EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
AMONG
GENERAL MOTORS CORPORATION,
XXXXXX ELECTRONICS CORPORATION
AND
UNITED STATES SATELLITE BROADCASTING COMPANY, INC.
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TABLE OF CONTENTS
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ARTICLE 1
THE MERGER . . . . . . . . . . . . . . . . 1
1.1. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Closing of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . 2
1.6. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
CONVERSION OF SHARES; MERGER CONSIDERATION . . . . . . . . 3
2.1. Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Stock and Cash Elections; Exchange Fund . . . . . . . . . . . . . . . . . . 5
2.4. Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . 11
3.2. Capitalization of the Company and Its Subsidiaries. . . . . . . . . . . . . 12
3.3. Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . . 14
3.4. SEC Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . 14
3.5. Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6. Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . 15
3.7. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8. No Undisclosed Liabilities; Absence of Changes. . . . . . . . . . . . . . . 16
3.9. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10. Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 17
3.11. Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14. Opinion of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . 24
3.15. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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3.16. Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.17. Labor and Employment Matters. . . . . . . . . . . . . . . . . . . . . . . . 26
3.18. FCC Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.19. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.21. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.22. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.23. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.24. Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.25. Programming Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.26. Consolidation Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.27. No Other Representations or Warranties. . . . . . . . . . . . . . . . . . . 29
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF GM AND XXXXXX. . . . . . . . . . . . . . . 29
4.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . 29
4.2. Capitalization of GM and Its Subsidiaries . . . . . . . . . . . . . . . . . 29
4.3. Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . . 30
4.4. SEC Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . 30
4.5. Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.6. Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . 31
4.7. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.8. No Undisclosed Liabilities; Absence of Changes. . . . . . . . . . . . . . . 32
4.9. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.10. Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 32
4.11. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.12. Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.14. FCC Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.15. No Other Representations or Warranties. . . . . . . . . . . . . . . . . . . 34
ARTICLE 5
COVENANTS. . . . . . . . . . . . . . . . . 35
5.1. Conduct of Business of the Company. . . . . . . . . . . . . . . . . . . . . 35
5.2. Conduct of Business of GM and Xxxxxx. . . . . . . . . . . . . . . . . . . . 37
5.3. Preparation of S-4 and the Proxy Statement. . . . . . . . . . . . . . . . . 38
5.4. Company Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.5. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.6. Letter of the Company's Accountants . . . . . . . . . . . . . . . . . . . . 39
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5.7. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.8. Additional Agreements; Reasonable Best Efforts. . . . . . . . . . . . . . . 41
5.9. Regulatory Reviews. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.10. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.11. Directors' and Officers' Insurance; Indemnification . . . . . . . . . . . . 42
5.12. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . 43
5.13. Tax-Free Reorganization Treatment . . . . . . . . . . . . . . . . . . . . . 43
5.14. Company Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.15. SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.16. Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.17. Ancillary Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.18. Billing and Customer Management Systems . . . . . . . . . . . . . . . . . . 47
5.19. 110DEG. Construction Permit. . . . . . . . . . . . . . . . . . . . . . . . 47
5.20. Spring Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.21. Confirmatory Certificates; Communications . . . . . . . . . . . . . . . . . 47
5.22. Affiliate Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER. . . . . . . . . 48
6.1. Conditions to Each Party's Obligations to Effect the Merger . . . . . . . . 48
6.2. Conditions to the Obligations of the Company. . . . . . . . . . . . . . . . 49
6.3. Conditions to the Obligations of GM and Xxxxxx. . . . . . . . . . . . . . . 49
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . 51
7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 8
MISCELLANEOUS. . . . . . . . . . . . . . . . 52
8.1. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . 52
8.2. Entire Agreement; Assignment. . . . . . . . . . . . . . . . . . . . . . . . 52
8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.4. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.5. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.6. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.7. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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8.8. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.9. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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EXHIBITS
Exhibit A - Shareholders Agreement
Exhibit B-1 - Company Tax Certificate
Exhibit B-2 - Shareholder Tax Certificate
Exhibit B-3 - Xxxxxx Tax Certificate
Exhibit C - Form of Consulting Agreement
Exhibit D - Non-Competition Agreement
Exhibit E - Transition Services Agreement
Exhibit F - Replacement Payload Option Agreement
Exhibit G - Channel Capacity Provision Agreement
Exhibit H - United States Satellite Broadcasting Company, Inc. Closing
Certificate
v
GLOSSARY OF DEFINED TERMS
DEFINED TERMS DEFINED IN SECTION
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110DEG. Construction Permit. . . . . . . . . . . . . . . . . . . 3.18
20-Day Average Price. . . . . . . . . . . . . . . . . . . . . . . 2.2(a)(ii)(3)
Acquiror Certificates . . . . . . . . . . . . . . . . . . . . . . 2.3(d)
Acquiror Share Cap. . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)(i)
Acquiror Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)(ii)(1)
Acquisition Proposal. . . . . . . . . . . . . . . . . . . . . . . 5.5(a)
Adjusted Price. . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)(ii)
ADS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.26
Adverse Environmental Condition . . . . . . . . . . . . . . . . . 5.7(b)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Allocation Determination. . . . . . . . . . . . . . . . . . . . . 2.3(c)
Ancillary Agreements. . . . . . . . . . . . . . . . . . . . . . . 5.17
Cap Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)(i)(A)
Cash Cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)(iii)
Cash Consideration Per Share. . . . . . . . . . . . . . . . . . . 2.2(a)(i)
Cash Election . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)(i)
Class A Common Stock. . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Closing Date Price. . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)(iv)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Communications Act. . . . . . . . . . . . . . . . . . . . . . . . 3.6
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 5.14
Company Board . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Company Certificate . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
Company Common Stock. . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Company Disclosure Schedule . . . . . . . . . . . . . . . . . . . 3.1(b)
Company Employee Benefit Plan . . . . . . . . . . . . . . . . . . 3.11(a)
Company Financial Advisors. . . . . . . . . . . . . . . . . . . . 3.14
Company Permits . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Company Securities. . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Company Stock Options . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . 5.7(d)
D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11(a)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
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DEFINED TERMS DEFINED IN SECTION
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DIRECTV Benefit Plan. . . . . . . . . . . . . . . . . . . . . . . 4.12(a)
DIRECTV FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . 4.14
Dissenters' Rights Statute. . . . . . . . . . . . . . . . . . . . 2.5
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Election Deadline . . . . . . . . . . . . . . . . . . . . . . . . 2.3(c)
Election Form . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(2)
Environmental Investigation . . . . . . . . . . . . . . . . . . . 5.7(b)
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(1)
Environmental Permit. . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(3)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11(a)
Excess Termination Amount . . . . . . . . . . . . . . . . . . . . 2.2(b)(ii)
Excess Termination Amount Per Share . . . . . . . . . . . . . . . 2.2(b)(ii)(A)
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(d)
Excise Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.16(j)
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.18
FCC Application . . . . . . . . . . . . . . . . . . . . . . . . . 3.18
FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.18
Filed Company SEC Reports . . . . . . . . . . . . . . . . . . . . 3.4(a)
Filed GM SEC Reports. . . . . . . . . . . . . . . . . . . . . . . 4.8
Floor Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)(1)(A)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
GM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
GM Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10
GM SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . 3.6
Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(4)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
Xxxxxx. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Xxxxxx Securities . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . 5.11(b)
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 3.19(b)
Latest Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.22
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . 3.16(a)
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
vii
DEFINED TERMS DEFINED IN SECTION
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Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Minimum Cash Amount . . . . . . . . . . . . . . . . . . . . . . . 2.4(e)(v)
NPL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(m)
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)(ii)(3)
Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.16(j)
Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.16(e)
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(5)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(b)
Redacted Contracts. . . . . . . . . . . . . . . . . . . . . . . . 5.7(a)
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(6)
Relocation Package. . . . . . . . . . . . . . . . . . . . . . . . 5.16(b)
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . 3.12(a)(7)
Requested Cash Amount . . . . . . . . . . . . . . . . . . . . . . 2.4(e)(vi)
S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5(a)
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4(a)
Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)(ii)(2)
Shareholders Agreement. . . . . . . . . . . . . . . . . . . . . . Recitals
Spring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.20
Statutory Committee . . . . . . . . . . . . . . . . . . . . . . . Recitals
Stock Consideration Per Share . . . . . . . . . . . . . . . . . . 2.2(a)(ii)
Stock Election. . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)(ii)
subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . 1.1
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13(a)
tax returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13(a)
viii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 11, 1998
(the "AGREEMENT"), is among GENERAL MOTORS CORPORATION, a Delaware
corporation ("GM"), XXXXXX ELECTRONICS CORPORATION, a Delaware corporation
and a direct wholly owned subsidiary of GM ("XXXXXX"), and UNITED STATES
SATELLITE BROADCASTING COMPANY, INC., a Minnesota corporation (the "COMPANY").
WHEREAS, the Board of Directors of the Company and the committee of
disinterested directors of the Company formed pursuant to Section 302A.673,
subd. 1(d) of the MBCA (as defined in Section 1.1) (the "STATUTORY
COMMITTEE") have determined that the Merger (as defined in Section 1.1) is
fair to and in the best interests of the Company's shareholders and have
approved the Merger in accordance with this Agreement;
WHEREAS, the respective Boards of Directors of GM and Xxxxxx have
determined that the Merger is advisable and in the best interests of Xxxxxx,
XX and GM's common stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE");
WHEREAS, concurrently with the execution hereof, certain holders of
shares of Company Common Stock (as defined in Section 3.2) are entering into
an agreement providing for certain matters with respect to their shares of
Company Common Stock (the "SHAREHOLDERS AGREEMENT"), a copy of which is
attached hereto as EXHIBIT A; and
WHEREAS, GM, Xxxxxx and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, GM,
Xxxxxx and the Company hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. THE MERGER. At the Effective Time, upon the terms and
subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL") and the Minnesota Business
Corporations Act (the "MBCA"), the Company shall be merged with and into
Xxxxxx (the "MERGER"). Following the Merger, Xxxxxx shall continue as the
surviving corporation (the "SURVIVING CORPORATION") and shall continue its
corporate existence under the DGCL, and the separate corporate existence of
the Company shall cease.
1.2. EFFECTIVE TIME. Subject to the provisions of this Agreement,
GM, Xxxxxx and the Company shall cause the Merger to be consummated by (i)
filing a certificate of merger complying with the DGCL with the Secretary of
State of the State of Delaware and (ii) filing articles of merger complying
with the MBCA with the Secretary of State of the State of Minnesota, in each
case as soon as practicable on or after the Closing Date (as defined in
Section 1.3). The Merger shall become effective upon the later of such
filings or at such time thereafter as is provided in such certificate of
merger and such articles of merger (the "EFFECTIVE TIME").
1.3. CLOSING OF THE MERGER. The closing of the Merger (the
"CLOSING") will take place at a time and on a date (the "CLOSING DATE") to be
specified by the parties, which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article 6, at
the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, unless another time, date or place is agreed to in writing by the
parties hereto.
1.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL and the MBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, immunities, powers and franchises of the Company and
Xxxxxx shall vest in the Surviving Corporation, and all debts, liabilities,
obligations and duties of the Company and Xxxxxx shall become the debts,
liabilities, obligations and duties of the Surviving Corporation.
1.5. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Xxxxxx in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, until
amended in accordance with such Certificate of Incorporation and the DGCL.
The Bylaws of Xxxxxx in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation, until amended in accordance with
such Bylaws and the DGCL.
1.6. DIRECTORS. The directors of Xxxxxx immediately prior to the
Effective Time 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 until such director's successor is duly
elected or appointed and qualified.
1.7. OFFICERS. The officers of Xxxxxx at the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
2
ARTICLE 2
CONVERSION OF SHARES; MERGER CONSIDERATION
2.1. CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of any of the parties hereto or
any holder of shares of Company Common Stock:
(a) COMMON STOCK OF XXXXXX AND GM. Each issued and outstanding
share of common stock, par value $1.00 per share, of Xxxxxx shall remain
outstanding and shall be unchanged as a result of the Merger. The issued and
outstanding securities of GM shall remain outstanding and shall be unchanged
as a result of the Merger.
(b) CANCELLATION OF TREASURY SHARES AND GM-OWNED SHARES. Each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (each, a "SHARE") that is owned by the Company or any
subsidiary of the Company, or by GM or Xxxxxx (other than Shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) shall automatically be cancelled and
shall cease to exist, and no consideration shall be delivered or deliverable
in exchange therefor.
(c) COMMON STOCK OF THE COMPANY. Each Share, other than Shares
to be cancelled in accordance with Section 2.1(b) and any Dissenting Shares
(as defined in Section 2.5), shall be converted, in accordance with Section
2.2(a), into the right to receive the Merger Consideration (as defined in
Section 2.2(a)) and shall cease to be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a certificate
previously evidencing any such Shares (each, a "COMPANY CERTIFICATE") shall
cease to have any rights with respect thereto, except the right to receive,
upon the surrender of such Company Certificate in accordance with the
provisions of Section 2.3, the Merger Consideration multiplied by the number
of Shares previously evidenced by such Company Certificate.
2.2. MERGER CONSIDERATION.
(a) MERGER CONSIDERATION. Except as otherwise provided in
Section 2.4 and subject to Section 2.5, the term "MERGER CONSIDERATION" shall
mean, at the election of each holder of Shares, which election shall be
available on a share-by-share basis, one of the following:
(i) for each Share with respect to which an election to
receive cash has been effectively made or deemed made pursuant to
Section 2.3 and not revoked (a "CASH ELECTION"), the right to receive
an amount in cash, without interest, equal to the Share Value (the
"CASH CONSIDERATION PER SHARE"); or
(ii) for each Share with respect to which an election to
receive shares of Acquiror Stock has been effectively made pursuant to
Section 2.3 and not revoked (a "STOCK ELECTION"), the right to receive
a fractional interest
3
in a share of Acquiror Stock equal to the Exchange Ratio (as defined
in Section 2.2(b)) (the "STOCK CONSIDERATION PER SHARE"), subject to
Section 2.3(h).
For purposes of this Agreement:
(1) "ACQUIROR STOCK" shall mean the Class H Common Stock of
GM, par value $0.10 per share;
(2) "SHARE VALUE" shall mean the product of (x) the Exchange
Ratio and (y) the 20-Day Average Price; and
(3) "20-DAY AVERAGE PRICE" shall mean the average (rounded
to nearest 1/10,000, or if there shall not be a nearest 1/10,000, to
the next highest 1/10,000) of the volume weighted averages (rounded to
the nearest 1/10,000, or if there shall not be a nearest 1/10,000, to
the next highest 1/10,000) of the trading prices of the Acquiror Stock
on the New York Stock Exchange, Inc. (the "NYSE") as reported by
Bloomberg Financial Markets (or such other source as the parties shall
agree in writing) for each of the 20 consecutive trading days ending
on and including the second trading day prior to the Closing Date;
(b) EXCHANGE RATIO.
(i) The Exchange Ratio shall be determined in the following
manner, subject to reduction pursuant to Section 2(b)(ii):
(A) If the 20-Day Average Price is less than or equal
to $47.6821 (the "CAP PRICE"), and greater than or equal to
$27.8146 (the "FLOOR PRICE"), the Exchange Ratio shall be equal
to 0.3775.
(B) If the 20-Day Average Price is greater than the Cap
Price, the Exchange Ratio shall be equal to the quotient obtained
by dividing $18.00 by the 20-Day Average Price (such quotient
shall be rounded to the nearest 1/10,000, or if there shall not
be a nearest 1/10,000 to the next lowest 1/10,000).
(C) If the 20-Day Average Price is less than the Floor
Price, the Exchange Ratio shall be equal to the quotient obtained
by dividing (x) the lower of (1) $10.50 and (2) the Adjusted
Price (as defined in Section 2.4(e)) by (y) the 20-Day Average
Price (such quotient shall be rounded to the nearest 1/10,000, or
if there shall not be a nearest 1/10,000, to the next highest
1/10,000).
(ii) The Exchange Ratio shall be reduced by the amount
determined by:
4
(A) first, dividing the Excess Termination Amount by the
number of Shares (such quotient, the "EXCESS TERMINATION AMOUNT PER
SHARE"), and
(B) then, dividing the Excess Termination Amount Per Share
by the 20-Day Average Price (the resulting quotient shall be rounded
to the nearest 1/10,000 or, if there shall not be a nearest 1/10,000,
to the next highest 1/10,000).
The "EXCESS TERMINATION AMOUNT" shall be the sum of (x) the amount, if
any, by which the payments made or required to be made by the Company
or any of its subsidiaries after the date hereof arising out of or
relating to the termination of the contract identified on Section
2.2(b)(ii)(x) of the Acquiror Disclosure Schedule exceed the
Termination Amount in respect thereof set forth therein, and (y) the
amount, if any, by which the payments made or required to be made by
the Company or any of its subsidiaries after the date hereof arising
out of or relating to the termination of the contract identified in
Section 2.2(b)(ii)(y) of the Acquiror Disclosure Schedule exceed the
Termination Amount in respect thereof set forth in therein.
(iii) If between the date of this Agreement and the Effective
Time, the outstanding shares of Acquiror Stock or Company Common Stock
shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, rights offering, split,
combination or exchange of shares, the Exchange Ratio correspondingly
shall be adjusted to the extent warranted to reflect such stock
dividend, subdivision, reclassification, recapitalization, rights
offering, split, combination or exchange of shares.
2.3. STOCK AND CASH ELECTIONS; EXCHANGE FUND.
(a) RIGHT TO ELECT. Each Person who, at the Effective Time, is
a record holder of Shares (other than holders of Shares to be cancelled as
set forth in Section 2.1(b) or Shares subject to Section 2.5) shall have the
right to submit an Election Form (as defined in Section 2.3(b)) specifying
the number of Shares that such Person desires to have converted into the
right to receive, subject to Section 2.4, (i) the Stock Consideration Per
Share pursuant to the Stock Election and (ii) the Cash Consideration Per
Share pursuant to the Cash Election.
(b) LETTER OF TRANSMITTAL AND ELECTION FORM. As soon as
reasonably practicable after the Effective Time, a bank or trust company to
be designated by GM (the "EXCHANGE AGENT") shall mail to each holder of
record of Shares immediately prior to the Effective Time (excluding any
Shares to be cancelled pursuant to Section 2.1(b) or subject to Section 2.5)
(i) a letter of transmittal (the "LETTER OF TRANSMITTAL") which shall specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of such Company Certificates to
the Exchange Agent and shall be in such form and have such other provisions
as GM shall reasonably specify, (ii) an election form (the "ELECTION FORM")
providing for such holders to make the Cash Election or the Stock
5
Election and (iii) instructions for use in effecting the surrender of the
Company Certificates in exchange for the Merger Consideration with respect to
the Shares formerly represented thereby. The Election Form shall include
information as to the Share Value and the Exchange Ratio. As of the Election
Deadline (as hereinafter defined), to the extent that a holder of Shares
shall not have submitted to the Exchange Agent an effective, properly
completed Election Form with respect to all or certain of the Shares held by
such holder or shall have properly revoked and not properly submitted to the
Exchange Agent a subsequent Election Form with respect to all or certain of
the Shares, such holder shall be deemed to have made the Cash Election with
respect to such Shares.
(c) ELECTION DEADLINE AND ALLOCATION DETERMINATION. Any Stock
Election shall have been validly made only if the Exchange Agent shall have
received by 5:00 p.m. New York, New York time on a date (the "ELECTION
DEADLINE") to be mutually agreed upon by Xxxxxx and the Company (which date
shall not be later than the twentieth (20th) business day after the Effective
Time), an Election Form properly completed and executed (with the signature
or signatures thereof guaranteed to the extent required by the Election Form)
by such holder accompanied by such holder's Company Certificates, or by an
appropriate guarantee of delivery of such Company Certificates from a member
of any registered national securities exchange or of the National Association
of Securities Dealers, Inc. or a commercial bank or trust company in the
United States as set forth in such Election Form. Any holder of Shares
(other than a holder who has submitted an irrevocable election) who has made
an election by submitting an Election Form to the Exchange Agent may at any
time prior to the Election Deadline change such holder's election by
submitting a revised Election Form, properly completed and signed that is
received by the Exchange Agent prior to the Election Deadline. Any holder of
Shares may at any time prior to the Election Deadline revoke such holder's
election by written notice to the Exchange Agent received by the close of
business on the day prior to the Election Deadline. As soon as practicable
after the Election Deadline, the Exchange Agent shall, subject to Section
2.4, determine the allocation of the cash portion of the Merger Consideration
and the stock portion of the Merger Consideration and shall notify GM, Xxxxxx
and HBI (as a representative of the shareholders of the Company) of its
determination (the "ALLOCATION DETERMINATION").
(d) DEPOSIT OF MERGER CONSIDERATION. Promptly after the
Allocation Determination, Xxxxxx shall deposit with the Exchange Agent, for
the benefit of the holders of Shares for exchange in accordance with this
Article 2, (i) cash in an amount sufficient to pay the aggregate Merger
Consideration that shall take the form of cash and (ii) certificates or other
evidence representing the aggregate Merger Consideration that shall take the
form of shares of Acquiror Stock ("ACQUIROR CERTIFICATES"; the cash and
certificates or other evidence deposited pursuant to clauses (i) and (ii)
being hereinafter referred to as the "EXCHANGE FUND"). The Acquiror Stock
into which Company Common Stock shall be converted pursuant to the Merger
shall be deemed to have been issued at the Effective Time for purposes of
entitlement to dividends declared, if any, after the Effective Time. In
connection with the issuance of shares of Acquiror Stock pursuant to this
Agreement and the contribution by GM to the capital of Xxxxxx of cash in an
amount no less than the fair market value of such shares, GM's Board of
Directors shall, in accordance with paragraph (a)(4) of Division I of Article
Fourth of GM's Amended and Restated Certificate of Incorporation, as amended,
make an appropriate adjustment to the denominator of the
6
fraction used to determine the "Available Separate Consolidated Net Income of
Xxxxxx," as defined therein.
(e) SURRENDER OF COMPANY CERTIFICATES. Upon surrender of a
Company Certificate to the Exchange Agent, together with the Letter of
Transmittal, duly executed, and such other documents as Xxxxxx or the
Exchange Agent shall reasonably request, the holder of such Company
Certificate shall be entitled to receive, promptly after the Election
Deadline in exchange therefor, (i) a certified or bank cashier's check in the
amount equal to the aggregate amount of the Merger Consideration consisting
of cash which such holder has the right to receive pursuant to the provisions
of this Article 2 (including any cash in lieu of fractional shares of
Acquiror Stock pursuant to Section 2.3(h)) and (ii) Acquiror Certificates
representing the Acquiror Stock, if any, which such holder has the right to
receive (in each case without interest and less the amount of any required
withholding taxes, if any, in accordance with Section 2.3(k)).
(f) RULES GOVERNING EXCHANGE. Xxxxxx, in consultation with the
Company prior to the Effective Time, shall have the right to make reasonable
rules, not inconsistent with the terms of this Agreement, governing the
validity of the Election Forms, the manner and extent to which Cash Elections
or Stock Elections are to be taken into account in making the determinations
prescribed by Section 2.4, the issuance and delivery of certificates for, or
other evidence of, Acquiror Stock, and the payment of the Cash Consideration
Per Share.
(g) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF ACQUIROR
STOCK. No dividends or other distributions with respect to shares of
Acquiror Stock, with a record date after the Effective Time, shall be paid to
the holder of any unsurrendered Company Certificate with respect to the
shares of Acquiror Stock they are entitled to receive until such Company
Certificate is surrendered by such holder.
(h) FRACTIONAL SHARES. No fraction of a share of Acquiror Stock
shall be issued in the Merger. In lieu of any such fractional shares, each
holder of Shares entitled to receive a fraction of a share of Acquiror Stock
in the Merger, upon surrender of a Company Certificate for exchange pursuant
to this Section 2.3, shall be paid in lieu thereof an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (x) the
Share Value by (y) the fractional interest in Acquiror Stock to which such
holder would otherwise be entitled (after aggregating all shares of Acquiror
Stock which such holder is entitled to receive pursuant to this Article 2).
(i) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the former holders of Shares for twelve
(12) months after the Effective Time shall be delivered to Xxxxxx, upon
demand, and any former holders of Shares who have not theretofore complied
with this Article 2 shall thereafter look only to Xxxxxx for the Merger
Consideration to which they are entitled pursuant to this Article 2.
(j) NO LIABILITY. None of GM, Xxxxxx or the Company shall be
liable to any former holder of Shares for any Merger Consideration from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
7
(k) WITHHOLDING RIGHTS. GM, Xxxxxx and the Exchange Agent shall
be entitled to deduct and withhold, from the consideration otherwise payable
pursuant to this Agreement to any former holder of Shares, such amounts as
GM, Xxxxxx, the Company (or any subsidiary thereof) or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment
under the Code or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by GM, Xxxxxx or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the former holder of the Shares in respect of which such
deduction and withholding was made by GM, Xxxxxx or the Exchange Agent.
2.4. PRORATIONS.
(a) REQUESTED CASH AMOUNT NOT IN EXCESS OF CASH CAP AND NOT
BELOW MINIMUM CASH AMOUNT. If the Requested Cash Amount equals or exceeds
the Minimum Cash Amount and does not exceed the Cash Cap, the Merger
Consideration shall be issued and paid in the manner set forth in Section
2.2, unless the 20-Day Average Price is less than the Floor Price and the
Acquiror Stock to be issued pursuant to this Agreement would exceed the
Acquiror Share Cap, in which case the adjustments set forth in Section 2.4(d)
shall be made.
(b) REQUESTED CASH AMOUNT IN EXCESS OF CASH CAP. If the
Requested Cash Amount exceeds the Cash Cap, each holder who makes or is
deemed to have made a Cash Election pursuant to Section 2.3 shall receive,
for each Share for which a Cash Election has been made or deemed made, Merger
Consideration consisting of:
(i) cash in an amount equal to the product of the Share
Value and a fraction, (A) the numerator of which is the Cash Cap and
(B) the denominator of which is the Requested Cash Amount; and
(ii) a fractional interest in a share of Acquiror Stock equal
to a fraction, (A) the numerator of which is equal to the Share Value
minus the amount of cash payable pursuant to clause (i) of this
Section 2.4(b) and (B) the denominator of which is the 20-Day Average
Price.
(c) REQUESTED CASH AMOUNT BELOW MINIMUM CASH AMOUNT. If the
Requested Cash Amount is less than the Minimum Cash Amount and the 20-Day
Average Price equals or exceeds the Floor Price, each holder making a Stock
Election shall receive, for each Share for which a Stock Election has been
made, Merger Consideration consisting of:
(i) cash in an amount equal to the quotient obtained by
dividing (A) the excess of the Minimum Cash Amount over the Requested
Cash Amount by (B) the number of Shares for which such Stock Elections
have been made; and
(ii) a fractional interest in a share of Acquiror Stock
equal to a fraction, (A) the numerator of which is equal to the excess
of the Share Value
8
over the amount of cash payable pursuant to clause (i) of this
Section 2.4(c) and (B) the denominator of which is the 20-Day Average
Price.
(d) ADJUSTMENTS REQUIRED IF 20-DAY AVERAGE PRICE IS LESS THAN
FLOOR PRICE. If (A) the 20-Day Average Price is less than the Floor Price,
(B) the Requested Cash Amount does not exceed the Cash Cap, and (C) the
number of shares of Acquiror Stock that would be issuable pursuant to this
Agreement would, but for this Section 2.4(d), exceed the Acquiror Share Cap,
then each holder making a Stock Election shall receive, for each Share for
which a Stock Election has been made, Merger Consideration consisting of:
(x) a fractional interest in a share of Acquiror Stock
equal to the product of the Stock Consideration Per Share and a
fraction, (I) the numerator of which is the Acquiror Share Cap and (II)
the denominator of which is the total number of shares of Acquiror
Stock that, but for Section 2.4, would have been issuable to all
holders of Shares pursuant to this Agreement, and
(y) an amount of cash equal to the excess of (I) the
Share Value over (II) the product of (a) the fractional interest in a
share of Acquiror Stock to which such holder shall be entitled pursuant
to clause (x) of this Section 2.4(d) and (b) the 20-Day Average Price.
(e) CERTAIN DEFINITIONS. For purposes of this Agreement:
(i) "ACQUIROR SHARE CAP" shall mean a number equal to
seventy percent (70%) of the product of the number of Shares and
0.3775.
(ii) "ADJUSTED PRICE" shall mean an amount equal to the
quotient obtained by dividing (1) an amount equal to two hundred
percent (200%) of the product of the Acquiror Share Cap and the 20-Day
Average Price by (2) the number of Shares.
(iii) "CASH CAP" shall mean an amount of cash determined as
follows:
(A) If the 20-Day Average Price equals or exceeds the
Floor Price, the Cash Cap shall be equal to fifty percent (50%) of the
product of (1) the Exchange Ratio, and (2) the Closing Date Price, and
(3) the number of Shares.
(B) If the 20-Day Average Price is less than the
Floor Price, the Cash Cap shall be equal to the lesser of (1) the
amount described in clause (A) of this Section 2.4(e)(iii) and (2) the
product of (X) the Acquiror Share Cap and (Y) the Closing Date Price.
(C) Notwithstanding anything to the contrary
contained in this Agreement, if, based on the Merger Consideration
payable pursuant to this Agreement, the tax opinions referred to in
Sections 6.2(e) and 6.3(h) hereof
9
cannot be delivered as a result of the Merger potentially failing
to satisfy continuity of interest requirements under applicable
federal income tax principles relating to reorganizations under
368(a) of the Code (as reasonably determined by Weil, Gotshal &
Xxxxxx LLP, in consultation with Xxxxxxx, Street and Deinard
Professional Association, such determination to be made (x) taking
into account Dissenting Shares and cash issued in lieu of
fractional shares, if any, (y) using the Closing Date Price as the
measure of value of the shares of Acquiror Stock issued as Merger
Consideration and (z) on the basis that the total value of such
Acquiror Stock issued as Merger Consideration must represent no
less than forty-five percent (45%) of the total consideration
issued and to be issued in the Merger to all holders of Shares),
then the Cash Cap shall be reduced to the extent necessary to
enable the tax opinions to be rendered.
(iv) "CLOSING DATE PRICE" shall mean the per share closing
price of the Acquiror Stock on the NYSE as of the Closing Date.
(v) "MINIMUM CASH AMOUNT" shall mean an amount equal to the
lesser of (A) 30% of the product of the Share Value and the number of
Shares and (B) the Cash Cap.
(vi) "REQUESTED CASH AMOUNT" shall mean the aggregate amount
of cash that would be payable with respect to all Shares for which
Cash Elections have been made or deemed made pursuant to Section 2.3
or 2.5, before giving effect to Section 2.4.
(f) APPLICATION OF CASH AND SHARE LIMITATIONS. The foregoing
provisions of this Article 2 are not intended to, and shall not be applied so as
to, result in:
(i) the issuance of an aggregate number of shares of
Acquiror Stock in excess of the Acquiror Share Cap;
(ii) the payment of an aggregate amount of cash in excess of
the Cash Cap;
(iii) the receipt by a holder of Merger Consideration per
Share having an aggregate value (with Merger Consideration in the form
of Acquiror Stock valued for this purpose at the 20-Day Average Price)
less than the Share Value unless both (x) the aggregate number of
shares of Acquiror Stock to be issued is equal to the Acquiror Share
Cap, and (y) the aggregate amount of cash to be paid is equal to the
product of (1) the Acquiror Share Cap and (2) the Closing Date Price;
or
(iv) the receipt by a holder making a Cash Election of a
value per Share which is different from the value per Share received
by a holder making a Stock Election (with Acquiror Stock valued for
this purpose at the 20-Day Average Price).
10
2.5. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares held by a holder (if any) who has the right
to exercise dissenters' rights under Section 302A.471 and Section 302A.473 of
the MBCA, or any successor provisions (the "DISSENTERS' RIGHTS STATUTE") and
who shall have filed with the Company, prior to the vote by the shareholders
of the Company on this Agreement and the Merger, a notice of intent to demand
payment of the fair value of such Shares in accordance with the Dissenters'
Rights Statute and shall not have voted to approve this Agreement and the
Merger ("DISSENTING SHARES") shall not be converted into a right to receive
the Merger Consideration, unless such holder fails to perfect or otherwise
loses such holder's right to exercise such holder's dissenters' rights with
respect to such Shares, if any. If, before or after the Effective Time, such
holder fails to perfect or loses any such right to exercise such holder's
dissenters' rights with respect to such Shares, each such Share of such
holder shall be treated as a Share that had been converted as of the
Effective Time into the right to receive the Merger Consideration and such
holder shall be deemed to have made the Cash Election. At the Effective Time,
any holder of Dissenting Shares shall cease to have any rights with respect
thereto, except the rights provided in the Dissenters' Rights Statute and as
provided in the immediately preceding sentence. The Company shall give
prompt notice to Xxxxxx of any notices of intent to demand fair value of
Shares in accordance with the Dissenters' Rights Statute received by the
Company, and Xxxxxx shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Xxxxxx, make any payment with
respect to, or settle or offer to settle, any such demands.
2.6. STOCK OPTIONS. The Company may elect to take all such action
necessary to cause each Company Stock Option (as defined in Section 3.2(a)),
which is outstanding and unexercised immediately prior to the Effective Time,
to become vested as of the Effective Time. Xxxxxx shall pay each holder of
any Company Stock Option, with respect to each Share subject to such Company
Stock Option, an amount in cash equal to the excess of the Share Value over
the exercise price per Share of such Company Stock Option, less all
applicable withholding taxes. All Company Stock Options and all Company
stock option plans, arrangements or agreements shall be terminated thereafter
as of the Effective Time.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of GM and Xxxxxx
as follows:
3.1. ORGANIZATION AND QUALIFICATION.
(a) The Company and each of its subsidiaries (as defined in
Section 3.1(b)) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to
11
have such power and authority would not have or constitute a Material Adverse
Effect (as defined below) on the Company. When used in connection with any
party to this Agreement, the term "MATERIAL ADVERSE EFFECT" means (i) a
material adverse effect, or any development that results in a material
adverse effect, on the business, operations, financial performance or
prospects of such party and its subsidiaries, taken as whole, or (ii) an
event, change, effect or development that may materially impair or delay the
ability of such party to consummate the transactions contemplated hereby;
PROVIDED, HOWEVER, that effects or developments arising from (A) general
economic conditions affecting participants in the multichannel entertainment
distribution industry, (B) inactions of the Company resulting from Xxxxxx'
refusal to provide its consent pursuant to Section 5.1 of this Agreement or
(C) actions which the Company is required to take pursuant to this Agreement,
shall not constitute a Material Adverse Effect.
(b) Except as set forth in Section 3.1(b) of the Disclosure
Schedule previously delivered by the Company to GM (the "COMPANY DISCLOSURE
SCHEDULE"), the Company has no subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity.
The term "SUBSIDIARY" shall mean, when used with reference to any party to
this Agreement, any entity more than fifty percent (50%) of either the
outstanding voting securities or the value of the outstanding equity
securities or interests (including membership interests) of which are owned
directly or indirectly by such party.
(c) The Company and each of its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(d) The Company has heretofore delivered to Xxxxxx accurate and
complete copies of the articles of incorporation and by-laws, as currently in
effect, of the Company and each of its subsidiaries.
3.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of: (i)
100,000,000 shares of Common Stock, par value $.0001 per share (the "COMMON
STOCK"), of which, as of December 1, 1998, 60,868,825 shares were issued and
outstanding and no shares were held in treasury, (ii) 500,000,000 shares of
Class A Common Stock, par value $.0001 per Share (the "CLASS A COMMON STOCK";
and collectively with the Common Stock, the "COMPANY COMMON STOCK"), of
which, as of December 1, 1998, 28,941,950 shares were issued and outstanding
and no shares were held in treasury and (iii) 50,000,000 shares of Preferred
Stock, par value $.01 per share, no shares of which are issued and
outstanding. All of the issued and outstanding shares of Company Common Stock
have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of December 1, 1998, 713,400 shares of Class A Common
Stock were reserved for issuance and issuable upon or otherwise deliverable
in connection with the exercise of outstanding
12
options granted by the Company to purchase shares of Class A Common Stock
(the "COMPANY STOCK OPTIONS") issued pursuant to the Company stock option
plans listed in Section 3.2(a) of the Company Disclosure Schedule. Since
December 1, 1998, no shares of the Company's capital stock have been issued
other than pursuant to the exercise of Company Stock Options already in
existence on such date and, since December 1, 1998, no Company Stock Options
have been granted. Except as set forth above in this Section 3.2(a), as of
the date hereof, there are outstanding (i) no shares of capital stock or
other voting securities of the Company, (ii) no securities of the Company or
its subsidiaries convertible into or exchangeable for shares of capital stock
or voting securities of the Company, (iii) no options or other rights to
acquire from the Company or its subsidiaries, and no obligations of the
Company or its subsidiaries to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company, and (iv) no equity equivalents, or interests in
the ownership or earnings, of the Company or its subsidiaries or other
similar rights (including stock appreciation rights) (collectively, "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or its
subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule, there are no shareholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to which it
is bound relating to the voting of any shares of capital stock of the Company.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear
of any Lien (as defined below) or any other limitation or restriction
(including any restriction on the right to vote or sell the same, except as
may be provided as a matter of law). There are no securities of the Company
or its subsidiaries convertible into or exchangeable for, no options or other
rights to acquire from the Company or its subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly of,
any capital stock or other ownership interests in, or any other securities
of, any subsidiary of the Company. There are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"LIEN" means, with respect to any asset (including, without limitation, any
security) any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset.
13
3.3. AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Board of Directors of the Company (the
"COMPANY BOARD") and the Statutory Committee and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by
the holders of a majority of the voting power of the then outstanding shares
of Company Common Stock). This Agreement has been duly and validly executed
and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.
(b) The Company Board has, by unanimous vote of those present,
duly and validly approved, and taken all corporate actions required to be
taken by the Company Board for the consummation of the transactions,
including the Merger, contemplated hereby and by the Shareholders Agreement
and resolved to recommend that the shareholders of the Company approve and
adopt this Agreement. The Statutory Committee has been duly formed pursuant
to Section 302A.673, subd.1, and has duly and validly authorized and approved
this Agreement, the Merger and the Shareholders Agreement and the
consummation of the transactions contemplated by this Agreement and the
Shareholders Agreement. The action of the Statutory Committee in approving
this Agreement and the transactions contemplated hereby, including the
Merger, and in approving the Shareholders Agreement and the transactions
contemplated thereby, is sufficient to render inapplicable to the Merger,
this Agreement, and the transactions contemplated by the Shareholders
Agreement, the provisions of Sections 302A.673 and 302A.675 of the MBCA and
no Minnesota or other State takeover statute or similar statute or regulation
applies to the Merger, this Agreement, the Shareholders Agreement, or any of
the transactions contemplated hereby or thereby.
3.4. SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since
February 6, 1996 (the "COMPANY SEC REPORTS"), each of which has complied in
all material respects with all applicable requirements of the Securities Act
and the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
each as in effect on the dates such forms, reports and documents were filed.
None of the Company SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in the Company SEC Reports
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto and fairly present, in conformity with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
14
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to (A) normal year-end adjustments and (B) any
other adjustments described in the Company SEC Reports filed prior to the
date of this Agreement (the "FILED COMPANY SEC REPORTS")).
(b) The Company has heretofore made available to GM a complete
and correct copy of any material amendments or modifications, which have not
yet been filed with the SEC, to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Exchange Act.
3.5. INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the registration
statement on Form S-4 to be filed with the SEC by GM in connection with the
issuance of shares of Acquiror Stock in the Merger, including the prospectus
contained therein and any amendment thereof or supplement thereto (the "S-4")
will, at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. If at
any time prior to the Effective Time, any event with respect to the Company,
its officers and directors or any of its subsidiaries should occur which is
required to be described in the S-4, the Company shall promptly so advise
Xxxxxx.
(b) The proxy statement relating to the meeting of the Company's
shareholders to be held in connection with the Merger, including any
amendment thereof or supplement thereto (the "PROXY STATEMENT") will not, at
the date mailed to shareholders of the Company and at the times of the
meeting of shareholders of the Company to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
3.6. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), the Communications Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"COMMUNICATIONS ACT"), the filing and recordation of a certificate of merger
as required by the DGCL, the filing of articles of merger as required by the
MBCA, and as otherwise set forth in Section 3.6 of the Company Disclosure
Schedule, no filing with or notice to, and no permit, authorization, consent
or approval of, any court or tribunal or administrative, governmental or
regulatory body, agency or authority (a "GOVERNMENTAL ENTITY") is necessary
for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby, except
where the
15
failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as set
forth in Section 3.6 to the Company Disclosure Schedule, neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
certificate or articles of incorporation or bylaws (or similar governing
documents) of the Company or any of its subsidiaries, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, or (iii) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to the
Company or any of its subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches or
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Except as set forth in Section 3.6 of the
Company Disclosure Schedule, neither the execution, delivery and performance
of this Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will require any consent or approval
pursuant to any material programming agreement, software license or
billing/customer service agreement binding on the Company. No rights of
first refusal or first offer, preemptive rights or similar rights of
participation are applicable to the transactions contemplated by this
Agreement or the Shareholders Agreement.
3.7. NO DEFAULT. None of the Company or its subsidiaries is in
default or violation (and no event has occurred which with or without due
notice or the lapse of time or both would constitute a default or violation)
of any term, condition or provision of (i) its certificate or articles of
incorporation or bylaws (or similar governing documents), (ii) any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is
now a party or by which any of them or any of their respective properties or
assets may be bound or (iii) any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company, its subsidiaries or
any of their respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
3.8. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. Except as
and to the extent disclosed by the Company in the Filed Company SEC Reports
or as disclosed in Section 3.8 of the Company Disclosure Schedule, since
January 1, 1998, (a) neither the Company nor its subsidiaries has incurred
any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted or
unasserted, which would, individually or in the aggregate, have a Material
Adverse Effect on the Company, (b) except as contemplated by this Agreement,
the business of the Company and its subsidiaries has been carried on in all
material respects in the ordinary course consistent with past practices, (c)
the Company has not paid any dividend or distribution in respect of, or
redeemed or repurchased any of, its capital stock or other equity
16
securities, including securities directly or indirectly convertible into or
exercisable or exchangeable for any of its capital stock or other equity
securities, (d) the Company has not entered into or consummated any
transaction with any officer, director or affiliate of the Company or any
person known by the Company to be an affiliate of any of them and (e) except
as required by GAAP, the Company has not changed its methods of accounting
(either for financial accounting or tax purposes).
3.9. LITIGATION. Except as disclosed by the Company in the Filed
Company SEC Reports, as disclosed in Section 3.9 of the Company Disclosure
Schedule, or as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, (i) there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or any of their
respective properties or assets and (ii) none of the Company or its
subsidiaries is subject to any outstanding order, writ, injunction or decree.
3.10. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed by the
Company in the Filed Company SEC Reports and for failures which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company, (i) the Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "COMPANY
PERMITS"), (ii) the Company and its subsidiaries are in compliance with the
terms of the Company Permits, (iii) the businesses of the Company and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity and (iv) no investigation or review by
any Governmental Entity with respect to the Company or its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the
knowledge of the Company, has any Governmental Entity indicated an intention
to conduct the same. No representation or warranty is made in this Section
3.10 with respect to Environmental Laws (as defined in Section 3.12(a)) and
the FCC Licenses (as defined in Section 3.18).
3.11. EMPLOYEE PLANS.
(a) Section 3.11(a) of the Company Disclosure Schedule lists all
"employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and all other
employee benefit plans or other benefit arrangements, including but not
limited to all employment and consulting agreements and all bonus and other
incentive compensation, deferred compensation, disability, severance,
retention, salary continuation, stock and stock-related award, stock option,
stock purchase, collective bargaining or workers' compensation agreements,
plans, policies and arrangements which the Company or any of its subsidiaries
maintains, is a party to, contributed to or has any obligation to or
liability for in respect of current or former employees and directors (each,
a "COMPANY EMPLOYEE BENEFIT PLAN" and collectively, the "COMPANY EMPLOYEE
BENEFIT PLANS"). None of the Company Employee Benefit Plans is subject to
Title IV of ERISA.
17
(b) True, correct and complete copies of the most recent summary
plan description for each Company Employee Benefit Plan have been delivered
to Xxxxxx for review prior to the date hereof.
(c) Except as would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, (i) all payments required to be
made by or under any Company Employee Benefit Plan, any related trusts,
insurance policies or ancillary agreements, or any collective bargaining
agreement have been timely made, (ii) the Company and its subsidiaries have
performed all obligations required to be performed by them under any Company
Employee Benefit Plan, (iii) the Company Employee Benefit Plans comply in all
respects and have been maintained in compliance with their terms and the
requirements of ERISA, the Code and other applicable laws, and (iv) there are
no actions, suits, arbitrations or claims (other than routine claims for
benefits) pending or, to the knowledge of the Company, threatened with
respect to any Company Employee Benefit Plan.
(d) Each Company Employee Benefit Plan and its related trust
which are intended to be "qualified" within the meaning of Sections 401(a)
and 501(a) of the Code, respectively, have been determined by the Internal
Revenue Service to be so "qualified" under such Sections, as amended by the
Tax Reform Act of 1986, and the Company knows of no fact which would
adversely affect the qualified status of any such Company Employee Benefit
Plan and its related trust.
(e) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) increase
any benefits otherwise payable under any Company Employee Benefit Plan, or
(ii) result in the acceleration of the time of payment or vesting of any such
benefits. Except as contemplated by Section 5.1(f) or 5.16 of this
Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
payment becoming due, or increase the compensation due, to any current or
former employee or director of the Company or any of its subsidiaries.
3.12. ENVIRONMENTAL MATTERS. (a) As used in this Agreement:
(i) "ENVIRONMENTAL LAW" means any applicable federal, state or
local law, statute, code, ordinance, policy, rule, regulation, order,
settlement agreement, or other governmental requirement from any U.S. or
foreign jurisdiction concerning the Release (as defined herein), handling,
storage, management, processing, transportation or other use, or disposal or
arrangement for disposal, of any solid waste, industrial waste or Hazardous
Substance (as defined herein) including, by way of example but not
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (43 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean
Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (33 U.S.C.
Section 2601 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7
U.S.C. Section 136 et seq.) and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.) as such laws have been amended and the
regulations promulgated
18
pursuant thereto, and any applicable and analogous state or local statutes,
codes, policies, rules, regulations or related requirements of governmental
entities of foreign jurisdictions.
(ii) "ENVIRONMENTAL CLAIM" means any allegation, notice of
violation, action, claim, lien, demand, order, injunction, judgment, decree,
ruling, assessment or arbitration award or directive (conditional or
otherwise) by any court, arbitrator or governmental entity or any person for
personal injury (including sickness, disease or death), tangible or
intangible property damage, diminution in value, damage to the environment or
natural resources, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties or restrictions resulting
from or based upon (A) the existence, or the continuation of the existence,
of a Release (including, without limitation, sudden or non-sudden accidental
or non-accidental Release) of, or exposure to, any Hazardous Substance, odor,
audible noise, or any solid or industrial waste, (B) the transportation,
storage, treatment or disposal of solid waste, industrial waste or Hazardous
Substances, in connection with the past or present operations of the Company,
any of its subsidiaries or any of their respective predecessors or assigns,
or (C) the violation, or alleged violation, of any Environmental Laws,
orders, injunctions, judgments, decrees, rulings, assessments, arbitration
awards, Environmental Permits or ruling, order or decision of any court
arbitrator or Government Entity relating to environmental matters.
(iii) "ENVIRONMENTAL PERMIT" means any permit, approval,
authorization, license, variance, registration, permit application,
notification, program development and implementation, or permission required
under any applicable Environmental Law.
(iv) "HAZARDOUS SUBSTANCE" means any substance, material or waste
which is regulated under any Environmental Law or by any applicable
governmental entity, governmental entity in the jurisdictions in which the
Company or any subsidiary or any of their respective predecessors or assigns
conducts or has conducted business, or the United States, including, without
limitation, any material or substance which is defined as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste" or "restricted hazardous waste," "subject waste," "contaminant,"
"toxic waste," "toxic substance" or "residual waste" "under any Environmental
Law, including, but not limited to, radioactive materials, petroleum products
(including fractions thereof), asbestos and polychlorinated biphenyls.
(v) "PROPERTY" means any land, facility or operations currently
or previously owned by the Company, any of its subsidiaries or any of their
respective predecessors or assigns.
(vi) "RELEASE" means any intentional or unintentional, continuous
or intermittent release, spill, emission, seepage, leaking, pumping,
uncontrolled loss, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the environment, or any building surface, or onto
or from any Property of any Hazardous Substance, including the movement of
any Hazardous Substance through or in the air, soil, surface water, ground
water or otherwise.
19
(vii) "REMEDIAL ACTION" means all actions, including, without
limitation, any capital expenditures, required or voluntarily undertaken to
(A) clean up, remove, treat, or in any other way address any Hazardous
Substance or any other material required pursuant to applicable Environmental
Law, (B) prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Substance or any other material required pursuant to
applicable Environmental Law, (C) perform pre-remedial studies and
investigations or post-remedial monitoring and care including the conduct of
risk assessments and negotiation with applicable governmental entities
regarding Hazardous Substance or any other material required pursuant to
applicable Environmental Law, or (D) bring the Properties into compliance
with all applicable Environmental Laws and Environmental Permits.
(b) The Company and each of its subsidiaries, with respect to its
use of and operations at each Property, has been and is in compliance in all
material respects with all Environmental Laws, except where the failure so to be
in compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(c) Neither the Company nor any of its subsidiaries or any of
their respective predecessors (to the Company's knowledge, with respect to
non-affiliated predecessors) has received any written communication from a
court, arbitrator or governmental entity or any other person that alleges
that the Company or any such subsidiary or predecessor is not in compliance,
in any respect, with any Environmental Law or has liability thereunder,
except for written communications which make allegations which, if true, are
not reasonably likely, individually or in the aggregate, to result in a
Material Adverse Effect on the Company.
(d) Except as disclosed in Section 3.12 of the Company
Disclosure Schedule, none of the operations or Properties of the Company or
any of its subsidiaries or any of their respective predecessors or assigns
(to the Company's knowledge, with respect to unaffiliated predecessors and
assigns) is the subject of investigation by any governmental entity, whether
U.S., State, local or foreign, respecting (i) Environmental Laws, (ii) any
Remedial Action or (iii) any Environmental Claim arising from a Release or
otherwise of any Hazardous Substance or any other substance regulated under
any Environmental Law, which in each case would, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company and
each of its subsidiaries have filed all notices, obtained all Environmental
Permits and conducted all actions required under all Environmental Laws,
except where the failure to file such notices, obtain such Environmental
Permits or take such actions would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(e) The Company, each of its subsidiaries and any of their
respective predecessors (to the Company's knowledge, with respect to
unaffiliated predecessors) have filed all notices required to be filed under
all Environmental Laws reporting any Release, obtained all Environmental
Permits and taken all Remedial Actions required under all Environmental Laws,
except where failure to file such notices, obtain such Environmental Permits
or take such Remedial Actions would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
20
(f) Neither the Company nor any of its subsidiaries has any
contingent liabilities (as defined in GAAP) with respect to its business or
that of its predecessors in connection with any Hazardous Substance or
Environmental Law that would, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(g) Underground storage tanks are not and have not been located
on or under any Property and there have been no Releases of Hazardous
Substances on, in or under any Property or other real property for which the
Company or any of its subsidiaries would be responsible or potentially
responsible and that would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(h) Neither the Company nor any of its subsidiaries or any of
their respective predecessors (to the Company's knowledge, with respect to
unaffiliated predecessors) is subject to any judicial, administrative or
arbitral actions, suits, proceedings (public or private), written claims or
governmental proceedings alleging the violation of any Environmental Law or
Environmental Permit that would, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(i) Neither the Company nor any of its subsidiaries or any of
their respective predecessors or assigns (to the Company's knowledge, with
respect to unaffiliated predecessors and assigns) as a result of their
respective past and current operations, has caused or permitted any Hazardous
Substances to remain or be disposed of, either on or under any Property or on
any real property not permitted to accept, store or dispose of such Hazardous
Substances, that would, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(j) The transactions contemplated under this Agreement do not
trigger any obligation or duty on the part of the Company or the subsidiaries
to file any notice with or obtain approval from any Governmental Entity
having jurisdiction over environmental or health and safety matters.
(k) None of the Properties owned by the Company or any of its
subsidiaries contain or are constructed with any asbestos or
asbestos-containing building materials, the presence of which in its current
condition requires abatement or encapsulation.
(l) The Company and all its subsidiaries have obtained,
currently maintain, and are in material compliance with all Environmental
Permits required for their operations, such Environmental Permits are readily
transferable to the Buyer, and there is no pending or threatened action or
proceeding to revoke or materially modify or alter the terms and condition of
such Environmental Permits.
(m) None of the Properties of the Company or any subsidiaries is
listed or proposed for listing on the National Priorities List ("NPL"), the
CERCLIS, or any analogous state list of sites to be investigated or
remediated as a result of the possible presence of Hazardous Substances and
neither the Company nor the subsidiaries has received any notice from any
Governmental Entity or Person that it is or could potentially be liable for
the cost
21
to investigate or remediate contamination under Environmental Law or any
request for information under section 104 of CERCLA or any analogous state
law.
3.13. TAX MATTERS. Except as disclosed on Section 3.13 of the
Company Disclosure Schedule:
(a) The Company and each of its subsidiaries, and each
affiliated group (within the meaning of Section 1504 of the Code), unitary
group or combined group of which the Company or any of its subsidiaries is or
has ever been a member, has (or, by the Closing Date, will have) timely filed
with the appropriate taxing authorities all Federal income tax returns and
all other material tax returns and reports required to be filed by it through
the Closing Date. All such tax returns are (or will be) complete and correct
in all material respects. Except to the extent adequately reserved for in
accordance with GAAP, the Company and each of its subsidiaries has (or, by
the Closing Date, will have) paid (or the Company has paid on its
subsidiaries' behalf) all taxes due in respect of the taxable periods covered
by such tax returns. The most recent consolidated financial statements
contained in the Company SEC Reports reflect an adequate reserve in
accordance with GAAP for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof through the date of
such financial statements. Since December 31, 1997, neither the Company nor
any of its subsidiaries has incurred any liability for taxes other than in
the ordinary course of its businesses for which adequate reserves have been
established on subsequent unaudited financial statements. The Company has
previously delivered to Xxxxxx copies of all income and franchise tax returns
filed by the Company and each of its subsidiaries for their taxable years
ended in 1995, 1996 and 1997 and all audit or examination reports relating to
income or franchise taxes in respect of the Company or any of its
subsidiaries within the preceding ten (10) years. For purposes of this
Agreement, "TAX" or "TAXES" shall mean all taxes, charges, fees, imposts,
levies, gaming or other assessments, including, without limitation, all net
income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, property and estimated taxes, customs duties, fees, assessments
and charges of any kind whatsoever, together with any interest and any
penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any joint and/or
transferee liability (including any liability under Treasury Regulation
Section 1.1502-6 or any comparable provision of state, local or foreign tax
law) in respect of taxes or any liability in respect of taxes imposed by
contract, tax sharing agreement, tax indemnity agreement or any similar
agreement; and "TAX RETURNS" shall mean any report, return, document,
declaration or any other information or filing required to be supplied to any
taxing authority or jurisdiction (foreign or domestic) with respect to taxes,
including, without limitation, information returns, any document with respect
to or accompanying payments or estimated taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return document, declaration or other information.
(b) No material deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its subsidiaries that have
not been fully paid or adequately provided for in the appropriate financial
statements of the Company and its subsidiaries. No state where the Company
or one of its subsidiaries does not file an income
22
or franchise tax return has asserted in writing during the preceding five (5)
years that such corporation should be so filing, no outstanding waivers or
comparable consents regarding the application of the statute of limitations
with respect to taxes or tax returns have been given by or on behalf of the
Company or any of its subsidiaries (and no request for any such waiver or
consent is pending) and no power of attorney with respect to any taxes has
been executed or filed with any taxing authority. No material issues relating
to taxes have been raised in writing by the relevant taxing authority during
any presently pending audit or examination. None of the federal income tax
returns of the Company and each of its subsidiaries consolidated in such tax
returns have been reviewed by the Internal Revenue Service and the Company
has not been contacted regarding any such review, and the state and local tax
returns of the Company and its subsidiaries have been examined for the
taxable periods set forth in Section 3.13(b) of the Company Disclosure
Schedule.
(c) No material Liens for taxes exist with respect to any assets
or properties of the Company or any of its subsidiaries, except for statutory
liens for taxes not yet due.
(d) None of the Company or any of its subsidiaries is a party to
or is bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to taxes (including any
advance pricing agreement, closing agreement or other agreement relating to
taxes with any taxing authority).
(e) None of the Company or any of its subsidiaries has taken,
agreed to take or will take any action that would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section
368(a) of the Code.
(f) Neither the Company nor any of its subsidiaries has made,
will make, or is obligated to make any payment (whether in cash or property
or the vesting of property) that, either individually or in the aggregate,
would not be deductible by reason of Section 280G or 162(m) of the Code, or
is party to any employment, severance or termination agreement, other
compensation arrangement or Company Employee Benefit Plan currently in
effect, or the Program (as defined in Section 5.16(e)) or any other program
established pursuant to Section 5.16, which provides for the making of any
such payment.
(g) The Company and its subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of taxes.
(h) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending or
threatened in writing with regard to any federal income or material state,
local or foreign taxes or tax returns of the Company or its subsidiaries and
neither the Company nor any of its subsidiaries has received a written notice
of any pending audit or proceeding.
(i) Neither the Company nor any of its subsidiaries has agreed
to or is required to make any adjustment under Section 481(a) of the Code.
23
(j) Neither the Company nor any of its subsidiaries has (i) with
regard to any assets or property held or acquired by any of them, filed a
consent to the application of Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its subsidiaries, (ii) executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any similar provision of
state, local or foreign law, or (iii) received or filed any requests for
rulings or determinations in respect of any taxes within the last five (5)
years.
(k) No property owned by the Company or any of its subsidiaries
(i) is property required to be treated as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986, (ii) constitutes "tax exempt use property" within the
meaning of Section 168(h)(1) of the Code, or (iii) is "tax exempt bond
financed property" within the meaning of Section 168(g) of the Code.
(l) The Company and each of its subsidiaries are not currently,
have not been within the last five years, and do not anticipate becoming, a
"United States real property holding company" within the meaning of Section
897(c) of the Code.
(m) No subsidiary of the Company owns any Shares.
3.14. OPINION OF FINANCIAL ADVISORS. Each of Credit Suisse First
Boston Corporation and Xxxxxxx, Xxxxx & Co. (the "COMPANY FINANCIAL
ADVISORS") has delivered to the Company Board its opinion, dated the date of
this Agreement, to the effect that, as of such date, and based upon and
subject to certain matters stated in such opinions, the Merger Consideration
is fair to the holders of Shares from a financial point of view, and such
opinion has not been withdrawn or adversely modified.
3.15. BROKERS. No broker, finder or investment banker (other than
the Company Financial Advisors, a true and correct copy of whose engagement
agreements have been provided to GM) is entitled to any brokerage, finder's
or other fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by
and on behalf of the Company or any of its affiliates.
24
3.16. MATERIAL CONTRACTS.
(a) Section 3.16 of the Company Disclosure Schedule lists all
contracts and agreements (and all amendments, modifications and supplements
thereto and all side letters to which the Company is a party affecting the
obligations of any party thereunder) to which the Company or any of its
subsidiaries is a party or by which any of its properties or assets are bound
that relate to: (i) material employment, product design or development,
personal services, consulting, non-competition, severance or indemnification;
(ii) material licensing, merchandising, production, manufacturing, retailing,
sales (including sales agency) or programming, production or distribution
(including any programming "puts"), including without limitation, all such
contracts and agreements containing exclusivity or "most favored nation"
provisions; (iii) a right of first refusal, first negotiation, "tag along" or
"drag along" rights applicable to any capital stock or material assets of the
Company; (iv) a partnership or joint venture, or cooperative development
efforts; (v) the acquisition, sale, lease or other disposition of material
properties or assets of the Company or its subsidiaries or predecessors (by
merger, purchase or sale of assets or stock or otherwise) entered into since
February 6, 1996; (vi) agreements with any Governmental Entity; (vii)
contracts for the construction of satellites; (viii) financial incentive
arrangements for equipment manufacturers; (ix) signal security and testing or
signal theft; (x) material promotion, marketing, sponsorship or similar
arrangements; (xi) indebtedness for borrowed money, letters of credit,
security agreements, lockbox arrangements or guaranties of the foregoing;
(xii) real property deeds or leases and material equipment leases including,
without limitation, all satellite transponder leases; (xiii) material
software or Intellectual Property (as defined in Section 3.19(b)) license or
maintenance agreements; (xiv) customer services (including, without
limitation, telemarketing and billing); (xv) the provision of any services,
products or payments to or from any officer, director, employee or other
affiliate of the Company or such officer, director or employee; (xvi) all
agreements relating to the retransmission of the Company's signal by cable
systems or any other multichannel programming distributor; and (xvii) all
commitments and agreements to enter into any contracts or agreements relating
to any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 5.1 hereof, the "MATERIAL CONTRACTS").
(b) Each of the Material Contracts is valid and enforceable in
accordance with its terms, and there is no default under any Material
Contract so listed either by the Company (including the consummation of the
Merger) or, to the knowledge of the Company, by any other party thereto, and
no event has occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder by the Company (including the
consummation of the Merger) or, to the knowledge of the Company, any other
party, in any such case in which such default or event would, individually or
in the aggregate, have a Material Adverse Effect on the Company. Except as
set forth in Section 3.16 of the Company Disclosure Schedule, all material
agreements or other arrangements between the Company and its sales agents,
dealers and retailers are terminable by the Company on not greater than 30
days' notice, with no material termination fee or, except for commissions or
fees earned, continuing payment obligations thereunder.
(c) No party to any Material Contract has given notice to the
Company of, or made a claim against the Company with respect to, any breach
or default thereunder, in
25
any such case in which such breach or default would, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company is not
currently being audited, and has not received notice of an intent to conduct
any audit, under any material programming agreement.
3.17. LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth in Section 3.17(a) of the Company
Disclosure Schedule or as contemplated by Section 5.16 of this Agreement,
neither the Company nor any of its subsidiaries is a party to any employment,
severance compensation, labor or collective bargaining agreement and there
are no employment, severance compensation, labor or collective bargaining
agreements which pertain to employees of the Company or any of its
subsidiaries. No labor organization or group of employees of the Company or
any of its subsidiaries has made a pending written demand for recognition or
certification.
(b) Except as contemplated by Section 5.16 of this Agreement,
the only employment agreements and severance compensation agreements with
officers of the Company or any of its subsidiaries are set forth in Section
3.17(b) of the Company Disclosure Schedule. Except as set forth in Section
3.17(b) of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is a party to or bound by any severance or other agreement
with any employee or consultant pursuant to which such person would be
entitled to receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions contemplated
hereby.
3.18. FCC MATTERS. Section 3.18 of the Company Disclosure
Schedule sets forth all permits, licenses, waivers or authorizations issued
by the Federal Communications Commission (the "FCC") held by the Company and
its subsidiaries (the "FCC LICENSES"). For the purposes of this Agreement,
the term "FCC Licenses" shall not include the FCC construction permit and
launch authority to use DBS frequencies at 110DEG. west longitude (the
"110DEG. CONSTRUCTION PERMIT"). Except as is not material to the conduct of
the business of the Company and its subsidiaries: (i) the Company and its
subsidiaries are financially qualified and, to the knowledge of the Company,
are otherwise qualified to hold the FCC Licenses or to control the FCC
Licenses, as the case may be; (ii) the FCC Licenses constitute all permits,
licenses, waivers or authorizations that the Company and its subsidiaries are
required by the FCC to hold in connection with the operation of its business
as currently conducted, the Company and such subsidiaries that are required
to hold FCC Licenses to operate the Company's business as currently conducted
validly hold such FCC Licenses, and the FCC Licenses are in full force and
effect; (iii) the Company is not aware of any facts or circumstances relating
to the FCC qualifications of the Company or any of its subsidiaries that
would prevent the FCC's granting the Transfer of Control Application to be
filed with respect to the Merger (the "FCC APPLICATION"); (iv) the Company
and its subsidiaries are in compliance with all FCC Licenses and with the
Communications Act; and (v) there is not pending or, to the knowledge of the
Company threatened, any application, petition, objection or other pleading
with the FCC or other governmental authority which challenges the validity
of, or any rights of the holder under, any FCC License.
26
3.19. INTELLECTUAL PROPERTY.
(a) The Company or one of its subsidiaries owns or possesses
(and will own or possess as of the Effective Time) all right, title and
interest in and to, or a valid and enforceable license or other right to use
all of the Intellectual Property (as defined below), and all of the right,
benefits, and privileges associated therewith, that is material to the
conduct of the business of the Company and its subsidiaries as currently
conducted (and as conducted as of the Effective Time). To the knowledge of
the Company, neither the Company nor any of its subsidiaries has infringed,
misappropriated or otherwise violated any Intellectual Property of any other
person, and neither the Company nor any of its subsidiaries is aware of any
such infringement, misappropriation or violation which would reasonably be
expected to occur prior to the Effective Time. To the knowledge of the
Company, no person is materially infringing upon any Intellectual Property
right of the Company or any of its subsidiaries. Notwithstanding the
foregoing, no representation or warranty is made with respect to any
Intellectual Property licensed from Xxxxxx or DIRECTV Enterprises, Inc.
("DIRECTV"), or developed or used by Xxxxxx or DIRECTV in connection with the
multichannel entertainment distribution business.
(b) The term "INTELLECTUAL PROPERTY" means all patents, patent
applications and patent disclosures; all inventions (whether or not
patentable and whether or not reduced to practice); all trademarks, service
marks, trade dress, trade names and corporate names and all the goodwill
associated therewith; all mask works; all registered and unregistered
statutory and common law copyrights; all registrations, applications and
renewals for any of the compositions, know-how, manufacturing and production
processes and techniques, research information, drawings, specifications,
design plans, improvements, proposals, technical and computer data,
documentation and software, financial proposals, technical and computer data,
documentation and software, financial business and marketing plans, customer
and supplier lists and related proprietary information, marketing materials
and all other proprietary rights.
3.20. INSURANCE. The Company and its subsidiaries maintain
adequate insurance with respect to its properties and business against loss
or damage of the kinds customarily insured against by corporations of
established reputations engaged in the same or similar business and similarly
situated, of such types and in such amounts as are customarily carried under
similar circumstances by such other corporations. For all such insurance
policies, as described in Section 3.20 of the Company Disclosure Schedule,
all premiums shall be paid to ensure that they are in effect and will remain
in force until or after the Effective Time.
3.21. INDEBTEDNESS. Except as set forth in the Filed Company SEC
Reports, neither the Company nor any of its subsidiaries has any outstanding
indebtedness for borrowed money or representing the deferred purchase price
of property or services or similar liabilities or obligations, including any
guarantee in respect thereof, or is a party to any agreement, arrangement or
understanding providing for the creation, incurrence or assumption thereof.
27
3.22. LIENS. Neither the Company nor any of its subsidiaries has
granted, created or suffered to exist with respect to any of its assets, any
security interest, mortgage, deed of trust, pledge or encumbrance (a "LIEN")
of any kind or nature whatsoever.
3.23. REAL PROPERTY. Section 3.23 of the Company Disclosure
Schedule sets forth all of the real property owned in fee by the Company and
its subsidiaries that is material to the conduct of the business of the
Company and its subsidiaries, taken as a whole. Each of the Company and its
subsidiaries has good and marketable title to each parcel of real property
owned by it free and clear of all Liens, except those listed in Section 3.22
of the Company Disclosure Schedule.
3.24. TANGIBLE PROPERTY. With respect to the tangible properties
and assets of the Company and its subsidiaries (excluding real property) that
are material to the conduct of the businesses of the Company and its
subsidiaries, the Company and its subsidiaries have good title to, or hold
pursuant to valid and enforceable leases, all such properties and assets.
All of the assets of the Company and its subsidiaries have been maintained
and repaired for their continued operation and are in good operating
condition, reasonable wear and tear excepted, and usable in the ordinary
course of business, except where the failure to be in such repair or
condition or so usable would not individually or in the aggregate, have a
Material Adverse Effect on the Company.
3.25. PROGRAMMING ARRANGEMENTS. The amount of license fees
currently paid by the Company pursuant to any material programming agreement
has not been and shall not be increased due to the Company's failure to meet
any subscriber penetration requirements or other similar benchmarks. Except
as set forth in Section 3.25 of the Company Disclosure Schedule, none of the
Company's material programming agreements are subject to renewal prior to
December 31, 2000, nor will any negotiation period relating to the renewal or
extension of any material programming agreement commence prior to December
31, 2000. Except as set forth on Section 3.25 to the Company Disclosure
Schedule, there are no affirmative obligations under any programming (or
similar) agreement to carry any additional programming channels (or feeds
thereof) above and beyond what the Company currently carries.
3.26. CONSOLIDATION MATTERS. The Agreement, dated March 5, 1993,
as amended, between ADS Alliance Data Systems, Inc. ("ADS") and the Company
is terminable effective as of June 17, 1999, without the payment of any
termination fee and without the obligation to continue to use or pay for ADS
services following such date. The Company has the contractual right to
terminate (i) Direct Broadcast Satellite Contract No. 104274-B, effective
December 31, 1996, between Lockheed Xxxxxx Corporation and the Company, as
amended and (ii) the Billing and Customer Service Agreement between the
Company and Convergys Information Management Group Inc., effective October
16, 1998 and the letter agreement dated October 16, 1998. The rights of
Vulcan Ventures, Inc. and Dow Xxxxx & Company under their respective
programming agreements with the Company have been suspended effective on the
date hereof. Such agreements automatically terminate upon the Closing of the
Merger, and there will be no continuing payment or performance obligation of
the Company under such agreements thereafter. The Agreement, dated March 21,
1997 between the Company and ADS for remittance processing service (the "ADS
28
REMITTANCE AGREEMENT") is terminable effective March 20, 2000 upon prior
notice as required by such agreement. The fees due under the ADS Remittance
Agreement are subject to adjustment in March 1999 as provided in Section 4.2
of such Agreement. The ADS Remittance Agreement contains minimum fee
obligations as provided in Appendix A thereto.
3.27. NO OTHER REPRESENTATIONS OR WARRANTIES. Notwithstanding
anything contained in this Article 3 or any other provision of this
Agreement, it is the explicit intent of each party hereto that the Company is
making no representation or warranty whatsoever, express or implied, except
those representations and warranties of the Company set forth in this Article
3.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF GM AND XXXXXX
XX and Xxxxxx hereby jointly and severally represent and warrant to
the Company as follows:
4.1. ORGANIZATION AND QUALIFICATION. GM is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power and
authority would neither have a Material Adverse Effect on Xxxxxx nor
materially impair or delay the ability of GM to consummate the transactions
contemplated hereby. GM is duly qualified or licensed and in good standing
to do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would
neither have a Material Adverse Effect on Xxxxxx nor may materially impair or
delay the ability of GM to consummate the transactions contemplated hereby.
4.2. CAPITALIZATION OF GM AND ITS SUBSIDIARIES. The Acquiror
Stock is the only class of authorized capital stock of GM as to which GM
reports earnings per share based upon the Available Separate Consolidated Net
Income of Xxxxxx attributable to holders of Acquiror Stock, as provided for
under GM's Amended and Restated Certificate of Incorporation and as set forth
in GM's Annual Report on Form 10-K for the fiscal year ended December 31,
1997. As of November 30, 1998, 600,000,000 shares of Acquiror Stock were
authorized and 105,993,793 shares of Acquiror Stock were issued and
outstanding. All of the issued and outstanding shares of Acquiror Stock have
been validly issued, and are fully paid, nonassessable and free of preemptive
rights. As of November 30, 1998, 16,396,454 shares of Acquiror Stock were
reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding options to purchase Acquiror
Stock granted by GM or Xxxxxx pursuant to the GM Amended Stock Incentive Plan
and the Xxxxxx Incentive Plan. Except (i) as described in the GM SEC
Reports, and (ii) as set forth above, as of the date hereof, there are
outstanding (A) no securities of GM or
29
its subsidiaries convertible into or exchangeable for shares of Acquiror
Stock, (B) no options or other rights to acquire from GM or its subsidiaries,
and no obligations of GM or its subsidiaries to issue, any Acquiror Stock, or
securities convertible into or exchangeable for Acquiror Stock, and (C) no
equity equivalents, interests in the ownership or earnings of Xxxxxx or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "XXXXXX SECURITIES"). There are no outstanding obligations of
GM or any of its subsidiaries to repurchase, redeem or otherwise acquire any
Acquiror Stock.
4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of GM and Xxxxxx
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Boards of Directors of GM and Xxxxxx and by GM as the sole shareholder of
Xxxxxx, and no other corporate proceedings on the part of GM or Xxxxxx are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of GM and Xxxxxx and constitutes a valid, legal and binding
agreement of each of GM and Xxxxxx, enforceable against each of GM and Xxxxxx
in accordance with its terms.
4.4. SEC REPORTS; FINANCIAL STATEMENTS. (a) GM has filed all
required forms, reports and documents with the SEC since January 1, 1996 (the
"GM SEC REPORTS"), each of which has complied in all material respects with
all applicable requirements of the Securities Act and the Exchange Act, each
as in effect on the dates such forms, reports and documents were filed. None
of the GM SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of GM included in the GM SEC Reports complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and fairly
present, in conformity with GAAP applied on a consistent basis (except as may
be indicated in the notes thereto), the consolidated financial position of GM
and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject, in the case of the unaudited interim financial
statements, to (A) normal year-end adjustments and (B) any other adjustments
described in the GM SEC Reports filed prior to the date of this Agreement
(the "FILED GM SEC REPORTS")).
(b) Xxxxxx has heretofore made available to the Company a
complete and correct copy of any material amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by GM with the SEC pursuant to
the Exchange Act, to the extent that Xxxxxx or DIRECTV is a party to such
agreements or such agreements relate to the business of Xxxxxx or DIRECTV.
30
4.5. INFORMATION SUPPLIED.
(a) None of the information supplied or to be supplied by GM or
Xxxxxx for inclusion in the Proxy Statement will, at the date mailed to
shareholders of the Company and at the time of the meeting of shareholders of
the Company to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time, any event with respect to GM, its officers
and directors or any of its subsidiaries should occur which is required to be
described in the Proxy Statement, GM shall promptly so advise the Company.
(b) Neither the S-4 nor any amendment thereto will at the time
it becomes effective under the Securities Act or at the Effective Time
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. No representation or warranty is made by GM or Xxxxxx in
this Section 4.5 with respect to statements made or incorporated by reference
therein based on information supplied by the Company or any of its
subsidiaries for inclusion or incorporation by reference in the S-4. The S-4
will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
4.6. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, the Communications Act, the filing
and recordation of a certificate of merger as required by the DGCL, and the
filing of articles of merger as required by the MBCA, no filing with or
notice to, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution and delivery by GM or
Xxxxxx of this Agreement or the consummation by GM or Xxxxxx of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or
give such notice would neither have a Material Adverse Effect on Xxxxxx nor
materially impair or delay the ability of GM to consummate the transactions
contemplated hereby. Except as set forth in Section 4.6 of the GM
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement by GM or Xxxxxx nor the consummation by GM or Xxxxxx of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective certificate or articles of
incorporation or bylaws (or similar governing documents) of GM or Xxxxxx or
any of GM's subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which GM or Xxxxxx or any of GM's
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to GM or
Xxxxxx or any of GM's subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches or
defaults which would neither have a Material Adverse
31
Effect on Xxxxxx nor materially impair or delay the ability of GM to
consummate the transactions contemplated hereby.
4.7. NO DEFAULT. None of GM or its subsidiaries is in default or
violation (and no event has occurred which with or without due notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its certificate or articles of incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which GM or any of its subsidiaries is now a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to GM, its subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches or
defaults which would neither have a Material Adverse Effect on Xxxxxx nor
materially impair or delay the ability of GM to consummate the transactions
contemplated hereby.
4.8. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. Except as
and to the extent disclosed by GM in the GM SEC Reports filed prior to the
date of this Agreement (the "FILED GM SEC REPORTS"), since January 1, 1998,
(a) neither GM nor its subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
and whether due or to become due or asserted or unasserted, which would
either have a Material Adverse Effect on Xxxxxx or materially impair or delay
the ability of GM to consummate the transactions contemplated hereby, (b)
except as contemplated by this Agreement, Xxxxxx and its subsidiaries have
conducted their respective businesses in all material respects in the
ordinary course consistent with past practices, (c) GM has not paid any
dividend or distribution in respect of, or redeemed or repurchased any of,
the Acquiror Stock or other securities directly or indirectly convertible
into or exercisable or exchangeable for any Acquiror Stock, and (d) except as
required by GAAP, neither GM nor Xxxxxx has changed its method of accounting
(either for financial accounting or tax purposes) in any manner which would
reasonably be expected to materially adversely affect the valuation of the
Acquiror Stock.
4.9. LITIGATION. Except as disclosed by GM in the Filed GM SEC
Reports, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of GM, threatened against GM or any of its subsidiaries
or any of their respective properties or assets which, individually or in the
aggregate, would either have a Material Adverse Effect on Xxxxxx or
materially impair or delay the ability of GM to consummate the transactions
contemplated hereby. Except as disclosed by GM in the Filed GM SEC Reports,
none of GM or its subsidiaries is subject to any outstanding order, writ,
injunction or decree which would either have a Material Adverse Effect on
Xxxxxx or materially impair or delay the ability of GM to consummate the
transactions contemplated hereby.
4.10. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed by GM
in the Filed GM SEC Reports, GM and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses (the
"GM PERMITS"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would neither have a Material Adverse
Effect on Xxxxxx nor materially impair or delay the ability of GM to
32
consummate the transactions contemplated hereby. Except as disclosed by GM
in the Filed GM SEC Reports, the businesses of GM and its subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity except for violations or possible violations which would
neither have a Material Adverse Effect on Xxxxxx nor impair or materially
delay the ability of GM to consummate the transactions contemplated hereby.
Except as publicly disclosed by GM in the Filed GM SEC Reports, no
investigation or review by any Governmental Entity with respect to GM or its
subsidiaries is pending or, to the knowledge of GM, threatened, nor, to the
knowledge of GM, has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, those the outcome of which would
neither have a Material Adverse Effect on Xxxxxx nor materially impair or
delay the ability of GM to consummate the transactions contemplated hereby.
No representation or warranty is made in this Section 4.10 with respect to
Environmental Laws and the FCC Licenses.
4.11. BROKERS. No broker, finder or investment banker (other than
Xxxxxxx Xxxxx Xxxxxx) 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 and on behalf of GM or Xxxxxx or any of their
affiliates.
4.12. EMPLOYEE PLANS.
(a) Section 4.12(a) of the Disclosure Schedule previously
delivered by GM and Xxxxxx to the Company (the "ACQUIROR DISCLOSURE
SCHEDULE") lists all "employee benefit plans," as defined in Section 3(3) of
ERISA and all bonus and other incentive compensation, disability, severance,
retention, salary continuation, stock and other stock-related award, stock
option, stock purchase, collective bargaining or workers' compensation
agreements, plans, policies and arrangements generally made available to the
employees of DIRECTV and which will be made available to the employees of the
Company (each, a "DIRECTV BENEFIT PLAN" and collectively, the "DIRECTV
BENEFIT PLANS").
(b) Except as set forth in the Filed GM SEC Reports or would
not, individually or in the aggregate, have a Material Adverse Effect on
Xxxxxx, (i) all payments required to be made by or under any DIRECTV Employee
Benefit Plan, any related trusts, insurance policies or ancillary agreements,
or any collective bargaining agreement have been timely made; (ii) Xxxxxx has
performed all obligations required to be performed by it under any DIRECTV
Employee Benefit Plan; (iii) the DIRECTV Employee Benefit Plans comply in all
respects and have been maintained in compliance with their terms and the
requirements of ERISA, the Code and other applicable laws; and (iv) there are
no actions, suits, arbitrations or claims (other than routine claims for
benefits) pending or, to the knowledge of Xxxxxx, threatened with respect to
any DIRECTV Employee Benefit Plan.
(c) Each DIRECTV Employee Benefit Plan and its related trust
which are intended to be "qualified" within the meaning of Sections 401(a)
and 501(a) of the Code,
33
respectively, have been determined by the Internal Revenue Service to be so
"qualified" under such Sections, as amended by the Tax Reform Act of 1986,
and Xxxxxx knows of no fact which would adversely affect the qualified status
of any such DIRECTV Employee Benefit Plan and its related trust.
4.13. ENVIRONMENTAL MATTERS. Except as would not reasonably be
expected to have a Material Adverse Effect on Xxxxxx, (1) Xxxxxx is in
compliance with Environmental Laws; (2) no judicial or administrative
proceedings are pending or, to the knowledge of Xxxxxx, threatened against
Xxxxxx or any real property owned or operated by Xxxxxx alleging the
violation of or seeking to impose liability under any Environmental Law, and
there are no investigations of an environmental nature pending or, to the
knowledge of Xxxxxx, threatened against Xxxxxx or any real property owned or
operated by Xxxxxx; and (3) there are no facts, circumstances or conditions
relating to, arising from or attributable to Xxxxxx or any real property
currently or, to the knowledge of Xxxxxx, formerly owned, operated or leased
by Xxxxxx that are reasonably likely to result in Xxxxxx incurring
liabilities under Environmental Laws.
4.14. FCC MATTERS. Section 4.14 of the Acquiror Disclosure
Schedule sets forth all material permits, licenses, waivers or authorizations
issued by the FCC held by DIRECTV (the "DIRECTV FCC LICENSES"). Except as is
not material to the conduct of the business of DIRECTV: (i) DIRECTV is
financially qualified and, to the knowledge of Xxxxxx, is otherwise qualified
to hold the DIRECTV FCC Licenses or to control the DIRECTV FCC Licenses, as
the case may be; (ii) the DIRECTV FCC Licenses constitute all permits,
licenses, waivers or authorizations that DIRECTV is required by the FCC to
hold in connection with the operation of its business as currently conducted;
(iii) DIRECTV is not aware of any facts or circumstances relating to the FCC
qualifications of Xxxxxx that would prevent the FCC's granting the FCC
Application; (iv) DIRECTV is in compliance with all DIRECTV FCC Licenses and
with the Communications Act; and (v) there is not pending or, to the
knowledge of Xxxxxx threatened, any application, petition, objection or other
pleading with the FCC or other governmental authority which challenges the
validity of, or any rights of the holder under, any DIRECTV FCC License.
4.15. NO OTHER REPRESENTATIONS OR WARRANTIES. Notwithstanding
anything contained in this Article 4 or any other provision of this
Agreement, it is the explicit intent of each party hereto that neither GM nor
Xxxxxx is making any representation or warranty whatsoever, express or
implied, except those representations and warranties of GM and Xxxxxx set
forth in this Article 4.
34
ARTICLE 5
COVENANTS
5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated
by this Agreement, during the period from the date hereof to the Effective
Time, the Company will, and will cause each of its subsidiaries to, conduct
its operations in the ordinary course of business consistent with past
practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organizations, take all actions
necessary to maintain and preserve the FCC Licenses, seek to keep available
the service of its current officers and employees and seek to preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the
Effective Time, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of Xxxxxx (which consent
shall not be unreasonably withheld):
(a) amend its certificate or articles of incorporation or bylaws
(or other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the issuance or sale of shares of Company
Common Stock pursuant to outstanding options granted prior to the date hereof
under existing stock incentive plans;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
shareholders in their capacity as such, or redeem or otherwise acquire any of
its securities or any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary;
(f) except as may be required by law or as contemplated by this
Agreement, (i) enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan,
35
fund, award or other arrangement for the benefit or welfare of any director,
officer or employee in any manner; (ii) except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required
by any plan and arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock appreciation rights or performance
units); or (iii) pay any bonuses or annual incentive awards with respect to
fiscal 1998 or the interim period of fiscal 1999 ending on the Closing Date
in excess of $1,375,000 in the aggregate;
(g) except as set forth on Section 5.1(g) of the Company
Disclosure Schedule, hire or retain any individual as an employee of or
consultant to the Company or any subsidiary of the Company;
(h) except as set forth on Section 5.1(h) of the Company
Disclosure Schedule, enter into, renew or modify any agreement which, if in
effect on the date hereof, would have been required to be disclosed in
Section 3.16 of the Company Disclosure Schedule;
(i) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(j) revalue any of its assets, including, without limitation,
writing up or down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice;
(k) make or revoke any tax election or settle or compromise any
tax liability material to the Company and its subsidiaries taken as a whole,
or change (or make a request to any taxing authority to change) any material
aspect of its method of accounting for tax purposes;
(l) pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes thereto)
of the Company and its subsidiaries or incurred in the ordinary course of
business consistent with past practice;
(m) settle or compromise any pending or threatened material
suit, action or claim or initiate or join any material suit, action or claim;
(n) (i) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business and in amounts not material to the
Company and its subsidiaries, taken as a whole; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in
the ordinary
36
course of business consistent with past practice and in amounts not material
to the Company and its subsidiaries, taken as a whole, and except for
obligations of wholly owned subsidiaries of the Company; (iii) make any
loans, advances or capital contributions to, or investments in, any other
person (other than to wholly owned subsidiaries of the Company or customary
loans or advances to employees in the ordinary course of business consistent
with past practice and in amounts not material to the maker of such loan or
advance); (iv) pledge or otherwise encumber shares of capital stock of the
Company or its subsidiaries; or (v) mortgage or pledge any of its assets,
tangible or intangible, or create or suffer to exist any Lien thereupon;
(o) (i) acquire, sell, lease or dispose of any assets outside
the ordinary course of business or any assets which in the aggregate are
material to the Company and its subsidiaries, taken as a whole; (ii) enter
into any commitment or transaction outside the ordinary course of business;
or (iii) grant any exclusive distribution rights;
(p) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization
or division thereof or any equity interest therein; (ii) authorize any new
capital expenditure or expenditures which, individually, is in excess of
$250,000 or, in the aggregate, are in excess of $3 million; or (iii) enter
into or amend any contract, agreement, commitment or arrangement providing
for the taking of any action that would be prohibited hereunder; or
(q) take, propose to take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.1(a) through 5.1(p) or any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect.
5.2. CONDUCT OF BUSINESS OF GM AND XXXXXX. Except as
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, Xxxxxx and its subsidiaries shall conduct their respective
operations in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in
this Agreement, prior to the Effective Time, GM shall not, and shall not
permit Xxxxxx and its subsidiaries to, without the prior written consent of
the Company, which consent shall not be unreasonably withheld:
(a) amend its certificate or articles of incorporation or bylaws
(or other similar governing instrument) in a manner which adversely affects
the rights, powers and preferences of the Acquiror Stock;
(b) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of Xxxxxx or any of its subsidiaries (except that Xxxxxx
and/or any subsidiary of Xxxxxx may adopt a plan of merger in connection with
(i) a merger of any subsidiary of Xxxxxx into Xxxxxx or another subsidiary of
Xxxxxx or (ii) an acquisition or disposition of a business or assets, except
for any such acquisition or disposition which would have a Material Adverse
Effect on Xxxxxx);
37
(c) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
Xxxxxx or any of its subsidiaries, except for any such alteration which would
not have a Material Adverse Effect on Xxxxxx; or
(d) take any action, or agree to take any action, which would
have the effect of terminating Xxxxxx'x engaging in the multichannel
entertainment distribution industry.
5.3. PREPARATION OF S-4 AND THE PROXY STATEMENT.
(a) The Company will, as promptly as practicable, prepare and
file with the SEC the Proxy Statement in connection with the vote of the
shareholders of the Company with respect to the Merger. GM and Xxxxxx shall
have a reasonable opportunity to review the Proxy Statement and any
supplement thereto prior to the filing or submission thereof to the SEC.
(b) GM will, as promptly as practicable, prepare, following
receipt of notification from the SEC that it has no further comments on the
Proxy Statement, and file with the SEC the S-4 in connection with the
registration under the Securities Act of the shares of Acquiror Stock
issuable upon conversion of the Shares and the other transactions
contemplated hereby. The Company will have a reasonable opportunity to
review the S-4 and any amendments thereto prior to the filing thereof with
the SEC.
(c) GM and the Company will, and will cause their accountants
and lawyers to, use all reasonable best efforts to have or cause the S-4
declared effective as promptly as practicable after it is filed, and will
take any other action required or necessary to be taken under federal or
state securities laws or otherwise in connection with the registration
process. The Company will use its reasonable best efforts to cause the Proxy
Statement to be mailed to its shareholders at the earliest practicable date
after the S-4 shall become effective.
5.4. COMPANY MEETING. The Company shall call a meeting of its
shareholders to be held as promptly as practicable for the purpose of voting
upon this Agreement and the Merger. The Company agrees that its obligations
pursuant to the first sentence of this Section 5.4 shall not be affected by
the commencement, public proposal, public disclosure or communication to the
Company of any Acquisition Proposal (as defined in Section 5.5). The Company
shall use its reasonable best efforts to hold such meeting as soon as
practicable after the date hereof and will, through the Company Board,
subject to the fiduciary duties of the Company Board, recommend to its
shareholders approval of this Agreement and the Merger.
5.5. NO SOLICITATION.
(a) Until the termination of this Agreement, the Company shall
not, and shall not permit any of its subsidiaries, or any of its or its
subsidiaries' officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment
38
banker, financial advisor, attorney, accountant or other representative of
the Company or any of its subsidiaries), to, directly or indirectly,
initiate, solicit or knowingly encourage (including by way of furnishing
non-public information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, an Acquisition Proposal (as defined
below), or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain an
Acquisition Proposal or agree to or endorse any Acquisition Proposal, or
authorize or permit any of its officers, directors or employees or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative of it or any of its subsidiaries to take
any such action; PROVIDED, HOWEVER, that the Company may engage in
discussions with any person or entity for the sole purpose of clarifying the
terms of any unsolicited Acquisition Proposal if such discussions are in the
judgment of independent counsel to the independent directors of the Company
(as set forth in a reasoned legal opinion delivered to Xxxxxx prior to any
such discussions), required by the fiduciary duties of the Company Board. The
Company will promptly (and in no event later than twenty-four (24) hours
after receipt of any Acquisition Proposal) notify (which notice shall be
provided orally and in writing and shall identify the person making such
Acquisition Proposal and set forth the material terms thereof) Xxxxxx after
any receipt of any Acquisition Proposal. For purposes of this Agreement,
"ACQUISITION PROPOSAL" means any proposal regarding any of the following
(other than the transactions contemplated by this Agreement) involving the
Company or any of its subsidiaries: (w) any merger, consolidation, share
exchange, recapitalization, business combination or other similar
transaction; (x) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of fifteen percent (15%) or more of the assets of the
Company and its subsidiaries, taken as a whole, in a single transaction or
series of related transactions; (y) any tender offer or exchange offer that
if consummated would result in any person (other than HBI) beneficially
owning more than fifteen percent (15%) of the outstanding shares of Company
Common Stock or the filing of a registration statement under the Securities
Act in connection therewith; or (z) any public announcement of a proposal,
plan or intention to do any of the foregoing or any agreement to engage in
any of the foregoing.
(b) Until the termination of this Agreement, the Company Board
shall not (i) subject to the fiduciary duties of the Company Board, withdraw
or modify, or propose to withdraw or modify, in a manner adverse to GM or
Xxxxxx, the approval or recommendation of the Merger, this Agreement and the
Shareholders Agreement by the Company Board, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or (iii) cause the
Company or any of its subsidiaries to enter into any agreement (including,
without limitation, any letter of intent) with respect to any Acquisition
Proposal.
5.6. LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use
all reasonable best efforts to cause to be delivered to GM a letter of Xxxxxx
Xxxxxxxx LLP (or its successor firm), the Company's independent auditors,
dated a date within two (2) business days before the date on which the S-4
shall become effective and addressed to GM, in form and substance reasonably
satisfactory to GM and customary in scope and substance for letters delivered
by independent public accountants in connection with registration statements
similar to the S-4.
39
5.7. ACCESS TO INFORMATION.
(a) Between the date hereof and the Effective Time, the Company
will give GM and Xxxxxx and their authorized representatives reasonable
access to all employees (which access shall be coordinated with the Company's
executive management), plants, offices, warehouses and other facilities and
to all books and records of the Company and its subsidiaries, will permit GM
and Xxxxxx to make such inspections as GM and Xxxxxx may reasonably require
and will cause the Company's officers and those of its subsidiaries to
furnish GM and Xxxxxx with such financial and operating data and other
information with respect to the business, properties and personnel of the
Company and its subsidiaries as GM or Xxxxxx may from time to time reasonably
request; PROVIDED, that no investigation pursuant to this Section 5.7(a)
shall affect or be deemed to modify any of the representations or warranties
made by the Company and PROVIDED, FURTHER, except as provided in Section
6.3(i), that information heretofore redacted by the Company and relating to
exclusivity and renegotiation provisions of programming agreements may, at
the Company's discretion, be provided only in redacted form (contracts
containing such redaction being referred to herein as the "REDACTED
CONTRACTS").
(b) From and after the date of this Agreement, Xxxxxx shall have
the right, but not the obligation, to retain one or more environmental
professionals to conduct an environmental assessment and investigation
("ENVIRONMENTAL INVESTIGATION") of the Properties, which Environmental
Investigation shall be conducted as promptly as reasonably practicable in
consultation with the Company and shall include the right to conduct such
tests of soil, groundwater, surface water or air that Xxxxxx reasonably
requires, in its sole discretion, to determine whether there exists an
Adverse Environmental Condition at any of the Properties. For purposes of
this Agreement, "ADVERSE ENVIRONMENTAL CONDITION" shall mean any of the
following: (i) the existence, or the continuation of the existence, of a
Release (including, without limitation, sudden or non-sudden, accidental or
non-accidental Releases), of, or exposure to, any Hazardous Substance at, in,
by, from or related to the Properties, (ii) damage or injury to the
environment in connection with the transportation, storage, treatment or
disposal (or the arrangement thereof) of Hazardous Substances in connection
with the operation of the Company or its subsidiaries or (iii) the violation,
or alleged violation, of Environmental Law by the Company or any of its
subsidiaries.
(c) Between the date hereof and the Effective Time, the Company
shall furnish to Xxxxxx (i) within two business days after the delivery
thereof to management, such monthly financial statements and data as are
regularly prepared for distribution to the Company's Chief Executive Officer
and (ii) at the earliest time at which they are available and prior to filing
thereof with the SEC, such quarterly and annual financial statements as are
prepared for the Company's SEC filings, which shall be in accordance with the
books and records of the Company, and drafts of all such Company SEC filings.
(d) Each of GM and Xxxxxx will hold and will cause its
consultants and advisors to hold in confidence all documents and information
concerning the Company and its subsidiaries furnished to GM or Xxxxxx in
connection with the transactions contemplated by this Agreement to the extent
required by that certain confidentiality agreement entered
40
into between the Company, DIRECTV and Xxxxxx dated December 1, 1998 (the
"CONFIDENTIALITY AGREEMENT").
5.8. ADDITIONAL AGREEMENTS; REASONABLE BEST EFFORTS. Subject to
the terms and conditions herein provided, each of the parties hereto agrees
to use its reasonable best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) cooperation in the preparation and filing of the Proxy
Statement and the S-4, any filings that may be required under the HSR Act and
the Communications Act, and any amendments to any thereof, (ii) cooperation
in obtaining, prior to the Effective Time, the approval for listing on the
NYSE, effective upon the official notice of issuance, of the shares of
Acquiror Stock into which the Shares will be converted pursuant to Article 2
hereof, (iii) the taking of all action reasonably necessary, proper or
advisable to secure any necessary consents of all third parties and
Governmental Entities, including those relating to existing debt obligations
of the Company and its subsidiaries, (iv) the transfer of existing
Environmental Permits to Xxxxxx (or, if such transfer is not permissible, the
Company shall assist Xxxxxx in obtaining new Environmental Permits as
necessary), (v) contesting any legal proceeding relating to the Merger and
(vi) the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of
this Agreement, GM, Xxxxxx and the Company agree to use all reasonable
efforts to cause the Effective Time to occur as soon as practicable after the
shareholder vote with respect to the Merger. In case at any time after the
Effective Time any further action is necessary to carry out the purposes of
this Agreement, the proper officers and directors of each party hereto shall
take all such necessary action.
5.9. REGULATORY REVIEWS. Each party hereto will use its
reasonable best efforts (a) to file with the U.S. Department of Justice and
U.S. Federal Trade Commission, as soon as practicable after the date hereof,
the Notification and Report Form under the HSR Act and any supplemental
information or material requested pursuant to the HSR Act, and (b) to comply
as soon as practicable after the date hereof with any other laws of any
country and the European Union under which any consent, authorization,
registration, declaration or other action with respect to the transactions
contemplated herein may be required. Each party hereto shall furnish to the
other such information and assistance as the other may reasonably request in
connection with any filing or other act undertaken in compliance with the HSR
Act or other such laws, and shall keep each other timely apprised of the
status of any communications with, and any inquiries or requests for
additional information from, any Governmental Entity under the HSR Act or
other such laws. Xxxxxx and the Company will each use its reasonable best
efforts to cause termination of the HSR waiting period(s) in connection with
any review of the transactions contemplated by this Agreement under the HSR
Act. In connection with any litigation or administrative proceeding
instituted to prevent the consummation of the Merger, Xxxxxx and the Company
shall take any and all action reasonably necessary in connection with such
litigation or administrative proceeding (i) to prevent the entry of any
order, preliminary or permanent injunction, or other legal restraint or
prohibition preventing consummation of the Merger or any related transactions
contemplated by this Agreement and (ii) to vacate any order, injunction of
legal restraint or prohibition which would prevent the consummation of the
transactions contemplated by this
41
Agreement; PROVIDED, however, that nothing contained herein shall require
Xxxxxx to divest any portion of Xxxxxx or the Company or to accept any
restrictions or the operation of Xxxxxx or the Company in order to consummate
the transactions contemplated this Agreement.
5.10. PUBLIC ANNOUNCEMENTS. Each of GM, Xxxxxx and the Company
will agree on the text of any press release before issuing any press release
or otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Merger.
The press release or public statement shall make appropriate reference to the
role of the Company and the HBI family in the development of the
direct-to-home satellite broadcasting business. None of GM, Xxxxxx or the
Company shall issue any such press release or make any such public statement
prior to such agreement, except as may be required by applicable law or by
obligations pursuant to any agreement with the NYSE or NASDAQ, as determined
by GM, Xxxxxx or the Company, as the case may be, in which case such release
or statement shall be limited to a factual summary of the material provisions
of this Agreement and the transactions contemplated hereby.
5.11. DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION.
(a) DIRECTORS' AND OFFICERS' INSURANCE. Xxxxxx will provide,
for an aggregate period of not less than six (6) years from the Effective
Time, the directors and officers of the Company who are currently covered by
the Company's existing insurance and indemnification policy an insurance and
indemnification policy that provides coverage for events occurring prior to
the Effective Time (the "D&O INSURANCE") that is no less favorable than the
Company's existing policy or, if substantially equivalent insurance coverage
is unavailable, the best available coverage; PROVIDED that Xxxxxx shall not
be required to pay an annual premium for the D&O Insurance in excess of 150%
of the last annual premium paid prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount.
(b) INDEMNIFICATION. To the extent, if any, not provided by a
right under one of the parties' directors and officers liability insurance
policies, from and after the Effective Time, Xxxxxx shall, to the fullest
extent permitted by applicable law and consistent with the by-laws of Xxxxxx,
indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date hereof, or who becomes prior to the Effective
Time, a director or officer of the Company (each an "INDEMNIFIED PARTY" and,
collectively, the "INDEMNIFIED PARTIES") against all losses, expenses
(including reasonable attorneys' fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence,
amounts paid in settlement, arising out of actions or omissions occurring at
or prior to the Effective Time and whether asserted or claimed prior to, at
or after the Effective Time that are in whole or in part (i) based on, or
arising out of the fact that such person is or was a director or officer of
the Company or (ii) based on, arising out of or pertaining to the
transactions contemplated by this Agreement. In the event of any such loss,
expense, claim, damage or liability (whether or not arising before the
Effective Time), in addition to any indemnification and hold harmless
hereunder (i) Xxxxxx shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to Xxxxxx, promptly after statements therefor are received and
otherwise advance
42
to such Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by the DGCL
and upon receipt of any affirmation and undertaking required by the DGCL and
(ii) Xxxxxx will cooperate in the defense of any such matter; PROVIDED,
HOWEVER, that Xxxxxx shall not be liable for any settlement effected without
its written consent. The Indemnified Parties as a group may retain only one
law firm with respect to each related matter.
(c) SUCCESSORS. In the event Xxxxxx or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity or such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then and in either such case, proper provision shall be
made so that the successors and assigns of Xxxxxx shall assume the
obligations set forth in this Section 5.11.
(d) BENEFIT. The provisions of this Section 5.11 are intended
to be for the benefit of, and shall be enforceable by, each Indemnified
Party, his or her heirs and his or her representatives.
5.12. NOTIFICATION OF CERTAIN MATTERS. The Company, on the one
hand, and GM and Xxxxxx, on the other, shall give prompt notice to each other
of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time, (ii) any material failure
of a party to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, (iii) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by a party or any of its
subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract or agreement material to the financial
condition, properties, businesses or results of operations of a party and its
subsidiaries taken as a whole to which it or any of its subsidiaries is a
party or is subject, (iv) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, or (v) any
Material Adverse Effect on a party; PROVIDED, that the delivery of any notice
pursuant to this Section 5.12 shall not cure such breach or non-compliance or
limit or otherwise affect the remedies available hereunder to GM and Xxxxxx.
5.13. TAX-FREE REORGANIZATION TREATMENT. The Company, the
significant shareholders of the Company, and Xxxxxx (on behalf of GM and
Xxxxxx) shall execute and deliver to Xxxxxxx, Street and Deinard Professional
Association, counsel to the Company, and Weil, Gotshal & Xxxxxx LLP, counsel
to Xxxxxx and GM, certificates containing customary representations relating
to their business operations and substantially in the forms attached hereto
as Exhibits X-0, X-0 and B-3 (with such changes as may be reasonably
requested by such law firms) at such time or times as may be reasonably
requested by such law firms in connection with their respective deliveries of
opinions, pursuant to Sections 6.2(e) and 6.3(h) hereof, with respect to the
tax-free reorganization treatment of the Merger. Prior to the Effective
Time, none of the Company, GM or Xxxxxx shall take or cause to be taken any
action which would cause to be untrue (or fail to take or cause not to
43
be taken any action which would cause to be untrue) any of the
representations in such certificates.
5.14. COMPANY AFFILIATES. Prior to the Closing Date, the Company
shall deliver to GM a letter identifying each affiliate (as such term is
defined in Rule 12b-2 under the Exchange Act) of the Company at the time the
Merger is submitted for approval to the shareholders of the Company (each a
"COMPANY AFFILIATE") and the Company shall use its reasonable best efforts to
cause each Company Affiliate to deliver to GM on or prior to the Closing
Date, a written agreement that such Company Affiliate will not sell, pledge,
transfer or otherwise dispose of any shares of Acquiror Stock issued to such
Company Affiliate pursuant to the Merger, except in compliance with Rule 145
promulgated under the Securities Act or an exemption from the registration
requirements of the Securities Act.
5.15. SEC FILINGS. Each of GM and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by
the other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
5.16. EMPLOYEE MATTERS.
(a) All employees of the Company who are actively at work as of
the Closing Date shall be employed immediately after the Closing Date at a
rate of salary comparable to the salary rate in effect for such employee as
of the date immediately preceding the Closing Date. All employees of the
Company who are on unpaid leave as of the Closing Date and who have rights of
re-employment upon termination of such individual's leave shall be employed
by DIRECTV upon such termination and shall not receive any salary until the
return of such employees to active work with DIRECTV. Section 5.16(a) of the
Company Disclosure Schedule sets forth a list of all employees of the
Company, their positions, status and rates of salary as of November 24, 1998.
(b) If any employee of the Company is required within the first
twelve (12) months after the Closing Date by DIRECTV to relocate to a
facility that was owned by DIRECTV immediately prior to the Closing Date and
such employee accepts such relocation, such employee shall be provided with
(i) the standard relocation benefits under the DIRECTV Relocation Allowances
Policy (the "RELOCATION PACKAGE") and (ii) an adjusted salary rate for
comparable positions at DIRECTV at such DIRECTV facility; PROVIDED, that any
such employee who is required to relocate pursuant to this paragraph shall be
provided with up to two (2) weeks to consider such relocation.
(c) Any employee of the Company who (i) (x) is actively at work
as of the Closing Date or (y) is on an authorized leave of absence as of the
Closing Date, has rights of re-employment upon termination of such
individual's leave, and is able to return to work, and (ii) (x) has not
accepted a Relocation Package and within twelve (12) months after the Closing
terminates employment with DIRECTV (other than any employee whose employment
was terminated or could have been terminated for cause, death or disability)
or (y) has accepted a Relocation Package and within twelve (12) months after
the Closing is terminated by DIRECTV without cause, shall be entitled to
receive severance pay of six (6) months'
44
salary (in lump sum), career counseling and outplacement services (consistent
with the counseling and outplacement services previously provided to
similarly situated employees of DIRECTV); PROVIDED, HOWEVER, that no such
severance shall be paid under this Section 5.16(c) unless (i) such employee
has signed a full release of any claims against DIRECTV, the Company and any
of their affiliates and (ii) such employee, if voluntarily terminating his or
her employment with DIRECTV, has provided at least two (2) weeks' notice to
DIRECTV; and PROVIDED, FURTHER, that any severance paid under this Section
5.16(c) shall be reduced by the amount of any payment under the Worker
Adjustment and Retraining Notification Act and by the amount of severance
paid or payable under any other plan or arrangement, but not any severance
paid pursuant to Section 5.16(e) hereof. Any person receiving a severance
payment under this Section 5.16(c) shall not be entitled to any payment or
benefit under the Xxxxxx Employment Transition Assistance Plan.
(d) Subject to applicable laws and Sections 5.16(a), (b), (c)
and (e) hereof, DIRECTV shall have the right to terminate the employment of
any employee of the Company who becomes an employee of DIRECTV, with or
without cause, change the terms and conditions of employment of any such
employee, and amend or terminate any employee benefit plans or employee
arrangements applicable to such employees.
(e) The Company and DIRECTV shall establish a program
("PROGRAM") pursuant to which $15 million shall be made available to be
awarded to current employees and certain former employees of the Company and
certain current employees of HBI. The amount of individual awards shall be
as heretofore established by the executive management of the Company with the
approval of DIRECTV. Awards under the Program to any participating employee
shall be payable on (i) the first anniversary of the Closing Date, (ii) with
respect to current employees of the Company, such participating employee's
termination of employment by reason of death or disability or by DIRECTV
without cause, if earlier, or (iii) with respect to current employees of HBI,
the termination of the Transition Services Agreement by DIRECTV, if earlier.
No person shall be entitled to payment of an award if such person is
terminated or could have been terminated for cause or resigns from employment
with the Company, DIRECTV and their affiliates, and awards with respect to
such persons shall be forfeited. The amount payable with respect to any award
under the Program shall be reduced by the amount paid or payable under any
change-in-control, retention or similar arrangements, but not any severance
paid pursuant to Section 5.16(c) hereof. For purposes of this Section
5.16(e), a termination of employment by DIRECTV "without cause" shall include
a termination of employment by a participating employee resulting from a
material reduction in his or her job duties or salary, which reduction shall
have continued for a period of ten (10) days after written notice to DIRECTV.
(f) For purposes of this Section 5.16, "cause" shall mean: (A)
fraud, embezzlement, theft or material dishonesty against the Company or the
Surviving Corporation, any of their subsidiaries or the Board of Directors;
(B) conviction of or plea of NOLO CONTENDERE to any crime (whether or not
involving the Company or the Surviving Corporation) constituting a felony in
the jurisdiction involved; PROVIDED, that such felony is related to such
employee's job responsibility or the safety of co-workers; (C) a willful
failure by the employee to follow reasonable directions or instructions of
his or her supervisor and, in the case of senior officers, the Board of
Directors, in each case consistent with his or her
45
position, which failure shall have continued for a period of time that allows
the progressive discipline policy to be followed and shall not be the result
of the employee's physical or mental incapacity or disability, PROVIDED that
the employee's resignation during such time shall not be effective without
the written consent of the Company; or (D) willful misconduct in the
performance of the employee's duties which results in material damage to or
material liability of the Company, the Surviving Corporation or any of their
subsidiaries.
(g) Service by the employees of the Company who are actively at
work as of the Closing Date or who are on authorized leave of absence as of
the Closing Date with rights of re-employment upon termination of such leave
and return to active work shall be recognized under any benefit plan or
arrangement established, maintained or contributed to by DIRECTV or its
affiliates after the Closing Date for the benefit of any such employee solely
for purposes of eligibility and vesting, except that, with respect to
DIRECTV's Non-Bargaining Retirement Plan, such service shall be recognized
solely for purposes of vesting; PROVIDED, that such recognition does not
result in any duplication of benefits. Individuals who have terminated
employment with the Company prior to the Closing Date and are subsequently
hired by DIRECTV or its affiliates will not be entitled to any service
recognition under this paragraph.
(h) Xxxxxx shall cause DIRECTV to perform all of the obligations
under this Section 5.16, and all rights hereunder are intended to accrue to
the benefit of DIRECTV.
(i) Notwithstanding anything to the contrary herein, in the
event that any payment pursuant to this Section 5.16, together with any
payment or benefit received or to be received by any person pursuant to the
terms of this Agreement or of any other plan, arrangement or agreement of the
Company or its affiliates (each a "PAYMENT" and collectively, the
"PAYMENTS"), would be subject to the excise tax imposed by Section 4999 of
the Code (the "EXCISE TAX") either in whole or in part, the Payments shall be
reduced (but not below zero) until no portion of the Payments would be
subject to the Excise Tax. The Company and HBI agree to provide all such
information DIRECTV may request to determine whether and to what extent the
Excise Tax applies to any Payment. Each recipient of a Payment pursuant to
this Section 5.16 shall be required to agree, as a condition to receiving
such Payment, to indemnify and hold GM, Xxxxxx and their respective
affiliates harmless with respect to any liability for the Excise Tax arising
from or relating to the Payments if it is established that such Payments
resulted in the imposition of the Excise Tax.
5.17. ANCILLARY AGREEMENTS. On or prior to the Closing Date,
Xxxxxx shall, or shall cause DIRECTV to, and the Company shall, or shall use
its reasonable best efforts to cause its relevant affiliates to, enter into
the following agreements (the "ANCILLARY AGREEMENTS"): (i) Consulting
Agreements, substantially in the form of EXHIBIT C hereto, with the Chairman,
the President and the Executive Vice President of the Company, (ii) a
Non-Competition Agreement, substantially in the form of EXHIBIT D hereto,
binding HBI and the foregoing officers, and (iii) a Transition Services
Agreement, substantially in the form of EXHIBIT E hereto, providing for
certain transition services to be provided by HBI to the Company.
Concurrently with the execution of this Agreement, Xxxxxx and the Company
have entered into (i) a Replacement Payload Option Agreement, substantially
in the form of EXHIBIT F hereto, providing for certain arrangements for the
benefit of the Company in the
46
event that this Agreement is terminated pursuant to Section 7.1(g) and
(ii) a Channel Capacity Provision Agreement, substantially in the form of
EXHIBIT G hereto, providing for channel capacity and related services to be
provided to the Company in the event of a "Total Failure" (as defined
therein) of DBS-1.
5.18. BILLING AND CUSTOMER MANAGEMENT SYSTEMS. Prior to the
Closing Date, the Company and DIRECTV will cooperate with each other to
facilitate the consolidation of their respective billing and customer
management systems and other support systems, and DIRECTV shall provide the
Company, upon terms reasonably satisfactory to the Company, in the event the
transactions contemplated by this Agreement are not consummated, with billing
and customer management systems (including CUI) for a period of up to
eighteen (18) months (the length of such period to be determined by the
Company in its sole discretion) commencing on the later of July 1, 1999 or
the date on which this Agreement is terminated pursuant to Section 7.1 at the
rates specified in the contract for such services between the Company and
Convergys, a true, correct and complete copy of which has been provided to
Xxxxxx. The Company has advised Xxxxxx that it has elected to, and covenants
and agrees to, exercise its existing contractual right to terminate its
contract with Convergys within two (2) weeks of the date hereof. The parties
hereto agree that the payment by the Company of any fee or penalty pursuant
to such contract on account of such termination shall not be a violation of
Section 5.1 hereof and shall not constitute a Material Adverse Effect. Each
of the Company and Xxxxxx covenants and agrees to use its reasonable best
efforts to reduce the amount of such termination fee or penalty. In the
event the Company utilizes the billing and customer management systems of
DIRECTV, DIRECTV shall use its reasonable best efforts to assist the Company
in transitioning such services to DIRECTV and, subsequently, transitioning
such services to a third party service provider.
5.19. 110DEG. CONSTRUCTION PERMIT. The Company and Xxxxxx will
cooperate and use their reasonable best efforts to maintain (including,
without limitation, by obtaining extensions of) the 110DEG. Construction
Permit including, without limitation, jointly developing a plan for the
110DEG. Construction Permit which may include, without limitation, the use of
a satellite produced by Xxxxxx. The Company, with prior notice to Xxxxxx,
shall exercise its existing contractual right to terminate the Lockheed
Xxxxxx Contract on or prior to December 31, 1998, unless instructed to the
contrary by Xxxxxx.
5.20. SPRING COMMUNICATIONS. Promptly following the date hereof,
HBI shall purchase from the Company, and the Company shall sell to HBI, all
of the Company's interest in Spring USSB Communications LLC ("SPRING") for a
purchase price of One Hundred Thousand Dollars ($100,000), plus an amount
equal to all capital contributions paid by the Company to Spring following
the date hereof and prior to such purchase. As part of such purchase and
sale, HBI shall assume all liabilities and obligations relating to Spring and
shall indemnify and hold the Company harmless with respect thereto. All
documents relating to the purchase of Spring and such indemnification shall
be reasonably satisfactory to Xxxxxx and the Company.
5.21. CONFIRMATORY CERTIFICATES; COMMUNICATIONS. In order to
verify the truth of the representations and warranties contained in (i)
Section 3.16(b), (ii) the penultimate sentence of Section 3.6 and (iii) the
first sentence of Section 3.25, Xxxxxx may elect to
47
provide the Company with a list of Material Contracts as to which it desires
written confirmation to such effect from the parties to such Contracts.
Xxxxxx shall consult with the Company regarding the content of such list and
conduct such confirmation in a reasonable manner to limit disruption to the
business. The Company shall use its reasonable best efforts to obtain such
requested written confirmations prior to the Closing Date. The Company and
Xxxxxx will coordinate their communications to, and each participate in all
meetings and discussions with, material providers of programming and other
suppliers to the Company; PROVIDED, that the Company may continue its
day-to-day operational activities with such parties in the ordinary course of
business. Without limiting the foregoing, Xxxxxx shall direct, and the
Company shall assist and cooperate with respect to, the development of any
new programming arrangements to be effective from and after the Closing Date,
to the extent deemed necessary or advisable by Xxxxxx to fulfill the
conditions to closing pursuant to this Agreement, with providers of
programming to the Company.
5.22. AFFILIATE AGREEMENTS. On or prior to the Closing Date, the
Company shall (i) assume the Company's liability insurance and
indemnification policy currently held by HBI and (ii) terminate and cancel
all agreements with HBI and its affiliates, except as set forth in the
Transition Services Agreement.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the shareholders of the Company;
(b) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
enforced by any United States court or United States governmental authority
and continued in effect which prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired, and any other governmental or
regulatory notices or approvals required with respect to the transactions
contemplated hereby shall have been either filed or received;
(d) the FCC shall have consented to the transfer of control of
the FCC Licenses, by means of action by the FCC (including action duly taken
by the FCC's staff, pursuant to delegated authority), which shall not have
been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which no timely request for stay, petition for rehearing, appeal
or certiorari or SUA SPONTE action of the FCC with comparable effect shall be
pending and as to which the time for filing any such request, petition,
appeal, certiorari or for the taking of any such SUA SPONTE action by the FCC
shall have expired;
48
(e) the S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order and GM shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Acquiror Stock in
exchange for the Shares in the Merger; and
(f) the Acquiror Stock issuable in the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
6.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger is subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) the representations and warranties of GM and Xxxxxx
contained in this Agreement or in any other document delivered pursuant
hereto shall be true and correct in all respects at and as of the Effective
Time with the same effect as if made at and as of the Effective Time, and at
the Closing GM and Xxxxxx shall have delivered to the Company a certificate
to that effect;
(b) each of the obligations of GM and Xxxxxx to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and at the Closing GM and Xxxxxx shall have delivered to the Company a
certificate to that effect;
(c) the Ancillary Agreements shall have been duly executed and
delivered by Xxxxxx or DIRECTV;
(d) there shall have been no events, changes or effects with
respect to Xxxxxx or its subsidiaries which would have a Material Adverse
Effect on Xxxxxx; and
(e) the opinion of Xxxxxxx, Street and Deinard Professional
Association, dated the Closing Date and addressed to the Company
substantially to the effect that (i) the Merger should be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a)
of the Code; (ii) each of GM, Xxxxxx and the Company should be a party to the
reorganization within the meaning of Section 368(b) of the Code; and (iii) no
gain or loss should be recognized by a shareholder of the Company as a result
of the Merger with respect to Shares converted into shares of Acquiror Stock
(other than with respect to cash received in lieu of fractional shares of
Acquiror Stock), shall have been delivered and such opinion shall not have
been withdrawn or modified in any material respect. In rendering such
opinion, Xxxxxxx, Street and Deinard Professional Association shall have
received and may rely upon the representations contained in the certificates
referred to in Section 5.13.
6.3. CONDITIONS TO THE OBLIGATIONS OF GM AND XXXXXX. The
respective obligations of GM and Xxxxxx to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
49
(a) the representations and warranties of the Company contained
in this Agreement or in any other document delivered pursuant hereto shall be
true and correct in all respects at and as of the Effective Time with the
same effect as if made at and as of the Effective Time, and at the Closing
the Company shall have delivered to GM and Xxxxxx a certificate to that
effect in the form of EXHIBIT H hereto, duly executed by each of the
Chairman, President, Executive Vice President and Chief Financial Officer of
the Company in their respective capacities as such;
(b) each of the obligations of the Company to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time
and at the Closing the Company shall have delivered to GM and Xxxxxx a
certificate to that effect;
(c) the Dissenting Shares shall constitute not more than five
percent (5%) of the Shares;
(d) the Company shall have delivered to Xxxxxx all consents or
notices necessary to effect valid assignments of the contracts listed on
Section 6.3(d) of the Acquiror Disclosure Schedule, all in form and substance
reasonably acceptable to Xxxxxx;
(e) HBI and the Company, as applicable, shall have duly executed
and delivered the Ancillary Agreements;
(f) the Shareholders Agreement shall be in full force and effect;
(g) there shall have been no events, changes or effects with
respect to the Company or its subsidiaries (except for events, changes or
effects primarily resulting from the actions of DIRECTV) which would have a
Material Adverse Effect on the Company;
(h) the opinion of Weil, Gotshal & Xxxxxx LLP, dated the Closing
Date and addressed to Xxxxxx and GM, substantially to the effect that (i) the
Merger should be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; (ii) each of GM, Xxxxxx and
the Company should be a party to the reorganization within the meaning of
Section 368(b) of the Code; and (iii) no gain or loss should be recognized by
GM, Xxxxxx or the Company as a result of the Merger, shall have been
delivered and such opinion shall not have been withdrawn or modified in any
material respect. In rendering such opinion, Weil, Gotshal & Xxxxxx LLP
shall have received and may rely upon the representations contained in the
certificates referred to in Section 5.13;
(i) the Company shall have delivered to Xxxxxx no later than two
(2) business days prior to the Effective Time true, correct and complete
copies of the Redacted Contracts, without any redaction of the information
contained therein; and
(j) the modifications to certain Material Contracts described in
Section 6.3(j) of the Acquiror Disclosure Schedule shall have been adopted by
each party thereto and shall be in full force and effect.
50
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of GM, Xxxxxx and the Company;
(b) by Xxxxxx or the Company if the Merger has not been
consummated by September 30, 1999 (the "LATEST DATE"); PROVIDED, that no
party may terminate this Agreement pursuant to this Section 7.1(b) if such
party's failure to fulfill any of its obligations under this Agreement shall
have been the reason that the Effective Time shall not have occurred on or
before said date;
(c) by Xxxxxx or the Company if the U.S. Department of Justice
or U.S. Federal Trade Commission has issued or stated its intention to seek
an order, preliminary or permanent injunction, or other legal restraint or
prohibition preventing consummation of the Merger or any related transactions
contemplated by this Agreement;
(d) by the Company, so long as the Company is not then in
material breach of its obligations hereunder, if (i) there shall have been a
breach of any representation or warranty on the part of GM or Xxxxxx set
forth in this Agreement, or (ii) there shall have been a material breach by
GM or Xxxxxx of any of their respective covenants or agreements hereunder, in
either case such that the conditions set forth in Section 6.2(a) would be
incapable of being satisfied by the Latest Date;
(e) by Xxxxxx, so long as GM and Xxxxxx are not then in material
breach of any of their obligations hereunder, if (i) there shall have been a
breach of any representation or warranty on the part of the Company set forth
in this Agreement or (ii) there shall have been a material breach by the
Company of its covenants or agreements hereunder in either case such that the
conditions set forth in Section 6.3(a) would be incapable of being satisfied
by the Latest Date;
(f) by Xxxxxx if the Company shall have convened a meeting of
its shareholders and failed to obtain the requisite vote to approve this
agreement and the Merger; or
(g) by Xxxxxx by written notice to the Company following the
date on which all transponders on DBS-1 (and not solely those transponders
utilized by the Company) have suffered a "Confirmed Failure" as defined in
the Satellite Payload Purchase Agreement dated as of May 31, 1991.
7.2. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part
of any party hereto or its affiliates, directors, officers or shareholders,
other than the provisions of this Section 7.2 and Sections 5.7(d),
51
5.10, 5.18 and 7.3, which shall survive any termination. Nothing contained
in this Section 7.2 shall relieve any party from liability for any breach of
this Agreement.
7.3. EXPENSES. Each party shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby. The
cost of filing and printing the S-4 and the Proxy Statement shall be borne by
the Company.
7.4. AMENDMENT. This Agreement may be amended by action taken by
the Company, GM and Xxxxxx at any time before or after approval of the Merger
by the shareholders of the Company but, after any such approval, no amendment
shall be made which requires the approval of such shareholders under
applicable law without such approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
7.5. EXTENSION; WAIVER. At any time prior to the Effective Time,
each party hereto (for these purposes, GM and Xxxxxx shall together be deemed
one party and the Company shall be deemed the other party) may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other party with
any of the agreements or conditions contained herein. Any agreement on the
part of either party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of either party hereto to assert any of its rights hereunder
shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
8.2. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement:
(a) constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof; and
(b) shall not be assigned by operation of law or otherwise;
PROVIDED, HOWEVER, that Xxxxxx may assign any or all of its rights and
obligations under this Agreement to any direct or indirect wholly owned
subsidiary of GM, but any representation, warranty or covenant of Xxxxxx
contained in this Agreement shall remain a representation, warranty or
covenant of Xxxxxx and no such assignment shall relieve Xxxxxx of its
obligations hereunder if such assignee does not perform such obligations.
52
8.3. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, confirmed facsimile or telex, or by first class mail (postage
prepaid, return receipt requested), to the other party as follows:
if to GM or
to Xxxxxx to: General Motors Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Treasurer
Facsimile:
and Xxxxxx Electronics Corporation
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company to: United States Satellite Broadcasting Company, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx, Street and Deinard Professional
Association
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
8.4. GOVERNING LAW. Except to the extent that Minnesota law is
mandatorily applicable to the Merger and the rights of the shareholders of
the Company, this Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the principles of
conflicts of law thereof.
53
8.5. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
8.6. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 5.11, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
8.7. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall 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.
8.8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific
performance issued by a court of competent jurisdiction. Such remedy shall,
however, not be exclusive and, shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
8.9. BROKERS. Except as otherwise provided in Section 7.3, the
Company agrees to indemnify and hold harmless GM and Xxxxxx, and Xxxxxx
agrees to indemnify and hold harmless the Company, from and against any and
all liability to which GM and Xxxxxx, on the one hand, or the Company, on the
other hand, may be subjected by reason of any broker's, finder's or similar
fees or expenses with respect to the transactions contemplated by this
Agreement to the extent such similar fees and expenses are attributable to
any action undertaken by or on behalf of the Company, or GM or Xxxxxx, as the
case may be.
8.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed on its behalf as of the day and year first above written.
GENERAL MOTORS CORPORATION
By: /s/ Xxxx Xxxxxxxxx
--------------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Treasurer
XXXXXX ELECTRONICS CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
UNITED STATES SATELLITE
BROADCASTING COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman of the Board
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
