AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 17, 1997, by and among
HERITAGE MEDIA CORPORATION, a Delaware corporation (the "Company"), THE NEWS
CORPORATION LIMITED (XXX 000 000 000), x Xxxxx Xxxxxxxxx corporation ("News
Corp."), and HMC ACQUISITION CORP., a Delaware corporation and a wholly-owned
direct subsidiary of News Corp. ("Merger Sub").
RECITALS
WHEREAS, it is the intention of the parties that the Company merge with and
into Merger Sub (the "Merger"), with the Merger Sub surviving as a wholly-owned
direct subsidiary of News Corp.;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a tax-free reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and any successor statute (the
"Code");
WHEREAS, as a condition to the willingness of News Corp. and Merger Sub to
enter into this Agreement, the Company has agreed to enter into an agreement
providing for the transfer of title of all outstanding shares of HMI
Broadcasting Corp., an indirect wholly-owned subsidiary of the Company ("HMI"),
to a trust for the sole benefit of the Company; and
WHEREAS, the Boards of Directors of News Corp., Merger Sub and the Company
have determined that the transactions contemplated by this Agreement (the
"Transactions"), including, without limitation, the Merger, are advisable and in
the best interest of their respective corporations and stockholders and have
approved this Agreement;
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2), in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"), the
Company shall be merged with and into Merger Sub in accordance with this
Agreement and the separate existence of the Company shall cease. Merger Sub
shall be the surviving corporation in the Merger (hereinafter sometimes referred
to as the "Surviving Corporation").
Section 1.2 EFFECTIVE TIME OF THE MERGER. Upon the terms and subject to
the conditions hereof, a certificate of merger (the "Certificate of Merger")
shall be duly prepared, executed and acknowledged by the Surviving Corporation
and thereafter delivered to the Secretary of State of the State of Delaware, for
filing, on the Closing Date (as defined in Section 1.3). The Merger shall become
effective as of the date and at such time as the Certificate of Merger pursuant
to Section 251 of the DGCL and any other documents necessary to effect the
Merger in accordance with the DGCL are duly filed (the "Merger Filing") with the
Secretary of State of the State of Delaware or at such subsequent date or time
as shall be agreed by the Company and News Corp. and specified in the
Certificate of Merger (the time the Merger becomes effective pursuant to the
DGCL being referred to herein as the "Effective Time").
Section 1.3 CLOSING. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Article VII hereof, the closing of the Merger
(the "Closing") will take place at 10:00 a.m., New York City time, on a date to
be specified by the parties, which shall be no later than the fifth Business Day
(as defined below) after the satisfaction or waiver of the conditions to Closing
contained in Article VII hereof, at the offices of Squadron, Ellenoff, Plesent &
Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date
or place is agreed to in writing by the parties hereto. The date and time at
which the Closing occurs is referred to herein as the "Closing Date." "Business
Day" shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in New York City are not required to be open.
Section 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with the
terms thereof and with applicable law.
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(b) The By-Laws of Merger Sub in effect at the Effective Time shall
be the By-Laws of the Surviving Corporation until amended in accordance with the
terms thereof and with applicable law.
Section 1.6 DIRECTORS. The directors of Merger Sub at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation and until his or her successor is duly
elected and qualified.
Section 1.7 OFFICERS. The officers of Merger Sub at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
from the Effective Time in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation and until his or her successor is duly
appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
outstanding shares of capital stock of the Company or of the holder of any
shares of capital stock of Merger Sub:
(a) EXCHANGE RATIO FOR COMPANY COMMON STOCK. Subject to Section
2.2(e), each issued and outstanding share of Common Stock, par value $.01 per
share (the "Company Common Stock"), of the Company shall be converted into the
right to receive that number of American Depositary Shares of News Corp. (the
"News Corp. Preferred ADRs"), each of which represents four fully paid and
nonassessable Preferred Limited Voting Ordinary Shares, par value A$.50 per
share, of News Corp. (the "News Corp. Preferred Stock"), equal to the quotient
(the "Exchange Ratio") of (x) $20.50 divided by (y) the average of the daily
closing price of News Corp. Preferred ADRs on the New York Stock Exchange
("NYSE") Composite Tape on the twenty consecutive trading days ending on the
date which is five Business Days prior to the date of the Company Meeting (as
defined in Section 6.8 hereof) (the "Effective Date Price"); PROVIDED, HOWEVER,
that, if the Effective Time has not occurred within two days after the date of
the Company Meeting, the denominator of the Exchange Ratio referred to in the
foregoing subclause (y) shall be equal to the average of the daily closing price
of the News Corp. Preferred ADRs on the NYSE Composite Tape on the twenty
consecutive trading days ending on the date which is five Business Days prior to
the Effective Time. All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate that, immediately
prior to the Effective Time, represented outstanding shares of Company Common
Stock (the "Common Stock Certificates") shall cease to have any rights with
respect thereto, except the right to receive, upon the surrender of such Common
Stock Certificate, the News Corp. Preferred ADRs to which such holder is
entitled pursuant to this Section 2.1(a), as represented by one or more
certificates, and any cash in lieu of fractional News Corp. Preferred ADRs to be
issued or paid in consideration therefor in accordance with Section 2.2(e) and
any dividends or distributions to which such holder is entitled pursuant to
Section 2.2(c), in each case without interest. All shares of capital
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stock of the Company that are owned by the Company as treasury stock shall not
convert into the right to receive News Corp. Preferred ADRs in accordance with
this Section 2.1(a).
(b) EXCHANGE RATIO FOR COMPANY STOCK OPTIONS.
(i) At the Effective Time, each outstanding Company Stock
Option (as defined in Section 3.2) shall, to the extent provided for in the
Company Stock Option Plans (as defined in Section 3.2), vest and be exercisable,
if not vested and exercisable at such time, and all Company Stock Options shall
be adjusted in accordance with the terms thereof and this Agreement to be
exercisable to purchase News Corp. Preferred ADRs, as provided below. Following
the Effective Time, each Company Stock Option shall continue to have, and shall
be subject to, the same terms and conditions set forth in the Company Stock
Option Plans or any other agreement pursuant to which such Company Stock Option
was subject immediately prior to the Effective Time, except as set forth in this
Section 2.1(b) and except that (A) each such Company Stock Option shall be
exercisable for that number of News Corp. Preferred ADRs equal to the product of
(1) the aggregate number of shares of Company Common Stock for which such
Company Stock Option was exercisable and (2) the Exchange Ratio; PROVIDED,
HOWEVER, that no Company Stock Option shall be exercisable for a fractional News
Corp. Preferred ADR, and holders of a Company Stock Option exercisable for a
fractional News Corp. Preferred ADR shall be entitled to receive, upon exercise
thereof, an offset against the aggregate exercise price of the Company Stock
Options being exercised therewith, such offset to be determined by multiplying
the fraction of a News Corp. Preferred ADR to which a holder of a Company Stock
Option would be entitled to receive times the excess of the closing price of the
News Corp. Preferred ADRs as reported on the NYSE Composite Tape on the date of
exercise over the exercise price of such Company Stock Option, and (B) the
exercise price per News Corp. Preferred ADR issuable pursuant to such Company
Stock Option shall be equal to the aggregate exercise price of such Company
Stock Option at the Effective Time divided by the number of News Corp. Preferred
ADRs for which such Company Stock Option shall be exercisable as determined in
accordance with the preceding clause (A), rounded up to the next highest cent,
if necessary.
(ii) Prior to the Effective Time, the Company shall make
such amendments, if any, to the Company Stock Option Plans as shall be necessary
to permit the assumption and adjustment and other terms referred to in this
Section 2.1(b) and, if requested by News Corp., to comply with the requirements
of the Australian Stock Exchange ("ASX") or Australia law; PROVIDED, HOWEVER,
that any such amendments requested by News Corp. shall not affect in any respect
the number of News Corp. Preferred ADRs issuable upon exercise of Company Stock
Options or the exercise price thereof. As soon as practicable after the
Effective Time, the Surviving Corporation shall deliver to the participants in
the Company Option Plans notices advising them of the Merger and setting forth
the formula for converting shares of Company Common Stock issuable upon the
exercise of Company Stock Options into News Corp. Preferred ADRs.
(iii) At the time that a Company Stock Option is exercised in
accordance with the terms hereof, News Corp. shall, pursuant to the terms of the
Deposit Agreement (as defined below), (x) deposit with the Custodian (as defined
in the Deposit Agreement) the shares of News Corp. Preferred Stock underlying
the News Corp. Preferred ADRs to be issued upon such exercise and (y) instruct
the Depositary (as defined below) to deliver the News Corp. Preferred ADRs
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to be issued upon such exercise in accordance with the written instructions of
the holder of such Company Stock Option so exercised. For purposes of this
Agreement, "Depositary" shall mean Citibank, N.A., as Depositary, pursuant to
the Amended and Restated Deposit Agreement, dated as of December 3, 1996, among
News Corp., the Depositary and the holders from time to time of News Corp.
Preferred ADRs (the "Deposit Agreement").
(iv) News Corp. shall (i) file a registration statement on
Form S-8 (or amend an existing registration statement on Form S-8) to become
effective as of the Effective Time with respect to the News Corp. Preferred ADRs
subject to Company Stock Options; (ii) maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding;
(iii) promptly prepare and submit to the NYSE applications covering the News
Corp. Preferred ADRs subject to Company Stock Options and use commercially
reasonable efforts to cause such securities to be approved for listing on the
NYSE prior to the Effective Time, subject to official notice of issuance; and
(iv) within ten days after the Effective Time, prepare and submit to the ASX,
pursuant to the Listing Rules of the ASX, applications covering the News Corp.
Preferred Stock underlying the News Corp. Preferred ADRs to be issued upon the
exercise of Company Stock Options.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT; DEPOSITARY. News Corp., pursuant to the terms of
the Deposit Agreement, shall (i) prior to the Effective Time, (A) deposit with
the Custodian the shares of News Corp. Preferred Stock underlying the News Corp.
Preferred ADRs to be issued in the Merger and (B) instruct the Depositary to
deposit the News Corp. Preferred ADRs to be issued in the Merger with News
Corp.'s transfer agent for the News Corp. Preferred ADRs or with such other bank
or trust company designated by News Corp. with an office or agency in the City
of New York, New York (the "Exchange Agent"), for the benefit of the holders of
shares of Company Common Stock, for exchange in the Merger in accordance with
this Article II, through the Exchange Agent; and (ii) from time to time as
necessary at or after the Effective Time, deposit with the Exchange Agent cash
to be paid in lieu of fractional News Corp. Preferred ADRs pursuant to Section
2.2(e) (such certificates representing News Corp. Preferred ADRs, together with
any dividends or distributions with respect thereto to which the holders of
shares of Company Common Stock may be entitled to pursuant to Section 2.2(c),
and cash in lieu of fractional News Corp. Preferred ADRs, being hereinafter
referred to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, News Corp. shall cause the Exchange Agent to mail to each holder
of record of Company Common Stock immediately prior to the Effective Time whose
shares were converted, pursuant to the Merger, into the right to receive News
Corp. Preferred ADRs (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other customary provisions as News Corp., in
consultation with the Company, may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing News Corp. Preferred ADRs which such holder has the right to
receive pursuant to the provisions of this Article II. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by News Corp., together with such letter of
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transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor certificates representing that whole number of News
Corp. Preferred ADRs which such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. News Corp. or the Surviving Corporation shall pay any
transfer or other similar taxes required by reason of the issuance and receipt
by the former stockholders of the Company of the News Corp. Preferred ADRs
pursuant to the provisions of this Article II; PROVIDED, HOWEVER, in the event
of a transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, certificates representing the
proper number of News Corp. Preferred ADRs may be issued to a transferee if the
Certificate representing such shares of Company Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed, at any time after the Effective Time, to represent only the
right to receive upon such surrender certificates representing the News Corp.
Preferred ADRs and any cash in lieu of fractional News Corp. Preferred ADRs, as
contemplated by this Section 2.2 and any dividends or distributions to which a
holder may be entitled. No interest will be paid or will accrue on any cash paid
or payable in lieu of any fractional News Corp. Preferred ADRs.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED COMPANY COMMON STOCK.
No dividends or other distributions declared or made after the Effective Time
with respect to News Corp. Preferred ADRs with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the News Corp. Preferred ADRs issuable hereunder in respect thereof, and no
cash payment in lieu of fractional News Corp. Preferred ADRs shall be paid to
any such holder pursuant to Section 2.2(e), until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable Laws (as defined in Section 3.4(a)), following surrender of any such
Certificate there shall be paid to the record holder of the certificates
representing News Corp. Preferred ADRs issued in exchange therefor, without
interest, (i) at the later of (A) the time of such surrender and (B) the day
following the Effective Time, the amount of any cash payable in lieu of a
fractional News Corp. Preferred ADR to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole News
Corp. Preferred ADRs, and (ii) if the payment date for any dividend or
distribution payable with respect to such whole News Corp. Preferred ADRs has
not occurred prior to the surrender of such Certificate, at the appropriate
payment date therefor, the amount of dividends or other distributions with a
record date after the Effective Time but prior to the surrender of such
Certificate.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All News
Corp. Preferred ADRs issued upon the surrender for exchange of shares of Company
Common Stock pursuant to the Merger and in accordance with the terms hereof
(including any cash paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date hereof and which remain unpaid at the
Effective Time, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the
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shares of Company Common Stock which are converted pursuant to the Merger and
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged for News Corp. Preferred ADRs,
together with any cash in lieu of fractional News Corp. Preferred ADRs and any
dividends or distributions with respect to News Corp. Preferred ADRs, as
provided in this Article II.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional News Corp. Preferred ADRs shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests shall not entitle
the owner thereof to any rights as a security holder of News Corp. All holders
entitled to receive a fractional News Corp. Preferred ADR shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying (i) the
fraction of a News Corp. Preferred ADR to which such holder would otherwise have
been entitled times (ii) the Effective Date Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of shares of Company Common Stock on
the second anniversary of the Effective Time shall be delivered to News Corp.,
upon demand, and any holders of shares of Company Common Stock who have not
theretofore delivered all of their Certificates in accordance with Section 2.2
shall thereafter look only to News Corp. for payment of their claim for News
Corp. Preferred ADRs, any cash in lieu of fractional News Corp. Preferred ADRs
and any dividends or distributions with respect to News Corp. Preferred ADRs.
(g) NO LIABILITY. Neither News Corp., the Company nor the Exchange
Agent shall be liable to any holder of shares of Company Common Stock or News
Corp. Preferred ADRs, as the case may be, for such shares (or dividends or
distribution with respect thereto) or cash in lieu of fractional shares
delivered to a public official pursuant to any applicable abandoned property,
escheat, or similar Law.
(h) DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock (the "Shares") outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such Shares in accordance with Section 262 of the DGCL, if such
Section 262 provides for appraisal rights for such Shares in the Merger
("Dissenting Shares"), shall not be converted into a right to receive the Merger
consideration, as provided in Section 2, unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or loses his right to appraisal,
such Shares shall be treated as if they had been converted as of the Effective
Time into a right to receive the Merger consideration, without interest thereon.
The Company shall give News Corp. prompt notice of any demands received by the
Company for appraisal of Shares, and, prior to the Effective Time, News Corp.
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company shall not,
except with the prior written consent of News Corp., make any payment with
respect to, or settle or offer to settle, any such demands.
Section 2.3 CLOSING OF TRANSFER BOOKS. From and after the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock
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converted pursuant to the Merger shall thereafter be made. If, after the
Effective Time, Certificates representing such shares are presented to News
Corp., they shall be canceled and exchanged for News Corp. Preferred ADRs,
together with any cash in lieu of fractional News Corp. Preferred ADRs and any
dividends or distributions with respect to News Corp. Preferred ADRs, as
provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to News Corp. and Merger Sub
that:
Section 3.1 ORGANIZATION AND QUALIFICATIONS; SUBSIDIARIES.
(a) The Company and each Company Subsidiary (as defined below) is a
corporation, partnership or other legal entity duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority and all
governmental permits, approvals and other authorizations necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental permits, approvals
and other authorizations would not, individually or in the aggregate, have a
material adverse effect on the business, assets, financial or other condition,
or results of operations of the Company and the Subsidiaries (as defined below)
of the Company (each, a "Company Subsidiary"), taken as a whole (a "Company
Material Adverse Effect").
(b) Attached as Schedule 3.1 is an organizational chart that includes
the Company and all Company Subsidiaries. Except as set forth on Schedule 3.1,
all outstanding shares of capital stock of each Company Subsidiary are owned
either by the Company or another Company Subsidiary. For purposes of this
Agreement, a "Subsidiary" of any person means (A) a corporation in which such
person, a subsidiary of such person, or such person and one or more subsidiaries
of such person, directly or indirectly, at the date of determination, has either
(i) a majority ownership interest or (ii) the power, under ordinary
circumstances, to elect, or to direct the election of, a majority of the board
of directors of such corporation or (B) a partnership in which such person, a
subsidiary of such person, or such person and one or more subsidiaries of such
person (i) is, at the date of determination, a general partner of such
partnership, or (ii) has a majority ownership interest in such partnership or
the right to elect, or to direct the election of, a majority of the governing
body of such partnership, or (C) any other person (other than a corporation or a
partnership) in which such person, a subsidiary of such person, or such person
and one or more subsidiaries of such person has either (i) at least a majority
ownership interest or (ii) the power to elect, or to direct the election of, a
majority of the directors or other governing body of such person.
Section 3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 10,000,000 shares of
preferred stock, par value $.01 per share, of which 800,000 shares were
designated as Series A Junior Participating Preferred Stock ("Series A Stock").
As of the date hereof, (a) 35,728,998 shares of Common Stock were
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issued and 34,772,342 were issued and outstanding, all of which were validly
issued, fully paid and nonassessable; (ii) no shares of Series A Stock were
issued and outstanding; (iii) 3,841,504 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding stock options (the "Company
Stock Options") granted pursuant to the Company's stock option plans (the
"Company Stock Option Plans"); (iv) 1,430,000 shares of Common Stock were
reserved for issuance upon exercise of options available for grant under the
Company Stock Option Plan; (v) 35,728,998 preferred stock purchase rights (the
"Purchase Rights") were issued and 34,772,342 Purchase Rights were issued and
outstanding, and the rights agreement pursuant to which the Purchase Rights have
been issued has been amended to exclude the Merger and the other Transactions as
triggering events thereunder; and (vi) 956,656 shares of Company Common Stock
were held as treasury shares. All of the Company Stock Options have been duly
and validly authorized and issued in compliance with all federal and state
securities laws and regulations. Except as set forth above or in Schedule 3.2,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Except as set forth above or in
Schedule 3.2, there are no options or agreements relating to the issued or
unissued capital stock of the Company or any Company Subsidiary, or obligating
the Company or any Company Subsidiary to issue, transfer, grant or sell any
shares of capital stock of, or other equity interests in, or securities
convertible into or exchangeable for any capital stock or other equity interests
in, the Company or any Company Subsidiary. Except for required repurchases of
options or stock upon termination of employment to the extent required by
agreements in effect on the date hereof, there are no outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or any other shares of
capital stock of the Company or any Company Subsidiary.
Section 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and, subject to adoption of this Agreement
by a majority of the issued and outstanding shares of Company Common Stock (the
"Company Stockholder Approval"), to consummate the Transactions. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
Transactions other than Company Stockholder Approval. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by News Corp. and Merger Sub,
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and by equitable principles to which the remedies of
specific performance and injunctive and similar forms of relief are subject and
except that rights to indemnity hereunder may be subject to federal or state
securities laws or the policies underlying such laws.
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Section 3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS; CERTAIN
CONTRACTS.
(a) Except as set forth in Schedule 3.4 and subject to obtaining
Company Stockholder Approval, the execution and delivery of this Agreement by
the Company do not, and the performance of its obligations under this Agreement
and the consummation of the Transactions by the Company will not, (i) conflict
with or violate the certificate of incorporation or by-laws or equivalent
organizational documents of the Company or any Company Subsidiary, (ii) subject
to the making of the filings and obtaining the approvals identified in Section
3.4(b), conflict with or violate any law, rule, regulation, order, judgment or
decree (collectively, "Laws") applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected, except in such instances which would not have a
Company Material Adverse Effect; or (iii) subject to the making of the filings
and obtaining the approvals identified in Section 3.4(b), conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, result in the loss (by
the Company, any such Company Subsidiary or the Surviving Corporation) or
modification in a manner materially adverse to the Company and the Company
Subsidiaries of any material right or benefit under, or give to others any right
of termination, amendment, acceleration, repurchase or repayment, increased
payments or cancellation of, or result in the creation of any security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever (collectively, "Liens") on any property or asset of the Company or
any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other instrument or
obligation (collectively, "Contracts"), to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary is bound or affected,
except in such instances which would not result in a Company Material Adverse
Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of its obligations under this Agreement and the
consummation of the Transactions by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
federal, state or local governmental or regulatory agency, authority, commission
or instrumentality, whether domestic or foreign (each a "Governmental Entity"),
except for (A) applicable requirements of the Exchange Act, the Securities Act
of 1933, as amended (the "Securities Act"), and state securities or "blue sky"
laws (the "Blue Sky Laws"), (B) the pre-merger notification requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (C) approval of the transactions
contemplated by the Transfer Agreement (as defined in Section 6.2(b) hereof) by
the Federal Communications Commission (the "FCC") under the Communications Act
of 1934, as amended (the "Communications Act"), and the rules and regulations of
the FCC promulgated thereunder (the "FCC Rules"), (D) the Merger Filing and
(E) such instances in which the failure to obtain such consents, approvals,
authorizations or permits or to make such filings or provide such notice will
not have a material adverse effect on the business, assets, financial or other
condition, or results of operations of the Company or any of the Company's
broadcasting, Actmedia or DIMAC business units (a "Business Unit Material
Adverse Effect").
10
(c) Except as set forth in Section 3.4(b) or in Schedule 3.4(c),
there are no consents, authorizations or other approvals from any Person
(including, without limitation, any Person that has entered into any contract,
agreement, arrangement or understanding with the Company) required to permit the
consummation of the Transactions, except for such instances in which the failure
to obtain such consent, authorization or other approval will not result in a
Business Unit Material Adverse Effect.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. Each form, report,
schedule, registration statement and definitive proxy statement filed by the
Company with the Securities and Exchange Commission (the "SEC") since December
31, 1994 and prior to the date hereof, including, without limitation, the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (as
such documents have been amended prior to the date hereof, collectively, the
"Company SEC Reports"), as of their respective dates, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations thereunder. None of the Company SEC Reports,
as of their respective dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except for such statements, if any, as have been
modified or superseded by subsequent filings prior to the date hereof. The
consolidated financial statements of the Company and the Company Subsidiaries
included in such reports comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited interim financial statements, as permitted by
Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited
interim financial statements, to normal, year-end audit adjustments) the
consolidated financial position of the Company and the Company Subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. Except as set forth in Schedule 3.5, since
December 31, 1996, neither the Company nor any of the Company Subsidiaries has
incurred any liabilities or obligations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become
due) of any nature, except liabilities, obligations or contingencies (a) which
are reflected on the audited balance sheet of the Company and the Company
Subsidiaries as at December 31, 1996, (including the notes thereto) (the
"Company Balance Sheet"), (b) which (i) were incurred in the ordinary course of
business after December 31, 1996 and consistent with past practices, (ii) are
disclosed in the Company SEC Reports filed after December 31, 1996 or
(iii) would not, individually or in the aggregate, have a Company Material
Adverse Effect. Since December 31, 1996, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of the Company or any Company Subsidiary.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except (a) as set
forth in Schedule 3.6, (b) as contemplated by this Agreement, (c) as disclosed
in any Company SEC Report, since December 31, 1996, or (d) due to general
economic changes after the date hereof or changes in the Company's business
after the date hereof attributable solely to action taken by News Corp., (i) the
Company and the Company Subsidiaries have conducted their respective businesses
in the ordinary course, consistent with past practice, and have not taken any of
the actions set forth in Section 5.1 hereof and (ii) there has not occurred or
arisen any event that, individually or in the aggregate, has
11
had or, insofar as reasonably can be foreseen, is likely in the future to have,
a Company Material Adverse Effect other than events or developments generally
affecting the industry in which the Company and the Company Subsidiaries
operate.
Section 3.7 PROPERTIES. Schedule 3.7 lists and describes briefly (i) all
real property that the Company and the Company Subsidiaries own and (ii) all
real property leased to the Company or any of the Company Subsidiaries, the
location, the rent and the expiration dates, if any, under such leases. The
Company has good and marketable title to, or a valid leasehold or license
interest in, all tangible properties and assets (real, personal and mixed)
reflected on the Company Balance Sheet or acquired after the date thereof
(except for properties and assets sold or otherwise disposed of in the ordinary
course of business since the date of the Company Balance Sheet) necessary for
the present or proposed conduct of its business, free and clear of any and all
Liens, subject only to (i) statutory Liens arising or incurred in the ordinary
course of business with respect to which the underlying obligations are not
delinquent, (ii) Liens reflected on the Company Balance Sheet or notes thereto,
(iii) Liens for taxes, assessments or other governmental charges or levies which
are not yet due and payable or which are being contested in good faith in
appropriate proceedings and as to which adequate reserves have been set aside,
and (iv) Liens which are not substantial in character, amount, or extent, and
which do not materially detract from the value, or interfere with the present
use, of the property subject thereto or affect thereby. The Company and each
Company Subsidiary has a valid leasehold interest under each such lease, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
default under any such lease or, to the Company's Knowledge (as defined in
Section 3.17 hereof), 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, except for defaults that are not likely to result in a
Business Unit Material Adverse Effect. The Company has heretofore delivered or
agreed to make available to News Corp. copies of all of the material written
leases and licenses described on Schedule 3.7, together with all amendments
thereto. Schedule 3.7 also sets forth those leases or licenses for which
third-party consents as a result of the Transactions are required.
Section 3.8 INTELLECTUAL PROPERTY. The Company and the Company
Subsidiaries own or have valid, binding and enforceable rights to use in North
America all material patents, trademarks, trade names, service marks, service
names, copyrights, applications therefor and licenses or other rights in respect
thereof ("Intellectual Property") used or held for use in connection with the
business of the Company or the Company Subsidiaries, without any known conflict
with the rights of others, except for such conflicts as do not have a Company
Material Adverse Effect. Schedule 3.8 or the Company SEC Reports set forth
(i) each material patent or registration which has been issued to the Company or
any of the Company Subsidiaries with respect to any of their Intellectual
Property, (ii) each material pending patent application or application for
registration which the Company or any of the Company Subsidiaries has made with
respect to any of their Intellectual Property, (iii) each material license,
agreement or other permission which the Company or any of the Company
Subsidiaries has granted to any third party with respect to any of its
Intellectual Property and (iv) each material item of Intellectual Property that
any third party owns and that the Company or any of the Company Subsidiaries
uses pursuant to license, sublicense, agreement or permission. Neither the
Company nor any of the Company Subsidiaries has received any notice from any
other person
12
pertaining to or challenging the right of the Company or any of the Company
subsidiaries to use any material Intellectual Property or any material trade
secrets, proprietary information, inventions, know-how, processes and procedures
owned or used or licensed to the Company or the Company Subsidiaries.
Section 3.9 MATERIAL CONTRACTS. The Company has furnished or agreed to
make available to News Corp. accurate and complete copies of the Material
Contracts (as defined below) of the Company and the Company Subsidiaries, all of
which are listed on Schedule 3.9. There is not under any of the Material
Contracts any existing breach, default or event of default by the Company or any
of the Company Subsidiaries, nor event that with notice or lapse of time or both
would constitute a breach, default or event of default by the Company or any of
the Company Subsidiaries other than breaches, defaults or events of default
which would not have a Business Unit Material Adverse Effect; nor does the
Company have Knowledge of, and the Company has not received notice of, or made a
claim with respect to, any breach or default by any other party thereto. As used
herein, the term "Material Contracts" shall mean (i) all contracts and
agreements filed, or required to be filed, as exhibits to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996; (ii) all contracts and
agreements entered into since December 31, 1996 which would be required to be
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ending March 31, 1997 or to any Current Report on Form 8-K; (iii) any
debt instrument, including, without limitation, any loan agreement, promissory
note, security agreement or other evidence of indebtedness, where the Company or
any Company Subsidiary is a lender or borrower; (iv) any contract or commitment
restricting the Company or any Company Subsidiary from engagement in any line of
business; (v) any in-store agreement with a retailer; (vi) any agreement with a
manufacturer with a term in excess of twelve months; (vii) any material joint
venture agreement; (viii) any agreement providing for contingent consideration;
and (ix) any agreement, option, commitment or rights with, to or in any third
party to acquire or to sell a material business division or unit after the date
hereof.
Section 3.10 INSURANCE. Schedule 3.10 contains a description of all
policies or binders of insurance held by or on behalf of the Company or any
Company Subsidiary or insuring any of its employees, properties or assets
(specifying the insurer, the amount of the coverage, the type of insurance, the
risks insured, the expiration date, the policy number, the premium and any agent
or broker). All such policies are in full force and effect and neither the
Company nor any Company Subsidiary is in default of any provision thereof,
except in such instances which would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect.
Section 3.11 LITIGATION. Except as set forth in Schedule 3.11, as of the
date hereof: (i) there are no actions, suits, arbitrations, legal or
administrative proceedings or investigations ("Legal Proceedings") pending or,
to the Company's Knowledge, threatened against the Company or any of the Company
Subsidiaries; and (ii) neither the Company's nor the Company Subsidiaries'
assets, properties or business are subject to any judgment, writ, injunction or
decree of any court, governmental agency or arbitration tribunal.
Section 3.12 COMPLIANCE WITH LAWS. The Company and each Company
Subsidiary are in material compliance with all federal, state local or foreign
law (including common law), statute, code, ordinance, rule regulation or other
requirement applicable to the Company and its Subsidiaries or to
13
the conduct of the business or operations of the Company and its Subsidiaries or
the use of their respective properties (including any leased properties) and
assets, except in such instances which would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect. The
Company and each Company Subsidiary has all material governmental permits and
approvals from state, federal or local authorities which are required for the
Company to operate its business, except in such instances which would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
Section 3.13 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Tax" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative, or add-on minimum, estimated or other tax of any kind whatsoever,
however denominated, including any interest, penalty, or addition thereto,
whether disputed or not.
(ii) "Tax Return" means any return, declaration, report,
claim for refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
(b) Except as set forth in the Company Balance Sheet (including the
notes thereto): Each of the Company and the Company Subsidiaries has filed all
Tax Returns required to be filed by it or requests for extensions to file such
Tax Returns have been timely filed, granted and have not expired, except to the
extent that such failures to file or to have extensions granted that remain in
effect individually or in the aggregate would not have a Company Material
Adverse Effect. All Tax Returns filed by the Company and each Company Subsidiary
are complete and accurate except to the extent that such failure to be complete
and accurate would not have a Company Material Adverse Effect. The Company and
each Company Subsidiary have paid (or the Company has paid on the Subsidiary's
behalf) all Taxes shown as due on such Tax Returns, and the Company Balance
Sheet reflects an adequate reserve, in accordance with generally accepted
accounting principles, consistently applied, for all Taxes payable by the
Company and the Company Subsidiaries for all taxable periods and portions
thereof accrued through the date of the Company Balance Sheet.
(c) Except as set forth in the Company Balance Sheet (including the
notes thereto), no deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any Company Subsidiary that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a Company Material Adverse Effect, and no requests for waivers of
the time to assess any such Taxes have been granted or are pending.
(d) The Company and each Company Subsidiary have withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee,
14
independent contractor, creditor, stockholder, or other third party, except for
such Taxes that individually or in the aggregate would not have a Company
Material Adverse Effect, and complied with all information reporting and backup
withholding requirements, except to the extent that failure to comply with such
requirements would not have a Company Material Adverse Effect.
(e) Schedule 3.13(e) lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Company and each Company Subsidiary
for taxable periods ended on or after December 31, 1993, indicates those Tax
Returns that have been audited and indicates those Tax Returns that currently
are the subject of audit.
(f) None of the Company or any Company Subsidiary has made any
payments or is obligated to make any payments or is a party to any agreement
(including this Agreement) that could obligate it to make any payments that
will not be deductible under Section 280G of the Code, except to the extent that
the nondeductibility of such payment would not have a Company Material Adverse
Effect.
(g) Except as set forth in Schedule 3.13(g), none of the Company or
any Company Subsidiary (i) has been a member of any group of entities (other
than a group of which the Company is the common parent) filing a consolidated
federal income Tax Return or similar combined state, local or foreign Tax Return
or (ii) has any liability for the Taxes of any person (other than the Company or
any Company Subsidiary) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise, except for liabilities that individually or in the
aggregate would not have a Company Material Adverse Effect.
Section 3.14 EMPLOYEE BENEFIT PLANS.
(a) Each employee benefit plan, as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which the Company or the Company Subsidiaries contribute or had
contributed to or which the Company or the Company Subsidiaries maintain or have
maintained (collectively, the "Employee Plans") complies in all material
respects with all applicable requirements of ERISA, the Code and other
applicable laws and have been administered in accordance with their terms.
Except as set forth on Schedule 3.14, none of the Employee Plans is an employee
pension benefit plan or a multiemployer plan, as such terms are defined in
ERISA, and other than the Saint Louis Lithographers Pension Fund, none of the
Employee Plans are defined benefit plans. None of the Company, any Company
Subsidiary or any of their respective directors, officers, employees or agents
has, with respect to any Employee Plan, engaged in any "prohibited transaction,"
as such term is defined in the Code or ERISA, nor has any Employee Plan engaged
in such prohibited transaction which could result in any taxes or penalties or
other prohibited transactions, which in the aggregate could have a Company
Material Adverse Effect.
(b) Schedule 3.14 contains a list of (i) all material employee
benefit plans, as such term is defined in Section 3(3) of ERISA, (ii) all other
material employment, severance or other similar contracts, arrangements or
policies and (iii) each other plan or arrangement (written or oral) providing
for insurance coverage (including self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits or for deferred compensation, profit sharing, bonuses, forms of
incentive compensation or post-retirement insurance,
15
compensation or benefits which is not an employee benefit plan (as heretofore
defined) which the Company has maintained, contributed to, or in connection with
which it has or has had any liability, regardless of whether such employee
benefit plan, fund or program (x) is or is intended to be covered or qualified
under the Code, ERISA or any other applicable law, (y) is or is intended to be
funded or unfunded, or (z) covers any current or former employee of or
independent contractor to the Company or the Company Subsidiaries ("Benefit
Plans").
(c) There is no action, audit, suit or claim pending or threatened in
writing relating to any Benefit Plan, fiduciary of any such Plan or assets of
any such Plan, before any court, tribunal or government agency, except for any
action, audit, suit or claim which, individually or in the aggregate, would not
result in a Company Material Adverse Effect.
(d) In the case of any policies or binders of insurance that
constitute or are otherwise maintained in connection with a Benefit Plan, to the
Company's Knowledge (i) such policies and binders are valid and enforceable in
accordance with their terms in all material respects, and are in full force and
effect; (ii) neither the Company nor any Company Subsidiary is in default in
any material respect with respect to any material provisions contained in any
such policy or binder and has not materially failed to give any notice or
present any claim under any such policy or binder in a due and timely fashion;
and (iii) neither the Company nor any Company Subsidiary has received any notice
of cancellation or non-renewal of any such policy or binder which could have in
the aggregate a Company Material Adverse Effect.
Section 3.15 EMPLOYEE MATTERS. Schedule 3.15 sets forth a list, by
employee, of the severance obligations of the Company and the Company
Subsidiaries. Other than those set forth on Schedule 3.15 and the severance
plans for Actmedia, Inc. and DIMAC Corporation, neither the Company nor any of
the Company Subsidiaries has any severance obligations (other than immaterial
severance obligations). Except as set forth on Schedule 3.15, the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment, or
arrangement with any labor union, and no labor union has requested to the
Company or, to the Knowledge of the Company, has sought to represent any of the
employees of the Company. There is no strike or other labor dispute involving
the Company or any Company Subsidiary pending, or, to the Knowledge of the
Company, threatened, which could have an adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. Except as set forth on Schedule 3.15, there is no arbitration,
grievance or administrative proceeding relating to labor-management relations
and/or employee relations that is pending against the Company or any Company
Subsidiary or, to the Knowledge of the Company, threatened, which is reasonably
likely to result in a Company Material Adverse Effect.
16
Section 3.16 ENVIRONMENTAL LAWS.
(a) Each of the Company and the Company Subsidiaries (and, to the
Company's Knowledge, any of their respective predecessors) has complied with all
laws (including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof) concerning the environment,
public health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand or
notice has been filed or commenced against any of them alleging any failure to
comply with any such law or regulation, except where the failure to comply would
not, in the aggregate, result in a Company Material Adverse Effect.
(b) The Company and each Company Subsidiary have obtained all
permits, licenses and other authorizations which are required with respect to
the operation of its business under Federal, state, local and foreign laws
relating to (i) public health and safety or worker health and safety ("Health
and Safety Laws") or (ii) pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals,
or industrial toxic or hazardous substances or wastes (the "Environmental
Laws"), except where the failure to obtain such permits, licenses or
authorizations would not in the aggregate result in a Company Material Adverse
Effect.
(c) Neither the Company nor any Company Subsidiary has received any
notice that it is not in compliance with any other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or the Health and Safety Laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder.
(d) There is no civil, criminal or administrative action, suit,
demand, claim, hearing notice or demand letter pending against the Company or
any Company Subsidiary relating in any way to the Environmental Laws or the
Health and Safety Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except in such instances which would not in the aggregate result in
a Business Unit Material Adverse Effect.
Section 3.17 KNOWLEDGE. "Knowledge," as it applies to the Company, shall
refer to the actual knowledge which the chief executive officers, the chief
operating officers (other than station managers), the general counsel and the
chief financial officers of the Company and the Company Subsidiaries have after
due inquiry.
Section 3.18 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. The
information supplied or to be supplied by the Company, any Company Subsidiary or
their respective Representatives (as defined in Section 6.3) for inclusion in
(a) the Registration Statement (as defined in Section 6.9) will not, either at
the time the Registration Statement is filed with the SEC, at the time any
amendment thereof or supplement thereto is filed with the SEC, at the time it
becomes effective
17
under the Securities Act or at the Effective Time, 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 and (b) the
Proxy Statement/Prospectus (as defined in Section 6.9), including any amendments
and supplements thereto, will not, either at the date mailed to the Company's
stockholders or at the time of the Company Meeting, 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, in the light of the
circumstances under which they were made, not misleading. The Proxy
Statement/Prospectus, as to information supplied by the Company, any Company
Subsidiary or their respective Representatives, will comply in all material
respects with all applicable provisions of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
Section 3.19 OPINION OF FINANCIAL ADVISOR. The Company's Board of
Directors received the written opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation, dated March 16, 1997 (a copy of which has heretofore
been delivered to News Corp.), to the effect that, as of such date, the Exchange
Ratio is fair to the stockholders of the Company.
Section 3.20 BROKERS. No broker, finder or investment banker (other than
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation) is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWS CORP.
News Corp. hereby represents and warrants to the Company that:
Section 4.1 ORGANIZATION AND QUALIFICATIONS; SUBSIDIARIES. Each of News
Corp. and Merger Sub is a corporation, partnership or other legal entity duly
incorporated or organized, validly existing and, if applicable, in good standing
under the laws of the jurisdiction of its incorporation or organization and has
the requisite power and authority and all governmental permits, approvals and
other authorizations necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or, if applicable, in good standing or to have such
power, authority and governmental permits, approvals and other authorizations
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, financial or other condition, or results of operations of
News Corp. and the Subsidiaries of News Corp., taken as a whole (a "News Corp.
Material Adverse Effect").
Section 4.2 VALIDITY OF NEWS CORP. PREFERRED STOCK AND NEWS CORP.
PREFERRED ADRS. The News Corp. Preferred ADRs to be issued in the Merger will be
issued by the Depositary under the terms of the Deposit Agreement. All of the
shares of News Corp. Preferred Stock underlying the News Corp. Preferred ADRs to
be issued in the Merger, when deposited with the Custodian in accordance with
Section 2.2(a) and the terms of the Deposit Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free and clear of all Liens.
Upon the due issuance by the Depositary of News Corp. Preferred ADRs evidencing
News Corp. Preferred Stock against the deposit of the News Corp. Preferred Stock
in accordance with the terms of the Deposit Agreement, the News Corp. Preferred
ADRs to be issued in the Merger will be duly and validly issued and
18
persons in whose names the News Corp. Preferred ADRs are registered will be
entitled to the rights of registered holders of News Corp. Preferred ADRs
specified therein and in the Deposit Agreement, and the News Corp. Preferred
ADRs will conform in all material respects to the description of the News Corp.
Preferred ADRs contained in the Proxy Statement/Prospectus. The Deposit
Agreement has been duly and validly authorized by all necessary corporate action
of News Corp., has been duly and validly executed and delivered by News Corp.,
and, assuming the due authorization, execution and delivery thereof by the
Depositary, constitutes the legal, valid and binding obligation of News Corp.,
enforceable against News Corp. in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally and by equitable principles
to which the remedies of specific performance and injunctive and similar forms
of relief are subject.
Section 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Each of News Corp. and Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions.
(b) The execution and delivery of this Agreement by News Corp. and
Merger Sub and the consummation by News Corp. and Merger Sub of the Transactions
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of News Corp. or Merger Sub are
necessary to authorize this Agreement or to consummate the Transactions (other
than the Merger Filing). This Agreement has been duly and validly executed and
delivered by News Corp. and Merger Sub and, assuming the due authorization,
execution and delivery thereof by the Company, constitutes the legal, valid and
binding obligation of each of News Corp. and Merger Sub, enforceable against
News Corp. and Merger Sub in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights generally and by equitable principles to which the
remedies of specific performance and injunctive and similar forms of relief are
subject and except that rights to indemnity hereunder may be subject to federal
or state securities laws or the policies underlying such laws.
Section 4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by News Corp. and
Merger Sub do not, and the performance of their respective obligations under
this Agreement and the consummation of the Transactions by News Corp. and Merger
Sub will not, (i) conflict with or violate the articles of incorporation or
by-laws or equivalent organizational documents of News Corp. or Merger Sub, (ii)
subject to making the filings and obtaining the approvals identified in Section
4.4(b), conflict with or violate any Law applicable to News Corp. or Merger Sub
or by which any property or asset of News Corp. or Merger Sub is bound or
affected, except in such instances which would not result in a News Corp.
Material Adverse Effect, or (iii) subject to making the filings and obtaining
the approvals identified in Section 4.4(b), conflict with or result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss (by News Corp. or
Merger Sub) or modification in a manner materially adverse to News Corp. or
Merger Sub of a material right or benefit under, or give to others any right of
termination, amendment, acceleration, repurchase or repayment, increased
payments or
19
cancellation of, or result in the creation of any Liens on any property or asset
of News Corp. or Merger Sub pursuant to, any Contract to which News Corp. or
Merger Sub is a party or by which News Corp. or Merger Sub or any property or
asset of News Corp. or Merger Sub is bound or affected, except in such instances
which would not result in a News Corp. Material Adverse Effect.
(b) Except as set forth in Schedule 4.4(b), the execution and
delivery of this Agreement by News Corp. and Merger Sub do not, and the
performance of their respective obligations under this Agreement and the
consummation of the Transactions by News Corp. and Merger Sub will not, require
any consent, approval, waiver, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) applicable
requirements, if any, of the Exchange Act, the Securities Act or the Blue Sky
Laws, (B) the pre-merger notification requirements of the HSR Act, (C) the
approval of the transactions contemplated by the Transfer Agreement by the FCC
under the Communications Act and the FCC Rules, (D) the Merger Filing, (E) the
filing of listing applications and the filing of an application for quotation
with the stock exchanges on which the News Corp. Preferred Stock and the News
Corp. Preferred ADRs are listed or quoted and (F) a waiver from the ASX (which
will require the approval of the shareholders of News Corp. at the next general
meeting of shareholders) with respect to the Listing Rules requiring voting
rights for preferred shares at any time that dividends are in arrears (the "ASX
Waiver"), and (ii) where the failure to obtain such consents, approvals,
waivers, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, prevent or delay in any material
respect consummation of the Transactions, or otherwise prevent News Corp. or
Merger Sub from performing its respective obligations under this Agreement in
any material respect, or would not, individually or in the aggregate, have a
News Corp. Material Adverse Effect.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. Each form, report,
schedule and registration statement filed by News Corp. with the SEC since
December 31, 1994 and prior to the date hereof (as such documents have been
amended prior to the date hereof, the "News Corp. SEC Reports"), as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations thereunder. None of the News Corp. SEC Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except for such statements, if any, as have been modified
or superseded by subsequent filings prior to the date hereof. The consolidated
financial statements of News Corp. and the News Corp. Subsidiaries included in
such reports have been prepared in accordance with Australian generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and give a true and
fair view (subject, in the case of the unaudited interim financial statements,
to normal, year-end audit adjustments) of the consolidated financial position of
News Corp. and the News Corp. Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, and such financial statements and the reconciliations to United States
generally accepted accounting principles comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto. Since December 31, 1996,
neither News Corp. nor any of the News Corp. Subsidiaries has incurred any
liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature, except liabilities, obligations or contingencies (a) which are reflected
on the unaudited
20
balance sheet of News Corp. and the News Corp. Subsidiaries as at December 31,
1996 (including the notes thereto), or (b) which (i) were incurred in the
ordinary course of business after December 31, 1996 and consistent with past
practices, (ii) are disclosed in the News Corp. SEC Reports filed after December
31, 1996 or (iii) would not, individually or in the aggregate, have a News Corp.
Material Adverse Effect. Since December 31, 1996 there has been no change in any
of the significant accounting (including tax accounting) policies, practices or
procedures of News Corp.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated
by this Agreement or as disclosed in any News Corp. SEC Report, since December
31, 1996 (a) News Corp. has conducted its business in the ordinary course,
consistent with past practice, and has not taken any of the actions set forth in
Section 5.2 hereof, and (b) there has not occurred or arisen any event that,
individually or in the aggregate, has had or, insofar as reasonably can be
foreseen, is likely in the future to have, a News Corp. Material Adverse Effect,
other than events or developments generally affecting the industry in which News
Corp. and the News Corp. Subsidiaries operate.
Section 4.7 LITIGATION. Except as set forth in Schedule 4.7, there are
no Legal Proceedings pending or, to News Corp.'s knowledge, threatened against
News Corp. or any of the News Corp. Subsidiaries, which could reasonably be
expected to have, individually or in the aggregate, a News Corp. Material
Adverse Effect, or to prohibit or materially restrict the consummation of the
Transactions, nor is there any judgment, decree, order, injunction, writ or rule
of any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator outstanding against News Corp. or any News Corp.
Subsidiary having, or which, insofar as can be reasonably foreseen, in the
future is reasonably likely to have, any such News Corp. Material Adverse
Effect.
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. The
information supplied or to be supplied by News Corp., any News Corp. Subsidiary
or their respective Representatives for inclusion in (a) the Registration
Statement will not, either at the time the Registration Statement is filed with
the SEC, at the time any amendment thereof or supplement thereto is filed with
the SEC, 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
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (b) the Proxy Statement/Prospectus,
including any amendments and supplements thereto, will not, either at the date
mailed to the Company's stockholders or at the time of the Company Meeting,
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,
in the light of the circumstances under which they were made, not misleading.
The Proxy Statement/Prospectus, as to information supplied by News Corp., any
News Corp. Subsidiary or their respective Representatives, will comply as to
form in all material respects with all applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations promulgated thereunder,
and the Registration Statement, other than as to information supplied by the
Company, any Company Subsidiary or their respective Representatives, will comply
in all material respects with the provisions of the Securities Act and the rules
and regulations promulgated thereunder.
Section 4.9 FINANCING. News Corp. has adequate funds to, and to the
extent required at the Effective Time will, satisfy the obligations of the
Company which become due as a result of the
21
consummation of the Merger, including the indebtedness of the Company
accelerated as a result thereof and the expenses of the Company incurred in
connection with, and payable upon the consummation of, the Merger.
Section 4.10 CAPITALIZATION. The authorized capital stock of News Corp.
consists of 5,000,000,000 shares of A$.50 each, of which, as of January 31,
1997, 1,944,153,391 were designated as Ordinary Shares, par value A$.50 each
(the "News Corp. Ordinary Shares"), and were issued and outstanding;
1,510,206,602 were designated as News Corp. Preferred Stock, and were issued and
outstanding; 25,000,000 were designated as 6.25% Convertible Preference Shares,
par value A$.50 each (the "News Corp. Convertible Stock"), and were issued and
outstanding; 3,800,000 were designated as Cumulative Perpetual Preference
Shares, par value U.S.$25.00, and were issued and outstanding; 68.8 were
designated as 5.147% Subsidiary Preference Shares (represented by 209,708,738
News Corp. Ordinary Shares), and were issued and outstanding; and 10,000,000
were designated as 8-5/8% Guaranteed Perpetual Preference Shares, par value
U.S.$25.00, and were issued and outstanding. All of such shares were validly
issued, fully paid and nonassessable.
Section 4.11 BROKERS. No broker, finder or investment banker (other xxxx
Xxxxxxx, Xxxxx & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of News Corp. or Merger Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, except as expressly permitted or contemplated
by this Agreement and except as set forth on Schedule 5.1, until the Effective
Time, unless News Corp. shall otherwise agree in writing prior to the taking of
any action otherwise prohibited by the terms of this Section 5.1, the Company
shall, and shall cause each Company Subsidiary to, conduct its operations and
business in the ordinary and usual course of business and consistent with past
practice and use reasonable efforts to preserve intact its business
organizations' goodwill, keep available the services of its present officers and
key employees, and preserve the goodwill and business relationships with
suppliers, distributors, customers and others having business relationships with
it, unless the Company's failure to do so is solely the result of actions taken
by News Corp. after the date hereof. Without limiting the generality of the
foregoing, and except as otherwise expressly permitted by this Agreement or as
set forth in this Section 5.1 or Schedule 5.1, prior to the Effective Time,
without the prior written consent of News Corp., the Company will not, and will
cause each Company Subsidiary not to:
(a) amend or otherwise change its Certificate of Incorporation or
By-Laws (other than immaterial By-Law amendments which will not interfere with
or delay consummation of the Transactions);
(b) issue or authorize the issuance of, sell, pledge or otherwise
dispose of, grant or otherwise create any additional shares of, or any options
to acquire any shares of, its capital stock or any debt or equity securities
convertible into or exchangeable for such capital stock, other than (i)
22
any such issuance pursuant to the exercise of outstanding Company Stock Options,
or upon the conversion of outstanding convertible securities, in each case in
accordance with their respective terms as in effect on the date hereof, or (ii)
the issuance of shares of capital stock of a Company Subsidiary to the Company
or any wholly-owned Company Subsidiary;
(c) purchase, redeem or otherwise acquire or retire, or offer to
purchase, redeem or otherwise acquire or retire, any shares of its capital
stock, other than in transactions between the Company and its wholly-owned
Subsidiaries and required repurchases of options or stock upon termination of
employment to the extent required by agreements in effect on the date hereof;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except dividends declared and paid by a Company Subsidiary
only to the Company or a wholly-owned Company Subsidiary;
(e) incur or become contingently liable with respect to any
Indebtedness or guarantee any such Indebtedness or issue any debt securities.
For purposes of this Section 5.1(e), "Indebtedness" shall mean and include (i)
indebtedness of the Company or any Company Subsidiary for borrowed money whether
short-term or long-term and whether secured or unsecured, (ii) indebtedness of
the Company or any Company Subsidiary for the deferred purchase price of
services or property, which purchase price (A) is due twelve months or more from
the date of incurrence of the obligation in respect thereof or (B) customarily
or actually is evidenced by a note or other written instrument (including,
without limitation, any such indebtedness which is non-recourse to the credit of
the Company or any Company Subsidiary but is secured by the assets of the
Company or any Company Subsidiary), (iii) obligations of the Company or any
Company Subsidiary under capitalized leases, (iv) obligations arising under
acceptance facilities, (v) all obligations of the Company or any Company
Subsidiary evidenced by bonds, debentures, notes or other similar instruments,
(vi) all obligations of the Company or any Company Subsidiaries upon which
interest charges are customarily paid, (vii) all obligations of the Company or
any Company Subsidiaries under conditional sale or other title retention
agreements relating to property purchased by the Company or any Company
Subsidiary (even though the rights and remedies of the seller or lender under
such arrangement in the event of default are limited to repossession or sale of
such property), (viii) obligations of the Company to repurchase, redeem, retire,
defease or otherwise acquire for value any of its capital stock or any warrants,
rights or options to acquire such capital stock (with redeemable preferred stock
being valued at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends), (ix) the unpaid reimbursement
obligations in respect of all letters of credit issued for the account of the
Company or any Company Subsidiary (other than letters of credit issued by or on
behalf of the Company or any Company Subsidiary in connection with a contest or
similar promotion of a broadcast television station of such Company Subsidiary),
(x) guarantees of Indebtedness of others by the Company or any Company
Subsidiary, and (xi) renewals, extensions, refundings, deferrals,
restructurings, amendments and modifications of any such indebtedness, guarantee
or obligation; PROVIDED, HOWEVER, that the accrual of interest on Indebtedness
issued with original interest discount shall not be deemed to be an incurrence
of Indebtedness;
(f) merge, consolidate with or consummate any other business
combination with any person or acquire or agree to acquire by merging or
consolidating with, or by purchasing a
23
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business entity;
(g) dispose of a portion of the Company's assets in a transaction
outside the ordinary course of business;
(h) except as may be required by applicable Law or by contracts
existing as of the date hereof, or as contemplated by this Agreement, (i)
increase the compensation payable or to become payable to its officers or
employees, except in the ordinary course of business consistent with past
practice and except as set forth in Schedule 5.1; (ii) enter into any agreement
with an officer or employee subject to the excise tax imposed by Section 4999 of
the Code on excess parachute payments as defined by Section 280G of the Code to
"gross up" such employee for any such excise tax; (iii) enter into any
employment agreement with any executive officer of the Company or, except in the
ordinary course of business consistent with past practice, with any other
employee; (iv) grant any severance or termination pay to any director, officer
or employee of the Company or any Company Subsidiary, except in the ordinary
course of business consistent with past practice or pursuant to existing Company
Benefit Plans; (v) enter into any severance agreement with any director, officer
or employee except in the ordinary course of business consistent with past
practice; or (vi) establish, adopt, enter into, terminate, withdraw from or
amend in any material respect or take action to accelerate any rights or
benefits under any collective bargaining agreement, any stock option plan, or
any employee benefit plan or policy;
(i) take, or permit any affiliate to take, any other action that is
reasonably intended to delay, or adversely impact, the approval by any
Governmental Entity of the Transactions;
(j) mortgage, pledge or subject to any Lien any assets, or acquire
any assets or sell, assign, transfer, convey, lese or otherwise dispose of any
assets of the Company or any Company Subsidiary, except for assets acquired or
sold, assigned, transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past practice;
(k) discharge or satisfy any Lien, or pay any obligation or liability
(fixed or contingent), except in the ordinary course of business consistent with
past practice;
(l) cancel or compromise any debt or claim or amend, cancel,
terminate, relinquish, waive or release any contract or right except in the
ordinary course of business consistent with past practice;
(m) settle any Legal Proceedings requiring aggregate settlement
payments in excess of $250,000;
(n) incur payment obligations to any affiliate of the Company (other
than a Company Subsidiary); PROVIDED, HOWEVER, that compensation payments in the
ordinary course of business to the executives and other officers of the Company
and its Subsidiaries shall not be subject to the provisions of this clause (n);
or
(o) authorize any of, or commit or agree to take any of, the
foregoing actions.
24
Section 5.2 CONDUCT OF BUSINESS BY NEWS CORP. PENDING THE MERGER. From
the date hereof to the Effective Time, News Corp. will, except as required in
connection with the Merger and the other Transactions or consented to in writing
by Company:
(a) neither change nor amend the terms of the News Corp. Preferred
ADRs; and
(b) not bid for or purchase News Corp. Preferred ADR's for the thirty
trading days immediately preceding the Effective Time unless such purchases are
required to be made pursuant to any employee benefit plan of News Corp.
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 GOVERNMENTAL APPROVALS.
(a) As promptly as practicable after the execution of this Agreement,
News Corp. and the Company shall file notification reports under the HSR Act,
shall request early termination of the waiting period under the HSR Act and
shall use their best reasonable efforts to obtain clearance or authorization
under the HSR Act of the Merger and the other Transactions at the earliest
practicable time.
(b) News Corp. and the Company shall cooperate and use their best
reasonable efforts to obtain all required consents, approvals and waivers from
governmental agencies and third parties. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person is
commenced which questions the validity or legality of the Merger or any of the
other Transactions or seeks damages in connection therewith, the parties agree
to cooperate and use all reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any action, suit or other proceeding, to use all reasonable
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the Merger and
the other Transactions.
Section 6.2 SALE OF HMI BROADCASTING CORP.
(a) At the direction and expense of News Corp., at any time following
the termination or expiration of any applicable waiting period under the HSR
Act, the Company shall, or shall cause HMI and/or its Subsidiaries to, enter
into an agreement (the "HMI Sale Agreement") for the sale (the "HMI Sale") to a
third party designated by News Corp. of all outstanding shares or assets of HMI
and its Subsidiaries, whether through merger, consolidation, sale of stock, sale
of assets or otherwise; PROVIDED, HOWEVER, that the HMI Sale Agreement shall (i)
not require the Company to close the transactions contemplated thereby prior to
the Effective Time, (ii) terminate if this Agreement is terminated and (iii) not
contain any provisions which either interfere with the Company's conduct of
broadcast operations prior to the Effective Time or, in the opinion of Company's
Counsel, violate applicable FCC rules and regulations; and PROVIDED, FURTHER,
that, following the transfer pursuant to the Transfer Agreement (as defined in
subsection (b) below), the Trustee (as defined in subsection (b) below) shall,
on behalf of the Company, perform the transactions
25
contemplated by the HMI Sale Agreement. The terms and conditions of the HMI Sale
Agreement shall be determined by News Corp. in its sole discretion. Following
the execution of the HMI Sale Agreement, the Company shall submit an application
to the FCC for approval of the HMI Sale Agreement. Upon obtaining FCC approval
of the HMI Sale Agreement, the Company or the Trustee, if applicable, shall
consummate the HMI Sale Agreement in accordance with its terms or otherwise at
the direction of News Corp. The Company hereby represents and warrants to News
Corp. that HMI and its Subsidiaries (i) conduct all of the radio and broadcast
business of the Company and (ii) own or have the right to use all radio and
broadcast licenses used in connection with, related to or necessary for the
operation of the business of HMI and its Subsidiaries.
(b) As soon as practicable following the execution of this Agreement,
the Company shall enter into an agreement (the "Transfer Agreement") providing
for the transfer of title, at or after the Effective Time, of all outstanding
shares of HMI for the benefit of the Company to an independent trustee (the
"Trustee"), to be mutually designated by the Company and News Corp. The Transfer
Agreement will provide for, among other terms and conditions, the
indemnification of the Trustee for losses resulting from any actions taken at
the direction of News Corp., other than losses resulting from the willful
misconduct or gross negligence of the Trustee. Following the execution of the
Transfer Agreement, the Company shall submit an application to the FCC for
approval of the Transfer Agreement. On the Closing Date, the Company shall
transfer title to the shares of HMI in accordance with the terms of the Transfer
Agreement, subject to the terms of the Sale Agreement, if any, then in effect.
Following the consummation of the Transfer Agreement, the Trustee shall conduct
HMI's business in the ordinary and usual manner, consistent with past practice,
and shall use commercially reasonable efforts to maintain the general character
of HMI's business, to preserve its business intact, to keep available to HMI the
services of its present officers and employees and to retain the benefit of its
current broadcasting and radio licenses.
Section 6.3 ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to
applicable law, from the date hereof to the Effective Time, the Company shall
(and shall cause the Company Subsidiaries and officers, directors, employees,
auditors and agents to) afford the officers, employees, auditors and agents (the
"Representatives") of News Corp. access at reasonable times to its officers,
employees, agents, properties, offices, plants and other facilities, books,
records and Tax Returns, and shall furnish such Representatives with all
financial, operating and other data and information as may be reasonably
requested. All files, records, documents, information, data and similar items
relating to the confidential information of the Company and the Company
Subsidiaries, whether furnished pursuant to this Section 6.3 or otherwise in
connection with the Transactions (other than information which (i) is or becomes
generally available to the public other than as a result of a disclosure by the
Company or its Representatives, (ii) is or becomes available to News Corp. from
a source other than the Company, the Company Subsidiaries or their
Representatives; PROVIDED, HOWEVER, that such source is not, and was not, bound
by a confidentiality agreement with the Company or any of its affiliates or
Representatives, or (iii) is reasonably necessary to be disclosed in connection
with any litigation between the parties hereto and/or their respective
Representatives with respect to the subject matter hereof), shall be deemed
"confidential information" of the Company and shall remain the exclusive
property of the Company. Such confidential information has been furnished
solely for the purpose of News Corp.'s evaluating and consummating the Merger,
and, in the event the Merger is not consummated, News Corp. may not, and shall
cause its Representatives to not, otherwise use such information or disclose the
same to third parties. If this Agreement is terminated for any reason
26
pursuant to Article VIII hereof, the obligations of News Corp. and its
Representatives pursuant to this Section 6.3 shall terminate two years from the
date hereof. Further, News Corp. shall, and shall cause its respective
Representatives to, promptly deliver all copies of any such confidential
information to the Company upon termination of this Agreement, in accordance
with Article VIII hereof. Notwithstanding anything in the foregoing to the
contrary, News Corp. and its Representatives may use such confidential
information in connection with the HMI Sale; PROVIDED, HOWEVER, that News Corp.
and its Representatives shall not provide such confidential information to any
third party unless such third party agrees to be bound in a writing containing
substantially similar terms to those contained in this Section 6.3 (including,
without limitation, the obligations of News Corp. and its Representatives with
respect to such information).
Section 6.4 ACQUISITION PROPOSALS. None of the Company, any Company
Subsidiary or any of the respective officers and directors of the Company and
the Company Subsidiaries shall, and the Company will use its best efforts to
cause its employees, agents and Representatives (including, without limitation,
any investment banker, attorney or accountant retained by the Company or any of
the Company Subsidiaries) not to, initiate or solicit, directly or indirectly,
any inquiries or the making of any proposal with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets of, or any equity interest in, the Company or
any of the Company Subsidiaries (an "Acquisition Proposal") or, except to the
extent that, consistent with its fiduciary duties as advised by counsel, the
Board of Directors of the Company determines that it is required to do so,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to, an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company will
notify News Corp. promptly in writing if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with the Company.
Section 6.5 FURTHER ACTION; REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using commercially reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities,
make all filings and required submissions with Governmental Entities, including
foreign filings and submissions, and obtain all consents and approvals from
parties to Contracts with the parties hereto or their respective Subsidiaries as
are necessary for the consummation of the Transactions. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use their reasonable efforts to take all such
action.
(b) Each party to this Agreement and their respective Subsidiaries
shall use its commercially reasonable efforts not to take any action, or enter
into any transaction, which would
27
result in a breach of any representation, warranty, covenant or agreement made
by such party in this Agreement.
Section 6.6 PUBLIC ANNOUNCEMENTS. Each party to this Agreement and their
respective Subsidiaries shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or any of the Transactions and shall not issue any such press release or make
any such public statement without the prior consent of the other parties to this
Agreement, which consent shall not be unreasonably withheld; PROVIDED, HOWEVER,
that a party may, without the prior consent of the other parties to this
Agreement, issue such press release or make such public statement as may be
required by law or any listing agreement or arrangement to which any such person
is a party with a national securities exchange or if it has used all reasonable
efforts to consult with the other parties to this Agreement and to obtain such
parties' consent but has been unable to do so in a timely manner.
Section 6.7 NOTIFICATION OF CERTAIN MATTERS. News Corp. shall give
prompt notice to the Company, and the Company shall give prompt notice to News
Corp., of (a) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be reasonably likely to cause any representation or
warranty contained in this Agreement to be untrue or any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(b) any failure of News Corp. or the Company, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 6.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 6.8 STOCKHOLDER MEETING. The Company shall call a meeting of its
stockholders (the "Company Meeting") to be held as promptly as practicable for
the purpose of considering and voting upon this Agreement and the Merger. The
Board of Directors of the Company shall, unless otherwise required in accordance
with their fiduciary duties to the stockholders of the Company, recommend that
the stockholders of the Company approve this Agreement and the Merger.
Section 6.9 REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS.
(a) As promptly as practicable after the execution of this Agreement,
(i) the Company and News Corp. shall prepare and file with the SEC a proxy
statement relating to the Company Meeting to be held in connection with the
Transactions (together with any amendments thereof or supplements thereto, the
"Proxy Statement/Prospectus") and (ii) News Corp. shall prepare and file with
the SEC a registration statement (together with all amendments thereto, the
"Registration Statement") in which the Proxy Statement/Prospectus shall be
included as a prospectus, in connection with the registration under the
Securities Act of the News Corp. Preferred ADRs to be issued pursuant to the
Merger. Each of News Corp. and the Company (i) shall cause the Proxy
Statement/Prospectus and the Registration Statement to comply as to form in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder, (ii) shall use
commercially reasonable efforts to have or cause the Registration Statement to
become effective as promptly as practicable, and (iii) shall take all or any
action required under any applicable federal or state securities laws in
connection with the issuance of News Corp. Preferred ADRs pursuant to the
Merger. The Company and News Corp. shall furnish to the other all
28
information concerning the Company and News Corp. as the other may reasonably
request in connection with the preparation of the documents referred to herein.
As promptly as practicable after the Registration Statement shall have become
effective, the Company shall mail the Proxy Statement/Prospectus to its
respective stockholders.
(b) The information supplied by each of the Company and News Corp.
for inclusion in the Registration Statement and the Proxy Statement/Prospectus
shall not, at (i) the time the Registration Statement is declared effective,
(ii) the time the Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (iii)
the time of the Company Meeting, or (iv) the Effective Time, 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 not
misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company, any Company Subsidiary, News Corp., any
News Corp. Subsidiary, or their respective officers or directors, should be
discovered by such party which should be set forth in an amendment or a
supplement to the Registration Statement or the Proxy Statement/Prospectus, such
party shall promptly inform the other thereof and take appropriate action in
respect thereof.
Section 6.10 BLUE SKY. News Corp. shall use its commercially reasonable
efforts to obtain prior to the Effective Time all approvals or permits required
to carry out the Transactions under applicable Blue Sky Laws in connection with
the issuance of News Corp. Preferred ADRs in the Merger and as contemplated by
this Agreement; PROVIDED, HOWEVER, that with respect to such qualifications
neither News Corp. nor the Company shall be required to register or qualify as a
foreign corporation or to take any action which would subject it to general
service of process or taxation in any jurisdiction where any such entity is not
now so subject. The Company shall cooperate with News Corp. in the making of all
required filings under applicable Blue Sky Laws in connection with the issuance
of News Corp. Preferred ADRs in the Merger.
Section 6.11 NYSE; ASX. News Corp. shall (a) promptly prepare and submit
to the NYSE applications covering the News Corp. Preferred ADRs to be issued
pursuant to the Transactions, and shall use commercially reasonable efforts to
cause such securities to be approved for listing on the NYSE prior to the
Effective Time, subject to official notice of issuance, (b) within ten days
after the Effective Time, prepare and submit to the ASX, pursuant to the Listing
Rules of the ASX, applications covering the News Corp. Preferred Stock
underlying the News Corp. Preferred ADRs issued pursuant to the Transactions to
cause such securities to be approved for quotation by the ASX., and (c) promptly
seek the ASX Waiver or, if the ASX Waiver is not granted, call a special meeting
of shareholders to approve the terms of the News Corp. Preferred Stock required
by the ASX Listing Rules (the "Shareholder Ratification").
Section 6.12 AFFILIATES. At least 10 days prior to the mailing of the
Proxy Statement/Prospectus, (a) the Company shall deliver to News Corp. a letter
identifying all persons who may be deemed to be ease or make any such public
statement without the prior consent of the other parties to this Agreement,
which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that a
party may, without the prior consent of the other parties to this Agreement,
issue such press release or make such public statement as may be required by law
or any listing agreement or arrangement to which any such person is a party with
a national securities exchange or if it has used
29
all reasonable efforts to consult with the other parties to this Agreement and
to obtain such parties' consent but has been unable to do so in a timely manner.
Section 6.13 TAX COVENANTS.
(a) News Corp., or a qualified subsidiary, within the meaning of
Treas. Reg. Section 1.367(a)-3(c)(5)(vii), has been (for the thirty-six months
preceding the Effective Time) and will be engaged in the active conduct of a
trade or business outside of the United States, within the meaning of Treas.
Reg. Section 1.367(a)-3(c)(3)(i)(A) and Temp. Treas. Reg. Sections
1.367(a)-2T(b)(2) and (3), and News Corp. will satisfy the substantiality test
in Treas. Reg. Section 1.367(a)-3(c)(3)(i)(C) as of the Effective Time. As of
the Effective Time, News Corp. will not have any intention to substantially
dispose of or discontinue such trade or business.
(b) The Company will, and News Corp. and the Surviving Corporation
will cause the Company to, file the statement required by the reporting
requirements of Treas. Reg. Section 1.367-3(c)(6) using information that is
reasonably available.
(c) Each of News Corp. and the Company shall use its reasonable best
efforts to cause the Merger to qualify as a reorganization under Section 368(a)
of the Code and to obtain the opinion of counsel referred to in Section 7.2(e),
insofar as such opinion refers to tax matters.
(d) None of News Corp., the Surviving Corporation, the Company or any
of their affiliates shall knowingly take any action, or knowingly cause any
action to be taken, which would cause or permit the Merger to fail to qualify as
a reorganization under Section 368(a) of the Code.
30
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the following conditions:
(a) The Company shall have received the Company Stockholder Approval.
(b) The Effective Time shall have occurred at or before the close of
business in New York City on December 31, 1997 (the "Outside Date"); PROVIDED,
HOWEVER, that News Corp. shall not have the right to terminate this Agreement if
the Effective Time shall not have occurred solely as a result of the failure to
obtain the FCC approval for the transactions contemplated by the Transfer
Agreement.
(c) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) No action shall have been taken, and no statute, rule,
regulation, executive order, judgment, decree, or injunction (other than a
temporary restraining order) shall have been enacted, entered, promulgated or
enforced (and not repealed, superseded, lifted or otherwise made inapplicable),
by any court of competent jurisdiction or Governmental Entity which restrains,
enjoins or otherwise prohibits the consummation of the Transactions (each party
agreeing to use its commercially reasonable efforts to avoid the effect of any
such statute, rule, regulation or order or to have any such order, judgment,
decree or injunction lifted).
(e) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect.
(f) The News Corp. Preferred ADRs shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
Section 7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligations of the Company to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by the Company:
(a) The representations and warranties of News Corp. contained
herein, without regard to any News Corp. Material Adverse Effect qualification,
shall be true and accurate, except in those instances where the aggregate
amounts represented by all breaches of such representations and warranties are
not likely to result, in a News Corp. Material Adverse Effect, at and as of the
Effective Time with the same force and effect as though made at and as of the
Effective Time (except to the extent a representation or warranty speaks
specifically as of an earlier date); PROVIDED, HOWEVER, that if information
which would constitute a breach of the representations and warranties of News
Corp. made in this Agreement is disclosed in the Proxy Statement and has been
brought to
31
the attention of News Corp., and if the Company has consented in writing to such
disclosure, then the Company shall be deemed to have waived this condition to
the performance of its obligations hereunder.
(b) News Corp. shall have performed, in all material respects, all
obligations and complied, in all material respects, with all covenants required
by this Agreement to be performed or complied with by it prior to the Effective
Time.
(c) News Corp. shall have delivered to the Company a certificate,
dated the Effective Time and signed by any two Directors of News Corp.,
evidencing compliance with Sections 7.2(a) and (b).
(d) All necessary regulatory and governmental approvals, consents and
waivers (including, without limitation, the approval of the FCC with respect to
the transactions contemplated by the Transfer Agreement, the ASX Waiver and, if
the ASX Waiver is not granted, the Shareholder Ratification) shall have been
obtained.
(e) The Company shall have received legal opinions of Squadron,
Ellenoff, Plesent & Xxxxxxxxx, LLP, and Xxxxx, Xxxxx & Xxxxxxx, counsel to News
Corp., in form and substance reasonably acceptable to the Company and its
counsel, including, without limitation, opinions that (i) the Merger will
qualify as a reorganization under Section 368(a) of the Code and (ii) except in
the case of a Company shareholder who is a "five-percent transferee
shareholder," as defined in Treas. Reg. Section 1.367-3(c)(5)(ii) with respect
to News Corp., and who does not properly file and maintain an agreement to
recognize gain under Temp. Treas. Reg. Section 1.367-3T(g), shareholders of the
Company will not recognize any gain or loss (except to the extent of cash
received in lieu of fractional shares) as a result of consummation of the
Merger.
Section 7.3 CONDITIONS TO OBLIGATIONS OF NEWS CORP. AND MERGER SUB TO
EFFECT THE MERGER. The obligations of News Corp. and Merger Sub to effect the
Merger are subject to the satisfaction of the following conditions, unless
waived by News Corp. and Merger Sub:
(a) The representations and warranties of the Company contained
herein, without regard to any Company or Business Unit Material Adverse Effect
qualification, shall be true and accurate, except in those instances where the
aggregate amount represented by all breaches of such representations and
warranties are not likely to result, in a Company Material Adverse Effect, at
and as of the Effective Time with the same force and effect as though made at
and as of the Effective Time (except to the extent a representation or warranty
speaks specifically as of an earlier date); PROVIDED, HOWEVER, that if
information which would constitute a breach of the representations and
warranties of the Company made in this Agreement is disclosed in the Proxy
Statement and has been brought to the attention of the Company and if News Corp.
has consented in writing to such disclosure, then News Corp. shall be deemed to
have waived this condition to the performance of its obligations hereunder.
(b) The Company shall have performed, in all material respects, all
obligations and complied, in all material respects, with all covenants required
by this Agreement to be performed or complied with by it prior to the Effective
Time.
32
(c) The Company shall have delivered to News Corp. a certificate,
dated the Effective Time and signed by its Chairman of the Board and Chief
Executive Officer or President, evidencing compliance with Sections 7.3(a) and
(b).
(d) All third-party consents, authorizations and approvals shall have
been obtained, except for such consents, authorizations and approvals which,
individually or in the aggregate, would not result in a Business Unit Material
Adverse Effect.
(e) All necessary regulatory and governmental approvals, consents and
waivers (other than the approval of the FCC with respect to the transactions
contemplated by the Transfer Agreement, the ASX Waiver and, if the ASX Waiver is
not granted, the Shareholder Ratification) shall have been obtained.
(f) News Corp. shall have received the legal opinion of Xxxxxx &
Xxxxxxx, LLP, in form and substance reasonably acceptable to News Corp. and its
counsel.
ARTICLE VIII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by the mutual consent of News Corp. and the Company.
Section 8.2 TERMINATION BY EITHER NEWS CORP. OR THE COMPANY. This
Agreement may be terminated and the Merger may be abandoned by either News Corp.
or the Company if (i) the Effective Time shall not have occurred by the Outside
Date; PROVIDED, HOWEVER, that News Corp. shall not have the right to terminate
this Agreement if the Effective Time shall not have occurred solely as a result
of the failure to obtain the FCC approval for the transactions contemplated by
the Transfer Agreement, the ASX Waiver or, if the ASX Waiver is not granted, the
Shareholder Ratification, (ii) any court of competent jurisdiction in the United
States or any other jurisdiction shall have issued an order, judgment or decree
(other than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall have become
final and nonappealable or (iii) the Company Stockholder Approval is not
obtained at the Company Meeting; PROVIDED, HOWEVER, that the right to terminate
this Agreement pursuant to clause (i) shall not be available to any party whose
failure to fulfill any obligation under the Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date.
Section 8.3 TERMINATION BY NEWS CORP. This Agreement may be terminated
and the Merger may be abandoned by News Corp. (i) at any time prior to 5:00 p.m.
New York City time on Friday, March 21, 1997 if the due diligence review of
Actmedia, Inc. and its Subsidiaries (collectively, "Actmedia") conducted by News
Corp. shall have revealed matters which (A) are reasonably likely to have a
material adverse effect on any of Actmedia's material product lines, (B) are
inconsistent in any material respect with Actmedia's 1997 business plan,
previously furnished to News Corp., or (C) indicate, in News Corp.'s reasonable
judgment, that the material assumptions underlying Actmedia's 1997 business plan
are not reasonable and (ii) at any time prior to the Effective Time if
33
(A) there has been a material breach by the Company of any representation,
warranty, covenant or agreement set forth in this Agreement, which breach has
not been cured within ten Business Days following receipt by the Company of
notice of such breach from News Corp.; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 8.3(ii)(A) shall not be
available to News Corp. if News Corp., at such time, is in material breach of
any representation, warranty, covenant or agreement set forth in this Agreement,
or (B) the Board of Directors of the Company shall have withdrawn, rescinded or
modified in a manner adverse to News Corp. or Merger Sub its approval or
recommendation of this Agreement or the Merger or the Board of Directors of the
Company, upon reasonable request by News Corp., shall fail to reaffirm such
approval or recommendation, or shall have resolved to do any of the foregoing.
Section 8.4 TERMINATION BY THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by the Company (i) if there has been a material breach by News Corp. or
Merger Sub of any representation, warranty, covenant or agreement set forth in
this Agreement, which breach has not been cured within ten Business Days
following receipt by News Corp. of notice of such breach from the Company;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to this
Section 8.4(i) shall not be available to the Company if the Company, at such
time, is in material breach of any representation, warranty, covenant or
agreement set forth in this Agreement, or (ii) prior to a vote of the Company's
stockholders approving the Merger, if the Board of Directors of the Company
receives an unsolicited written offer with respect to an Acquisition Proposal,
and the Board of Directors of the Company, in consultation with its investment
bankers, determines that such transaction is more favorable to the stockholders
of the Company than the Transactions and that, consistent with its fiduciary
duties as advised by counsel, it is required to approve, accept or recommend
such transaction, but only after giving News Corp. at least three Business Days'
notice of its intent to terminate this Agreement pursuant to this Section
8.4(ii) (describing in reasonable detail the transaction being considered, the
terms thereof and the parties thereto).
Section 8.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) In the event of termination of this Agreement and abandonment of
the Merger pursuant to this Article VIII, no party hereto (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except as provided in Section 8.5(b) below and
except that nothing herein will relieve any party from liability for any breach
of this Agreement. Without limiting the generality of the foregoing, if the
Effective Time shall not have occurred by the Outside Date as a result of the
failure to obtain FCC approval for the transactions contemplated by the Transfer
Agreement, the ASX Waiver, or, if the ASX Waiver is not granted, the Shareholder
Ratification, the Agreement shall remain in effect until terminated by the
Company, which shall be the sole remedy of the Company in such event.
(b) If the Company shall have terminated this Agreement pursuant to
Section 8.4(ii) or News Corp. shall have terminated this Agreement pursuant to
Section 8.3(ii) (but, in the case of Section 8.3(ii)(A), only if the Company has
willfully or intentionally made a material breach of any representation,
warranty or agreement for the purpose of avoiding payment of the Termination Fee
(as hereinafter defined), which breach has not been cured within ten Business
Days following receipt by the Company of notice of such breach from News Corp.)
the Company, if requested by
34
News Corp., in News Corp.'s sole discretion, shall promptly, but in no event
later than two Business Days after the date of such request, (i) pay News Corp.
a fee (the "Termination Fee") equal to the sum of (x) $20,000,000 and (y) all
actual and documented out-of-pocket costs and expenses of News Corp. and Merger
Sub (up to a maximum of $5,000,000) incurred in connection with this Agreement
and the consummation and negotiation of the Transactions, including, without
limitation, legal, professional and service fees and expenses, which amount
shall be payable in same day funds. The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the Transactions, and
that, without these agreements, News Corp. and Merger Sub would not enter into
this Agreement; accordingly, if the Company fails to comply with this Section
8.5(b), and, in order to obtain such compliance or damages in lieu thereof, News
Corp. or Merger Sub commences a suit which results in a judgment against the
Company for the Termination Fee, the Company shall pay to News Corp. its costs
and expenses (including attorneys' fees) in connection with such suit, together
with interest on the amount of the Termination Fee, from the date such payment
was required to be made under this Section 8.5(b) to the date of payment, at the
rate of nine percent (9%) per annum.
Section 8.6 AMENDMENT OR SUPPLEMENT. At any time before or after
approval of this Agreement by the stockholders of the Company and prior to the
Effective Time, this Agreement may be amended or supplemented in writing by the
Company, News Corp. and Merger Sub with respect to any of the terms contained in
this Agreement, except that following approval by the stockholders of the
Company there shall be no amendment or supplement which by law requires further
approval by such stockholders without further approval by the stockholders of
the Company.
Section 8.7 EXTENSION OF TIME, WAIVER, ETC. At any time prior to the
Effective Time, the Company and News Corp. may:
(a) extend the time for the performance of any of the obligations or
acts of the other party;
(b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant hereto;
or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein; PROVIDED, HOWEVER, that the Company may not waive
the condition set forth in Section 7.2(d); and PROVIDED, FURTHER, that no
failure or delay by the Company or News Corp. in exercising any right hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right hereunder.
Any agreement on the part of a party hereto to any extension or waiver
contemplated by this Section 8.7 shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
35
ARTICLE IX
INDEMNIFICATION
Section 9.1 THE MERGER. In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any of the present or former officers or
directors (the "Managers") of the Company or any of the Company Subsidiaries is,
or is threatened to be, made a party by reason of the fact that he or she is or
was a stockholder, director, officer, employee or agent of the Company or any of
the Company Subsidiaries, or is or was serving at the request of the Company or
any of the Company Subsidiaries as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
whether before or after the Effective Time, the Company shall indemnify and hold
harmless, and from and after the Effective Time each of the Surviving
Corporation and News Corp. shall indemnify and hold harmless, as and to the
fullest extent permitted by applicable law (including by advancing reasonable
expenses promptly as reasonable statements therefor are received), each such
Manager against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorneys' fees of attorneys designated after the
Effective Time by News Corp. in the absence of conflict), judgments, fines and
amounts paid in settlement in connection with any such claim, action, suit,
proceeding or investigation, and in the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) if the Company (prior to the Effective Time) or News Corp. or the
Surviving Corporation (after the Effective Time) have not promptly assumed the
defense of such matter, the Managers may retain counsel satisfactory to them,
and the Company, or the Surviving Corporation and News Corp. after the Effective
Time, shall pay all reasonable fees and expenses of such counsel for the
Managers promptly, as reasonable statements therefor are received, and (ii) the
Company, or the Surviving Corporation and News Corp. after the Effective Time,
will use their respective best efforts to assist in the defense of any such
matter; PROVIDED, HOWEVER, that neither the Company nor the Surviving
Corporation or News Corp. shall be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld);
and PROVIDED, FURTHER, that the Surviving Corporation and News Corp. shall have
no obligation under the foregoing provisions of this Section 9.1 to any Manager
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final and non-appealable, that
indemnification of such manager in the manner contemplated hereby is prohibited
by applicable law. Upon the finality of any such determination that the
Surviving Corporation or News Corp. is not liable for any such indemnification
claims, the Manager will reimburse News Corp. and the Surviving Corporation for
any reasonable fees, expenses and costs incurred by News Corp. or the Surviving
Corporation in connection with the defense of such claims. Any Manager wishing
to claim indemnification under this Section 9.1, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify the Company and,
after the Effective Time, the Surviving Corporation and News Corp, thereof
(provided that the failure to give such notice shall not affect any obligations
hereunder, except to the extent that the indemnifying party is actually and
materially prejudiced thereby). News Corp. and the Company agree that all rights
to indemnification existing in favor of the Managers, as provided in the
Certification of Incorporation or Bylaws of the Company as in effect as of the
date hereof, and in any agreement between the Company and any Manager with
respect to matters occurring prior to the Effective Time, shall survive the
Merger to the extent permitted by applicable law. The Surviving Corporation and
News Corp. further covenant not to amend or repeal
36
any provisions of the Certification of Incorporation or Bylaws of the Company in
any manner which would adversely affect the indemnification or exculpatory
provisions contained therein. The provisions of this Section 9.1 are intended to
be for the benefit of, and shall be enforceable by, each indemnified party and
his or her heirs and representatives.
Section 9.2 DIRECTORS' AND OFFICERS' INSURANCE. For six years from the
Effective Time, the Surviving Corporation shall either (x) maintain in effect
the Company's current directors' and officers' liability insurance covering
those Managers who are currently covered on the date of this Agreement by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to News Corp.); PROVIDED, HOWEVER, that the
Surviving Corporation may substitute for such Company policies, policies with at
least the same coverage containing terms and conditions which are no less
advantageous to the Manager; and PROVIDED, FURTHER, that said substitution does
not result in any gaps or lapses in coverage with respect to matters occurring
prior to the Effective Time or (y) to the extent applicable, cause the News
Corp.'s directors' and officers' liability insurance policy with respect to
those matters covered by the Company's directors' and officers' liability
insurance policy. The provisions of this Section 9.2 are intended to be for the
benefit of, and shall be enforceable by, each Manager and his or her heirs and
representatives.
ARTICLE X
MISCELLANEOUS
Section 10.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger or the termination of this
Agreement pursuant to Article VIII. All of the covenants and agreements in this
Agreement shall survive the Merger indefinitely. Except for the covenants and
agreements contained in Sections 6.3 and 6.6 and this Article X, none of the
covenants and agreements contained in this Agreement shall survive the
termination of this Agreement pursuant to Article VIII.
Section 10.2 EXPENSES. Except as provided in Section 8.5 hereof, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Transactions shall be paid by the party incurring
such expenses, except that the expenses incurred in connection with the
preparation and printing of the Proxy Statement/Prospectus shall be paid in
equal shares by the Company and News Corp. (other than attorneys' and
accountants' fees, which shall be borne by the party incurring them).
Section 10.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered the same agreement.
Section 10.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. News Corp.
hereby appoints News America Publishing Incorporated, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxx, as its
authorized agent (the "Authorized Agent") upon which process may be served in
any such action arising out of or based upon this Agreement or the Transactions
that may be instituted in any Court by any party hereto and expressly
37
consents to the jurisdiction of any such Court, but only in respect of any such
action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. News Corp. represents and warrants that the
Authorized Agent has agreed to act as said agent for service of process, and
News Corp. agrees to take any and all action, including the filing of any and
all documents and instruments, that may be necessary to continue such
appointment in full force and effect as aforesaid. If the Authorized Agent shall
cease to act as News Corp.'s agent for service of process, News Corp. shall
appoint without delay another such agent and notify the Company of such
appointment. With respect to any such action in the Courts, service of process
upon the Authorized Agent and written notice of such service to News Corp. shall
be deemed, in every respect, effective service of process upon News Corp.
Section 10.5 SPECIFIC PERFORMANCE. Each of the parties acknowledges and
agrees that the other parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
Section 10.6 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered by hand, mailed by
registered or certified mail (return receipt requested) or sent by prepaid
overnight courier (with proof of service) or confirmed facsimile transmission to
the parties as follows (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which so
hand-delivered, mailed, delivered or sent by confirmed facsimile transmission:
To the Company:
Heritage Media Corporation
00000 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx, L.L.P.
000 X. Xxxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
38
To News Corp. or Merger Sub:
The News Corporation Limited
c/o News America Publishing Incorporated
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
with a copy (which shall not constitute notice) to:
Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx, Esq.
Section 10.7 MISCELLANEOUS. This Agreement:
(a) together with the Exhibits and the Schedules, constitutes the
entire agreement, and supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and thereof, including without limitation the Confidentiality Agreement
between the Company and News Corp., dated as of January 27, 1997;
(b) is not intended to and shall not confer upon any person other
than the parties hereto any rights or remedies hereunder or by reason hereof,
except as provided in Article IX hereof; and,
(c) shall not, nor shall any of the rights or interests hereunder, be
assigned by any party hereto or assignable by operation of law or otherwise
without the prior written consent of the other parties; PROVIDED, HOWEVER, that
News Corp. may assign its rights under this Agreement to any News Corp.
Subsidiary so long as News Corp. remains responsible for all of its obligations
hereunder.
Section 10.8 HEADINGS. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or interpretation
of this Agreement.
Section 10.9 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
39
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
HERITAGE MEDIA CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
THE NEWS CORPORATION LIMITED
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
Director
HMC ACQUISITION CORP.
By: /s/ Xxxxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
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