing its obligations under this
Agreement in any material respect.
(b) The execution and delivery of this Agreement by Merger Sub does
not, and the performance of this Agreement by Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for (A) applicable requirements, if any,
of the Exchange Act, state takeover laws, the NASD, the HSR Act, the
Communications Act and the FCC, (B) applicable requirements, if any, of the
consents, approvals, authorizations or permits described in Schedule 4.4, and
(C) filing and recordation of appropriate merger documents as required by
Delaware Law and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger in any material respect.
30
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR
Acquiror represents and warrants to the Company as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each Subsidiary of Acquiror, Globalstar Telecommunications Limited, a
Bermuda company, and Globalstar, L.P., a Delaware limited partnership (each an
"Acquiror Subsidiary" and collectively, the "Acquiror Subsidiaries,") and
Acquiror is a corporation or partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization. The
Acquiror and each Acquiror Subsidiary is duly qualified to conduct its business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures which would not in the
aggregate have an Acquiror Material Adverse Effect (as defined below). The
Acquiror and each Acquiror Subsidiary has the requisite power and authority and
any necessary governmental authority, franchise, license or permit to own,
operate, lease and otherwise to hold and operate its assets and properties and
to carry on its business as now being conducted, except for such failures which
would not have an Acquiror Material Adverse Effect. As used herein, the term
"Acquiror Material Adverse Effect" means any material adverse effect on the
business, assets or condition (financial or otherwise), liabilities or
operations of Acquiror and Acquiror Subsidiaries taken as a whole.
SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Acquiror has heretofore delivered to the Company a complete and
correct copy of the memorandum of association and the bye-laws of Acquiror, each
as amended to date. Such memorandum of association and bye-laws are in full
force and effect. Acquiror is not in violation of any of the provisions of its
memorandum of association or bye-laws.
SECTION 5.3. CAPITALIZATION.
As of September 30, 1997, the authorized capital stock of Acquiror
consists of: (a) seven hundred fifty million (750,000,000) shares of common
stock, par value $.01 per share of which two hundred million six hundred
thirty-three thousand one hundred sixty-one (200,633,161) shares are issued and
outstanding; (b) one hundred fifty million (150,000,000) shares of Series A
convertible preferred stock, par value $.01 per share ("Acquiror Series A
Preferred") of which forty-five million eight hundred ninety-six thousand nine
hundred seventy-seven (45,896,977) shares are issued and outstanding; (c) seven
hundred fifty thousand (750,000) shares Series B preferred stock, par value $.01
per share, no shares of which are
31
outstanding; and (d) twenty million (20,000,000) shares 6% Series C convertible
redeemable preferred stock, par value $.01 per share ("Acquiror Series C
Preferred") of which fourteen million nine hundred nine thousand four hundred
thirty-seven (14,909,437) are outstanding. As of September 30, 1997, (i) eleven
million eight hundred thirteen thousand five hundred (11,813,500) shares of
common stock were reserved for issuance under the Acquiror's 1996 stock option
plan; (ii) four million eight hundred forty-three thousand two hundred
(4,843,200) shares of common stock were reserved for issuance under the
Acquiror's savings plan; (iii) two hundred thousand (200,000) shares of the
Acquiror's common stock were reserved for issuance under the Acquiror's
non-employee director stock option plan; and (iv) shares were reserved for
issuance upon conversion of the Acquiror Series A Preferred and Acquiror Series
C Preferred. Other than as set forth above, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Acquiror or obligating Acquiror to
issue or sell any shares of capital stock of, or other equity interests, in
Acquiror.
As of the date hereof, there are no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which Acquiror's
stockholders may vote issued or outstanding. Except for agreements or other
documents set forth in Schedule 5.3, there are no outstanding contractual
obligations of Acquiror to repurchase, redeem or otherwise acquire any shares of
its capital stock. All of the issued and outstanding shares of Acquiror capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable and not subject to preemptive rights. All of the Acquiror Shares
issuable in accordance with this Agreement in exchange for Capital Stock will be
when so issued duly authorized, validly issued, fully paid and nonassessable and
shall be delivered free and clear of all liens, claims, charges and encumbrances
of any kind or nature whatsoever. Except as set forth in Schedule 5.3, with
respect to each Acquiror Subsidiary that is a corporation, all of the
outstanding shares of capital stock of such Acquiror Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable. With respect
to each Acquiror Subsidiary that is a partnership, all of the partnership
interests owned by Acquiror, and with respect to each Acquiror Subsidiary that
is a corporation, all of the outstanding shares of capital stock owned by
Acquiror, are owned by Acquiror free and clear of any Encumbrances, except as
set forth in Schedule 5.3.
SECTION 5.4. AUTHORITY.
Acquiror has the necessary corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other proceedings on the part of Acquiror are necessary to authorize this
32
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Acquiror and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Acquiror, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity. No vote of the stockholders of Acquiror is
necessary to approve this Agreement or any of the transactions contemplated
hereby.
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Acquiror do not,
and the performance by Acquiror of its obligations under this Agreement will
not, (i) conflict with or violate the memorandum of association or bye-laws of
Acquiror, (ii) subject to obtaining the approvals and compliance with the
requirements set forth in Section 5.5(b) below, conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment or decree applicable
to Acquiror or any Acquiror Subsidiary or by which any of its properties is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with or without 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 an Encumbrance on
any of the properties or assets of Acquiror pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Acquiror or any Acquiror Subsidiary is a
party or by which Acquiror or any of its properties or assets is bound or
affected, except, in the case of clauses (ii) and (iii) above, for any such
conflicts, violations, breaches, defaults or other alterations or occurrences
that would not prevent or delay consummation of the Merger in any material
respect, or otherwise prevent Acquiror from performing its obligations under
this Agreement in any material respect, and would not have an Acquiror Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Acquiror does not,
and the performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
Securities Act, Blue Sky Laws, Exchange Act, state takeover laws, the NYSE, the
NASD, the HSR Act, the Communications Act and the FCC, (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in Schedule 5.5, and (C) filing and recordation of appropriate merger
documents as required by Delaware Law and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger in any
material respect, or otherwise
33
prevent Acquiror from performing its obligations under this Agreement in any
material respect, and would not have an Acquiror Material Adverse Effect.
SECTION 5.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Acquiror and each Acquiror Subsidiary required to file has filed
all forms, reports, statements and other documents required to be filed with the
SEC since January 1, 1996, and has heretofore delivered to the Company, in the
form filed with the SEC since such date, together with any amendments thereto,
its (i) Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q,
(iii) all proxy statements relating to meetings of stockholders (whether annual
or special), (iv) all reports on Form 8-K and (v) all other reports or
registration statements filed by Acquiror and such Acquiror Subsidiaries
(collectively, the "Acquiror SEC Reports"). As of their respective filing dates,
the Acquiror SEC Reports (i) complied as to form in all material respects with
the requirements of the Exchange Act and the Securities Act and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The audited consolidated financial statements and unaudited
interim financial statements of Acquiror included in the Acquiror SEC Reports
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto. The financial statements, including all related notes and
schedules, contained in the Acquiror SEC Reports (or incorporated by reference
therein) present fairly in all material respects the consolidated financial
position of Acquiror and the Acquiror Subsidiaries as at the respective dates
thereof and the consolidated results of operations and cash flows of Acquiror
and the Acquiror Subsidiaries for the periods indicated, in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be noted therein) and subject in
the case of interim financial statements to normal year-end adjustments.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in Schedule 5.7, since June 30, 1997, Acquiror and
the Acquiror Subsidiaries have not incurred any material liability, except in
the ordinary course of their businesses consistent with their past practices,
and Acquiror and the Acquiror Subsidiaries have conducted their respective
businesses in the ordinary course consistent with their past practices. Except
set forth in Schedule 5.7, since June 30, 1997, there has not been any change in
the business, condition (financial or otherwise) or results of operations of
Acquiror and the Acquiror Subsidiaries, including any transaction, commitment,
dispute, damage, destruction or loss, whether or not covered by insurance, or
other event of any
34
character (whether or not in the ordinary course of business) individually or in
the aggregate which has had, or is reasonably likely to have, an Acquiror
Material Adverse Effect.
SECTION 5.8. ABSENCE OF LITIGATION.
Except as set forth in Schedule 5.8, as of the date hereof, there are
(a) no claims, actions, suits, investigations, or proceedings pending or, to
Acquiror's knowledge, threatened against Acquiror or any Acquiror Subsidiary
before any court, administrative, governmental, arbitral, mediation or
regulatory authority or body, domestic or foreign, that would be reasonably
likely to have an Acquiror Material Adverse Effect, or that challenge or seek to
prevent, enjoin, alter or materially delay the transactions contemplated hereby,
and (b) no judgments, decrees, injunctions or orders of any Governmental Entity
or arbitrator outstanding against Acquiror or any Acquiror Subsidiary that would
reasonably be likely to have an Acquiror Material Adverse Effect.
SECTION 5.9. LICENSES AND PERMITS; COMPLIANCE WITH LAWS.
Except as set forth in Schedule 5.9 or disclosed in the Acquiror SEC
Reports:
(a) Acquiror and Acquiror Subsidiaries hold all permits, licenses and
approvals (none of which has been modified or rescinded and all of which are in
full force and effect) from all Governmental Entities (collectively, the
"Acquiror Permits") necessary for Acquiror and Acquiror Subsidiaries to own,
lease and operate their respective properties and to carry on their respective
businesses, including, without limitation, the construction, launch and
operation of, and transmitting to and from, each of the satellites and
transponders owned by Acquiror (the "Acquiror Satellites") and ground stations,
including, without limitation, the related broadcasting facility assets
consisting of land, building, fixtures, improvements and telemetry, tracking and
control equipment that is owned or leased by Acquiror or an Acquiror Subsidiary
(each an "Acquiror Ground Station" and collectively the "Acquiror Ground
Stations") and the provision of broadcasting or communications services, except
for Acquiror Permits for which the failure to obtain would not have a Acquiror
Material Adverse Effect. Each of Acquiror and Acquiror Subsidiaries has
fulfilled and complied in all material respects with its obligations under each
of Acquiror Permits owned, held or possessed by it, and no event has occurred or
condition or state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute a breach or default under any Acquiror Permit
and which permits or, after notice or lapse of time or both, would permit
revocation or termination of any such Acquiror Permit, and neither Acquiror nor
any Acquiror Subsidiary has received or has knowledge of any written notice of
cancellation or default or of any dispute concerning any Acquiror Permit, or of
any such event, condition or state of facts that would constitute a default the
effect of
35
which would be revocation or termination of such Acquiror Permit, in each case
where these would be an Acquiror Material Adverse Effect. If any of the Acquiror
Permits that has been issued prior to the date hereof is the subject of any
pending renewal application, Acquiror is not aware of any reason why the
Acquiror Permits will not be renewed in the ordinary course or why any of
Acquiror Permits might be revoked, except in each case where any such
non-renewal or revocation would not individually or in the aggregate be an
Acquiror Material Adverse Effect. Except for rulemaking proceedings affecting
the satellite industry in general, no judgment, decree, order or notice of
violation has been issued by the FCC (or other Governmental Entity) which
permits or contemplates revocation, modification or termination or any of
Acquiror Permits or which would result in any material impairment of any rights
thereunder, except where there would be no Acquiror Material Adverse Effect. The
businesses of Acquiror and the Acquiror Subsidiaries are not being conducted in
violation of any applicable law, statute, ordinance, regulation, judgment,
Acquiror Permit, order, decree, concession, grant or other authorization of any
Governmental Entity, except for violations that would not be reasonably likely
to have an Acquiror Material Adverse Effect.
(b) Acquiror is not aware of any material difficulties in obtaining
any IGO Determinations with respect to the Acquiror Satellites that are needed
to operate the business of Acquiror and Acquiror Subsidiaries, taken as a whole,
as it is now conducted, or for which Acquiror or any Acquiror Subsidiary has
applied for an Acquiror Permit, except for those that would not have an Acquiror
Material Adverse Effect.
SECTION 5.10. TAXES.
Except as set forth in Schedule 5.10, Acquiror and the Acquiror
Subsidiaries have prepared and filed on a timely basis with all appropriate
Governmental Entities all material returns, reports, information statements and
other documentation in respect of Taxes that they are required to file on or
prior to the Closing Date or by the date therefor including extensions, and all
such returns, reports, information statements and other documentation are
correct and complete in all material respects. Except as set forth in Schedule
5.10, Acquiror and the Acquiror Subsidiaries have paid in full all Taxes (other
than Taxes, the failure to pay which would not, individually or in the
aggregate, have a Acquiror Material Adverse Effect) due on or before the Closing
Date and, in the case of material Taxes accruing on or before the Closing Date
that are not due on or before the Closing Date, Acquiror has made adequate
provision in its books and records and financial statements for such payment.
Except as set forth in Schedule 5.10, Acquiror and the Acquiror Subsidiaries
have withheld from payments made to its present or former employees, officers
and directors all amounts required by law to be withheld, except where the
liability would not, individually or in the aggregate, have a Acquiror Material
Adverse Effect, and has, where required, remitted such amounts within the
applicable periods to the appropriate Governmental Entities. In
36
addition, except as set forth in Schedule 5.10 and except for such matters which
would not individually or in the aggregate have an Acquiror Material Adverse
Effect, (a) there are no assessments of, or claims against, Acquiror or the
Acquiror Subsidiaries with respect to Taxes, that are outstanding; (b) no
Governmental Entity is conducting an examination or audit of Acquiror or any
Acquiror Subsidiary in respect of taxes; and (c) neither Acquiror nor any
Acquiror Subsidiary has executed or filed any agreement extending the period of
assessment or collection of any taxes which remain in effect.
SECTION 5.11. INTELLECTUAL PROPERTY.
Unless expressly set forth otherwise on Schedule 5.11, Acquiror and
Acquiror Subsidiaries own or have a right to use, free and clear of any liens,
security interests, encumbrances or claims of others, all patents, trademarks,
service marks, logos, slogans, designs, copyrights, tradenames, design
registrations, and other intellectual property and any trade secrets, know-how,
confidential information, material computer programs (including any source
code), documentation, engineering and technical drawings, processes,
methodologies, trade dress, mask works and technology, in each case material to
the conduct of the business of Acquiror and Acquiror Subsidiaries taken as a
whole (all of the foregoing items collectively referred to as the "Acquiror
Intellectual Property"). Except as set forth on Schedule 5.11 or where there
would be no Acquiror Material Adverse Effect, (a) no proceedings are pending or,
to Acquiror's knowledge, threatened in writing, which challenge the validity of
the ownership by Acquiror and/or any Acquiror Subsidiary of any material
Acquiror Intellectual Property; (b) Acquiror has no knowledge of any
infringement or infringing use of any material Acquiror Intellectual Property or
licenses by any person or entity; (c) to Acquiror's knowledge, no infringement
of any material intellectual property right or other proprietary right of any
third party has occurred or will result in any way from the signing and
execution of this Agreement or the consummation of any or all of the
transactions contemplated hereby, and no written claim has been made by any
third party based upon an allegation of any such infringement; and (d) material
Acquiror Intellectual Property is valid and in full force and effect and no
aspect thereof is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative agency.
SECTION 5.12. MATERIAL CONTRACTS.
Except as set forth in Schedule 5.12, all agreements filed as exhibits
to Acquiror SEC Reports and each agreement that would have been required to be
filed as an exhibit to Acquiror SEC Reports if such agreement had been entered
into prior to the date of filing any such Acquiror SEC Report (collectively, the
"Acquiror Material Contracts") are valid and in full force and effect on the
date hereof except to the extent they have previously expired in accordance with
their terms, and neither Acquiror nor any Acquiror Subsidiary has (or has any
knowledge that any
37
party thereto has) violated any provision of, or committed or failed to perform
any act which with or without notice, lapse of time or both would constitute a
default under the provisions of, any Acquiror Material Contract, except for
defaults which would not reasonably be expected to have an Acquiror Material
Adverse Effect.
SECTION 5.13. EMPLOYEE BENEFIT PLANS.
(a) Each of the Benefit Plans currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by Acquiror or any entity
required to be aggregated with Acquiror which is a member of the controlled
group of corporations which includes Acquiror within the meaning of Section
414(b) or (c) of the Code (each, an "Acquiror Commonly Controlled Entity") for
the benefit of present and former employees or directors of Acquiror and of each
Acquiror Subsidiary or their beneficiaries, or providing benefits to such
persons in respect of services provided to any such entity (collectively, the
"Acquiror Benefit Plans") intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified and, to Acquiror's knowledge, no circumstances exist that
could reasonably be expected by Acquiror to result in the revocation of any such
determination. Each of the Acquiror Benefit Plans is in compliance with the
applicable terms of ERISA and the Code and any other applicable laws, rules and
regulations the breach or violation of which could result in a material
liability to Acquiror or any Acquiror Commonly Controlled Entity.
(b) No Acquiror Benefit Plan which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA (an "Acquiror ERISA
Plan") which is a defined benefit pension plan that is subject to Title IV of
ERISA has any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA.
(c) No Acquiror Benefit Plan is a Multiemployer Plan. Neither Acquiror
nor any Acquiror Commonly Controlled Entity has completely or partially
withdrawn from any Multiemployer Plan. No termination liability to the Pension
Benefit Guaranty Corporation or withdrawal liability to any Multiemployer Plan
that is material in the aggregate has been or is reasonably expected to be
incurred with respect to any Multiemployer Plan by Acquiror or any Acquiror
Commonly Controlled Entity.
SECTION 5.14. QUALIFICATION OF ACQUIROR.
Acquiror is and pending the Effective Time will be legally,
technically, financially and otherwise qualified under the Communications Act
and all rules, regulations and policies of the FCC to acquire, own and operate
the material assets and business of the Company and the Company Subsidiaries.
Acquiror knows of the existence of no fact that, under any Acquiror Permits and
present law relating thereto, would disqualify Acquiror from consummating the
Merger within the time
38
contemplated herein. There are no facts or proceedings which would reasonably be
expected to disqualify Acquiror under the Communications Act or otherwise from
acquiring or operating any of the assets and business of the Company and the
Company Subsidiaries or would cause the FCC not to approve the FCC Application
(as defined in Section 7.4(a)). Acquiror has no knowledge of any fact or
circumstance relating to Acquiror or any of its affiliates that would reasonably
be expected to (a) except as set forth on Schedule 5.14, cause the filing of any
objection to the FCC Application, or (b) lead to a material delay in the
processing by the FCC of the FCC Application. No waiver of any FCC rule or
policy is necessary to be obtained for the approval of the FCC Application, nor
will processing pursuant to any exception or rule of general applicability be
requested or required in connection with the consummation of the transactions
herein.
SECTION 5.15. BROKERS.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
ARTICLE VI.
COVENANTS
SECTION 6.1. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees that, prior to the Closing
Date, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Acquiror, the Company shall, and shall cause each Company
Subsidiary to, (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its commercially reasonable efforts to
preserve substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective principal officers and key
employees and maintain its relationship with its respective principal customers
and suppliers; (c) use its commercially reasonable efforts to maintain and keep
its properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted; (d) use its commercially reasonable efforts to
keep in full force and effect insurance comparable in amount and scope of
coverage to that currently maintained; (e) prepare and file all tax returns
required to be filed in a timely manner, and in a manner consistent with prior
years and applicable laws and regulations; (f) timely file with the Commission
all reports required to be filed under the Exchange Act, which reports
(including the unaudited interim financial statements included in such reports)
shall comply with the Exchange Act, the rules and regulations promulgated
thereunder and all applicable accounting requirements; (g) operate its business
in accordance with the terms of its licenses, the Communications Act and the FCC
rules and policies and in all material respects with all other applicable
39
laws; (h) use its commercially reasonable efforts to maintain each Key Company
Permit in effect until the applicable construction projects are complete except
where (x) the loss of such Key Company Permit or pending Key Application would
not, individually or in the aggregate, have a Company Material Adverse Effect or
(y) the maintenance of any such Company Permit would require an expenditure
which would be in violation Section 6.2(e); (i) use its commercially reasonable
efforts to enforce its rights to have the transmissions to and from the Company
Satellites and Major Stations be free from interference from other radio
communications facilities (existing or proposed), to the extent that such
interference is prohibited by FCC Rules or inconsistent with rights accorded the
Company Satellites under the International Telecommunication Union's radio
regulations and shall promptly notify Acquiror of any actual or threatened
interference; and (j) proceed in the ordinary course of business with all
pending applications submitted by the Company or any Company Subsidiary with any
Governmental Entity and use its commercially reasonable efforts to ensure that
such applications are granted; provided, however, that in the event the Company
or any of the Company Subsidiaries deems it necessary to take certain actions
that would otherwise be prohibited by clauses (a)-(j) of this Section 6.1, the
Company shall consult with the President and Chief Operating Officer of Acquiror
and Acquiror shall consider in good faith the Company's request to take such
action and not unreasonably withhold or delay its consent for such action.
SECTION 6.2. NEGATIVE COVENANTS OF THE COMPANY.
Except as expressly contemplated by this Agreement and except as set
forth in Schedule 6.2, or otherwise consented to in writing by Acquiror (which
approval shall not be unreasonably delayed or withheld), from the date hereof
until the Closing Date, the Company shall not, and shall cause each Company
Subsidiary not to, do any of the following:
(a) (i) increase the periodic compensation payable to or to become
payable to any of its directors or executive officers, except for increases in
salary, wages or bonuses payable or to become payable in the ordinary course of
business and consistent with past practice; (ii) grant any severance or
termination pay (other than pursuant to existing severance arrangements or
policies as in effect on the date of this Agreement) to, or enter into or modify
any employment or severance agreement with, any of its directors, officers or
employees; or (iii) adopt or amend any employee benefit plan or arrangement,
except as may be required by applicable law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of its capital stock, except as required under
the Certificates of Designations with respect to the Series C Preferred Stock,
as presently in effect;
40
(c) (i) redeem, repurchase or otherwise reacquire any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any share of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations (except pursuant to agreements and documents as set forth in
Schedule 3.3 or Schedule 3.12, and except in connection with the exercise of
outstanding Options referred to in Schedule 3.3 in accordance with their terms);
(ii) effect any reorganization or recapitalization; or (iii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of its capital stock;
(d) (i) issue, pledge, deliver, award, grant or sell, or authorize or
propose the issuance, pledge, delivery, award, grant or sale (including the
grant of any Encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares, or any rights, warrants or
options to acquire, any such shares (except pursuant to agreements or other
documents set forth on Schedule 3.12, except pursuant to the agreements and
documents (other than the Company Stock Option Plans) set forth in Schedule 3.3
and except for the issuance of shares upon the exercise of outstanding Options,
the issuance of options to employees with the written consent of Acquiror and
the issuance of shares under the Company Stock Purchase Plan as presently in
effect, but only to the extent such issuances are in the ordinary course of
business and consistent with past practice); or (ii) amend or otherwise modify
the terms of any such rights, warrants or options;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, (i) any business or any corporation, partnership, association or other
business organization or division (other than a wholly-owned Subsidiary) thereof
or any satellite or other spacecraft the Company has not, on the date hereof,
previously agreed in writing to acquire, or otherwise acquire or agree to
acquire any assets of any other person or (ii) make or commit to make any
investments or capital expenditures, other than investments or capital
expenditures: (A) contemplated by the 1997 written business plan previously
furnished to Acquiror or by the 1998 written business plan to be furnished to
Acquiror (and the investments or capital expenditures of such plan shall be
subject to Acquiror's approval, which shall not be unreasonably withheld or
conditioned) (B) to replace any Company Satellite lost in a launch or in orbit;
(C) to continue capital programs now underway as described on Schedule 6.2, plus
additional expenses solely for change orders of up to 10% of the progress
payments on each satellite remaining to be paid as of the date hereof; (D)
purchase such terrestrial equipment as necessary to supply customers in the
ordinary course; or (E) other investments or capital expenditures that do not
exceed $500,000 in the aggregate for all such investments or expenditures that
occur from the date hereof.
41
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise encumber or dispose of, any of its material assets except for
dispositions in the ordinary course of business and consistent with past
practice which do not exceed five hundred thousand dollars ($500,000) in the
aggregate;
(g) propose or adopt any amendments to its certificate of
incorporation or its bylaws;
(h) (i) make any significant change in any of its methods of
accounting (other than in the ordinary course), or (ii) make or rescind any
express or deemed election relating to taxes, settle or compromise any claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to taxes (except where the amount of such settlements or
controversies, individually or in the aggregate, does not exceed five hundred
thousand dollars ($500,000), or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ended
December 31, 1996, except, in the case of clause (i) or clause (ii), as may be
required by law or generally accepted accounting principles;
(i) incur any obligation for borrowed money, whether or not evidenced
by a note, bond, debenture or similar instrument, other than purchase money
indebtedness not to exceed five hundred thousand dollars ($500,000) in the
aggregate, except in the ordinary course of business under existing loan
agreements or capitalized leases, or prepay, before the scheduled maturity
thereof, any of its long-term debt;
(j) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of such entity's
affiliates (as defined in Rule 12(b)-2 under the Exchange Act) which involves
the transfer of consideration or has a financial impact on such entity, other
than pursuant to such agreements, arrangements, or understandings (i) existing
on the date of this Agreement or (ii) which are on terms that the Board of
Directors of the Company determines in good faith to be equal to, or more
favorable to the Company, than the terms that the Company would be able to
obtain from third parties in similar transactions and/or for similar goods or
services;
(k) surrender, agree to allow to expire or be terminated, modify
adversely, forfeit, or fail to use reasonable best efforts to renew or extend
under regular terms any of the Key Company Permits or violate or breach any Key
Company Permits in a manner that would give valid grounds to the FCC or any
Governmental Entity to institute any proceeding for the revocation, suspension,
or adverse modification of any Key Company Permit issued by the FCC or any
Governmental Entity except for Key Company Permits which lapse or expire due to
ordinary course changes in the business of the Company. Should the FCC or other
42
Governmental Entity with jurisdiction institute any proceedings for the
suspension, revocation or adverse modification of any of such Key Company
Permits, the Company shall use reasonable best efforts to promptly contest such
proceedings and to seek to have such proceedings terminated in a manner that is
favorable to the Company;
(l) fail to use reasonable best efforts to avoid having, any pending
Key Application to be dismissed or denied, except where (i) the loss of such Key
Company Permit or pending Key Application would not, individually or in the
aggregate, have a Company Material Adverse Effect or (ii) the maintenance of any
such Key Company Permit would require an expenditure which would be in violation
of subsection (e) above;
(m) enter into any contract, agreement, commitment, arrangement, lease
(including with respect to personal property), policy or other instrument that
(i) does not expire by the later of one (1) year after the date hereof or six
(6) months after the Closing Date or (ii) is not subject to termination by the
Company upon less than six months written notice to the other party thereto,
which in either case materially restricts or limits the Company's or any Company
Subsidiary's right to conduct its business or compete, including, without
limitation, any restriction on its ability to sell, lease or otherwise provide
services from available transponder capacity to any person or entity for any
purpose at any orbital location and in any frequency band, any geographical
market segment, product line or other industry limitation, or any exclusive or
sole supply or vendor arrangement or agreement. Nothing in this Section 6.2(m)
shall preclude or require the Company or any Company Subsidiary from entering
into agreements containing most favored nation provisions, options for
additional services or capacity, rights of negotiation, or similar provisions,
in each case in the ordinary course of business; or
(n) agree in writing or otherwise to do any of the foregoing.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS AND INFORMATION.
During the period from the date hereof to the Effective Time (the
"Interim Period"), the Company and Acquiror shall, and shall cause the Company
Subsidiaries and the Acquiror Subsidiaries, respectively, to, afford to each
other and their respective officers, employees, accountants, consultants, legal
counsel and other representatives reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to the properties,
executive personnel and all information concerning the business, properties,
contracts, records and personnel of the Company and the Company Subsidiaries or
Acquiror
43
and the Acquiror Subsidiaries, as the case may be, as such other party may
reasonably request.
SECTION 7.2. CONFIDENTIALITY.
Acquiror and the Company each acknowledge and agree that all
information received by it (the "Receiving Party") from or on behalf of the
other party in connection with the transactions contemplated under this
Agreement shall be deemed received, if by Acquiror, pursuant to the
confidentiality agreement, dated as of June 5, 1997, between the Company and
Acquiror, and if by the Company, pursuant to the confidentiality agreement,
dated as of September 12, 1997, between the Company and Acquiror (each, a
"Confidentiality Agreement" and together, the "Confidentiality Agreements") and
such Receiving Party shall, and shall cause its officers, directors, employees,
affiliates, financial advisors and agents to, comply with the provisions of the
applicable Confidentiality Agreement with respect to such information, and the
provisions of the Confidentiality Agreements are hereby incorporated herein by
reference with the same effect as if fully set forth herein.
SECTION 7.3. PROXY REGISTRATION STATEMENT; BOARD RECOMMENDATION AND
STOCKHOLDER VOTE.
(a) Proxy Registration Statement. As promptly as practicable after the
execution and delivery of this Agreement, Acquiror and the Company shall
cooperate and prepare and Acquiror shall file with the SEC a merger proxy
registration statement on Form S-4 (together with the amendments thereof or
supplements thereto, the "Proxy Registration Statement") in connection with the
registration under the Securities Act of the Acquiror Shares to be issued
pursuant to this Agreement and the approval by stockholders of the Company of
the Merger. As promptly as practicable after the execution and delivery of this
Agreement, the Company shall prepare for inclusion in the Proxy Registration
Statement the information relating to the merger and approval of the merger by
stockholders of the Company and any other information relating to the Company
which would be included in a merger proxy statement of the Company relating
thereto under the rules and regulations of the SEC. Such information furnished
by the Company shall include the recommendation of the Company's Board of
Directors in favor of approval and adoption of this Agreement and the Merger
(subject to Section 7.10 hereof). Acquiror and the Company will cooperate in the
production and filing of the Proxy Registration Statement, use all reasonable
efforts to have or cause the Proxy Registration Statement to become effective as
promptly as practicable, and take any action required to be taken under any
applicable federal or state securities laws in connection with the issuance of
Acquiror Shares pursuant to this Agreement and approval of this Agreement and
the Merger by stockholders of the Company. None of the information supplied by
any party hereto for inclusion in the Proxy Registration Statement will at the
time the Proxy Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain
44
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statement
therein, in light of the circumstances under which they are made, not
misleading.
(b) Board Recommendation; Stockholder Approval. The Company shall,
promptly after the date of this Agreement, take all action necessary in
accordance with Delaware Law and its certificate of incorporation and bylaws to
convene a meeting of the Company's stockholders (together with any adjournment
or postponement thereof, the "Stockholders' Meeting"), to approve and adopt this
Agreement and the Merger. As promptly as practicable after effectiveness of the
Proxy Registration Statement, the Company shall mail the proxy statement
included in the Proxy Registration Statement to its stockholders. The Company's
Board of Directors shall recommend approval of the transactions contemplated
hereby and shall take all lawful action to solicit from stockholders of the
Company proxies in favor of the approval and adoption of this Agreement and this
Merger (subject to Section 7.10 hereof). Notwithstanding the foregoing, the
Company shall not be obligated to mail such proxy statement (or, if the proxy
statement has been mailed, hold the Stockholders Meeting) until the earlier of
(i) the receipt of the Requisite Consents under Section 7.14 or (ii) the making
by Acquiror of the election under Section 7.14(b) as to whether to (A) waive as
a condition of Closing (Section 8.2(f)) that the Requisite Consents shall have
been obtained, or (B) except as otherwise provided in Section 7.15(g), commence
an Exchange Offer.
SECTION 7.4. FCC APPLICATION.
(a) As promptly as practicable after the execution and delivery of
this Agreement, Acquiror, Merger Sub and the Company shall prepare all
appropriate applications for FCC consent, and such other documents as may be
required, with respect to the transfer of control of the Company to Acquiror
(collectively, the "FCC Application"). As promptly as practicable thereafter,
Acquiror and Merger Sub shall deliver to the Company their respective completed
portions of the FCC Application. As promptly as practicable, but not later than
twenty-one (21) calendar days after the date hereof, the Company and Acquiror
shall jointly file, or cause to be filed, the FCC Application. Acquiror, Merger
Sub and the Company shall use their reasonable best efforts to prosecute the FCC
Application in good faith and with due diligence in order to obtain such FCC
consent as expeditiously as practicable. If the Closing shall not have occurred
for any reason within the initial effective period of the granting of approval
by the FCC of the FCC Application, and neither Acquiror nor the Company shall
have terminated this Agreement pursuant to Section 9.1, Acquiror and the Company
shall jointly request one or more extensions of the effective period of such
grant. No party hereto shall knowingly take, or fail to take, any action the
intent or reasonably anticipated consequence of which action or failure to act
would be to cause the FCC not to grant approval of the FCC Application.
45
(b) Acquiror and the Company shall each pay one-half (1/2) of any FCC
fees that may be payable in connection with the filing or granting of approval
of the FCC Application. The Company shall pay any cost incurred in connection
with complying with the FCC notice and advertisement requirements in connection
with the transfer of control of the Company.
SECTION 7.5. HSR ACT MATTERS.
Acquiror, Merger Sub and the Company (as may be required pursuant to
the HSR Act) promptly will complete all documents required to be filed with the
Federal Trade Commission and the United States Department of Justice in order to
comply with the HSR Act and, not later than fifteen (15) calendar days after the
date hereof, together with the persons, if any, who are required to join in such
filings, shall file such documents with the appropriate Governmental Entities.
Acquiror, Merger Sub and the Company shall promptly furnish all materials
thereafter required by any of the Governmental Entities having jurisdiction over
such filings, and shall take all reasonable actions and shall file and use their
best efforts to have declared effective or approved all documents and
notifications with any such Governmental Entity, as may be required under the
HSR Act or other federal or state antitrust laws for the consummation of the
Merger and the other transactions contemplated hereby. Acquiror and the Company
shall each pay one-half (1/2) of all filing fees related to compliance with the
HSR Act in connection with the transactions contemplated hereby.
SECTION 7.6. PUBLIC ANNOUNCEMENTS.
Acquiror and the Company shall consult with each other before issuing
any press release or otherwise making any public statements with respect to the
transactions contemplated hereunder and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with the NYSE, or the Nasdaq National
Market.
SECTION 7.7. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the certificate of incorporation and bylaws of the Company on the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any manner
that would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnitees under the
certificate of incorporation or bylaws of the Company in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by applicable law.
46
(b) From and after the Effective Time, Acquiror shall cause the
Surviving Corporation to indemnify, defend and hold harmless the present and
former officers, directors and employees of the Company and the Company
Subsidiaries (collectively, the "Indemnified Parties") against all losses,
expenses, claims, damages, liabilities or amounts that are paid in settlement
of, with the approval of Acquiror (which approval shall not be unreasonably
withheld), or otherwise in connection with, any claim, action, suit, proceeding
or investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer or employee and arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), in each case to
the fullest extent permitted under Delaware Law (and shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Delaware Law, upon
receipt from the Indemnified Party to whom expenses are advanced of the
undertaking to repay such advances contemplated by Section 145(e) of Delaware
Law).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time: (i) the Indemnified Parties may retain its
regularly engaged independent legal counsel as of the date of this Agreement, or
other independent legal counsel satisfactory to them provided that such other
counsel shall be reasonably acceptable to Acquiror, (ii) Acquiror shall cause
the Surviving Corporation to pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, and (iii) Acquiror shall cause the Surviving Corporation to use its
reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Acquiror nor the Surviving Corporation shall be liable
for any settlement of any Claim effected without the written consent of
Acquiror, which consent shall not be unreasonably withheld. Any Indemnified
Party wishing to claim indemnification under this Section 7.7, promptly upon
learning of any such Claim, shall notify the Acquiror and Surviving Corporation
(although the failure so to notify the Acquiror and Surviving Corporation shall
not relieve the Acquiror and Surviving Corporation from any liability which the
Acquiror and Surviving Corporation may have under this Section 7.7, except to
the extent such failure prejudices the Acquiror and Surviving Corporation), and
shall deliver to the Acquiror and Surviving Corporation the undertaking
contemplated by Section 145(e) of Delaware Law. The Indemnified Parties as a
group may retain one law firm (in addition to local counsel) to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct (as reasonably determined by counsel to such Indemnified
Parties) a conflict on any significant issue between the position of any two or
more of such Indemnified Parties, in which event, an additional counsel as may
be required may be retained by such Indemnified Parties.
47
(d) Acquiror shall cause to be maintained in effect for not less than
six (6) years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company with respect to matters occurring prior to the Effective Time;
provided, however, that (i) Acquiror may substitute therefor policies of
substantially the same coverage containing terms and conditions that are
substantially the same for the Indemnified Parties to the extent reasonably
available and (ii) Acquiror shall not be required to pay an annual premium for
such insurance in excess of two hundred percent (200%) of the last annual
premium paid prior to the date of this Agreement, but in such case shall
purchase as much coverage as possible for such amount.
(e) This Section 7.7 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Acquiror and Merger Sub and the
Surviving Corporation and their respective successors and assigns. Acquiror
hereby guarantees the Surviving Corporation's obligations pursuant to this
Section 7.7.
SECTION 7.8. EMPLOYEE BENEFITS MATTERS.
(a) Acquiror shall cause the Surviving Corporation to provide employee
benefits under plans, programs and arrangements, which, in the aggregate, will
provide benefits to the employees of the Company and the Company Subsidiaries
which are no less favorable, in the aggregate, than those provided pursuant to
the plans, programs and arrangements of the Company in effect and disclosed to
Acquiror on the date hereof; provided, however, that nothing herein shall
interfere with the Surviving Corporation's right or obligation to make such
changes to such plans, programs or arrangements as are necessary to conform with
applicable law.
(b) Acquiror acknowledges and agrees that prior to the Effective Time,
the Company will take all such actions as may be necessary to cause (i) all
participants to become fully vested in their benefits under the Company's 401(k)
Plan, and (ii) employer contributions to be made with respect to periods prior
to the Effective Time to the Company's 401(k) Plan to the extent that such
contributions would be made if the participants were employed by the Company on
the last day of the calendar year in which the Closing occurs.
SECTION 7.9. FURTHER ACTION; COMMERCIALLY REASONABLE EFFORTS.
(a) Each of the parties shall use all commercially reasonable efforts
to take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable under applicable laws or
otherwise to consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable, including, without limitation, using all
its commercially reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and parties to
48
contracts with the Company and Acquiror as are necessary for the transactions
contemplated herein. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use all
commercially reasonable efforts to take all such action.
(b) During the Interim Period, each of the parties shall promptly
notify the other in writing of any pending or, to the knowledge of such party,
threatened action, proceeding or investigation by any Governmental Entity or any
other person (i) challenging or seeking damages in connection with the Merger or
the conversion of the Capital Stock into the Merger Consideration pursuant to
the Merger or (ii) seeking to restrain or prohibit the consummation of the
Merger or otherwise limit the right of Acquiror to own or operate all or any
portion of the business or assets of the Company.
(c) Each party shall use its commercially reasonable efforts to
refrain from taking any action, or entering into any transaction, which would
cause any of its representations or warranties contained in this Agreement to be
untrue or result in a breach of any covenant made by it in this Agreement.
SECTION 7.10. NEGOTIATION WITH OTHERS.
(a) Neither the Company nor any Company Subsidiary shall, through any
officer, director, employee, representative, agent or direct or indirect
stockholder of the Company or any Company Subsidiary, directly or indirectly,
take any action to (i) encourage, initiate or solicit the submission of any
proposal that constitutes an Acquisition Proposal, (ii) enter into any agreement
with respect to or accept any Acquisition Proposal; or (iii) encourage, initiate
or solicit the making of any proposal that constitutes or may reasonably be
expected to lead to, an Acquisition Proposal; provided, however, that nothing
contained in this Section 7.10 shall prohibit the Company, or its Board of
Directors, from making any disclosure to its stockholders that, in the judgment
of its Board of Directors in accordance with, and based upon, the advice of
independent legal counsel, is required under applicable law.
For purposes of this Agreement, "Acquisition Proposal" means any of
the following: (i) any merger, consolidation or similar transaction involving
the Company, (ii) any sale, lease or other disposition directly or indirectly by
merger, consolidation, share exchange or otherwise of assets of the Company or
Company Subsidiaries representing 20% or more of the consolidated assets of the
Company and the Company Subsidiaries, (iii) any issue, sale, or other
disposition of securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such securities) representing
20% or more of the voting power of the Company, or (iv) any transaction in which
any person shall acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act), or the
49
right to acquire beneficial ownership or any "group" (as such term is defined
under the Exchange Act) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of 35% or more of the outstanding
Common Stock.
(b) Notwithstanding Section 7.10(a), the Board of Directors of the
Company, in the exercise of and as required by its fiduciary duties as
determined in good faith by the Board of Directors of the Company in accordance
with and based upon the advice of independent legal counsel, may (i) furnish
information to, or enter into discussions with, a third party who makes (or
requests information for the purpose of making) an unsolicited bona fide
Acquisition Proposal, if such third party executes and delivers a
confidentiality agreement in reasonably customary form on terms not more
favorable to such person or entity than the terms of the Confidentiality
Agreement, or (ii) withdraw or modify in any manner adverse to the Acquiror or
propose publicly to withdraw or modify in any manner adverse to the Acquiror the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement, if and only to the extent that the Board of Directors:
(A) believes in good faith, based on the advice of its financial advisor that
such Acquisition Proposal would, if consummated, result in a transaction more
favorable from a financial point of view to all stockholders of the Company, and
(B) determines in good faith, based upon, to the extent legal matters are
relevant to such fiduciary duties, a reasoned written opinion of its outside
legal counsel, that such action is necessary for the directors to comply with
their fiduciary duties to the stockholders under applicable Delaware Law; and
(C) in the event that the Board of Directors of the Company determines to
withdraw or modify in a manner adverse to the Acquiror its approval or
recommendation of the Merger or this Agreement, it shall do so only at a time
that is after the second business day following Acquiror's receipt of the
written notice in accordance with the next succeeding sentence. The Company
shall promptly notify Acquiror in writing of any such request for information or
Acquisition Proposal, specifying reasonable details of any inquiry or
Acquisition Proposal (including the identity of the entity making the
Acquisition Proposal, to the extent not prohibited by a confidentiality
agreement in effect on the date hereof), and shall keep Acquiror informed as to
the status of any discussions or negotiations.
SECTION 7.11. STOCK MERGER LISTING.
Acquiror shall use all reasonable efforts to cause the Acquiror Shares
to be issued pursuant to this Agreement to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
SECTION 7.12. BLUE SKY.
Acquiror shall use reasonable efforts to obtain prior to the Closing
Date any necessary blue sky permits and approvals required to permit the
50
distribution of the shares of Acquiror Shares to be issued in accordance with
the provisions of this Agreement.
SECTION 7.13. AFFILIATE AGREEMENTS.
At least 30 days prior to the Effective Time, the Company shall
deliver to Acquiror a letter identifying all persons who may be deemed
affiliates of the Company under Rule 145 of the Securities Act. The Company
shall use all reasonable efforts to deliver or cause to be delivered to
Acquiror, from each person who will be identified in such letter, written
agreements (collectively, the "Affiliate Agreements") substantially in the form
attached to this Agreement as Exhibit A.
SECTION 7.14. CONSENT SOLICITATION AND SUPPLEMENTAL INDENTURE.
(a) As promptly as practicable after the execution and delivery of
this Agreement, the Company shall prepare, in consultation with Acquiror,
written materials to commence a solicitation (the "Consent Solicitation") of
consents to amendments to, or waivers under, the Indentures, dated as of January
31, 1997, for the Senior Notes (as defined below) among the Company, the
subsidiaries of the Company named therein as Guarantors, and Bankers Trust
Company, as Trustee (the "Indentures"), from the Holders (as defined in the
Indentures) of not less than a majority in aggregate principal amount of the
Senior Notes in order to obtain a waiver of the Company's compliance with the
covenants set forth in Section 5.01 (iii) and Section 5.01(iv) of the Indentures
in connection with the consummation of the Merger (the consents from such
Holders, the "Requisite Consents"). The Company will distribute such
solicitation materials to the Holders as promptly as practicable and will use
commercially reasonable efforts to obtain such consents, provided that no
consideration shall be offered to the Holders of the Senior Notes pursuant to
the Consent Solicitation for rendering their consents thereunder without the
prior written approval of Acquiror. At the Effective Time, Acquiror shall cause
the Surviving Corporation to execute and deliver to the Trustee a supplemental
indenture pursuant to, and satisfying the requirements of, the Indentures.
"Senior Notes" shall mean the Company's 11.25% Senior Notes Due 2007 and 12.5%
Senior Discount Notes Due 2007.
(b) If, within forty (40) days after the date the Company distributes
the Consent Solicitation to the Holders (the "Solicitation Termination Date"),
the Company has not received the Requisite Consents, Acquiror shall elect (the
"Acquiror Election") either to (i) commence an exchange offer as set forth in
Section 7.15, or (ii) waive as a condition of Closing (Section 8.2(f)) that the
Requisite Consents shall have been obtained. Acquiror shall exercise the
Acquiror Election by delivering written notice of Acquiror's election to the
Company within two business days after the Solicitation Termination Date. If
Acquiror fails to timely and properly exercise the Acquiror Election within such
two business days, Acquiror shall be deemed to have waived the delivery of the
Requisite Consents as a closing
51
condition. The Company agrees to provide the Acquiror with written notice of the
date of the Solicitation Termination Date at least five business days prior to
the occurrence of such Solicitation Termination Date.
SECTION 7.15. THE EXCHANGE OFFER.
(a) Terms of the Exchange Offer. As promptly as practicable (and in
any event within five business days) after Acquiror's delivery of an Acquiror
Election pursuant to Section 7.14(b) hereof electing to commence an exchange
offer, Acquiror shall announce its election to commence (within the meaning of
Rule 14d-2 under the Exchange Act) an irrevocable exchange offer (the "Exchange
Offer") to acquire all of the issued and outstanding shares of Capital Stock in
exchange for the number of fully paid and nonassessable Acquiror Shares (the
"Exchange Consideration") equal to the number that would be issued pursuant to
the Merger (except that the Averaging Period would end on the tenth Trading Day
immediately prior to the closing date for the Exchange Offer), and with such
other terms and conditions which make the Exchange Offer at least as favorable
to the holders of the issued and outstanding shares of Capital Stock (and
options, warrants and other rights to purchase Capital Stock) as the terms and
conditions of the Merger, as set forth herein. Acquiror shall conduct such
Exchange Offer in accordance with this Section 7.15 and applicable law. To the
extent practicable in the context of the Exchange Offer the parties hereto shall
seek to provide to each other all of the benefits of the provisions of this
Agreement. Acquiror hereby agrees that within two business days following the
later to occur of the expiration of the minimum statutory period during which
exchange offers must remain open and all Exchange Offer Conditions (as defined
below) having been satisfied or waived, Acquiror shall accept for exchange all
shares of Capital Stock tendered and promptly issue the Exchange Consideration
to the holders of Capital Stock who shall have tendered their shares in the
Exchange Offer.
The obligation of Acquiror to consummate the Exchange Offer once it is
commenced and to accept for exchange the shares of Capital Stock tendered
pursuant to the Exchange Offer shall be subject only to the following conditions
(the "Exchange Offer Conditions"): (i) the holders of the outstanding Capital
Stock representing at least 50.1% of the voting power of the Capital Stock (on a
fully diluted basis) as of the date the Exchange Offer is commenced (and all
shares of Capital Stock held by Acquiror, each Acquiror Subsidiary and each
affiliate thereof shall be deemed to be included within such 50.1%) accepting
the Exchange Offer, (ii) the resignations of the Company's directors prior to
consummation of the Exchange Offer and (iii) the satisfaction of the following
conditions precedent sections of this Agreement (to the extent applicable to an
exchange offer): 8.1(b), 8.1(c), 8.1(d), 8.1(e), 8.2(a), 8.2(b), 8.2(c), 8.2(d),
8.2(e). Acquiror expressly reserves the right to waive any such condition, to
increase the consideration payable in the Exchange Offer and to make any other
changes in the terms and conditions of the Exchange Offer which make the
Exchange Offer more favorable to the holders of the
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issued and outstanding shares of Capital Stock than the Merger and than the
requirements for the Exchange Offer set forth herein. Notwithstanding the
foregoing, no change may be made which (i) causes the Exchange Offer not to meet
the requirements of this Section 7.15, (ii) decreases or changes the Exchange
Consideration to be paid in the Exchange Offer, (iii) reduces the number of
shares of Capital Stock sought to be purchased in the Exchange Offer, (iv)
imposes conditions to the Exchange Offer other than those permitted by this
Section 7.15, (v) extends the expiration date of the Exchange Offer or (vi)
otherwise alters or amends any term of the Exchange Offer in any manner
materially adverse to the holders of shares of Capital Stock; provided, however,
that subject to the right of the parties to terminate this Agreement pursuant to
Section 9.1, the Exchange Offer may be extended for any period to the extent
required to satisfy any Exchange Offer Condition or to the extent required by
law or by any rule, regulation, interpretation or position of the SEC or the
staff thereof, so long as the Exchange Offer shall not extend beyond June 30,
1998. Acquiror shall not acquire less than all of the shares of Capital Stock or
other securities that are tendered pursuant to the Exchange Offer.
(b) Exchange Offer Documents. As promptly as practicable after the
election by the Acquiror to commence of the Exchange Offer, Acquiror shall
convert the Proxy Registration Statement into and shall file with the SEC a
registration statement (together with the amendments thereof or supplements
thereto, the "Exchange Registration Statement") in connection with the
registration under the Securities Act of the Acquiror Shares to be issued
pursuant to the Exchange Offer. Acquiror shall use all reasonable efforts to
have or cause the Exchange Registration Statement to become effective as
promptly as practicable. As promptly as practicable (and in any event within
five business days) after the Exchange Registration Statement has become
effective, Acquiror shall commence the Exchange Offer. As promptly as
practicable on the date of commencement of the Exchange Offer, Acquiror shall
file with the SEC a Tender Exchange Offer Statement on Schedule 14D-1
promulgated under the Exchange Act (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Exchange Offer, and take such
steps as are reasonably necessary to cause the Exchange Offer to be disseminated
to the holders of shares of Capital Stock as and to the extent required by
applicable federal securities laws. The Schedule 14D-1 shall contain an offer to
exchange (the "Offer to Exchange") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule 14D-1, the
Exchange Registration Statement, the Offer to Exchange and such other documents
as may be required by the Exchange Act, the NYSE, the NASD or any other
applicable laws, rules or regulations, together with all amendments and
supplements thereto, the "Exchange Offer Documents"). Acquiror shall use its
best efforts to distribute such Exchange Offer Documents, and any other
documents required by law or this Agreement to all holders of shares of Capital
Stock, in accordance with the requirements of this Section 7.15. Acquiror and
the Company shall correct promptly any information provided by any of them for
use in the
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Exchange Offer Documents if such information shall contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading, and Acquiror
shall use all reasonable efforts to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and the other Exchange Offer Documents as so corrected to
be disseminated to holders of shares of Capital Stock, in each case as and to
the extent required by applicable federal securities laws and this Section 7.15.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on the Exchange Offer Documents prior to their being filed with the
SEC, and Acquiror will provide the Company and its counsel with copies of any
written comments that Acquiror receives from the SEC or its staff with respect
to the Exchange Offer Documents promptly after receipt of any such comments.
(c) Stock Options. The Exchange Offer will extend to all shares of
Capital Stock which may be issued as a result of the exercise of outstanding
options, warrants and other rights to purchase or acquire Capital Stock, and
will involve assumption of other options, warrants and rights, to the same
extent as required with respect to the Merger under Section 2.3.
(d) Company Recommendation. On the date the Schedule 14D-1 is filed
with the SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 promulgated under the Exchange Act (together with
all amendments and supplements thereto, the "Schedule 14D-9") containing the
recommendation of the Board of Directors of the Company for the stockholders of
the Company to accept the Exchange Offer, except to the extent the Board of
Directors would be permitted to alter its recommendation under Section 7.10(b)
with respect to the Merger, and shall take such steps as are necessary to cause
the Schedule 14D-9 to be disseminated to the holders of shares of Capital Stock
as and to the extent required by the NASD or any other applicable laws, rules
and regulations, including, without limitation, applicable federal securities
laws. The Company and Acquiror shall amend or correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading, and the Company shall take all steps necessary to cause the
Schedule 14D-9 as so amended or corrected to be filed with the SEC and
disseminated to holders of shares of Capital Stock, in each case as and to the
extent required by applicable federal securities laws. Acquiror and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 prior to its being filed with the SEC, and the Company will provide
Acquiror and its counsel with copies of any written comments that the Company
receives from the SEC or its staff with respect to the Schedule 14D-9 promptly
after receipt of any such comments.
(e) Stockholder List. In connection with the Exchange Offer, the
Company shall cause the Company's transfer agent to furnish Acquiror promptly
54
with mailing labels containing the names and addresses of all record holders of
shares of Capital Stock and with security position listings of shares of Capital
Stock held in stock depositories, each as of a recent date, together with all
other available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of shares of
Capital Stock. The Company shall furnish Acquiror with such additional
information, including, without limitation, updated listings and files of
stockholders, mailing labels and security position listings and such other
assistance as Acquiror or its agents may reasonably request in communicating the
Exchange Offer to record and beneficial holders of shares of Capital Stock.
Subject to the requirements of the Securities Act, the Exchange Act, the NYSE,
the NASD and any other applicable laws, rules or regulations, and except for
such steps as are necessary to disseminate the Exchange Offer Documents and any
other documents necessary to consummate the transactions contemplated by this
Agreement, Acquiror shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the transactions contemplated by this Agreement, and, if this Agreement shall be
terminated in accordance with Section 11, shall deliver to the Company all
copies of, and any extracts or summaries from, such information then in their
possession or control.
(f) Cooperation. In connection with the Exchange Offer, the Company
will furnish Acquiror with such information (which will be treated and held in
confidence by Acquiror except to the extent required to be disclosed pursuant to
the Exchange Offer or this Agreement) and assistance as Acquiror or its
representatives may reasonably request in connection with the preparation of the
Exchange Offer and communicating the Exchange Offer to the record and beneficial
holders of shares of Capital Stock.
(g) Subsequent Merger. In the event that the Requisite Consents are
obtained following commencement of the Exchange Offer, Acquiror will continue
with the Exchange Offer pursuant to this Section and promptly following
consummation of the Exchange Offer Acquiror will cause the Merger to occur, with
the Exchange Ratio equal to the exchange ratio applicable to the Exchange Offer.
Acquiror will make all requisite filings in connection with the Merger,
including the preparation and distribution of a registration statement and any
required information statement. If the Requisite Consents are obtained after the
Solicitation Termination Date but prior to the time the Exchange Offer is
commenced, Acquiror shall either proceed as set forth in this paragraph or
abandon the Exchange Offer and (by written notice to the Company) restore the
obligations of the parties with respect to the Merger, fully as though the
Requisite Consents had been obtained prior to commencement of the Exchange
Offer.
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SECTION 7.16. CONTROL OF ACQUIROR AND THE COMPANY.
During the Interim Period, control of the operations of the Company
and the Company's Subsidiaries shall remain with the Company and control of
Acquiror and Acquiror Subsidiaries shall remain with Acquiror. Acquiror agrees
that neither it nor any of Acquiror's Subsidiaries shall control, direct,
supervise, or attempt to control, direct or supervise, the operations of the
Company during this period. Likewise, the parties agree that neither the Company
nor any of the Company's Subsidiaries shall control, direct, supervise, or
attempt to control, direct or supervise Acquiror during the Interim Period.
Notwithstanding anything in this Agreement to the contrary, no action shall be
taken hereunder constituting an assignment or transfer of control of an FCC
license, permit, authorization or application requiring the prior consent or
approval of the FCC without first obtaining such consent or approval.
SECTION 7.17. PRIVATE LETTER RULING.
As promptly as practicable, Acquiror and the Company shall jointly
seek (including through the filing of an appropriate request) a private letter
ruling from the Internal Revenue Service under Section 367(a) of the Code that
the Merger will be respected for purposes of Section 367(a) as a tax-free
reorganization under Section 368(a) of the Code (the "Private Letter Ruling").
Acquiror agrees to use commercially reasonable efforts to satisfy any
requirements identified by the Internal Revenue Service as a condition to
receipt of such Private Letter Ruling. Following receipt (or internal assurances
of receipt by the staff of the Internal Revenue Service, as notified to Acquiror
in writing by one or more of the representatives of Acquiror or the Company
assisting in the seeking of the Private Letter Ruling) of such Private Letter
Ruling, Acquiror shall not, and shall not permit Merger Sub or any Acquiror
Subsidiaries to, intentionally take, fail to take, or cause to be taken or not
taken any action within its control that (without regard to any action taken or
agreed to be taken by the Company or any of its affiliates) would disqualify the
Merger as a "reorganization" within the meaning of Section 368(a) of the Code.
Nothing contained in this Section 7.17 shall be construed to require Acquiror to
incur substantial tax detriments or substantial direct expenses.
ARTICLE VIII.
CLOSING CONDITIONS
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF ACQUIROR, MERGER SUB AND THE
COMPANY TO EFFECT THE MERGER.
The respective obligations of Acquiror, Merger Sub and the Company to
effect the Merger and the other transactions contemplated herein shall be
subject
56
to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of the
Company in accordance with applicable law.
(b) Effectiveness of Registration Statement. The Proxy Registration
Statement (or the Exchange Registration Statement as applicable) shall have been
declared effective by the SEC under the Securities Act. No stop order suspending
the effectiveness of such registration statement shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or, to the
knowledge of Acquiror, the Company or the Stockholders, threatened by the SEC.
(c) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger or any other transactions contemplated in this Agreement; provided,
however, that the parties shall use their reasonable best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted.
(d) Stock Merger Listing. The Acquiror Shares issuable pursuant to
this Agreement shall have been included for listing on the NYSE upon official
notice of issuance.
(e) HSR Act. Any waiting period with any extensions thereof under the
HSR Act shall have expired or been terminated.
SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER
SUB.
The obligations of Acquiror and Merger Sub to effect the Merger and
the other transactions contemplated in this Agreement (except the Principal
Stockholder Agreement) are also subject to the following conditions, any or all
of which may be waived by Acquiror, in whole or in part, to the extent permitted
by applicable law:
(a) Representations and Warranties. The representations and warranties
of the Company made in this Agreement shall be true and correct when made and on
and as of the Effective Time with the same effect as though such representations
and warranties had been made on and as of the Effective Time (except for
representations and warranties that speak as of a specific date or time, which
need only be true and correct as of such date or time), except where the
57
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "Company
Material Adverse Effect" set forth therein) does not have a Company Material
Adverse Effect. Acquiror shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of the Company to that effect.
(b) Agreements and Covenants. The agreements and covenants of the
Company required to be performed on or before the Effective Time shall have been
performed in all material respects. Acquiror shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the Company to that
effect.
(c) FCC Approval. The FCC shall have granted by Final Order the FCC
Application, without conditions, qualifications or other restrictions that are
likely to have an Acquiror Material Adverse Effect or a Company Material Adverse
Effect immediately after the Closing Date. As used in this Agreement, the term
"Final Order" means an order, action or decision of a Governmental Entity that
has not been reversed, stayed or enjoined and as to which the time to appeal,
petition for certiorari or seek reargument or rehearing or administrative
reconsideration or review has expired and as to which no appeal, reargument,
petition for certiorari or rehearing or petition for reconsideration or
application for review is pending or as to which any right to appeal, reargue,
petition for certiorari or rehearing or reconsideration or review has been
waived in writing by each party having such a right or, if any appeal,
reargument, petition for certiorari or rehearing or reconsideration or review
thereof has been sought, the order or judgment of the court or agency has been
affirmed by the highest court (or the administrative entity or body) to which
the order was appealed or from which the argument or rehearing or
reconsideration or review was sought, or certiorari has been denied, and the
time to take any further appeal or to seek certiorari or further reargument or
rehearing, or reconsideration or review, has expired.
(d) Other Satellite Approvals. Each Governmental Entity other than the
FCC that has issued to the Company or any of the Company Subsidiaries (i) any
Company Permit with respect to the operation of or transmission to or from a
Company Satellite or a Company Ground Station that communicates with a Company
Satellite, or (ii) any Company Permit with respect to the provision of
broadcasting or communications services shall have, where required by applicable
law, approved the transfer of control or assignment, as applicable, of all such
Company Permits as a result of the Merger without any material qualifications,
restrictions or limitations and such approval shall have become a Final Order,
except where the failure to obtain such approvals would not, individually or in
the aggregate, have a Company Material Adverse Effect.
(e) Other Approvals. All consents, waivers, approvals and
authorizations required to be obtained, and all filings or notices required to
be
58
made, by the Company and the stockholders prior to consummation of the
transactions contemplated in this Agreement shall have been obtained from and
made with all required Governmental Entities, other than those that the failure
to be filed, expired or obtained would not have a Company Material Adverse
Effect.
(f) Requisite Consents. Subject to waiver pursuant to Section 7.14(b),
the Requisite Consents shall have been obtained.
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement (except the Principal Stockholder
Agreement) are also subject to the following conditions any or all of which may
be waived by the Company, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties. The representations and warranties
of Acquiror and Merger Sub made in this Agreement shall be true and correct when
made and on and as of the Effective Time with the same effect as though such
representations and warranties had been made on and as of the Effective Time
(except for representations and warranties that speak as of a specific date or
time, which need only be true and correct as of such date or time), except where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "Acquiror
Material Adverse Effect" set forth therein) does not have an Acquiror Material
Adverse Effect. The Company shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of Acquiror to that effect.
(b) Agreements and Covenants. The agreements and covenants of Acquiror
and Merger Sub required to be performed on or before the Effective Time shall
have been performed in all material respects. The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Acquiror to that effect.
(c) FCC Approval. The FCC shall have granted by Final Order the FCC
Application, without conditions, qualifications or other restrictions that are
likely to have an Acquiror Material Adverse Effect or a Company Material Adverse
Effect immediately after the Closing Date.
(d) Other Approvals. All consents, waivers, approvals and
authorizations required to be obtained, and all filings or notices required to
be made, by Acquiror prior to consummation of the transactions contemplated in
this Agreement shall have been obtained from and made with all required
59
Governmental Entities, other than those that the failure to be filed, expired or
obtained would not have an Acquiror Material Adverse Effect.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of this Agreement and the Merger by the
stockholders of the Company:
(a) by mutual written consent of each of Acquiror and the Company;
(b) by either the Company or Acquiror if the other shall have
breached, or failed to comply with, any of its obligations under this Agreement
or any representation or warranty made by such other party shall have been
incorrect when made or shall have since ceased to be true and correct in any
material respect, and such breach, failure or misrepresentation is not cured
within thirty (30) days after notice thereof and such breach, failure or
misrepresentation, results or would reasonably be expected to result in a
Company Material Adverse Effect or an Acquiror Material Adverse Effect;
(c) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting consummation
of the Merger shall have become final and nonappealable;
(d) by either Acquiror or the Company if the Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of the
Company at the Stockholders' Meeting;
(e) by either the Company or Acquiror if the merger shall not have
been consummated before June 30, 1998 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 9.1(e)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date.
(f) by Acquiror if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified its approval or
recommendation of the Merger or this Agreement in any manner adverse to
Acquiror, or approved or recommended any Acquisition Proposal (other than the
Merger), or shall have resolved to take any of the foregoing actions (provided
that a termination pursuant to this provision will be subject to Section 9.3
hereof); and
60
(g) by the Company if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified its approval or
recommendation of the Merger or this Agreement in any manner adverse to
Acquiror, or approved or recommended any Acquisition Proposal (other than the
Merger); provided, however, that the Company has complied with all provisions of
Section 7.10(b), including the notice provisions therein, and the requirements
of Section 9.3 hereof (provided that the termination described in this clause
(g) shall not be effective unless and until the Company shall have paid to
Acquiror the fee described in Section 9.3 hereof).
SECTION 9.2. EFFECT OF TERMINATION.
Except as provided in Section 9.3 or Section 10.1, in the event of the
termination of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become void, there shall be no liability on the part of Acquiror,
Merger Sub or the Company or any of their respective officers or directors to
the other parties hereto and all rights and obligations of any party hereto
shall cease, except (i) to the extent that such termination results from the
willful or reckless breach by any party hereto of any of its representations or
warranties, or of any of its covenants or agreements, in each case, as set forth
in this Agreement, (ii) that nothing herein shall relieve any party for any
breach of this Agreement and (iii) that Sections 7.2 (Confidentiality) and 9.3
(Expenses) shall survive termination of this Agreement indefinitely.
SECTION 9.3. EXPENSES.
(a) The Company shall pay to Acquiror (the "Company Termination Fee")
by wire transfer the amount of Twenty Million Dollars ($20,000,000) if:
(i) the Company terminates this Agreement pursuant to Section 9.1(g),
in which case, the Company Termination Fee must be paid simultaneously with such
termination;
(ii) Acquiror terminates this Agreement pursuant to Section 9.1(f), in
which case, the Company Termination Fee must be paid no later than three
business days after the termination of this Agreement; or
(iii) (A) Acquiror or the Company terminates this Agreement pursuant
to Section 9.1(d), (B) the approval of this Agreement by the stockholders of the
Company shall have not been obtained by reason of the failure to obtain the
required vote at the Stockholders' Meeting (a "Company Negative Vote"), (C) at
the time of such Company Negative Vote there shall be pending an Acquisition
Proposal, and (D) within one year after such termination, the Company
consummates either (1) a merger, consolidation or other business combination
between the Company and any other person (other than Acquiror, Merger Sub or an
affiliate of Acquiror) or (2) the sale of 30% or
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more (in voting power) of the voting securities of the Company or of 30% or more
(in fair market value) of the assets of the Company and its Subsidiaries, on a
consolidated basis, in which case, the Company Termination Fee must be paid
simultaneously with the closing of the event described in clause (1) or (2) of
this subparagraph.
(b) Except as set forth above and in Sections 7.4, 7.5 and 9.2, all
fees and expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.
SECTION 9.4. AMENDMENT.
This Agreement may be amended by the parties hereto by action taken by
or on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of this Agreement and
the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Capital Stock shall be converted pursuant to this Agreement upon
consummation of the Merger or which by law otherwise requires the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 9.5. WAIVER.
At any time prior to the Effective Time, each party may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement by the other parties and (c) waive compliance by the other parties
with any of the agreements or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. No delay or failure on the part of any party
hereto in exercising any right, power or privilege under this Agreement or under
any other instrument or document given in connection with or pursuant to this
Agreement shall impair any such right, power or privilege or be construed as a
waiver of any default or any acquiescence therein. No single or partial exercise
of any such right, power or privilege shall preclude the further exercise of
such right, power or privilege, or the exercise of any other right, power or
privilege.
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ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement (and
in any certificate delivered in connection with the Closing) shall be deemed to
be conditions to the Merger (or the Exchange Offer, as applicable) and shall not
survive the Effective Time (or consummation of the Exchange Offer, as
applicable) or termination of this Agreement, except for the agreements set
forth in Articles I (the Merger) and II (Conversion of Securities; Exchange of
Certificates) and Sections 7.7 (Indemnification and Insurance), 7.8 (Employee
Benefits Matters) 7.9 (Further Action) and 7.15(g) (Subsequent Merger), each of
which shall survive the Effective Time (or consummation of the Exchange Offer,
as applicable) indefinitely, and Sections 7.2 (Confidentiality), 9.2 (Effect of
Termination) and 9.3 (Expenses), each of which shall survive termination of this
Agreement indefinitely.
SECTION 10.2. NOTICES.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted, and shall be effective upon receipt,
if delivered personally, mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Acquiror:
Loral Space & Communications Ltd.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
With a copy (which shall not constitute notice) to:
Xxxxxxx Xxxx & Xxxxxxxxx
One Citicorp Center 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
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(b) If to the Company:
Orion Network Systems, Inc.
0000 Xxxxxxxx Xxxxxxxxx Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: President
With a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
SECTION 10.3. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" means with respect to any shares of Capital
Stock or Acquiror Shares a person who shall be deemed to be the beneficial owner
of such shares (i) which such person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such person or any of its
affiliates or associates (as such term is defined in Rule 12b-2 of the Exchange
Act) has, directly or indirectly, (A) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or disposing of any
such shares or (iv) pursuant to Section 13(d) of the Exchange Act and any rules
or regulations promulgated thereunder;
(c) "business day" shall mean any day other than a day on which banks
in the State of Maryland are authorized or obligated to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
64
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
(f) "reasonable efforts" shall mean, as to a party hereto, an
undertaking by such party to perform or satisfy an obligation or duty or
otherwise act in a manner reasonably calculated to obtain the intended result by
action or expenditure not disproportionate or unduly burdensome in the
circumstances, which means, among other things, that such party shall not be
required to (i) expend funds other than for payment of the reasonable and
customary costs and expenses of employees, counsel, consultants, representatives
or agents of such party in connection with the performance or satisfaction of
such obligation or duty or other action or (ii) institute litigation or
arbitration as a part of its reasonable efforts.
SECTION 10.4. HEADINGS.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
SECTION 10.5. 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 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.
SECTION 10.6. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the Schedules and the
other documents delivered pursuant hereto) and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided
65
herein, are not intended to confer upon any other person any rights or remedies
hereunder.
SECTION 10.7. SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique.
Accordingly, each of the parties acknowledges and agrees that, in addition to
all other remedies to which it may be entitled, each of the parties hereto is
entitled to a decree of specific performance, provided such party is not in
material default hereunder.
SECTION 10.8. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
SECTION 10.9. THIRD PARTY BENEFICIARIES.
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 other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement except for (a) the
Indemnified Parties under Section 7.7, and (b) the rights of the holders of
Capital Stock to receive the Merger Consideration payable in the Merger pursuant
to Article II or to receive the Exchange Consideration payable in the Exchange
Offer pursuant to Section 7.15.
SECTION 10.10. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the Delaware Law, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law.
SECTION 10.11. COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be executed and delivered as of the date first written above.
LORAL SPACE & COMMUNICATIONS LTD.
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President, General Counsel
and Secretary
LORAL SATELLITE CORPORATION
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President, General Counsel
and Secretary
ORION NETWORK SYSTEMS, INC.
By: /s/ W. Xxxx Xxxxx
-----------------------------------------
Name: W. Xxxx Xxxxx
Title: President and Chief Executive
Officer
67
EXHIBIT A TO AGREEMENT AND PLAN OF MERGE
FORM OF AFFILIATE LETTER
_________________ ________, 1997
Loral Space & Communications Ltd.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of Orion Network Systems, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). I have been further advised that
pursuant to the terms of the Agreement and Plan of Merger dated as of October 7,
1997 (the "Merger Agreement"), among the Company, Loral Space & Communications
Ltd., a Bermuda company ("Acquiror"), and Loral Satellite Corporation, a
Delaware corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"),
Merger Sub will be merged with and into the Company (the "Merger"), and that as
a result of the Merger, I may receive Acquiror Shares (as defined in the Merger
Agreement), in exchange for shares of Common Stock (as defined in the Merger
Agreement), owned by me.
I represent, warrant and covenant to Acquiror that in the event I
receive any Acquiror Shares as a result of the Merger:
(a) I shall not make any sale, transfer or other disposition of the
Acquiror Common Stock in violation of the Act or the Rules and Regulations.
(b) I have carefully read this letter and the Merger Agreement and
discussed their respective requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Acquiror Shares.
(c) I have been advised that the issuance of Acquiror Shares to me
pursuant to the Merger will be registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger will be submitted for a vote of the stockholders of
the
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Company, I may be deemed to have been an affiliate of the Company and the
distribution by me of Acquiror Shares has not been registered under the Act, I
may not sell, transfer or otherwise dispose of Acquiror Shares issued to me in
the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is made
in conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, or (iii) in accordance with a legal opinion of
counsel reasonably acceptable to Acquiror, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
(d) I understand that Acquiror is under no obligation to register the
sale, transfer or other disposition of Acquiror Shares by me or on my behalf
under the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available.
(e) I also understand that stop transfer instructions will be given to
Acquiror's transfer agent with respect to Acquiror Shares and that there will be
placed on the certificates for Acquiror Shares issued to me, or any
substitutions therefor, a legend stating in substance:
"The securities represented by this certificate have been issued in a
transfer to which Rule 145 promulgated under the Securities Act of 1933 applies
and may only be sold or otherwise transferred in compliance with the
requirements of Rule 145 or pursuant to a registration statement under said act
or an exemption from such registration."
(f) I also understand that unless the transfer by me of my Acquiror
Shares has been registered under the Act or is a sale made in conformity with
the provisions of Rule 145, Acquiror reserves the right to put the following
legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered under the
Securities Act of 1933 and were acquired from a person who received such shares
in a transaction to which Rule 145 promulgated under the Securities Act of 1933
applies. The shares have been acquired by the holder not with a view to, or for
resale in connection with, any distribution thereof within the meaning of the
Securities Act of 1933 and may not be sold, pedged or otherwise
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transferred except in accordance with an exemption from the registration
requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs
(e) and (f) above shall be removed by delivery of substitute certificates
without such legend if the undersigned shall have delivered to Acquiror a copy
of a letter from the staff of the Commission, or a legal opinion of counsel in
form and substance reasonably satisfactory to Acquiror, to the effect that such
legend is not required for purposes of the Act.
Execution of this letter should not be construed as an admission by me
that I am an "affiliate" of the Company as described in the first paragraph
hereof or considered as a waiver of any rights that I may have to object to any
claim that I am such an affiliate on or after the date hereof.
I understand that pursuant to the Merger Agreement, no certificate for
Acquiror Shares shall be delivered to me in exchange for certificates
representing Common Stock until I have executed and delivered this Agreement.
Very truly yours,
By: -----------------------------------
Name: -----------------------------------
Accepted this_____ day of
__________________, 1997 by
LORAL SPACE & COMMUNICATIONS LTD.
By:______________________________
Name:____________________________
Title:___________________________
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