EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
by and among
SPRINT CORPORATION,
DD ACQUISITION, CORP.
and
AMERICAN TELECASTING, INC.
dated as of
APRIL 26, 1999
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER................................................................ 2
Section 1.1 The Merger; Effects of the Merger.......................... 2
Section 1.2 Effective Time............................................. 2
Section 1.3 Closing.................................................... 3
Section 1.4 Directors and Officers of the Surviving Corporation........ 3
Section 1.5 Subsequent Actions......................................... 3
Section 1.6 Consideration for the Merger; Conversion or Cancellation
of Company Common Stock in the Merger...................... 3
ARTICLE II
SURRENDER OF SHARES OF COMPANY COMMON STOCK;
DISSENTING SHARES; COMPANY OPTIONS........................................ 4
Section 2.1 Surrender of Certificates.................................. 4
Section 2.2 Dissenting Shares.......................................... 6
Section 2.3 Company Stock Options and Purchase Plans................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 8
Section 3.1 Organization and Standing.................................. 8
Section 3.2 Capitalization............................................. 9
Section 3.3 Authority for Agreement.................................... 10
Section 3.4 No Conflict................................................ 11
Section 3.5 Required Filings and Consents.............................. 12
Section 3.6 Compliance................................................. 12
Section 3.7 Licenses and Permits....................................... 13
Section 3.8 SEC Filings, Financial Statements.......................... 17
Section 3.9 Absence of Certain Changes or Events....................... 19
Section 3.10 Taxes...................................................... 19
Section 3.11 Title to Assets............................................ 20
Section 3.12 Change of Control Agreements............................... 21
Section 3.13 Litigation................................................. 21
Section 3.14 Contracts and Commitments.................................. 21
Section 3.15 Information Supplied....................................... 22
Section 3.16 Employee Benefit Plans..................................... 22
Section 3.17 Labor and Employment Matters............................... 23
Section 3.18 Environmental Compliance and Disclosure.................... 25
Section 3.19 Intellectual Property...................................... 27
Section 3.20 Year 2000 Compliance....................................... 28
Section 3.21 Brokers.................................................... 29
Section 3.22 Insurance Policies......................................... 29
Section 3.23 Notes and Accounts Receivable.............................. 30
Section 3.24 Transactions with Affiliates............................... 30
Section 3.25 Company Warrants........................................... 30
Section 3.26 No Existing Discussions.................................... 30
Section 3.27 Disclosure................................................. 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.................... 31
Section 4.1 Organization and Standing.................................. 31
Section 4.2 Authority for Agreement.................................... 31
Section 4.3 No Conflict................................................ 32
Section 4.4 Required Filings and Consents.............................. 32
Section 4.5 Information Supplied....................................... 33
Section 4.6 Brokers.................................................... 33
Section 4.7 No Prior Activities........................................ 33
Section 4.8 Sufficient Funds........................................... 33
Section 4.9 Share Ownership............................................ 33
ARTICLE V
COVENANTS................................................................. 33
Section 5.1 Conduct of the Business Pending the Merger................. 34
Section 5.2 Access to Information; Confidentiality..................... 36
Section 5.3 Notification of Certain Matters............................ 36
Section 5.4 Further Assurances......................................... 37
Section 5.5 Stockholders' Meeting...................................... 38
Section 5.6 Board Recommendations...................................... 39
Section 5.7 Stockholder Litigation..................................... 41
Section 5.8 Indemnification............................................ 41
Section 5.9 Public Announcements....................................... 42
Section 5.10 Acquisition Proposals...................................... 43
Section 5.11 FCC Applications........................................... 43
Section 5.12 Undertakings of Parent..................................... 44
Section 5.13 Director Resignations...................................... 44
Section 5.14 Rights Plan................................................ 44
Section 5.15 Year 2000 Plan............................................. 44
Section 5.16 Employee Benefits.......................................... 44
Section 5.17 Matters Relating to BARs................................... 45
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Section 5.18 Matters Relating to Notes.................................. 46
ARTICLE VI
CONDITIONS................................................................ 46
Section 6.1 Conditions to the Obligation of Each Party................. 46
Section 6.2 Conditions to Obligations of Parent and
Purchaser to Effect the Merger.......................... 47
Section 6.3 Conditions to Obligations of the Company to
Effect the Merger....................................... 47
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER......................................... 47
Section 7.1 Termination................................................ 47
Section 7.2 Effect of Termination...................................... 49
Section 7.3 Amendments................................................. 50
Section 7.4 Waiver..................................................... 50
ARTICLE VIII
GENERAL PROVISIONS........................................................ 50
Section 8.1 No Third Party Beneficiaries............................... 50
Section 8.2 Entire Agreement........................................... 50
Section 8.3 Succession and Assignment.................................. 51
Section 8.4 Counterparts............................................... 51
Section 8.5 Headings................................................... 51
Section 8.6 Governing Law.............................................. 51
Section 8.7 Severability............................................... 51
Section 8.8 Specific Performance....................................... 51
Section 8.9 Construction............................................... 52
Section 8.10 Non-Survival of Representations and Warranties and
Agreements.............................................. 52
Section 8.11 Certain Definitions........................................ 52
Section 8.12 Fees and Expenses.......................................... 53
Section 8.13 Notices.................................................... 53
Section 8.14 Control of the Company..................................... 54
Section 8.15 Matters relating to the Voting Agreements.................. 54
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 26, 1999 (this
"Agreement"), by and among American Telecasting, Inc. a Delaware corporation
(the "Company"), DD Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and Sprint Corporation, a Kansas corporation
("Parent").
WHEREAS, the Board of Directors of each of Parent, Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance thereof, upon the terms and subject to the
conditions set forth in this Agreement, (i) Purchaser would be merged with and
into the Company (the "Merger"), with the Company as the surviving corporation
(the "Surviving Corporation"), in accordance with the General Corporation Law of
the State of Delaware (the "DGCL") and (ii) each issued and outstanding share of
Class A Common Stock, $0.01 par value per share, of the Company (including any
and all rights to be attached thereto to acquire shares of preferred stock of
the Company pursuant to the Rights Plan (as defined in Section 5.14), and any
other rights associated therewith, to be adopted by the Company pursuant to
Section 5.14, the "Company Common Stock") immediately prior to the Effective
Time (as defined in Section 1.2) would, except as otherwise expressly provided
herein, be converted into the right to receive the Merger Consideration (as
defined in Section 1.6); and
WHEREAS, concurrently herewith and as a condition and inducement to
Parent's and Purchaser's willingness to enter into this Agreement, Parent and
certain stockholders of the Company have entered into voting agreements, dated
as of the date hereof (the "Voting Agreements"), pursuant to which such
stockholders have agreed, upon the terms and conditions set forth therein, to
vote the outstanding shares of Company Common Stock owned by them in favor of
the Merger; and
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE XV
THE MERGER
Section 15.1 The Merger; Effects of the Merger. Subject to the
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terms and conditions of this Agreement, at the Effective Time, the Company and
Purchaser shall consummate a merger pursuant to which (a) Purchaser shall be
merged with and into the Company and the separate corporate existence of
Purchaser shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Delaware, and (c) the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth in this Section 1.1.
Pursuant to the Merger, (x) the certificate of incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
by law and such certificate of incorporation, and (y) the by-laws of the
Company, as in effect immediately prior to the Effective Time, shall be the by-
laws of the Surviving Corporation until thereafter amended as provided by law,
by such certificate of incorporation or by such by-laws. The Merger shall have
the effects specified in the DGCL.
Section 15.2 Effective Time. Subject to the provisions of this
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Agreement, the Merger shall be consummated as promptly as practicable (and in
any event within three business days) after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to each party's obligation to
consummate the Merger contained in Article VI, by duly filing an appropriate
certificate of merger (the "Certificate of Merger"), in such form as is required
by and executed in accordance with, the relevant provisions of the DGCL. The
Merger shall become effective on the date on which such Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware or such other
time as is agreed upon by the parties and specified in such certificate of
merger (the "Effective Time"). The date on which the Effective Time shall occur
is referred to herein as the "Effective Date."
Section 15.3 Closing. On the Effective Date, the closing ("Closing")
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of the Merger shall take place at 10:00 a.m. at the offices of King & Xxxxxxxx,
0000 Avenue of the Americas, New York, New York.
Section 15.4 Directors and Officers of the Surviving Corporation. The
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directors of Purchaser and the officers of the Company at the Effective Time
shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the certificate of incorporation and
the by-laws of the Surviving Corporation. If, at the Effective Time, a vacancy
shall exist on the Company Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
law.
Section 15.5 Subsequent Actions. If at any time after the Effective
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Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired
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by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either the Company or Purchaser, all such deeds, bills of sale,
instruments of conveyance, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
Section 15.6 Consideration for the Merger; Conversion or Cancellation
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of Company Common Stock in the Merger. At the Effective Time, by virtue of the
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Merger and without any action on the part of Parent, Purchaser, the Company or
the holders of any shares of Company Common Stock:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
pursuant to Section 1.6(b) and Dissenting Shares (as defined in Section 2.2, if
any)) shall be cancelled and extinguished and converted automatically into the
right to receive $6.50 in cash, without interest thereon (as may be adjusted
pursuant to Section 5.6, the "Merger Consideration").
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Parent or Purchaser (other
than shares in trust account, managed accounts, custodial accounts and the like
that are beneficially owned by third parties), or which is held in the treasury
of the Company or any of its Subsidiaries, shall cease to be outstanding, be
cancelled and retired without payment of any consideration therefor and cease to
exist.
(c) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
ARTICLE XVI
SURRENDER OF SHARES OF COMPANY COMMON STOCK; DISSENTING SHARES; COMPANY OPTIONS
Section 16.1 Surrender of Certificates.
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(a) Prior to the Effective Time, Parent shall designate a bank or
trust company reasonably satisfactory to the Company to act as agent (the
"Paying Agent") for the holders of shares of Company Common Stock in connection
with the Merger to receive in trust the funds to which holders of shares of
Company Common Stock shall become entitled pursuant to Section 1.6(a). On
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or prior to the Effective Time, Parent or Purchaser shall deposit, or cause to
be deposited, with the Paying Agent for the benefit of holders of shares of
Company Common Stock the aggregate Merger Consideration to which such holders
shall be entitled at the Effective Time pursuant to Section 1.6(a). Such funds
shall be invested as directed by Parent or the Surviving Corporation pending
payment thereof by the Paying Agent to holders of shares of Company Common
Stock. Earnings from such investments shall be the sole and exclusive property
of Purchaser and the Surviving Corporation, and no part of such earnings shall
accrue to the benefit of holders of shares of Company Common Stock.
(b) As soon as reasonably practicable after the Effective Time, Parent
shall cause the Paying Agent to mail to each holder of record of a certificate
representing shares of Company Common Stock (a "Certificate"), (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 Paying Agent and shall be in such form and have such other
provisions not inconsistent with this Agreement as Parent may specify) and (ii)
instructions for use in effecting the surrender of Certificates in exchange for
payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration for each share of Company Common Stock formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.1, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.1. If
any Certificate shall have been lost, stolen or destroyed, upon making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation or Parent, the
posting by such person of a bond, in such reasonable amount as the Surviving
Corporation or Parent may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration such holder is entitled to receive pursuant to this Section 2.1.
(c) At the Effective Time, the stock transfer books of the Company
shall be closed, and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares, except as
otherwise provided for herein or by applicable law. All cash paid pursuant to
this Article II upon the surrender or exchange of Certificates shall be deemed
to have been paid in full satisfaction of all
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rights pertaining to the shares of Company Common Stock theretofore represented
by such Certificate.
(d) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any earnings received with respect thereto) which had
been made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) and only as general creditors thereof with respect to the
Merger Consideration payable upon due surrender of their Certificates. If any
Certificates representing shares of Company Common Stock shall not have been
surrendered immediately prior to such date on which the Merger Consideration in
respect of such Certificate would otherwise escheat to or become the property of
any Governmental Entity, any such cash, shares, dividends or distributions
payable in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(e) Parent, Purchaser, the Surviving Corporation and the Paying Agent,
as the case may be, shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock and Company Options such amounts that Parent,
Purchaser, the Surviving Corporation or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended ( the "Code"), the rules and regulations
promulgated thereunder or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent, Purchaser, the Surviving
Corporation or the Paying Agent, such amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of shares of Company Common
Stock and Company Options in respect of which such deduction and withholding was
made by Parent, Purchaser, the Surviving Corporation or the Paying Agent.
Section 16.2 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Common Stock as to which the holder thereof has demanded
appraisal with respect to the Merger in accordance with Section 262 of the DGCL
and as of the Effective Time has neither effectively withdrawn nor lost his
right to such appraisal ("Dissenting Shares") shall not be converted into or
represent a right to receive cash pursuant to Section 1.6, but the holder
thereof shall be entitled to only such rights as are granted in Section 262 of
the DGCL.
(b) Notwithstanding the provisions of Section 2.2(a), if any holder of
shares of Company Common Stock who demands appraisal of such shares under the
DGCL effectively withdraws or loses (through failure to perfect or otherwise)
his right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's shares of
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Company Common Stock shall automatically be converted into and represent only
the right to receive the Merger Consideration as provided in Section 1.6(a),
without interest, upon surrender of the Certificate or Certificates representing
such shares pursuant to Section 2.1.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any shares of Company
Common Stock, withdrawals of such demands, and any other instruments served on
the Company pursuant to the DGCL received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. Except with the prior written consent of Parent,
the Company shall not voluntarily make any payment with respect to any demands
for appraisal, settle or offer to settle any such demands.
Section 16.3 Company Stock Options and Purchase Plans.
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(a) Immediately prior to the Effective Time, each holder of an
employee stock option to purchase shares of Company Common Stock (a "Company
Option"), whether vested or unvested, will be entitled to receive from the
Company, and shall receive, in settlement of each Company Option an amount in
cash equal to the product of (i) the excess, if any, of the Merger Consideration
over the exercise price per share of such Company Option and (ii) the number of
shares of Company Common Stock subject to such Company Option. All Options
shall terminate as of the Effective Time.
(b) Except as may be otherwise agreed to by Parent and the Company,
all stock option and purchase plans established by the Company or any of its
Subsidiaries shall terminate as of the Effective Time and the provisions in any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of Company or any of its
Subsidiaries shall be deleted, terminated and of no further force or effect as
of the Effective Time.
(c) If and to the extent necessary or required by the terms of the
plans governing Company Options or pursuant to the terms of any Company Option
granted thereunder, each of Parent and the Company shall use its best efforts to
obtain the consent of each holder of outstanding Company Options to the
foregoing treatment of such Company Options.
(d) Parent, Purchaser and the Company shall take all such steps as
may be required to cause the transactions contemplated by this Section 2.3 and
any other dispositions of the Company equity securities (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (a) is a
director or officer of the Company or (b) at the Effective Time, will become a
director or officer of Parent, to be exempt under Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such steps
to be taken in accordance with the No-Action Letter dated January 12, 1999,
issued by the Securities and Exchange Commission (the "SEC") to Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP.
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ARTICLE XVI
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule prepared and signed by
the Company and delivered to Parent simultaneously with the execution hereof
(the "Company Disclosure Letter"), the Company represents and warrants to Parent
and Purchaser that all of the statements contained in this Article III are true
and correct as of the date of this Agreement (or, if made as of a specified
date, as of such date).
Section 17.1 Organization and Standing. Each of the Company and each
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Subsidiary (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) has full
corporate power and authority and all necessary government approvals to own,
lease and operate its properties and assets and to conduct its business as
presently conducted and (iii) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary except where failure to
be so qualified or licensed would not, individually or in the aggregate, have a
Company Material Adverse Effect. "Company Material Adverse Effect" means any
material adverse change in or effect on the consolidated businesses, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole (including, but not limited to, any change that materially adversely
affects the FCC Licenses or Channel Leases), other than any change or effect
related to (i) any loss of subscribers to the Company's wireless cable
television services and (ii) any adverse developments in the Company's
consolidated revenue or results of operations. The Company has furnished or
made available to Parent true and complete copies of its certificate of
incorporation (including any certificates of designations attached thereto, the
"Company Certificate of Incorporation") and by-laws (the "Company By-laws") and
the certificate of incorporation and bylaws (or equivalent organizational
documents) of each Subsidiary, each as amended to date. Such certificate of
incorporation, bylaws or equivalent organizational documents are in full force
and effect, and neither the Company nor any Subsidiary is in violation of any
provision of its certificate of incorporation, bylaws or equivalent
organizational documents.
Section 17.2 Capitalization. The authorized capital stock of the
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Company (the "Company Stock") consists of 2,500,000 shares of Preferred Stock
(the "Preferred Stock"), 500,000 shares of Series B Convertible Preferred Stock
(the "Convertible Preferred Stock"), 45,000,000 shares of Company Common Stock
and 10,000,000 shares of Class B Common Stock (the "Class B Common Stock"). As
of the date hereof, (i) 25,818,154 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Company Common Stock are held in
the treasury of the Company, (iii) 503,220 shares of Company Common Stock are
issuable pursuant to outstanding Company Options, (iv) 1,898,856 shares of
Company Common Stock are issuable upon exercise of outstanding warrants of the
Company (the "Company Warrants"), and (v) there are no issued and outstanding
shares of Preferred Stock, Convertible Preferred Stock or Class B Common Stock.
The
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Company will authorize and reserve shares of Series A Junior Participating
Preferred Stock for future issuance pursuant to the Rights Plan. The Company
Disclosure Letter sets forth a true and complete list of the outstanding Company
Options and Company Warrants, in each case with the exercise price. Except as
set forth above or in the Company Disclosure Letter, there are no options,
warrants, convertible securities, subscriptions, stock appreciation rights,
phantom stock plans or stock equivalents or other rights, agreements,
arrangements or commitments (contingent or otherwise) of any character issued or
authorized by the Company relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or options, warrants, convertible
securities, subscriptions or other equity interests in, the Company or any
Subsidiary. All Company Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in the Company Disclosure Letter, there are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any shares of Company Stock or any capital stock of any
Subsidiary or to pay any dividend or make any other distribution in respect
thereof or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any person. Except as set forth in the
Company Disclosure Letter, the Company owns beneficially and of record all of
the issued and outstanding capital stock of each Subsidiary and does not own an
equity interest in any other corporation, partnership or entity, other than in
the Subsidiaries. Each outstanding share of capital stock of each Subsidiary is
duly authorized, validly issued, fully paid and nonassessable and each such
share owned by the Company or another Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever.
Section 17.3 Authority for Agreement.
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(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and,
subject to obtaining necessary stockholder approval, to consummate the Merger
and the other transactions contemplated by this Agreement. The execution,
delivery and performance by the Company of this Agreement, and the consummation
by the Company of the Merger and the other transactions contemplated by this
Agreement, have been duly authorized by all necessary corporate action
(including, without limitation, the unanimous approval of the Company Board of
Directors) and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement (other than, with respect to the
Merger, the approval and adoption of this Agreement by the affirmative vote of a
majority of the voting power of the then outstanding shares of Company Common
Stock and the filing and recordation of appropriate merger documents as required
by the DGCL). This Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Parent and
Purchaser, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The affirmative
vote of holders of the outstanding shares of Company Common Stock entitled to
vote at a duly called and held meeting
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of stockholders is the only vote of the Company's stockholders necessary to
approve this Agreement, the Merger and the other transactions contemplated by
this Agreement.
(b) At a meeting duly called and held on April 26, 1999, the Company
Board of Directors unanimously (i) determined that this Agreement and the other
transactions contemplated hereby, including the Merger, are fair to and in the
best interests of the Company and the holders of shares of Company Common Stock,
(ii) approved, authorized and adopted this Agreement, the Merger and the other
transactions contemplated hereby, and (iii) resolved, subject to the rights of
the Company Board of Directors under Section 5.6 hereof, to recommend that the
stockholders of the Company approve and adopt this Agreement and the Merger, and
none of the aforesaid actions by the Company Board of Directors has been
amended, rescinded or modified. The action taken by the Company Board of
Directors constitutes approval of the Merger and the other transactions
contemplated hereby by the Company Board of Directors under the provisions of
Section 203 of the DGCL such that Section 203 of the DGCL does not apply to this
Agreement or the other transactions contemplated hereby.
(c) Lazard Freres & Co. LLC has advised the Company Board of Directors
of its opinion, and has undertaken to deliver to the Company Board of Directors
such opinion in writing dated the date of this Agreement, that, as of such date
and based on the assumptions, qualifications and limitations contained therein,
the Merger Consideration is fair, from a financial point of view, to such
holders.
Section 17.4 No Conflict. The execution and delivery of this
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Agreement by the Company do not, and the performance of this Agreement by the
Company and the consummation of the Merger and the other transactions
contemplated by this Agreement will not, (i) conflict with or violate the
Company Certificate of Incorporation or Company Bylaws or equivalent
organizational documents of any of its Subsidiaries, (ii) subject to Section
3.5, conflict with or violate any United States federal, state or local or any
foreign statute, law, rule, regulation, ordinance, code, order, judgment, decree
or any other requirement or rule of law (a "Law") applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries is bound or affected, or (iii) except as set forth in the
Company Disclosure Letter, result in a breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
give to others any right of termination, amendment, acceleration or cancellation
of, result in triggering any payment or other obligations, or result in the
creation of a lien or other encumbrance on any property or asset of the Company
or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any property or asset of any of
them is bound or affected, except in the case of clauses (ii) and (iii) above
for any such conflicts, violations, breaches, defaults or other occurrences
which could not, individually or in the aggregate, have a Company Material
Adverse Effect.
Section 17.5 Required Filings and Consents. The execution and
-----------------------------
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will
9
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any United States federal, state or local or any foreign
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), except (i) for applicable requirements, if any, of the Exchange Act,
state securities or "blue sky" laws ("Blue Sky Laws") and filing and recordation
of appropriate merger documents as required by the DGCL, (ii) for those required
by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (iii) for those required by the Federal Communications Commission or
any successor entity (the "FCC") under the Communications Act of 1934, as
amended, and the rules, regulations and policies of the FCC promulgated
thereunder (collectively, the "Communications Act"), including those required in
connection with the transfer of control of the Company and the assignment of the
FCC Licenses (as defined in Section 3.7 hereof) held by the Company and its
Subsidiaries and affiliates (the "FCC Filings"), (iv) for filings contemplated
by Section 3.15 hereof, and (v) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
could not, individually or in the aggregate, have a Company Material Adverse
Effect.
Section 17.6 Compliance. Subject to Section 3.7 and except as
----------
disclosed in the Company Disclosure Letter, each of the Company and its
Subsidiaries (i) has been operated at all times in compliance with all Laws
applicable to the Company or any of its Subsidiaries or by which any property,
business or asset of the Company or any of its Subsidiaries is bound or affected
and (ii) is not in default or violation of any notes, bonds, mortgages,
indentures, contracts, agreements, leases, licenses, permits, franchises, or
other instruments or obligations to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or any property or
asset of the Company or any of its Subsidiaries is bound or affected, except in
either case for any such failures to comply, conflicts, defaults or violations
that could not, individually or in the aggregate, have a Company Material
Adverse Effect.
Section 17.7 Licenses and Permits.
--------------------
(a) The Company Disclosure Letter sets forth all of the FCC licenses,
permits, applications, and authorizations for BTAs (as hereinafter defined), MDS
stations (as hereinafter defined), Local Multipoint Distribution Service
facilities ("LMDS"), ITFS stations (as hereinafter defined) and other FCC
licensed facilities (collectively, the "FCC Licenses") either held by the
Company or a Subsidiary thereof, or that are subject to an agreement pursuant to
which the use of the transmission capacity associated therewith is leased by the
Company or a Subsidiary thereof (the "Channel Leases"). The Company Disclosure
Letter correctly sets forth the identity of the holder and lessor and lessee (if
other than the Company or a Subsidiary thereof) of the transmission capacity of
such FCC Licenses and the termination date of such FCC Licenses. Except as set
forth in the Company Disclosure Letter, each FCC License held by the Company or
a Subsidiary thereof, and to the knowledge of the Company, each other FCC
License was duly and validly issued and assigned to the holder thereof by the
FCC pursuant to procedures which comply with all requirements of applicable Law,
including the requirements of any international agreements implemented by the
FCC related to channel use or frequency coordination. There has been no
occurrence of any event or the existence of any circumstances which may lead to
the forfeiture,
10
revocation, suspension, impairment, adverse modification or non-renewal of any
FCC License held by the Company or a Subsidiary thereof, or to the knowledge of
the Company, of any FCC License held by the lessor of a Channel Lease or the
imposition of a monetary fine or forfeiture against the holder of an FCC License
including, without limitation, any limitation or discontinuance of service or
operation of the facility associated with the FCC License. Except as set forth
in the Company Disclosure Letter, each FCC License held by the Company or a
Subsidiary thereof, and to the knowledge of the Company, each other FCC License
has been duly authorized and is in full force and effect, and there is no known
conflict with the valid rights of others which could have a material adverse
effect on the value or use of the FCC Licenses or the transmission capacity
associated therewith. Except as set forth in the Company Disclosure Letter or in
any Channel Lease, there are no agreements, arrangements or understandings
relating to the assignment, transfer, conveyance or pledge of any FCC License
held by the Company or a Subsidiary thereof, or to the knowledge of the Company,
any other FCC License, in whole or in part, or any interest therein for the
markets in which the Company or any of its Subsidiaries operate.
(b) Except as disclosed in Schedule 3.7(a) of the Company Disclosure
Letter, the Company, its Subsidiaries and, to the knowledge of the Company, each
of the other holders of the FCC Licenses has duly filed in a timely manner all
filings and reports relating to the FCC Licenses and the Channel Leases required
to be filed with a Governmental Entity by the holders of the FCC Licenses, the
Company or its Subsidiaries, as the case may be, under the Communications Act,
other applicable Laws or FCC rules. The Company, its Subsidiaries and, to the
knowledge of the Company, the other holders of the FCC Licenses are in material
compliance with all applicable Laws, including, without limitation, the
Communications Act and the FCC rules relating to the operation or use of the FCC
Licenses, and, each filing and report filed with a Governmental Entity with
respect to the Company, its Subsidiaries, their FCC Licenses, or to the
knowledge of the Company, the other FCC Licenses is true, correct and complete
in all respects and there have been no changes in the ownership of the FCC
Licenses since the filing of the most recent ownership report.
(c) The Company Disclosure Letter correctly sets forth all of the
Channel Leases pursuant to which the Company or a Subsidiary thereof may use the
transmission capacity of the FCC Licenses corresponding thereto. Except as
disclosed in the Company Disclosure Letter, each of the Channel Leases was duly
and validly entered into by the parties thereto pursuant to procedures which
comply with all requirements of applicable Law, including the requirements of
the FCC, and no event has occurred or circumstances exist which may lead to the
revocation, suspension, termination, breach, default, adverse modification or
non-renewal of any Channel Lease or material provision thereof, or cause any
Channel Lease, or any material provision thereof, not to comply with the
requirements of the FCC. Except as disclosed in the Company Disclosure Letter,
no provision of any of the Channel Leases prohibits, restricts or would
reasonably be expected to materially adversely affect or delay: (i) the
Colocation (as defined herein) of the FCC Licenses at the corresponding
Colocation Site (as defined herein), and the filing with the FCC, by the holder
of the corresponding FCC License, of any application for authorization
(including a Colocation Application) relating thereto; (ii) the use or
implementation of digital technology in connection with the provision of one-way
transmission of data, Internet, video (including video programming), and
11
other similar services using the transmission capacity of the FCC License
("Digital Services"), and the filing with the FCC, by the holder of the
corresponding FCC License, of any application for authorization relating to such
Digital Service; or (iii) the use or implementation of two-way technology in
connection with the provision of two-way transmission of data, Internet, video
(including video programming), telephony and other similar services using the
transmission capacity of the FCC License ("Two-Way Services"), and the filing
with the FCC, by the holder of the corresponding FCC License, of any application
for authorization relating to such Two-Way Service. Except as set forth in the
Company Disclosure Letter, the Company has the sole right under each of the
Channel Leases to use all of the transmission capacity associated with the FCC
License for the provision of any services authorized by the FCC, including
analog services, Digital Services, and Two-Way Services (other than the
transmission capacity expressly reserved by such Channel Lease for the holder of
an FCC License in the Instructional Television Fixed Service (the "ITFS
Service")). Buyer upon the closing of the transactions contemplated by this
Agreement, will have the sole right to use the transmission capacity of the FCC
License under each of the Channel Leases for the provision of any services
authorized by the FCC, including analog services, Digital Services and Two-Way
Services (other than the transmission capacity expressly reserved by such
Channel Lease for the holder of an FCC License in the ITFS Service). Each
Channel Lease is in full force and effect and the parties thereto are in
compliance with the terms thereof and there are no known conflicts with the
valid rights of others. No third party has any rights to assert any interests in
any of the Channel Leases or the rights and benefits granted to the Company or
its Subsidiaries pursuant thereto. No event has occurred which permits, or after
notice or lapse of time or both would permit the revocation, suspension,
termination, breach, default, adverse modification or non-renewal of any Channel
Lease by the lessor of such Channel Lease. There are no existing or alleged
defaults by the lessors or the Company or its Subsidiaries under any of the
Channel Leases, including any defaults relating to the payment obligations
thereunder. Except as set forth in the Company Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not result
in the breach or violation of any of the terms, conditions, or provisions of any
of the Channel Leases or give rise to any right of termination of any Channel
Lease.
(d) Except as set forth in the Company Disclosure Letter, neither the
Company nor any Subsidiary thereof, nor , to the knowledge of the Company, any
lessor under any Channel Lease has agreed to accept any interference from any
third party or to take any action to protect any third party's reception from
interference that would have a Company Material Adverse Effect on the
development of the Company's current business. The Company Disclosure Letter
sets forth all interference and coordination agreements entered into by the
Company, any of its Subsidiaries or affiliates or, to the knowledge of the
Company, any other holder of an FCC License.
(e) There is no outstanding adverse judgment, injunction, decree or
order that has been issued by the FCC against the Company, or a Subsidiary or
affiliate thereof or, to the knowledge of the Company, the holder of an FCC
License, or any action, proceeding or investigation pending before or, to the
knowledge of the Company, threatened by the FCC or a third party (excluding a
cable franchising authority) specifically, including, but not limited to, any
pending or threatened proceeding that would have the effect of revoking or
restricting or impairing one or more of the FCC Licenses or the operations of
the Company or a Subsidiary or affiliate thereof.
12
(f) Except as set forth in the Company Disclosure Letter, all
regulatory fees and expenses due and payable to the FCC associated with the FCC
Licenses have been paid by the Company or a Subsidiary thereof and, to the
knowledge of the Company, by each other holder of an FCC License, including all
fees and costs associated with the FCC Licenses held by the Company or a
Subsidiary thereof to provide LMDS or MDS service in basic trading areas, as
defined by Rand XxXxxxx (the "BTAs"). The Company Disclosure Letter discloses
any discounts or bidding credits that the Company or a Subsidiary thereof
received from the FCC in conjunction with the licensing of the BTAs.
(g) The Company Disclosure Letter accurately lists each of the FCC
Licenses, and accurately discloses and describes (i) whether an application is
pending before, or has been granted by the FCC to authorize the operation of the
facilities associated with any FCC License at a common transmitter site with
other Multichannel Multipoint Distribution Service and Multipoint Distribution
Service stations (collectively, "MDS") and ITFS stations (a "Colocation
Application" for the "Colocation" of the FCC License); (ii) whether any other
applications, in addition to Colocation Applications, have been filed with or
granted by the FCC, to authorize the provision of Digital Services and/or Two-
Way Services on the facilities associated with any FCC License (collectively
referred to as "Other Applications"); and (iii) the status of each Colocation
Application and Other Application, including (A) the transmission site proposed
in the Colocation Application (the "Colocation Site") or in the Other
Applications, or authorized by the grant thereof; and (B) the authorized or
proposed technical parameters and conditions for the provision of analog
services and, to the extent applicable, Digital Services and Two-Way Services
pursuant to the Colocation Application or Other Application. Except as set forth
in the Company Disclosure Letter, (i) each Colocation Application and Other
Application filed with the FCC by the Company, a Subsidiary thereof or the
holder of an FCC License complies with the FCC rules and other applicable Laws
(including the interference protection and coordination requirements) and has
been accepted for filing by the FCC; (ii) there are no pending, or to the
knowledge of the Company, threatened interference issues, petitions to deny,
written informal objections, outstanding no-objection letters, comments,
petitions for reconsideration, petitions for review, waiver requests, other
similar filings, or to the knowledge of the Company, competing or conflicting
applications, relating to such Colocation Applications and Other Applications;
and (iii) a protected service area for the FCC License has been granted or
requested, unless such FCC License is associated with a BTA authorization for
the MDS service.
(h) Tower Site Leases
(i) The Company Disclosure Letter accurately and completely
lists and sets forth a description (including location of premises, term, and
assignability) of all agreements between the Company and any Person relating to
the location and use of towers, earth stations and associated real estate at
such sites (including at the Colocation Sites) (the "Tower Site Leases"). All
13
such Tower Site Leases are valid, subsisting, and in full force and effect and
not subject to a breach by the Company or, to the knowledge of the Company, any
of the parties thereto.
(ii) All of the existing towers owned by the Company or its
Subsidiaries or affiliates and located at the Colocation Sites ("Company
Towers"), and to the knowledge of the Company, all other towers used in
conjunction with one or more FCC Licenses ("Other Towers") are obstruction-
marked and lighted to the extent required by, and in accordance with applicable
Laws, including the rules and regulations of the Federal Aviation Administration
(the "FAA") and the FCC. Except as set forth in the Company Disclosure Letter,
all appropriate notifications to the FAA have been filed for each Company Tower,
and to the knowledge of the Company, each Other Tower where required by the
rules and regulations of the FAA or the FCC.
(i) Cable Franchises. The Company Disclose Letter discloses all cable
franchises ("Franchises") held by the Company or its Subsidiaries. Except as set
forth in the Company Disclosure Letter, (i) all such Franchises are valid and in
full force and effect; (ii) the Company and its Subsidiaries are in compliance
with the terms and conditions of such Franchises; and (iii) no third parties
have asserted any rights in such Franchises.
Section 17.8 SEC Filings, Financial Statements.
---------------------------------
(a) The Company has filed all forms, reports, statements and
documents required to be filed with the SEC since January 1, 1997 (collectively,
the "SEC Reports"), each of which has complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, or the
Exchange Act, and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. None of the SEC Reports (including, but not limited
to, any financial statements or schedules included or incorporated by reference
therein) contained when filed any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the audited consolidated balance sheets of the Company as
of December 31, 1998 and December 31, 1997 and the related consolidated
statements of operations, shareholders' deficit and cash flows for the three
fiscal years in the period ended December 31, 1998 included in its Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 (the "Company 10-K"),
in each case, including any related notes thereto, as filed with the SEC
(collectively, the "Company Financial Statements"), has been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and fairly presents in all material respects the consolidated
financial position of the Company and its Subsidiaries at the respective date
thereof and the consolidated results of its operations and changes in cash flows
for the periods indicated.
14
(c) Except as disclosed in the Company Disclosure Letter, there are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether or not accrued and whether or not contingent or absolute, that are
material to the Company and its Subsidiaries, taken as a whole, other than (i)
liabilities disclosed or provided for in the consolidated balance sheet of the
Company and its Subsidiaries at December 31, 1998, including the notes thereto,
(ii) liabilities disclosed in the SEC Reports, (iii) liabilities incurred on
behalf of the Company in connection with this Agreement and the transactions
contemplated hereby, and (iv) liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 1998, none of which
are, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect.
(d) The Company has heretofore furnished or made available to Parent
a complete and correct copy of any amendments or modifications through the date
hereof which have not yet been filed with the SEC to agreements, documents or
other instruments which previously had been filed by the Company with the SEC as
exhibits to the SEC Reports pursuant to the Securities Act and the rules and
regulations promulgated thereunder or the Exchange Act and the rules and
regulations promulgated thereunder.
Section 17.9 Absence of Certain Changes or Events. Except as
------------------------------------
contemplated by this Agreement or as disclosed in the Company Disclosure Letter
or the Recent SEC Reports, since December 31, 1998, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course and consistent with prior practice and there has not been (i) any event
or occurrence of any condition that has had or would reasonably be expected to
have a Company Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or any other distribution with respect to any of the
capital stock of the Company or any Subsidiary, (iii) any material change in
accounting methods, principles or practices employed by the Company, or (iv) any
action of the type described in Sections 5.1(b) (other than Section 5.1(b)(v)
and (vi)) or 5.1(c) which had such action been taken after the date of this
Agreement would be in violation of any such Section.
Section 17.10 Taxes. Except as set forth in the Company Disclosure
-----
Letter: (a) the Company and each of its Subsidiaries have timely filed all
material Tax Returns required to be filed by it and all such Tax Returns are
true, correct and complete in all material respects, or requests for extensions
to file such returns or reports have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be complete or
correct or to have extensions granted that remain in effect individually or in
the aggregate would not have a material adverse effect on the Company; (b) the
Company and each of its Subsidiaries has paid (or there has been paid on its
behalf) all Taxes shown as due on such Tax Returns, paid all Taxes otherwise due
and payable except for such Taxes otherwise due and payable that would not
individually or in the aggregate have a Company Material Adverse Effect, and the
most recent financial statements contained in the SEC Reports reflect an
adequate reserve in accordance with GAAP for all Taxes payable by the Company
and its Subsidiaries for all taxable periods and portions thereof accrued
through the date of the financial statements; (c) no deficiencies for any Taxes
have been proposed, asserted or
15
assessed against the Company or any of its Subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on the Company; (d) neither the Company
nor any of its Subsidiaries has made an election under Section 341(f) of the
Code; (e) neither the Company nor any of its Subsidiaries has waived any statute
of limitations in respect of any material Taxes or agreed to any extension of
time with respect to a material Tax assessment or material deficiency; and (f)
neither the Company nor any of its Subsidiaries is a party to, is bound by or
has any obligation under, a Tax sharing contract or other agreement or
arrangement for the allocation, apportionment, sharing, indemnification, or
payment of Taxes. For purposes of this Agreement, (a) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty or addition thereto, whether disputed or not, imposed by any
Governmental Entity, and (b) "Tax Return" means any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 17.11 Title to Assets.
---------------
(a) Except as set forth in the SEC Reports filed since January 1,
1999 and prior to the date hereof (the "Recent SEC Reports") or in the Company
Disclosure Letter, the Company and each of its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, all of their real and
personal properties and assets reflected in the Recent SEC Reports or acquired
after December 31, 1998 (other than assets disposed of since December 31, 1998
in the ordinary course of business consistent with past practice), in each case
free and clear of all title defects, liens, encumbrances and restrictions,
except for (i) liens, encumbrances or restrictions which secure indebtedness
which are reflected in the Recent SEC Reports; (ii) liens for Taxes accrued but
not yet payable; (iii) liens arising as a matter of law in the ordinary course
of business with respect to obligations incurred after December 31, 1998,
provided that the obligations secured by such liens are not delinquent; and (iv)
such title defects, liens, encumbrances and restrictions, if any, as
individually or in the aggregate are not reasonably likely to have a Company
Material Adverse Effect. The Company Disclosure Letter sets forth a true,
correct and complete list of all real property owned by the Company or any of
its Subsidiaries, or as to which the Company or any such Subsidiary has the
option to purchase or acquire. Except as set forth in the Company Disclosure
Letter, the Company and each of its Subsidiaries either own, or have valid
leasehold interests in, all properties and assets used by them in the conduct of
their business, except where the absence of such ownership or leasehold interest
could not individually or in the aggregate have a Company Material Adverse
Effect.
(b) Except as set forth in the Recent SEC Reports or in the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has any legal
obligation, absolute or
16
contingent, to any other person to sell or otherwise dispose of, or to grant any
right of first refusal or right to proceeds relating to such sale or disposition
of, any of its assets with an individual value in excess of $25,000.
Section 17.12 Change of Control Agreements. Except as disclosed in
----------------------------
the Company Disclosure Letter or the Recent SEC Reports, neither the execution
and delivery of this Agreement nor the consummation of the Merger or the other
transactions contemplated by this Agreement, will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
director, officer or employee of the Company. Except as set forth in the
Company Disclosure Letter, without limiting the generality of the foregoing, no
amount paid or payable by the Company in connection with the Merger or the other
transactions contemplated by this Agreement, including accelerated vesting of
options (either solely as a result thereof or as a result of such transactions
in conjunction with any other event) will be an "excess parachute payment"
within the meaning of Section 280G of the Code.
Section 17.13 Litigation. Except for such matters disclosed in the
----------
Company Disclosure Letter or the Recent SEC Reports which, if adversely
determined, have not had, and would not reasonably be expected to have, a
Company Material Adverse Effect, there are no claims, suits, actions,
investigations, indictments or information, or administrative, arbitration or
other proceedings ("Litigation") pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries. Except for such
matters which have not had, and could not reasonably be expected to have, a
Company Material Adverse Effect, there are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court, administrative
agency, or by arbitration, pursuant to a grievance or other procedure) against
or relating to the Company or any of its Subsidiaries.
Section 17.14 Contracts and Commitments. The Company Disclosure
-------------------------
Letter sets forth a true, correct and complete list of the following contracts
to which the Company or a Subsidiary is a party (including every amendment,
modification or supplement to the foregoing): (i) any contracts of employment,
(ii) agreements or arrangements for the purchase or sale of any assets
(otherwise than in the ordinary course of business), (iii) agreements, contracts
or indentures relating to the borrowing of money, (iv) agreements with unions,
material independent contractor agreements and material leased or temporary
employee agreements, (v) tower site leases and other leases of any real property
involving annual rent of $25,000 or more, (vi) programming and retransmission
consent agreements, (vii) contracts containing covenants limiting the freedom of
the Company, or any of its Subsidiaries, to engage in any line of business or to
compete with any entity and (viii) other than respect to contracts identified in
the Company Disclosure Letter pursuant to Section 3.7, all other contracts,
agreements or commitments involving annual payments made by or to the Company or
a Subsidiary of $100,000. Except for agreements, arrangements or commitments
disclosed in the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any agreement, arrangement or commitment which is
material to the business of the Company taken as a whole. The Company has
delivered or made available true, correct and complete
17
copies of all such agreements, arrangements and commitments to Parent. Neither
the Company nor any of its Subsidiaries is in default under any such agreement,
arrangement or commitment which has had, or could reasonably be expected to
have, a Company Material Adverse Effect.
Section 17.15 Information Supplied. The proxy statement to be mailed
--------------------
to the Company's stockholders in connection with the Stockholders' Meeting (as
defined in Section 5.5) (the "Proxy Statement") at the date such document is
first published, sent or delivered to the Company's stockholders or, unless
promptly corrected, at any time during the pendency of the Stockholders'
Meeting, will not, unless promptly corrected, 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 made therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form and substance in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder. Notwithstanding the foregoing, no representation or warranty is
made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Purchaser for inclusion or
incorporation by reference in the foregoing document.
Section 17.16 Employee Benefit Plans. All employee benefit plans,
----------------------
compensation arrangements and other benefit arrangements covering employees of
the Company or any of its Subsidiaries (the "Company Benefit Plans") and all
employee agreements providing for compensation, severance or other benefits to
any employee or former employee of the Company or any of its Subsidiaries are
set forth in the Company Disclosure Letter. True and complete copies of the
Company Benefit Plans have been made available to Parent. Any Company Benefit
Plan intended to be qualified under Section 401(a) of the Code has received a
determination letter or is a model prototype plan and continues to satisfy the
requirements for such qualification. Neither the Company nor any of its
Subsidiaries nor any ERISA Affiliate of the Company maintains, contributes to or
has maintained or contributed in the past six (6) years to any benefit plan
which is covered by Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 412 of the Code. Neither any Company
Benefit Plan, nor the Company nor any Subsidiary has incurred any material
liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA
or engaged in any transaction that is reasonably likely to result in any such
liability or penalty. Except as set forth in the Company Disclosure Letter, each
Company Benefit Plan has been maintained and administered in compliance with its
terms and with ERISA and the Code to the extent applicable thereto, except for
such non-compliance which individually or in the aggregate could not reasonably
be expected to have a Company Material Adverse Effect. There is no pending or
anticipated Litigation against or otherwise involving any of the Company Benefit
Plans and no Litigation (excluding claims for benefits incurred in the ordinary
course of Company Benefit Plan activities) has been brought against or with
respect to any such Company Benefit Plan, except for any of the foregoing which
individually or in the aggregate could not have a Company Material Adverse
Effect. All contributions required to be made as of the date hereof to the
Company Benefit Plans have been made or provided for. Except as described in the
SEC Reports or as required by Law, neither the Company nor any of its
Subsidiaries maintains or contributes to any plan or
18
arrangement which provides or has any liability to provide life insurance or
medical or other employee welfare benefits to any employee or former employee
upon his retirement or termination of employment, and neither the Company nor
any of its Subsidiaries has ever represented, promised or contracted (whether in
oral or written form) to any employee or former employee that such benefits
would be provided.
For purposes of this Agreement "ERISA Affiliate" means any business or
entity which is a member of the same "controlled group of corporations," an
"affiliated service group" or is under "common control" with an entity within
the meanings of Sections 414(b), (c) or (m) of the Code, is required to be
aggregated with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing sections.
Section 17.17 Labor and Employment Matters. Except as set forth in
----------------------------
the Company Disclosure Letter:
(a) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement or other contracts, arrangements,
agreements or understandings with a labor union or labor organization that was
certified by the National Labor Relations Board ("NLRB"). Except for such
matters which, individually or in the aggregate, could not have a Company
Material Adverse Effect, there is no existing, pending or threatened (i) unfair
labor practice charge or complaint, labor dispute, labor arbitration proceeding
or any other matter before the NLRB or any other comparable state agency against
or involving the Company or any of its Subsidiaries, (ii) activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its Subsidiaries, (iii) certification or decertification
question relating to collective bargaining units at the premises of the Company
or any of its Subsidiaries or (iv) lockout, strike, organized slowdown, work
stoppage or work interruption with respect to such employees.
(b) Neither the Company nor any of its Subsidiaries has taken any
action that would constitute a "Mass Layoff" or "Plant Closing" within the
meaning of the Worker Adjustment and Retraining Notification ("WARN") Act or
would otherwise trigger notice requirements or liability under any state or
local plant closing notice law. No agreement, arbitration or court decision or
governmental order in any way limits or restricts any of the Company, any of its
Subsidiaries or Parent from relocating or closing any of the operations of the
Company or any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has failed to pay
when due any wages, bonuses, commissions, benefits, taxes, penalties or
assessments or other monies, owed to, or arising out of the employment of or any
relationship or arrangement with, any officer, director, employee, sales
representative, contractor, consultant or other agent. There are no citations,
investigations, administrative proceedings or formal complaints of violations of
any federal or state wage and hour laws pending or, to the knowledge of the
Company, threatened before the Department
19
of Labor or any federal, state or administrative agency or court against or
involving the Company or any of its Subsidiaries.
(d) The Company and each of its Subsidiaries are in compliance in all
material respects with all immigration laws relating to employment and have
properly completed and maintained all applicable forms (including but not
limited to I-9 forms) and, to the knowledge of the Company, there are no
citations, investigations, administrative proceedings or formal complaints of
violations of the immigration laws pending or threatened before the Immigration
and Naturalization Service or any federal, state or administrative agency or
court against or involving the Company or any of its Subsidiaries.
(e) There are no investigations, administrative proceedings, charges
or formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, disability,
handicap or veteran status) pending or, to the knowledge of the Company,
threatened before the Equal Employment Opportunity Commission or any federal,
state or local agency or court against or involving the Company or any of its
Subsidiaries. No discrimination and/or retaliation claim is pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries under the 1866, 1877, 1964 or 1991 Civil Rights Acts, the Equal Pay
Act, the Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards
Act, ERISA, or any other federal law relating to employment or any comparable
state or local fair employment practices act regulating discrimination in the
workplace, and no wrongful discharge, libel, slander, invasion of privacy or
other claim (including but not limited to violations of the Fair Credit
Reporting Act, as amended, and any applicable whistleblower statutes) under any
state or federal law is pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries.
(f) If the Company or any of its Subsidiaries is a Federal, State or
local contractor obligated to develop and maintain an affirmative action plan,
no discrimination claim, show-cause notice, conciliation proceeding, sanctions
or debarment proceedings is pending or, to the knowledge of the Company, has
been threatened against the Company or any of it Subsidiaries with the Office of
Federal Contract Compliance Programs or any other Federal agency or any
comparable state or local agency or court and no desk audit or on-site review is
in progress.
(g) There are no citations, investigations, administrative
proceedings or formal complaints of violations of local, state or federal
occupational safety and health laws pending or, to the knowledge of the Company,
threatened before the Occupational Safety and Health Review Commission or any
federal, state or local agency or court against or involving the Company or any
of its Subsidiaries.
(h) No workers' compensation or retaliation claim is pending against
the Company or any of its Subsidiaries in excess of $250,000 in the aggregate
and the Company
20
maintains adequate insurance with respect to workers' compensation claims
pursuant to insurance policies that are currently in force, or has accrued an
adequate liability for such obligations, including, without limitation, adequate
accruals with respect to accrued but unreported claims and retroactive insurance
premiums.
Section 17.18 Environmental Compliance and Disclosure. Except as
---------------------------------------
disclosed in the Recent SEC Reports or in the Company Disclosure Letter:
(a) The Company possesses, and is in compliance in all material
respects with, all permits, licenses and government authorizations and has filed
all notices that are required under local, state and federal Laws and
regulations relating to protection of the environment, pollution control,
product registration and hazardous materials ("Environmental Laws") applicable
to the Company, and the Company is in compliance in all material respects with
all applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those laws or
contained in any Law, regulation, code, plan, order, decree, judgment, notice,
permit or demand letter issued, entered, promulgated or approved thereunder;
(b) The Company has not received notice of actual or threatened
liability under the Federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or any similar state or local statute or ordinance
from any governmental agency or any third party and, to the knowledge of the
Company, there are no facts or circumstances which could form the basis for the
assertion of any claim against the Company under any Environmental Laws
including, without limitation, CERCLA or any similar local, state or foreign Law
with respect to any on-site or off-site location;
(c) The Company has neither entered into or agreed to, nor does it
contemplate entering into any consent decree or order, and is not subject to any
judgment, decree or judicial or administrative order relating to compliance
with, or the cleanup of hazardous materials under, any applicable Environmental
Laws;
(d) The Company has not been subject to any administrative or judicial
proceeding pursuant to and, to the knowledge of the Company, has not been
alleged to be in violation of, applicable Environmental Laws or regulations
either now or any time during the past five years;
(e) The Company has not received notice that it is subject to any
claim, obligation, liability, loss, damage or expense of whatever kind or
nature, contingent or otherwise, incurred or imposed or based upon any
provision of any Environmental Law and arising out of any act or omission of the
Company, its employees, agents or representatives or, to the knowledge of the
Company, arising out of the ownership, use, control or operation by the Company
of any plant, facility, site, area or property (including, without limitation,
any plant, facility, site, area or property currently or previously owned or
leased by the Company) from which any hazardous materials were
21
released into the environment (the term "release" meaning any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment, and the term "environment"
meaning any surface or ground water, drinking water supply, soil, surface or
subsurface strata or medium, or the ambient air);
(f) The Company has heretofore furnished or made available to Parent
true, correct and complete copies of all files of the Company relating to
environmental matters (or an opportunity to review such files). The Company has
not paid any fines, penalties or assessments within the last five years with
respect to environmental matters; and
(g) To the Company's knowledge, none of the assets owned by the
Company or any real property leased by the Company contain any friable asbestos,
regulated PCBs or underground storage tanks.
(h) As used in this Section 3.18, the term "Hazardous Materials" means
any waste, pollutant, hazardous substance, toxic, ignitable, reactive or
corrosive substance, hazardous waste, special waste, industrial substance, by-
product, process intermediate product or waste, petroleum or petroleum-derived
substance or waste, chemical liquids or solids, liquid or gaseous products, or
any constituent of any such substance or waste, the use, handling or disposal of
which by the Company is in any way governed by or subject to any applicable Law,
rule or regulation of any Governmental Entity.
Section 17.19 Intellectual Property.
---------------------
(a) The Company Disclosure Letter sets forth a true and complete list
of (i) all United States and foreign patents, trademark, service xxxx and
copyright registrations and applications therefor, and material trademarks,
trade names, service marks and copyrights owned by the Company and its
Subsidiaries (the "Intellectual Property Rights") and (ii) all United States and
foreign patents, trademarks, trade names, service marks and copyrights licensed
to the Company or any of its Subsidiaries (the "Licensed Rights"). The Company
represents and warrants that, except as set forth in the Company Disclosure
Letter, (i) the Intellectual Property Rights are free and clear of any liens,
claims or encumbrances, are not subject to any license (royalty bearing or
royalty free) and are not subject to any other arrangement requiring any payment
to any person or the obligation to grant rights to any person in exchange; (ii)
to the knowledge of the Company, the Licensed Rights are free and clear of any
liens, claims, encumbrances, royalties or other obligations; and (iii) the
Intellectual Property Rights and the Licensed Rights are all those material
rights necessary to the conduct of the business of each of the Company, its
Subsidiaries and the Company's affiliates as presently conducted. Except as set
forth in the Company Disclosure Letter, the validity of the Intellectual
Property Rights and title thereto, (i) have not been questioned in any prior
Litigation; (ii) are not being questioned in any pending Litigation; and (iii)
to the knowledge of the Company, are not the subject(s) of any threatened or
proposed Litigation. The business of each of the Company and its Subsidiaries,
as presently conducted, does not conflict with and, to the knowledge of the
22
Company, has not been alleged to conflict with any patents, trademarks, trade
names, service marks, copyrights or other intellectual property rights of
others. The consummation of the transactions contemplated hereby will not result
in the loss or impairment of any of the Intellectual Property Rights or the
Company's or its Subsidiaries' right to use any of the Licensed Rights. To the
knowledge of the Company, there are no third parties using any of the
Intellectual Property Rights material to the business of the Company or its
Subsidiaries as presently conducted.
(b) Except as identified in the Company Disclosure Letter, each of the
Company and its Subsidiaries owns, or possesses valid rights to, all computer
software programs that are material to the conduct of the business of the
Company and its Subsidiaries. To the Company's knowledge, there are no
infringement suits, actions or proceedings pending or threatened against the
Company or any Subsidiary with respect to any software owned or licensed by the
Company or any Subsidiary.
Section 17.20 Year 2000 Compliance.
--------------------
(a) The Company has made available to Parent the Company's plan to
ensure that it will be Year 2000 Compliant (the "Year 2000 Plan"). To the
Company's knowledge, the Year 2000 Plan will enable the Company to be Year 2000
Compliant in a timely manner except as to matters which are not reasonably
likely to result in a Company Material Adverse Effect and the cost for the
Company to become Year 2000 Compliant is estimated to be $1.2 million.
(b) "Year 2000 Compliant" means that (i) the products, services, or
other item(s) at issue accurately process, provide and/or receive date/time
data (including calculating, comparing, and sequencing), within, from, into, and
between centuries (including the twentieth and twenty-first centuries and the
years 1999 and 2000), including leap year calculations, and (ii) neither the
performance nor the functionality nor the supply of the products, services, and
other item at issue will be affected by dates/times prior to, on, after, or
spanning January 1, 2000. The design of the products, services, and other item
at issue to ensure compliance with the foregoing warranties and representations
includes proper date/time data century recognition and recognition of 1999 and
2000, calculations that accommodate same century and multicentury formulae and
date/time values before, on, after, and spanning January 1, 2000, and date/time
data interface values that reflect the century, 1999, and 2000. In particular,
but without limitation, (A) no value for current date/time will cause any error,
interruption, or decreased performance in or for such product, service, and
other item, (B) all manipulations of date and time related data (including
calculating, comparing, sequencing, processing, and outputting) will produce
correct results for all valid dates and times, including when used in
combination with other products, services, or items, (C) all date/time elements
in interfaces and data storage will specify the century to eliminate date
ambiguity without human intervention, including leap year calculations, (D)
where any date/time element is represented without a century, the correct
century will be unambiguous for all manipulations involving that element, (E)
authorization codes, passwords, and zaps (purge functions) will function
normally and in the same manner during prior to, on, and after January 1, 2000,
including the manner in which they function
23
with respect to expiration dates and CPU serial numbers, and (F) the Company's
and its Subsidiaries' supply of the product, service, and other item will not be
interrupted, delayed, decreased, or otherwise affected by the advent of the year
2000.
Section 17.21 Brokers. Except for Lazard Freres & Co. LLC, no broker,
-------
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with this Agreement, the Merger or the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company Disclosure Letter includes a complete and
correct copy of the agreement between the Company and Lazard Freres & Co. LLC to
which such firm would be entitled to any payment relating to this Agreement, the
Merger or the other transactions contemplated by this Agreement.
Section 17.22 Insurance Policies. The Company has furnished or made
------------------
available to Parent prior to the date hereof a complete and accurate list of all
insurance policies in force naming the Company, any of its Subsidiaries or
employees thereof as an insured or beneficiary or as a loss payable payee or for
which the Company or any Subsidiary has paid or is obligated to pay all or part
of the premiums. Neither the Company nor any Subsidiary has received notice of
any pending or threatened cancellation or premium increase (retroactive or
otherwise) with respect thereto, and each of the Company and the Subsidiaries is
in compliance in all material respects with all conditions contained therein.
There are no material pending claims against such insurance policies by the
Company or any Subsidiary as to which insurers are defending under reservation
of rights or have denied liability, and there exists no material claim under
such insurance policies that has not been properly filed by the Company or any
Subsidiary. Except for the self-insurance retentions or deductibles set forth in
the policies contained in the aforementioned list, the policies are adequate in
scope and amount to cover all prudent and reasonably foreseeable risks which may
arise in the conduct of the business of the Company and the Subsidiaries that
would reasonably be expected to have a Company Material Adverse Effect.
Section 17.23 Notes and Accounts Receivable.
-----------------------------
(a) Except as disclosed in the Company Disclosure Letter, there are
no notes receivable of the Company or any Subsidiary owing by any director,
officer, stockholder or employee of the Company or any Subsidiary.
(b) Except as disclosed in the Company Disclosure Letter, all
accounts receivable of the Company and any Subsidiary are current or covered by
adequate reserves for uncollectability, and there are no material disputes
regarding the collectibility of any such accounts receivable that would
reasonably be expected to have a Company Material Adverse Effect.
Section 17.24 Transactions with Affiliates. Except as set forth in
----------------------------
the Company Disclosure Letter (other than compensation and benefits received in
the ordinary course of business as an employee or director of the Company or its
Subsidiaries), no director, officer or other
24
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any Subsidiary or any entity in which, to the
knowledge of the Company, any such director, officer or other affiliate or
associate, owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or in the over-the-
counter market and less than 1% of the stock of which is beneficially owned by
any such persons) has any interest in: (i) any contract, arrangement or
understanding with, or relating to the business or operations of Company or any
Subsidiary; (ii) any loan, arrangement, understanding, agreement or contract for
or relating to indebtedness of the Company or any Subsidiary; or (iii) any
property (real, personal or mixed), tangible, or intangible, used or currently
intended to be used in, the business or operations of the Company or any
Subsidiary.
Section 17.25 Company Warrants. Upon the consummation of the Merger,
----------------
each of the Company's then outstanding warrants to acquire shares of Company
Common Stock shall, pursuant to their terms, become exercisable, upon payment of
the applicable exercise price thereof, into the right to receive an amount in
cash determined by multiplying (A) the Merger Consideration by (B) the number of
shares of Company Common Stock such holder could have purchased had such holder
exercised such warrant in full immediately prior to the consummation of the
Merger.
Section 17.26 No Existing Discussions. As of the execution of this
-----------------------
Agreement, the Company is not engaged, directly or indirectly, in any
negotiations or discussions with any other party with respect to an Acquisition
Proposal (as defined in Section 5.10).
Section 17.27 Disclosure. No representation, warranty or covenant
----------
made by the Company in this Agreement or in the Company Disclosure Letter
contains an untrue statement of a material fact or omits to state a material
fact required to be stated herein or therein or necessary to make the statements
contained herein or therein not misleading. Any matter expressly disclosed in
the Company Disclosure Letter shall be deemed to be disclosed as to such matter
so long as such disclosure being made states clearly the matter being disclosed
and the context for which it is being disclosed.
ARTICLE XVIII
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Each of Parent and Purchaser represents and warrants to the Company as
follows:
Section 18.1 Organization and Standing. Such person (a) is a
-------------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, (b) has full corporate power and authority
to own, lease and operate it properties and assets and to conduct its business
as presently conducted and (c) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing
25
necessary, except where the failure to be so qualified or licensed would not,
individually or in the aggregate, have a material adverse effect on Parent or
Purchaser.
Section 18.2 Authority for Agreement. Such person has all necessary
-----------------------
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by such person of this Agreement, and the consummation by each such
person of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of such person are necessary to authorize this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly executed and delivered by such person and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of such person enforceable against such person in
accordance with its terms.
Section 18.3 No Conflict. The execution and delivery of this
-----------
Agreement by such person do not, and the performance of this Agreement by such
person and the consummation of the Merger and the other transactions
contemplated by this Agreement will not, (i) conflict with or violate the
certificate of incorporation or bylaws of such person, (ii) conflict with or
violate any Law applicable to such person or by which any property or asset of
such person is bound or affected, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, give to others any right of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or other encumbrance on
any property or asset of such person pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which such person is a party or by which such person
or any property or asset of either of them is bound or affected, except in the
case of clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
prevent or materially delay the performance by such person of its respective
obligations under this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 18.4 Required Filings and Consents. The execution and
-----------------------------
delivery of this Agreement by such person do not, and the performance of this
Agreement by such person will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity, except
(i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and
filing and recordation of appropriate merger documents as required by the DGCL,
(ii) for those required by the HSR Act, (iii) for the FCC Filings, (iv) for
filings contemplated by Section 3.15 and (v) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
materially delay the performance by such person of any of its respective
obligations under this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
26
Section 18.5 Information Supplied. None of the information supplied
--------------------
or to be supplied by Parent or Purchaser for inclusion or incorporation by
reference in the Proxy Statement will, at the date such document is first
published, sent or delivered to Company's stockholders or, unless promptly
corrected, at any time during the pendency of the Stockholders' Meeting, 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 made
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation or warranty is
made by such person with respect to statements made or incorporated by reference
therein based on information supplied by the Company for inclusion or
incorporation by reference in the foregoing document.
Section 18.6 Brokers. No broker, finder or investment banker (other
-------
than Warburg Dillon Read LLC) is entitled to any brokerage, finder's or other
fee or commission payable by such person in connection with this Agreement, the
Merger or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Purchaser.
Section 18.7 No Prior Activities. Except for obligations or
-------------------
liabilities incurred in connection with its incorporation or organization or
the negotiation and consummation of this Agreement, the Merger and the
transactions contemplated hereby, Purchaser has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person
or entity.
Section 18.8 Sufficient Funds. Either Parent or Purchaser has
----------------
available, or has made arrangements to obtain (through existing credit
arrangements or otherwise), sufficient funds to acquire all of the shares of
Company Common Stock outstanding on a fully diluted basis for the Merger
Consideration and to pay all fees and expenses related to the transactions
contemplated by this Agreement.
Section 18.9 Share Ownership. Except for the transactions
---------------
contemplated by this Agreement, none of Parent, Purchaser or any of their
respective affiliates or associates beneficially owns any shares of Company
Common Stock.
ARTICLE XIX
COVENANTS
Section 19.1 Conduct of the Business Pending the Merger.
------------------------------------------
(a) The Company covenants and agrees that, except for actions taken
to implement this Agreement and the transactions contemplated hereby and except
as set forth in the Company Disclosure Letter, between the date of this
Agreement and the Effective Time, unless Parent shall otherwise agree in
writing, (i) the business of the Company and its Subsidiaries shall be conducted
27
only in, and the Company and its Subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent with prior
practice, (ii) the Company and its Subsidiaries shall use all commercially
reasonable efforts to maintain and protect the FCC Licenses and Channel Leases,
to preserve substantially intact their business organizations, to keep available
the services of their current officers and employees and to preserve the current
relationships of the Company and its Subsidiaries with suppliers and other
persons with which the Company or its Subsidiaries has significant business
relations, (iii) the Company and its Subsidiaries shall use all commercially
reasonable efforts on a basis consistent with past practice to continue to
provide wireless cable television services to the Company's subscriber base and
(iv) the Company will comply in all material respects with all applicable Laws
and regulations wherever its business is conducted, including, without
limitation, the timely filing of all reports, forms or other documents with the
FCC and with the SEC required pursuant to the Securities Act or the Exchange
Act.
(b) The Company covenants and agrees that, except for actions taken
to implement this Agreement and the transactions contemplated hereby, between
the date of this Agreement and the Effective Time, the Company shall not, nor
shall the Company permit any of its Subsidiaries to, (i) declare or pay any
dividends on or make other distributions (whether in cash, stock or property) in
respect of any of its capital stock, except for dividends by a wholly owned
Subsidiary of the Company to the Company or another wholly owned Subsidiary of
the Company, (ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (iii) except as set
forth in the Company Disclosure Letter, repurchase or otherwise acquire any
shares of its capital stock, (iv) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into any such shares of its capital stock, or any
rights, warrants or options to acquire any such shares or convertible securities
or any stock appreciation rights, phantom stock plans or stock equivalents,
other than the issuance of shares of Company Common Stock upon the exercise of
Company Options or Company Warrants outstanding as of the date of this
Agreement, (v) willfully take any action that would make the Company's
representations and warranties set forth in Article III not true and correct in
all material respects, or (vi) take any action that would, or could reasonably
be expected to, result in any of the conditions set forth in Article VI not
being satisfied.
(c) The Company covenants and agrees that, except for actions taken
to implement this Agreement and the transactions contemplated hereby, between
the date of this Agreement and the Effective Time, the Company shall not, nor
shall the Company permit any of its Subsidiaries to, (i) amend its certificate
of incorporation (including any certificate of designations attached thereto) or
bylaws or other equivalent organizational documents; (ii) except as set forth in
the Company Disclosure Letter, incur any indebtedness for borrowed money or
guaranty any such indebtedness of another person, other than (A) borrowings
under existing lines of credit (or under any refinancing of such existing lines)
or (B) indebtedness owing to, or guaranties of indebtedness owing to, the
Company (iii) make any loans or advances to any other person other than loans or
advances between any Subsidiaries of the Company or between the Company and any
of its Subsidiaries (other than
28
loans or advances less than $50,000 made in the ordinary course of business
consistent with past practice); (iv) except as set forth in the Company
Disclosure Letter, merge or consolidate with any other entity in any
transaction, or sell any business or assets in a single transaction or series of
transactions in which the aggregate consideration is $100,000 or greater; (v)
change its accounting policies except as required by GAAP; (vi) make any change
in employment terms for any of its directors or officers; (vii) alter, amend or
create any obligations with respect to compensation, severance, benefits, change
of control payments or any other payments to employees, directors or affiliates
of the Company or its Subsidiaries, other than with respect to alterations or
amendments made with respect to non-officers and non-directors in the ordinary
course of business consistent with past practice or as expressly contemplated by
this Agreement or consented to in writing by Parent; (viii) make any change to
the Company Benefit Plans; (ix) enter into any leasing or licensing agreements,
take-or-pay arrangements or other affiliations, alignments or agreements with
respect to the FCC Licenses, provided, the Company may renegotiate any Channel
Leases in the ordinary course of business; or (x) commit or agree to take any of
the actions described in this Section 5.1.
Section 19.2 Access to Information; Confidentiality.
--------------------------------------
(a) From the date hereof to the Effective Time, the Company shall,
and shall cause the officers, directors, employees, auditors, attorneys,
financial advisors, lenders and other agents (collectively, the
"Representatives") of the Company to, afford the Representatives of Parent and
Purchaser reasonable access at all reasonable times to the officers, employees,
agents, properties, offices and other facilities, books and records of the
Company and its Subsidiaries, and shall furnish Parent and Purchaser with all
financial, operating and other data and information as Parent or Purchaser,
through its Representatives, may reasonably request. Parent will remain subject
to the terms of the Seller and Non-Disclosure of Proprietary Information
Agreement with the Company dated June 4, 1998 (the "Confidentiality Agreement").
(b) No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 19.3 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or nonoccurrence, of any event which would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (ii) any failure by such party (or
Purchaser, in the case of Parent) 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 5.3
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice. If any event or matter arises after the date of
this Agreement which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described in the Company Disclosure
Letter or which is necessary to correct any information in the Company
Disclosure Letter which has been rendered inaccurate thereby, then
29
from time to time prior to the Closing the Company shall supplement, or amend,
and deliver to Parent the Company Disclosure Letter which it has delivered
pursuant to this Agreement.
Section 19.4 Further Assurances.
------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all 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 Law to consummate and make effective the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, using all commercially reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of each Governmental Entity and parties to contracts with the Company and
its Subsidiaries as are necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement and to fulfill the conditions
set forth in Article VI. If 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 of each party to this Agreement and the Surviving
Corporation shall use all commercially reasonable efforts to take all such
action.
(b) In connection with, and without limiting the foregoing, the
Company shall (i) take all actions necessary to ensure that no state
antitakeover statute or similar statute or regulation is or becomes operative
with respect to this Agreement, the Merger or any other transactions
contemplated by this Agreement and (ii) if any state antitakeover statute or
similar statute or regulation is or becomes operative with respect to this
Agreement, the Merger or any other transaction contemplated by this Agreement,
take all actions necessary to ensure that this Agreement, the Merger and any
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
(c) The parties hereto shall use their best efforts to secure promptly
all necessary approvals from the FCC that are required to consummate this
Agreement. Without limitation to the foregoing, promptly after the date of this
Agreement, the parties shall file with the FCC applications seeking
authorization for the transfer of control of the Company to Purchaser at the
Closing. The parties shall use their best efforts to prosecute such
applications with diligence and shall diligently oppose any objections to such
applications to the end that each application, as soon as practicable, shall be
granted by the FCC and such grants shall no longer be subject to any further
administrative or judicial review.
Section 19.5 Stockholders' Meeting.
---------------------
(a) In order to consummate the Merger, the Company, acting through the
Company Board of Directors, shall, in accordance with applicable law:
30
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Stockholders' Meeting") as promptly as practicable after
the date of this Agreement for the purpose of voting on the approval and
adoption of this Agreement and the Merger (the "Company Stockholder Approval");
(ii) prepare and file with the SEC a preliminary proxy statement
relating to the Merger and this Agreement (the "Proxy Statement") and use its
best efforts to obtain and furnish the information required to be included by
the SEC in the Proxy Statement and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the preliminary Proxy
Statement and cause a definitive Proxy Statement to be mailed to its
stockholders at the earliest practicable time;
(iii) each party to this Agreement will notify the other parties
promptly of the receipt of the comments of the SEC, if any, and of any request
by the SEC for amendments or supplements to the Proxy Statement or for
additional information with respect thereto, and will supply the other parties
with copies of all correspondence between such party or its representatives, on
the one hand, and the SEC or members of its staff, on the other hand, with
respect to the Proxy Statement or the Merger. If (A) at any time prior to the
Stockholders' Meeting, any event should occur relating to the Company or any of
its Subsidiaries which should be set forth in an amendment of, or a supplement
to, the Proxy Statement, the Company will promptly inform Parent and (B) if at
any time prior to the Stockholders' Meeting, any event should occur relating to
Parent or Purchaser or any of their respective subsidiaries or affiliates, or
relating to the plans of any such persons for the Company after the Effective
Time, that should be set forth in an amendment of, or a supplement to, the Proxy
Statement, Parent will promptly inform the Company, and in the case of (A) or
(B) the Company and Parent, will, upon learning of such event, promptly prepare,
and the Company shall file and, if required, mail such amendment or supplement
to the Company's stockholders; provided, prior to such filing or mailing, the
--------
Company and Parent shall consult with each other with respect to such amendment
or supplement. The Company and its counsel shall permit Parent and its counsel
to participate in all communications with the SEC and its staff, including any
meetings and telephone conferences, relating to the Proxy Statement, the Merger
or this Agreement;
(iv) subject to Section 5.6, include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in favor of
the approval of the Merger and the adoption of this Agreement; and
(v) use all commercially reasonable efforts to solicit from holders
of shares of Company Common Stock proxies in favor of the Merger and shall take
all other action necessary or, in the reasonable opinion of Parent, advisable to
secure any vote or consent of stockholders required by the DGCL to effect the
Merger.
31
(b) The Company hereby represents that Lazard Freres & Co. LLC, the
Company's independent financial advisor, has, subject to the terms of its
engagement letter with the Company, consented to the inclusion of references to
its opinion in the Proxy Statement.
(c) Parent will provide the Company with the information concerning
Parent and Purchaser required to be included in the Proxy Statement.
(d) Parent shall vote, or cause to be voted, in favor of the approval
of the Merger and the approval and adoption of this Agreement all shares of
Company Common Stock owned by Parent, Purchaser or any of Parent's other
Subsidiaries.
Section 19.6 Board Recommendations.
---------------------
(a) In connection with the Merger and Stockholders' Meeting, the
Company Board of Directors shall (i) subject to Section 5.6(b) hereof, recommend
to the holders of shares of Company Common Stock to vote in favor of the Merger
and use all commercially reasonable efforts to obtain the necessary approvals by
the Company's stockholders of this Agreement and (ii) otherwise comply with all
legal requirements applicable to such meeting.
(b) Neither the Company Board of Directors nor any committee thereof
shall, except as expressly permitted by this Section 5.6 (b), (i) withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to Parent, the approval or recommendation of the Company Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any transaction
involving an Acquisition Proposal (as defined in Section 5.10) from a third
party (an "Alternative Transaction"), or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any Alternative
Transaction. Notwithstanding the foregoing, if during the 20-day period
commencing on the date hereof (the "Initial Period"), the Company Board of
Directors determines in good faith, after it has received a Superior Proposal
(as hereinafter defined) in compliance with Section 5.10 and after receiving
advice from outside counsel as to its fiduciary duties to the Company's
stockholders under applicable Law, the Company Board of Directors may (subject
to this and the following sentences) inform the Company's stockholders that it
no longer believes that the Merger is advisable and no longer recommends
approval of the Merger (a "Subsequent Determination") and enter into an
Acquisition Agreement with respect to a Superior Proposal, but only at a time
that is after the third business day following Parent's receipt of written
notice advising Parent that the Company Board of Directors has received a
Superior Proposal. Such written notice shall specify the material terms and
conditions of such Superior Proposal, identify the person making such Superior
Proposal and state that the Company Board of Directors intends to make a
Subsequent Determination. During such three business day period, the Company
shall provide an opportunity for Parent to propose such adjustments to the terms
and conditions of this Agreement as would enable the Company to proceed with its
recommendation to its stockholders without a Subsequent Determination; provided,
32
however, that the acceptance of any such proposed adjustment shall be at the
sole discretion of the Company Board of Directors, exercised in good faith, and
this Agreement shall be amended to reflect any such accepted adjustments;
provided, further, however, that any such proposed adjustment, the sole effect
of which is to (i) increase the amount of the Merger Consideration, (ii) waive
one or more conditions to the obligations of Parent or Purchaser to effect the
Merger or (iii) modify the terms and conditions of this Agreement to reflect
identical terms and conditions contained in such Superior Proposal, shall be
automatically accepted, and this Agreement shall be amended to reflect any such
automatically accepted adjustments. Parent and Purchaser hereby acknowledge and
agree that the Company may enter into an Acquisition Agreement with respect to a
Superior Proposal in accordance with this Section 5.6, whether or not this
Agreement is terminated, and that, in the event that the Company enters into an
Acquisition Agreement with respect to a Superior Proposal in accordance with
this Section 5.6, neither Parent nor the parties to such Acquisition Agreement
may propose or enter into any adjustments to the terms and conditions of this
Agreement or such Acquisition Agreement, respectively. Notwithstanding the
foregoing, unless this Agreement is earlier terminated in accordance with its
terms, this Agreement and the Merger shall be submitted to the stockholders of
the Company whether or not the Company Board of Directors has made a Subsequent
Determination. For purposes of this Agreement, a "Superior Proposal" means any
proposal (on its most recently amended or modified terms, if amended or
modified) made by a third party to enter into an Alternative Transaction which
the Company Board of Directors determines in its good faith judgment (based on,
among other things, the written advice of an independent financial advisor) to
be more favorable to the Company's stockholders than the Merger, taking into
account all relevant factors (including whether, in the good faith judgment of
the Company Board of Directors, after obtaining the advice of such independent
financial advisor, the third party is reasonably able to finance the
transaction, and any proposed changes to this Agreement that may be proposed by
Parent in response to such Alternative Transaction). Nothing contained in this
Section 5.6 or any other provision hereof shall prohibit the Company or the
Company Board of Directors from (x) taking and disclosing to the Company's
stockholders pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act a position with respect to a tender or exchange offer by a third party,
which is consistent with its obligations hereunder or (y) making such disclosure
to the Company's stockholders as, in the good faith judgment of the Company
Board of Directors after receiving advice from outside counsel, is consistent
with its obligations hereunder and is required by applicable law; provided, that
the Company may not, except as provided by this Section 5.6, withdraw, qualify
or modify, in a manner adverse to Parent, the approval or recommendation of the
Company Board of Directors of the Merger or this Agreement.
Section 19.7 Stockholder Litigation. The Company shall give Parent
----------------------
the opportunity to participate in the defense or settlement of any stockholder
Litigation against the Company and its directors relating to the transactions
contemplated by this Agreement or the Merger; provided, however, that no such
settlement shall be agreed to without Parent's consent which consent will not be
unreasonably withheld.
Section 19.8 Indemnification.
---------------
33
(a) It is understood and agreed that all rights to indemnification by
the Company now existing in favor of each present and former director, officer,
employee and agent of the Company or its Subsidiaries (the "Indemnified
Parties") as provided in the Company Certificate of Incorporation or the Company
Bylaws and the certificate of incorporation and bylaws (or equivalent
organizational documents) of each Subsidiary, in each case as in effect on the
date of this Agreement, or pursuant to any other agreements in effect on the
date hereof, copies of which have been furnished or made available to Parent,
shall survive the Merger and Parent shall (i) cause the Surviving Corporation to
continue in full force and effect for a period of at least six years from the
Effective Time and (ii) perform, or cause the Surviving Corporation to perform,
in a timely manner, the Surviving Corporation's obligation with respect thereto.
Parent and Purchaser agree that any claims for indemnification hereunder as to
which they have received written notice prior to the sixth anniversary of the
Effective Time shall survive, whether or not such claims shall have been finally
adjudicated or settled.
(b) Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
("D&O Insurance") covered by such policies (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable) with
respect to matters occurring prior to the Effective Time; provided, however,
that in no event shall the Surviving Corporation be required to expend pursuant
to this Section 5.8(b) more than an amount per year equal to 150% of current
annual premiums paid by the Company for such insurance. In the event that, but
for the proviso to the immediately preceding sentence, the Surviving Corporation
would be required to expend more than 150% of current annual premiums, the
Surviving Corporation shall obtain the maximum amount of such insurance
obtainable by payment of annual premiums equal to 150% of current annual
premiums. If the Surviving Corporation elects to reduce the amount of insurance
coverage pursuant to the preceding sentence, it will furnish to the officers and
directors currently covered by such D&O Insurance reasonable notice of such
reduction in coverage and shall, to the extent additional coverage is available,
afford such persons the opportunity to pay such additional premiums as may be
necessary to maintain the existing level of D&O Insurance coverage.
(c) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 5.8.
(d) The provisions of this Section 5.8 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
34
Section 19.9 Public Announcements. Parent and the Company shall
--------------------
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement, or the Merger and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law or any listing agreement with a
national securities exchange or trading system to which Parent or the Company is
a party.
Section 19.10 Acquisition Proposals. The Company shall not, nor shall
---------------------
it authorize or permit any of its Subsidiaries or Representatives to, directly
or indirectly, (a) solicit, initiate or encourage the submission of any
Acquisition Proposal or (b) participate in or encourage any discussion or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of, any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that the foregoing shall not prohibit
the Company Board of Directors from furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
Acquisition Proposal during the Initial Period, and to the extent that, (A) the
Company Board of Directors, based upon the advice of outside legal counsel,
determines in good faith that such action is required for the Company Board of
Directors to comply with its fiduciary obligations to the Company Stockholders
under applicable Delaware law, (B) prior to taking such action, the Company
receives from such person or entity an executed agreement in reasonably
customary form relating to the confidentiality of information to be provided to
such person or entity and (C) the Company Board of Directors concludes in good
faith, based upon written advice from its independent financial advisor, that
the Acquisition Proposal is a Superior Proposal. The Company shall provide
immediate oral and written notice to Parent of (a) the receipt of any such
Acquisition Proposal or any inquiry which could reasonably be expected to lead
to any Acquisition Proposal, (b) the material terms and conditions of such
Acquisition Proposal or inquiry, (c) the identity of such person or entity
making any such Acquisition Proposal or inquiry and (d) the Company's intention
to furnish information to, or enter into discussions or negotiations with, such
person or entity. The Company shall continue to keep Parent informed of the
status and details of any such Acquisition Proposal or inquiry. For purposes of
this Agreement, "Acquisition Proposal" means any bona fide proposal with respect
to a merger, consolidation, share exchange, tender offer or similar transaction
involving the Company, or any purchase or other acquisition of all or any
significant portion of the assets of the Company or any equity interest in the
Company.
Section 19.11 FCC Applications. The Company and Parent shall
----------------
coordinate efforts and cooperate with each other, to the extent permitted by the
FCC rules, in the preparation and filing of Colocation Applications and Other
Applications with the FCC. Without limitation to the foregoing, upon the
request of Parent, the Company shall use its reasonable efforts to prepare and
file and/or to cause the lessor of a Channel Lease to prepare and file, at
Parent's expense, a Colocation Application or Other Application to be filed with
the FCC, as soon as practicable, and to the extent applicable, in no event
after: (i) the end of the initial one week filing window in which the FCC will
accept Other Applications for the provision of Two-Way Services pursuant to the
newly adopted FCC rules governing the provision of Two-Way Services; or (ii) the
end of a filing
35
window for ITFS major modification applications established pursuant to Section
74.911(c) of the FCC rules.
Section 19.12 Undertakings of Parent. Parent shall perform, or cause
----------------------
to be performed, when due all obligations of Purchaser under this Agreement.
Section 19.13 Director Resignations. The Company shall cause to be
---------------------
delivered to Parent resignations of all the directors of the Company's
Subsidiaries to be effective upon the consummation of the Merger. The Company
shall cause such directors, prior to resignation, to appoint new directors
nominated by Parent to fill such vacancies.
Section 19.14 Rights Plan. The Board of Directors of Company shall as
-----------
promptly as practicable, and in any event prior to 5:00 p.m., New York time, on
April 30, 1999, adopt a Rights Agreement between the Company and a rights agent
selected by it (the "Rights Plan") and shall approve the appropriate resolutions
so that (i) neither Parent nor Purchaser will become an "Acquiring Person" (as
defined in the Rights Plan) as a result of the Merger or the Voting Agreements,
(ii) no "Stock Acquisition Date" or "Distribution Date" (as such terms are
defined in the Rights Plan) will occur as a result of the Merger or the Voting
Agreements, and (iii) all outstanding rights to purchase Series A Junior
Participating Preferred Stock issued and outstanding under the Rights Plan will
expire at the Effective Time.
Section 19.15 Year 2000 Plan. The Company shall use all commercially
--------------
reasonable efforts to ensure that the Year 2000 Plan shall be completed in a
timely manner. The Company shall (i) allow Parent to monitor the Company's Year
2000 Compliance issues and Year 2000 Plan, (ii) provide prompt notice to Parent
if the Company does not achieve, or reasonably expects it shall not achieve,
milestones and objectives identified in the Year 2000 Plan and (iii) cooperate
in good faith with Parent's efforts to ensure that the Company is Year 2000
Compliant.
Section 19.16 Employee Benefits.
-----------------
(a) Parent and Purchaser agree that, effective as of the Effective
Time and for a three-year period following the Effective Time, the Surviving
Corporation and its Subsidiaries and successors shall provide to the employees
of the Company or any of its Subsidiaries immediately prior to the Effective
Time ("Employees") with employee plans and programs which provide benefits that
are no less favorable in the aggregate to those provided to such Employees
immediately prior to the date hereof. With respect to such benefits, service
accrued by such Employees during employment with the Company and its
Subsidiaries prior to the Effective Time shall be recognized for all employment
and benefit-related purposes as service rendered to the Surviving Corporation
and its Subsidiaries and successors, except for benefit accruals under the
defined benefit pension plan sponsored by Parent and to the extent necessary to
prevent duplication of benefits.
36
(b) Parent and Purchaser agree to honor and to cause the Surviving
Corporation to honor, in accordance with their terms, and to make required
payments when due under, all contracts, agreements, arrangements, policies,
plans and commitments of the Company and its Subsidiaries in effect as of the
date hereof (including but not limited to employment, incentive and severance
agreements and arrangements), as amended through the date hereof, that are
applicable with respect to any employee, officer or director or former employee,
officer or director of the Company or any of its Subsidiaries (the "Plans");
provided, however, that the foregoing shall not preclude Parent or Purchaser
from amending or terminating any Plan in accordance with its terms. Parent and
Purchaser acknowledge that consummation of the Merger shall constitute a "Change
in Control" and a "Covered Transaction" for purposes of the Plans.
(c) With respect to any welfare plans in which the Employees are
eligible to participate after the Effective Time, Parent and Purchaser shall
cause the Surviving Corporation to (i) waive all limitations as to preexisting
conditions exclusions (to the extent such exclusions are not currently
applicable to Employees) and waiting periods with respect to participation and
coverage requirements (to the extent any such waiting periods are not currently
in effect with respect to Employees) applicable to the Employees and (ii)
provide each Employee with credit for any co-payments and deductibles paid prior
to the Effective Time in satisfying any applicable deductible or out-of-pocket
requirements.
Section 19.17 Matters Relating to BARs. At any time, and from time
------------------------
to time, prior to the Effective Time, upon the written request of the Company,
Parent shall loan funds to the Company, in an aggregate amount not to exceed
$3.5 million for the purpose of funding the amounts required to be paid by the
Company to the holders of the Company's Bond Appreciation Rights (relating to
the Company's Senior Discount Notes due 2004 (the "2004 Notes")) upon the
exercise thereof. Interest will accrue on such loans at a rate of ten percent
(10%) per annum, and the aggregate principal amount of such loans, together with
accrued interest thereon, shall be due and payable on the first anniversary of
any termination of this Agreement; provided, that, if (i) the Company enters
into an Acquisition Agreement related to an Alternative Transaction and (ii)
this Agreement is terminated pursuant to Section 7.1(d)(i), then the entire
principal amount of such loans, together with accrued interest thereon, shall be
due and payable upon demand as of the date of such termination. All loans made
to the Company by Parent pursuant to this Section 5.17 shall be secured by the
outstanding capital stock of a Subsidiary of the Company, which Subsidiary will
hold rights to use licenses to provide wireless cable services to not less than
150,000 PSA footprint households.
Section 19.18 Matters Relating to Notes. If on September 30, 1999
-------------------------
the only condition to the Closing remaining unfulfilled is the receipt of any
required approval by the FCC, then Parent shall have the option to extend the
End Date (as defined in Section 7.1(b)(i)) to December 31, 1999 by delivering to
the Company on or prior to September 30, 1999 a notice by which Parent shall
agree to loan to the Company up to $13,000,000, in cash, for the purpose, among
other things, of paying interest due in December 1999 on the Company's 2004
Notes. Interest will accrue on such loan at a rate of ten percent (10%) per
annum, and the aggregate principal amount
37
of such loan, together with accrued interest thereon, shall be due and payable
on the first anniversary of any termination of this Agreement; provided, that,
if (i) this Agreement is terminated in accordance with the terms hereof (other
than as a result of a breach of this Agreement by Parent or Purchaser) and (ii)
the Company enters into an Acquisition Agreement related to an Alternative
Transaction that would, if consummated in accordance with its terms, provide to
the Company or the stockholders of the Company a per share cash consideration
equal to or greater than ninety percent (90%) of the Merger Consideration, then
the entire principal amount of such loans, together with accrued interest
thereon, shall be due and payable upon demand as of the date of such
termination. All loans made to the Company by Parent pursuant to this Section
5.18 shall be secured by the outstanding capital stock of a Subsidiary of the
Company, which Subsidiary will hold rights to use licenses to provide wireless
cable services to not less than 500,000 PSA footprint households with at least
twenty (20) MDS and ITFS channels, in the aggregate.
ARTICLE XX
CONDITIONS
Section 20.1 Conditions to the Obligation of Each Party. The
------------------------------------------
respective obligations of Parent, Purchaser and the Company to effect the Merger
are subject to the satisfaction of the following conditions, unless waived in
writing by all parties:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the Company's stockholders, as required by the DGCL,
the Company Certificate of Incorporation and the Company Bylaws;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition (including, any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued or
deemed applicable to, or any consent or approval withheld with respect to, the
Merger, by any Governmental Entity) preventing the consummation of the Merger
shall be in effect; provided, however, that the parties invoking this condition
shall use all commercially reasonable efforts to have any such order or
injunction vacated; and
(c) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Merger shall have been
obtained or made (including any necessary approval by the FCC and the expiration
or termination of any applicable waiting period under the HSR Act).
Section 20.2 Conditions to Obligations of Parent and Purchaser to
----------------------------------------------------
Effect the Merger. The obligations of Parent and Purchaser to effect the Merger
-----------------
are further subject to satisfaction or waiver at or prior to the Effective Time
of the condition that the representations and warranties of the Company in this
Agreement shall have been true and correct in all material
38
respects as of the date of this Agreement and the Company shall have performed
in all material respects all obligations required to be performed by it under
this Agreement.
Section 20. Conditions to Obligations of the Company to Effect the
------------------------------------------------------
Merger. The obligations of the Company to effect the Merger are further subject
------
to satisfaction or waiver at or prior to the Effective Time of the condition
that the representations and warranties of Parent and Purchaser in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and Parent and Purchaser shall have performed in all material
respects all obligations required to be performed by them under this Agreement.
ARTICLE XXI
TERMINATION, AMENDMENT AND WAIVER
Section 21. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of matters presented in connection with the Merger by the
Company's stockholders:
(a) By the mutual written consent of Parent and the Company;
(b) By either of the Company or Parent:
(i) if the Effective Date shall not have occurred on or before
September 30, 1999 (or October 31, 1999 if the only condition to the Closing
remaining unfulfilled on September 30, 1999 is any required approval by the
FCC) (the "End Date"); provided, however, that if Parent delivers to the
Company the notice referred to in Section 5.18, the End Date shall be
extended to December 31, 1999; provided, further, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Date to
occur on or before such date;
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their reasonable efforts to lift),
which permanently restrains, enjoins or otherwise prohibits the Merger and
such order, decree, ruling or other action shall have become final and non-
appealable; or
(iii) if, at the Stockholders' Meeting, the Company Stockholder
Approval shall not have been obtained.
(c) By the Company:
39
(i) in connection with entering into a definitive agreement as
permitted by Section 5.6 related to a Superior Proposal that would, if
consummated in accordance with its terms, provide to the Company or the
stockholders of the Company a per share consideration equal to or greater
than $1.00 per share in excess of the Merger Consideration (as may be
adjusted pursuant to Section 5.6); provided the Company has complied with
all provisions of Section 5.6 and of Section 5.10, including the notice
provisions therein, and that the Company makes simultaneous payment to
Parent of funds as required by Section 7.2(b); or
(iii) if Parent or Purchaser shall have breached in any material
respect any of their respective representations, warranties, covenants or
other agreements contained in this Agreement, which breach cannot be or has
not been cured within 30 days after the giving of written notice by the
Company to Parent or Purchaser, as applicable.
(d) By Parent:
(i) if the Company Board of Directors shall have withdrawn,
modified or changed in a manner adverse to Parent or Purchaser its approval
or recommendation of this Agreement or the Merger or shall have recommended
an Acquisition Proposal or shall have executed an agreement in principle or
definitive agreement relating to an Acquisition Proposal or similar business
combination with a person or entity other than Parent, Purchaser or their
affiliates; or
(ii) if the Company shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement which (x)
would give rise to the failure of a condition set forth in Section 6.2 and
(y) cannot be or has not been cured within 30 days after the giving of
written notice to the Company.
Section 21. Effect of Termination.
---------------------
(a) In the event of the termination of this Agreement pursuant to
Section 7.1 hereof, this Agreement shall forthwith be terminated and have no
further effect except as specifically provided herein and, except as provided in
this Section 7.2 and in Section 8.12, there shall be no liability on the part of
any party hereto, provided that nothing herein shall relieve any party from
liability for fraud or any willful breach hereof.
(b) If (i) Parent or Purchaser exercises its right to terminate this
Agreement under Section 7.1(d)(i), the Company shall pay to Parent $11 million
(the "Termination Fee"), payable in same-day funds, as liquidated damages and
not as a penalty to reimburse Parent for its time, expense and lost opportunity
costs of pursuing the Merger, upon consummation of the transaction relating to
such Acquisition Proposal.
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(c) In the event that (i) any person shall have publicly
disclosed an Acquisition Proposal and (ii) following such disclosure, at the
Stockholders' Meeting, the Company Stockholder Approval is not obtained (other
than as a result of a breach of this Agreement by Parent or Purchaser) and (iii)
not later than twelve months after any termination of this Agreement pursuant to
Section 7.1(b)(iii) the Company shall have entered into a definitive agreement
for an Alternative Transaction, or shall have consummated an Alternative
Transaction, then immediately prior to, and as a condition of, the consummation
of such Alternative Transaction the Company shall pay, or cause to be paid, to
Parent the Termination Fee, payable in same-day funds, as liquidated damages and
not as a penalty, to reimburse Parent for its time, expense and lost opportunity
costs of pursuing the Merger.
(d) Notwithstanding anything to the contrary set forth in this
Agreement, if the Company fails promptly to pay to Parent any amounts due under
this Section 7.2, the Company shall pay the costs and expenses (including
reasonable legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee or obligation at the publicly
announced prime rate of Citibank, N.A. in effect from time to time from the date
such fee or obligation was required to be paid.
Section 21.3 Amendments. Subject to applicable law, this Agreement
----------
may not be amended except by action of the Board of Directors of each of the
parties hereto set forth in an instrument in writing signed on behalf of each of
the parties hereto; provided, however, that after approval of the Merger by the
Company's stockholders, no amendment may be made without the further approval of
the Company's stockholders if the effect of such amendment would be to reduce
the Merger Consideration or change the form thereof.
Section 21.4 Waiver. At any time prior to the Effective Time,
------
whether before or after the Stockholders' Meeting, any party hereto, by action
taken by its board of directors, may (i) extend the time for the performance of
any of the covenants, obligations or other acts of any other party hereto or
(ii) waive any inaccuracy of any representations or warranties or compliance
with any of the agreements, covenants or conditions of any other party or with
any conditions to its own obligations. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by its duly authorized
officer. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
The waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
ARTICLE XXII
GENERAL PROVISIONS
41
Section 22.1 No Third Party Beneficiaries. Other than the provisions
----------------------------
of Article II and Sections 5.7, 5.8 and 5.16 hereof, nothing in this Agreement
shall confer any rights or remedies upon any person other than the parties
hereto.
Section 22.2 Entire Agreement. This Agreement constitutes the entire
----------------
Agreement among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof.
Section 22.3 Succession and Assignment. This Agreement shall be
-------------------------
binding upon and inure to the benefit of the parties named herein and their
respective successors. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties; provided, however, that Purchaser may freely assign its
rights to another wholly owned subsidiary of Parent without such prior written
approval but no such assignment shall relieve Purchaser of any of its
obligations hereunder.
Section 22.4 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 22.5 Headings. The section headings contained in this
--------
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 22.6 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law thereof.
Section 22.7 Severability. Any term or provision of this Agreement
------------
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
42
Section 22.8 Specific Performance. Each of the parties acknowledges
--------------------
and agrees that the other party 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 party shall be entitled to seek 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 it may be entitled, at law or in equity.
Section 22.9 Construction. The language used in this Agreement shall
------------
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 22.10 Non-Survival of Representations and Warranties and
--------------------------------------------------
Agreements. The representations, warranties and agreements in this Agreement
----------
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that (i) the agreements set
forth in Articles I, II and VIII and Sections 5.4, 5.7, 5.8 and 5.16 shall
survive the Effective Time indefinitely and (ii) the agreements set forth in
Sections 5.7, 5.8 and 7.2 and in Article VIII shall survive the termination of
this Agreement indefinitely.
Section 22.11 Certain Definitions. For purposes of this Agreement,
-------------------
the terms "associate" and "affiliate" shall have the same meaning as set forth
in Rule l2b-2 promulgated under the Exchange Act, and the term "person" shall
mean any individual, corporation, partnership (general or limited), limited
liability company, limited liability partnership, trust, joint venture, joint-
stock company, syndicate, association, entity, unincorporated organization or
government or any political subdivision, agency or instrumentality thereof. For
purposes of this Agreement, the term "Subsidiary" shall mean, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (a) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries or (b) such party or any other Subsidiary of
such party is a general partner (excluding any such partnership where such party
or any subsidiary of such party does not have a majority of the voting interest
in such partnership).
Section 22.12 Fees and Expenses. Each party hereto shall pay its own
-----------------
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby.
43
Section 22.13 Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses, or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.13:
If to Parent or Purchaser:
Sprint Corporation
0000 Xxxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Telecopier: (000) 000-0000
Attention: President and J. Xxxxxxx Xxxxxx
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
If to the Company:
American Telecasting, Inc.
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
44
Section 22.14 Control of the Company. Purchaser has not exercised and
----------------------
shall not exercise any control of the Company, its Subsidiaries or the FCC
Licenses held by the Company or its Subsidiaries prior to the Closing and the
grant of the necessary approvals by the FCC.
Section 22.15 Matters relating to the Voting Agreements. The Company
-----------------------------------------
acknowledges and agrees that it shall be responsible and held liable for any and
all monetary damages arising out of or relating to any breach of any Voting
Agreement by the stockholder of the Company party thereto.
45
IN WITNESS WHEREOF, the Company, Parent and Purchaser and have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AMERICAN TELECASTING, INC.
By: /s/ XXXXXX X. XXXXXXXXX
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and
Chief Executive Officer
SPRINT CORPORATION
By: /s/ XXXXXXXX X. XXXXXX
-----------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Senior Vice President
DD ACQUISITION, CORP.
By: /s/ XXXXXXXX X. XXXXXX
-----------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
46
