AGREEMENT AND PLAN OF MERGER
dated as of March 31, 1999
by and among
KING WORLD PRODUCTIONS, INC.,
CBS CORPORATION
and
K ACQUISITION CORP.
TABLE OF CONTENTS
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ARTICLE I THE MERGER.....................................................1
SECTION 1.1 The Merger.....................................................1
SECTION 1.2 Effective Time of the Merger...................................2
SECTION 1.3 Closing........................................................2
SECTION 1.4 Effects of the Merger..........................................2
SECTION 1.5 Certificate of Incorporation and By-Laws.......................3
SECTION 1.6 Directors......................................................3
SECTION 1.7 Officers.......................................................3
ARTICLE II CONVERSION OF SHARES...........................................3
SECTION 2.1 Conversion of Capital Stock....................................3
SECTION 2.2 Exchange of Certificates.......................................4
SECTION 2.3 Closing of Transfer Books......................................7
SECTION 2.4 Exchange Ratio for Company Stock Options.......................7
SECTION 2.5 Adjustments to Prevent Dilution................................9
SECTION 2.6 Lost Certificates..............................................9
SECTION 2.7 Withholding Rights.............................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................9
SECTION 3.1 Organization and Qualifications; Subsidiaries..................9
SECTION 3.2 Certificate of Incorporation and Bylaws.......................10
SECTION 3.3 Capitalization................................................11
SECTION 3.4 Authority Relative to This Agreement..........................12
SECTION 3.5 No Conflict; Required Filings and Consents; Certain
Contracts.....................................................12
SECTION 3.6 Compliance....................................................13
SECTION 3.7 SEC Reports and Financial Statements; Undisclosed
Liabilities...................................................14
SECTION 3.8 Absence of Certain Changes or Events..........................15
SECTION 3.9 Litigation....................................................17
SECTION 3.10 Registration Statement and Statement/Prospectus..............17
SECTION 3.11 Employee Benefit Plans.......................................18
SECTION 3.12 Board Approval...............................................19
SECTION 3.13 Vote Required................................................19
SECTION 3.14 Opinion of Financial Advisor.................................19
SECTION 3.15 Brokers......................................................19
SECTION 3.16 Taxes........................................................20
SECTION 3.17 Real Property................................................21
SECTION 3.18 Labor Matters................................................21
SECTION 3.19 State Takeover Statutes......................................22
SECTION 3.20 Material Contracts...........................................22
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SECTION 3.21 Insurance....................................................24
SECTION 3.22 Intellectual Property........................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB...26
SECTION 4.1 Organization and Qualifications; Subsidiaries.................26
SECTION 4.2 Certificate of Incorporation and Bylaws.......................27
SECTION 4.3 Capitalization................................................27
SECTION 4.4 Authority Relative to This Agreement..........................28
SECTION 4.5 No Conflict; Required Filings and Consents....................28
SECTION 4.6 Compliance....................................................29
SECTION 4.7 SEC Reports and Financial Statements; Undisclosed
Liabilities...................................................30
SECTION 4.8 Absence of Certain Changes or Events..........................31
SECTION 4.9 Litigation....................................................31
SECTION 4.10 Registration Statement and Proxy Statement/Prospectus........31
SECTION 4.11 Board Approval...............................................32
SECTION 4.12 Vote Required................................................32
SECTION 4.13 Brokers......................................................32
SECTION 4.14 No Arrangements Triggering Section 203 of the
DGCL.........................................................32
SECTION 4.15 Y2K Compliance...............................................32
SECTION 4.16 Merger Sub...................................................32
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................33
SECTION 5.1 Conduct of Business of the Company Pending the Merger.........33
SECTION 5.2 Conduct of Business of the Parent Pending the Merger..........36
ARTICLE VI ADDITIONAL COVENANTS..........................................37
SECTION 6.1 Access to Information.........................................37
SECTION 6.2 No Solicitation...............................................37
SECTION 6.3 Directors and Officers Indemnification and Insurance..........39
SECTION 6.4 Notification of Certain Matters...............................40
SECTION 6.5 Tax Treatment.................................................41
SECTION 6.6 Company Stockholder Meeting...................................41
SECTION 6.7 Registration Statement, Proxy Statement/Prospectus............41
SECTION 6.8 Letters of Accountants........................................42
SECTION 6.9 Further Action, Reasonable Efforts............................42
SECTION 6.10 Public Announcements.........................................43
SECTION 6.11 Blue Sky.....................................................43
SECTION 6.12 NYSE.........................................................43
SECTION 6.13 Affiliates...................................................43
SECTION 6.14 Employee Benefits............................................43
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SECTION 6.15 Tax Matters..................................................44
ARTICLE VII CONDITIONS TO THE MERGER......................................45
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger....45
SECTION 7.2 Conditions to Obligations of the Company to Effect the
Merger........................................................46
SECTION 7.3 Conditions to Obligations of the Parent and Merger Sub to
Effect the Merger.............................................46
ARTICLE VIII TERMINATION WAIVER, AMENDMENT AND CLOSING.....................49
SECTION 8.1 Termination...................................................49
SECTION 8.2 Effect of Termination.........................................50
SECTION 8.3 Termination Fee...............................................51
SECTION 8.4 Amendment or Supplement.......................................52
SECTION 8.5 Extension of Time, Waiver, Etc................................52
ARTICLE IX MISCELLANEOUS.................................................52
SECTION 9.1 No Survival of Representations and Warranties.................52
SECTION 9.2 Expenses......................................................52
SECTION 9.3 Counterparts..................................................53
SECTION 9.4 Governing Law.................................................53
SECTION 9.5 Notices.......................................................53
SECTION 9.6 Miscellaneous.................................................54
SECTION 9.7 Severability..................................................54
SECTION 9.8 Specific Performance..........................................55
EXHIBIT A - FORM OF CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
EXHIBIT B - FORM OF AFFILIATE LETTER
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 31, 1999, by and among
CBS Corporation, a Pennsylvania corporation (the "Parent"), King World
Productions, Inc., a Delaware corporation (the "Company"), and K Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of the Parent
("Merger Sub").
WHEREAS, the respective Boards of Directors of the Parent, the Company
and Merger Sub have determined that the merger of Merger Sub with and into the
Company on the terms and subject to the conditions set forth in this Agreement
(the "Merger"), with the Company surviving as a wholly owned subsidiary of the
Parent, is advisable and in the best interest of their respective corporations
and stockholders and have approved this Agreement;
WHEREAS, as a condition to the willingness of the Parent to enter into
this Agreement, those individuals (the "Principal Stockholders") set forth on
Schedule A attached to the Stockholders Agreement (as defined below), have
entered into the Stockholders Agreement dated as of the date hereof (the
"Stockholders Agreement") with Parent, which provides, among other things, that,
subject to the terms and conditions thereof, each Principal Stockholder will
vote his or her shares of Company Common Stock (as defined in Section 2.1
hereof) in favor of the adoption of this Agreement;
WHEREAS, the Board of Directors of the Company has approved the terms
of the Stockholders Agreement; and
WHEREAS, for Federal income tax purposes it is intended that the Merger
qualify as a reorganization within the meaning of section 368(a) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the "Code").
NOW, THEREFORE, in consideration of the mutual representations,
warranties and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. (a) Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.2),
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Merger Sub shall be merged with and into the Company in accordance
with this Agreement and the separate existence of Merger Sub shall cease. The
Company shall be the surviving corporation in the Merger (hereinafter sometimes
referred to as the "Surviving Corporation").
(b) At the election of the Parent, any direct wholly owned
Parent Subsidiary (as defined in Section 4.1(b)) may be substituted for Merger
Sub as a constituent corporation in the Merger. In such event, the parties agree
to execute an appropriate amendment to this Agreement in order to reflect such
substitution.
SECTION 1.2 Effective Time of the Merger. Upon the terms and subject to
the conditions hereof, a certificate of merger (the "Certificate of Merger")
shall be duly prepared, executed and acknowledged by the Surviving Corporation
and thereafter filed with the Secretary of State of the State of Delaware on the
Closing Date (as defined in Section 1.3). The Merger shall become effective as
of the date and at such time as the Certificate of Merger pursuant to Section
251 of the DGCL and any other documents necessary to effect the Merger in
accordance with the DGCL are duly filed (the "Merger Filing") with the Secretary
of State of the State of Delaware or at such subsequent date or time as shall be
agreed by the Company and the Parent and specified in the Certificate of Merger
and in accordance with the DGCL (the time the Merger becomes effective pursuant
to the DGCL being referred to herein as the "Effective Time").
SECTION 1.3 Closing. Subject to the satisfaction or waiver of all of
the conditions to closing contained in Article VII hereof, the closing of the
Merger (the "Closing") will take place at 10:00 a.m., New York City time, on a
date to be specified by the parties, which shall be no later than the Business
Day (as defined below) after the satisfaction or waiver of the conditions to
Closing contained in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions), at the offices of Weil, Gotshal & Xxxxxx LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date or place is agreed
to in writing by the parties hereto. The date and time at which the Closing
occurs is referred to herein as the "Closing Date." Business Day shall mean any
day other than a Saturday, a Sunday or a day on which banking institutions in
New York City are not required to be open.
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the DGCL, including Section 259 of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
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SECTION 1.5 Certificate of Incorporation and By-Laws.
(a) The Certificate of Incorporation of the Company shall be
amended at the Effective Time so as to read in its entirety as specified in
Exhibit A and as so amended shall be the Certificate of Incorporation of the
Surviving Corporation, until further amended in accordance with the terms
thereof and with applicable law.
(b) The By-Laws of Merger Sub in effect at the Effective Time,
shall be the By-Laws of the Surviving Corporation until amended in accordance
with the terms thereof and with applicable law.
SECTION 1.6 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, each to
hold office from the Effective Time in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation and until his or her
successor is duly elected and qualified.
SECTION 1.7 Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, each to
hold office from the Effective Time in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation and until his or her
successor is duly appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, par value $.01 per share (the "Company Common Stock"),
of the Company or of the holder of any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding
share of common stock, par value $.01 per share, of Merger Sub 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.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by the Parent or Merger Sub shall
automatically be cancelled and shall cease to exist and no shares of capital
stock of Parent or other consideration shall be delivered in exchange therefor.
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(c) Exchange Ratio for Company Common Stock. Subject to
Section 2.2(e), each issued and outstanding share of Company Common Stock (other
than shares to be cancelled in accordance with Section 2.1(b)) shall be
converted into the right to receive .81 (the "Exchange Ratio") validly issued,
fully paid and nonassessable shares of common stock, par value $1.00 per share
(the "Parent Common Stock"), of the Parent (the "Merger Consideration"). As of
the Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
each holder of a certificate that, immediately prior to the Effective Time,
represented outstanding shares of Company Common Stock (the "Certificates")
shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of such Certificate, the whole shares of Parent
Common Stock to which such holder is entitled pursuant to this Section 2.1(c),
as represented by one or more certificates, and any cash in lieu of fractional
shares of Parent Common Stock to be issued or paid in consideration therefor in
accordance with Section 2.2(e) and any dividends or distributions to which such
holder is entitled pursuant to Section 2.2(c), in each case without interest.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the Parent shall
deposit with the Parent's transfer agent for its shares of Parent Common Stock,
or with such other bank or trust company designated by the Parent prior to the
Effective Time and reasonably acceptable to the Company with an office or agency
in the City of New York, New York (the "Exchange Agent"), for the benefit of the
holders of Certificates, for exchange in accordance with this Article II,
through the Exchange Agent, certificates representing the number of shares of
Parent Common Stock (such shares of Parent Common Stock, together with any
dividends or distributions with respect thereto to which the holders of
Certificates may be entitled pursuant to Section 2.2(c), being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.1(c) in
exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Parent shall cause the Exchange Agent to mail to
each holder of Certificates (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other customary provisions as the Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of the Parent
Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II. Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
the Parent, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor
certificates
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representing that whole number of shares of Parent Common Stock which such
holder has the right to receive pursuant to the provisions of this Article II,
and the Certificate so surrendered shall forthwith be cancelled. In the event of
a transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, certificates representing the
proper number of shares of Parent Common Stock may be issued to a transferee if
the Certificate representing such shares of Company Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed, at any time after the Effective Time, to represent only the
right to receive upon such surrender certificates representing the shares of
Parent Common Stock, dividends or distributions with respect thereto and any
cash in lieu of fractional shares of Parent Common Stock, as contemplated by
this Section 2.2. No interest will be paid or will accrue on any cash paid or
payable in lieu of any fractional shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Company Common
Stock. No dividends or other distributions declared or made after the Effective
Time with respect to shares of Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock issuable hereunder in respect
thereof, and no cash payment in lieu of fractional shares of Parent Common Stock
shall be paid to any such holder pursuant to Section 2.2(e), until the holder of
record of such Certificate shall surrender such Certificate. Subject to the
effect of applicable Laws (as defined in Section 3.5(a)), following surrender of
any such Certificate there shall be paid to the record holder of the
certificates representing shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the later of (A) the time of such surrender
and (B) the fifth Business Day following the Effective Time, the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) if the
payment date for any dividend or distribution payable with respect to such whole
shares of Parent Common Stock has not occurred prior to the surrender of such
Certificate, at the appropriate payment date therefor, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
the surrender of such Certificate.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued (and
paid for) in full satisfaction of all rights pertaining to the shares of Company
Common Stock formerly represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date
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prior to the Effective Time which may have been declared or made by the Company
on such shares of Company Common Stock in accordance with the terms of this
Agreement or prior to the date hereof and which remain unpaid at the Effective
Time, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged for shares of Parent Common Stock, together
with any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to shares of Parent Common Stock, as
provided in this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No fractional shares, and no
certificate or scrip representing fractional shares, of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests shall not entitle the owner thereof to any rights as
a security holder of the Parent.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock converted pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Parent Common
Stock multiplied by the closing price of a share of Parent Common Stock on the
New York Stock Exchange ("NYSE") Composite Transactions List (as reported by the
WALL STREET JOURNAL or, if not reported thereby, any other authoritative source)
on the Closing Date.
(iii) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Certificates in lieu of
any fractional share interests, the Parent shall cause the Exchange Agent to
distribute such amounts to such holders of Certificates entitled to such
amounts.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for six months
after the Effective Time shall be delivered to the Parent, upon demand, and any
holders of Certificates who have not theretofore delivered all of their
Certificates in accordance with Section 2.2 shall thereafter look only to the
Parent for payment of their claim for shares of Parent Common Stock, any cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distribution, with respect to shares of Parent Common Stock.
(g) No Liability. Neither the Parent, the Company nor the
Exchange Agent shall be liable to any holder of Certificates or shares of Parent
Common Stock, as the case may be, for any shares of Parent Common Stock (or
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dividends or distribution with respect thereto) or cash payable pursuant to this
Article II delivered to a public official pursuant to any applicable abandoned
property, escheat, or similar Law. If any Certificate shall not have been
surrendered prior to seven years after the Effective Time (or immediately prior
to such earlier date on which any Merger Consideration, any cash payable to the
holder of such Certificate pursuant to this Article II or any dividends or
distributions payable to the holder of such Certificate would otherwise escheat
to or become the property of any Governmental Entity (as defined in Section
3.5(b)), any such Merger Consideration or cash 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.
SECTION 2.3 Closing of Transfer Books. From and after the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made. If, after the Effective
Time, Certificates are presented to the Parent, they shall be cancelled and
exchanged for shares of Parent Common Stock, together with any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to shares of Parent Common Stock, as provided in this Article II.
SECTION 2.4 Exchange Ratio for Company Stock Options. (a) The Parent
and the Company shall take such actions as are necessary to provide that at the
Effective Time each outstanding Company Stock Option (as defined in Section
3.3(a)) shall be assumed by the Parent and adjusted in accordance with the terms
thereof and this Agreement to be exercisable to purchase shares of Parent Common
Stock, as provided below. Following the Effective Time, each Company Stock
Option shall continue to have, and shall be subject to, the same terms and
conditions set forth in the Company Option Plans (as defined in Section 3.3(a))
or any other agreement pursuant to which such Company Stock Option was subject
immediately prior to the Effective Time, except as set forth in this Section 2.4
and except that (i) each such Company Stock Option shall be exercisable for that
number of shares of Parent Common Stock equal to the product of (x) the
aggregate number of shares of Company Common Stock for which such Company Stock
Option was exercisable and (y) the Exchange Ratio, rounded, in the case of any
Company Stock Options other than an "incentive stock option" (within the meaning
of Section 422 of the Code), up, and, in the case of any incentive stock option,
down, to the nearest whole share, if necessary, and (ii) the exercise price per
share of such Company Stock Option shall be equal to the aggregate exercise
price of such Company Stock Option immediately prior to the Effective Time
divided by the number of shares of Parent Common Stock for which such Company
Stock Option shall be exercisable as determined in accordance with the preceding
clause (i), rounded to the nearest cent, if necessary. Except as otherwise
agreed to by the Parent and the Company, all restrictions or limitations on
transfer and vesting with respect to Company Stock Options, to the extent that
such restrictions or limitations shall not have already lapsed, shall remain
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in full force and effect with respect to such options after giving effect to the
Merger and the assumption by Parent as set forth above.
(b) As soon as practicable following the Effective Time, the
Parent shall (i) deliver to the holders of Company Stock Options appropriate
notices setting forth such holders' rights pursuant to the Company Option Plans
after giving effect to the Merger and the provisions set forth above and (ii)
subject to the Parent's receipt of evidence of a holder's agreement, if
necessary, to the adjustment of his or her Company Stock Options as set forth in
this Section 2.4, enter into an assumption agreement with respect to each
Company Stock Option, which shall provide for the Parent's assumption of the
obligations of the Company under the Company Option Plans or other agreement
under which such Company Stock Option was granted, which agreement will be in a
form approved by the Board of Directors of the Company prior to the Effective
Time. Prior to the Effective Time, the Company shall make such amendments and
take such other actions, if any, to the Company Option Plans as shall be
necessary to permit the assumption and adjustment referred to in this Section
2.4.
(c) It is the intention of the parties that, to the extent
that any Company Stock Option constituted an incentive stock option immediately
prior to the Effective Time, such option continue to qualify as an incentive
stock option to the maximum extent permitted by Section 422 of the Code, and
that the assumption of the Company Stock Options provided by this Section 2.4
satisfy the conditions of Section 424(a) of the Code. The Parent shall comply
with the terms of the Company Option Plans and ensure, to the extent required
by, and subject to the provisions of, such Company Option Plans, that the
Company Stock Options that qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options after the
Effective Time.
(d) The Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Stock Options under the Company Options Plans
assumed in accordance with Section 2.4(a). The Parent shall file a registration
statement on Form S-8 as of or prior to the Effective Time with respect to the
shares of Parent Common Stock subject to Company Stock Options and shall use
commercially reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, the Parent shall administer the Company Option Plans assumed
pursuant to Section 2.4 (a) in a manner that complies with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to the extent the applicable Company Option Plans complied with such rule
prior to the Merger.
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SECTION 2.5 Adjustments to Prevent Dilution. In the event that prior to
the Effective Time there is a change in the number of shares of Company Common
Stock or shares of Parent Common Stock or securities convertible or exchangeable
into or exercisable for shares of Company Common Stock or shares of Parent
Common Stock issued and outstanding as a result of a reclassification, stock
split (including a reverse stock split), stock dividend or distribution or
similar transaction, the Exchange Ratio shall be equitably adjusted to eliminate
the effects of that event.
SECTION 2.6 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby, any cash in lieu of fractional shares
of Parent Common Stock and unpaid dividends and distributions on shares of
Parent Common Stock deliverable in respect thereof, pursuant to this Agreement.
SECTION 2.7 Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from any amounts otherwise
payable pursuant to this Agreement to any holder of a Certificate such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the Code, or any provisions of Law (as defined in Section 3.5). To
the extent that amounts are so withheld by the Surviving Corporation or Parent,
as the case may be, such withheld amounts shall be treated for purposes of this
Agreement as having been paid to the holder of a Certificate in respect to which
such deduction and withholding was made by the Surviving Corporation or Parent,
as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and Merger Sub
that:
SECTION 3.1 Organization and Qualifications; Subsidiaries. (a) The
Company and each Material Company Subsidiary (as defined below) is a
corporation, partnership or other legal entity duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except, with respect to each
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Material Company Subsidiary, where the failure to be so organized, existing or
in good standing or to have such power and authority, individually or in the
aggregate, would not or would not reasonably be expected to have a Company
Material Adverse Effect (as defined below). The Company and each Material
Company Subsidiary is duly qualified or licensed as a foreign corporation to
transact business, 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 for such
failures to be so qualified or licensed and in good standing that, individually
or in the aggregate, would not or would not reasonably be expected to have a
Company Material Adverse Effect. For purposes of this Agreement, a "Company
Material Adverse Effect" shall mean any change, effect, event or occurrence (i)
that is materially adverse to the business, assets, properties, financial or
other condition, or results of operations of the Company and the Company
Subsidiaries, taken as a whole, or (ii) that adversely affects the ability of
the Company to consummate the transactions contemplated by this Agreement in any
material respect, or that would prevent or delay in any material respect the
consummation of the Merger.
(b) Section 3.1(b) of the letter from the Company, dated the
date hereof, addressed to the Parent (the "Company Disclosure Letter") sets
forth all Subsidiaries of the Company, the jurisdictions under which they are
organized and the ownership or other interest therein of the Company and each
Subsidiary of the Company (each a "Company Subsidiary"). Each Company
Subsidiary, other than inactive Subsidiaries which are designated as such in
said Section 3.1(b), is referred to herein as a "Material Company Subsidiary."
No such inactive Company Subsidiary conducts any material operations or has any
material liabilities. For purposes of this Agreement, a "Subsidiary" means, with
respect to the Parent, the Company or any other person, any entity of which the
Parent, the Company or such other person, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
stock or other equity interests the holders of which are generally entitled to
more than 50% of the vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 3.2 Certificate of Incorporation and Bylaws. The Company has
heretofore made available to the Parent a complete and correct copy of the
certificate of incorporation and the bylaws or equivalent organizational
documents, each as amended to the date hereof, of the Company and each Material
Company Subsidiary. Such certificates of incorporation, bylaws and equivalent
organizational documents are in full force and effect. The Company is not in
violation of any provision of its certificate of incorporation or bylaws. No
Material Company Subsidiary is in violation of any provision of its certificate
of incorporation, bylaws or equivalent organizational documents, except for such
violations that, individually or in the aggregate, would not or would not
reasonably be expected to have a Company Material Adverse Effect.
10
SECTION 3.3 Capitalization. (a) The authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $.01 per share (the "Company Preferred
Stock"). As of March 18, 1999, (i)(A) 70,745,131 shares of Company Common Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable, and (B) no shares of Company Preferred Stock were issued or
outstanding; and (ii)(A) 11,100,006 shares of Company Common Stock were reserved
for issuance upon the exercise of outstanding stock options (the "Plan Options")
granted pursuant to the Company's 1998 Stock Option and Restricted Stock
Purchase Plan, the Company's 1996 Amended and Restated Stock Option and
Restricted Stock Purchase Plan, the Company's Incentive Equity Plan for Senior
Executives and the Salesforce Bonus Plan (the "Company Option Plans"), (B)
2,000,000 shares of Company Common Stock were reserved for issuance pursuant to
options available for grant under the Company Option Plans and (C) 4,940,000
shares of Company Common Stock were reserved for issuance upon exercise of
outstanding options listed in Section 3.3 of the Company Disclosure Letter (the
"Third Party Options" and, together with the Plan Options, the "Company Stock
Options"). Section 3.3(a) of the Company Disclosure Letter sets forth a complete
and correct list as of March 18, 1999 of the holders of all Company Stock
Options, the number of shares subject to each option and the exercise price
thereof. Except as set forth above, as of March 18, 1999, no shares of capital
stock or other voting securities of the Company were issued, reserved for
issuance or outstanding and, since such date, no shares of capital stock or
other voting securities or options in respect thereof have been issued except
upon the exercise of the Company Stock Options outstanding on March 18, 1999.
Except for (i) the Company Option Plans and agreements granting options
thereunder and (ii) the agreements granting the Third Party Options, there are
no options, warrants, calls, rights, subscriptions, convertible or exchangeable
securities or other rights, agreements, arrangements or commitments of any kind
or character to which the Company or any Company Subsidiary is a party
(collectively, "Options") relating to the issued or unissued capital stock of
the Company or any Company Subsidiary, or obligating the Company or any Company
Subsidiary to issue, transfer, grant or sell any shares of capital stock of, or
other equity interests in, or securities convertible into or exchangeable for
any capital stock or other equity interests in, the Company or any Company
Subsidiary. All shares of Company Common 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. There are no outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
shares of Company Common Stock or any other shares of capital stock of the
Company or any Company Subsidiary, or make any material investment (in the form
of a loan, capital contribution or otherwise) in any Company Subsidiary or any
other person, other than a wholly owned Company Subsidiary.
11
(b) Each outstanding share of capital stock of each Material
Company Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Company or another Company
Subsidiary is free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on voting rights,
charges and other encumbrances of any nature whatsoever (collectively, "Liens").
Except for the capital stock of the Company Subsidiaries and as otherwise
disclosed in Section 3.3(b) of the Company Disclosure Letter, as of the date
hereof, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, limited liability company,
partnership, joint venture or other entity.
SECTION 3.4 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and, subject to adoption of this Agreement
by the Required Company Vote (as defined in Section 3.13), to consummate the
transactions contemplated hereby (the "Transactions"). The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Transactions
(other than (i) the Required Company Vote (as defined in Section 3.13) and (ii)
the Merger Filing). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery thereof by the Parent and Merger Sub, constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 3.5 No Conflict; Required Filings and Consents; Certain
Contracts. (a) Except as set forth in Section 3.5(a) of the Company Disclosure
Letter, the execution and delivery of this Agreement by the Company do not, and
the performance of its obligations under this Agreement and the consummation of
the Transactions by the Company will not, (i) conflict with or violate the
certificate of incorporation or bylaws or equivalent organizational documents of
the Company or any Material Company Subsidiary, (ii) subject to the making of
the filings and obtaining the approvals identified in Section 3.5(b), conflict
with or violate any law, rule, regulation, order, judgment or decree
(collectively, "Laws") applicable to the Company or any Company Subsidiary or by
which any property or asset of the Company or any Company Subsidiary is bound or
affected, or (iii) conflict with or result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, result in the loss (by the Company, any such Company Subsidiary
or the Surviving Corporation) or modification in a manner adverse to the Company
and the Company Subsidiaries of any material right
12
or benefit under, or give to others any right of termination, amendment,
acceleration, repurchase or repayment, increased payments or cancellation of, or
result in the creation of a Lien or other encumbrance on any property or asset
of the Company or any Company Subsidiary pursuant to, any (A) Material
Distribution Agreement (as defined in Section 3.20 of the Company Disclosure
Letter) or (B) note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise, or other instrument or obligation, whether written
or oral including, without limitation, the Program Licenses (as defined in
Section 3.20) (collectively with the Distribution Agreements (as defined in
Section 3.20), "Contracts") or (C) Company Plans (as defined in Section 3.11),
to which the Company or any Company Subsidiary is a party or by which the
Company or any Company Subsidiary or any property or asset of the Company or any
Company Subsidiary is bound or affected, except, in the case of clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which, individually or in the aggregate, would not or would not
reasonably be expected to have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of its obligations under this Agreement and
the consummation of the Transactions by the Company will not, require any
consent, order, approval, authorization or permit of, or filing with or
notification to, any federal, state or local governmental or regulatory agency,
authority, commission or instrumentality, whether domestic or foreign (each a
"Governmental Entity"), except (i) for (A) applicable requirements of the
Exchange Act, the Securities Act of 1933, as amended (the "Securities Act"), and
state securities or "blue sky" laws ("Blue Sky Laws"), (B) the pre-merger
notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act"), and
(C) the Merger Filing, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
individually or in the aggregate, would not or would not reasonably be expected
to have a Company Material Adverse Effect.
(c) Except as set forth in Section 3.5(c) of the Company
Disclosure Letter, there are no Contracts to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary or any
asset of the Company or any Company Subsidiary is bound, which by its terms
limits in any material respect the ability of the Company or any Company
Subsidiary or, after consummation of the Transactions, would by its terms limit
in any material respect the ability of the Parent or any of its affiliates, to
engage in any business in any area or for any period.
SECTION 3.6 Compliance. Except as set forth in Section 3.6 of the
Company Disclosure Letter or in the Company SEC Reports, neither the Company nor
any Company Subsidiary is in conflict with, or in default or violation of (nor
to the Company's knowledge does there exist any condition which upon the passage
of time or the giving of notice or both would cause such a conflict with or a
default or
13
violation of), (i) any Law applicable to the Company or any Company Subsidiary
or by which any property or asset of the Company or any Company Subsidiary is
bound or affected, including Laws relating to the protection of natural
resources, the environment and public and employee health and safety or
pollution or the release of or exposure to hazardous materials, (ii) any
Material Distribution Agreement or (iii) any other Contract to which the Company
or any Company Subsidiary is a party or by which the Company or any Company
Subsidiary or any property or asset of the Company or any Company Subsidiary is
bound or affected, except for any such conflicts, defaults or violations that,
individually or in the aggregate, would not or would not reasonably be expected
to have a Company Material Adverse Effect. The Company and each Company
Subsidiary has in effect all federal, state and local governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("Permits") necessary for it to own, lease or operate its properties
and assets and to carry on its business as now conducted, and there has occurred
no default under any such Permit, except for the lack of Permits and for
defaults under Permits which lack or default individually or in the aggregate
would not or would not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.7 SEC Reports and Financial Statements; Undisclosed
Liabilities. (a) Each form, report, schedule, registration statement and
definitive proxy statement filed by the Company with the Securities and Exchange
Commission ("SEC") since August 31, 1996 and prior to the date hereof (as such
documents have been amended prior to the date hereof, the "Company SEC
Reports"), as of their respective dates, complied in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations thereunder. None of the Company SEC Reports, as of their
respective dates, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company has made available to the Parent true,
accurate and complete copies of all of the Company SEC Reports. The consolidated
financial statements of the Company and the Company Subsidiaries included in
such reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited interim financial statements, as permitted by Form 10-Q of
the SEC) and fairly present in all material respects (subject, in the case of
the unaudited interim financial statements, to normal, year-end audit
adjustments) the consolidated financial position of the Company and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Since August 31, 1998,
neither the Company nor any of the Company Subsidiaries has incurred any
material liabilities or obligations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become
due) of any nature, except liabilities, obligations or contingencies (a) which
are reflected on the
14
audited balance sheet of the Company and its Subsidiaries as at August 31, 1998
(including the notes thereto), or (b) which (i) were incurred in the ordinary
course of business after August 31, 1998 and consistent with past practices, or
(ii) are disclosed or reflected in the Company SEC Reports filed after August
31, 1998. Since August 31, 1996, the Company has timely filed with the SEC all
forms, reports and other documents required to be filed prior to the date
hereof, and no Company Subsidiary has filed, or been required to file, any form,
report or other document with the SEC, in each case, pursuant to the Securities
Act, the Exchange Act or the rules and regulations thereunder. From the date
hereof until the Effective Time, the Company will timely file all forms,
reports, schedules and registration statements required to be filed by the
Securities Act or Exchange Act and the rules and regulations thereunder ("Future
Company SEC Reports"). All such Future Company SEC Reports and the consolidated
financial statements included therein shall comply in all material respects with
the representations and warranties made by the Company in this Section 3.7 with
respect to the Company SEC Reports.
(b) (i) The accounts receivable reflected on the Company's
latest consolidated balance sheet furnished or otherwise made available to the
Parent arose from, and the accounts receivable existing on the Effective Time
will have arisen from, bona fide transactions and except for reserves reflected
on such balance sheet or taken in the future in the ordinary course consistent
with past practice, to the Company's knowledge, such accounts receivable
constitute or will constitute, as the case may be, only valid claims of the
Company and the Company Subsidiaries, not subject to valid claims of set-off or
other defenses or counterclaims, except to the extent that the failure to have
so arisen or the failure to be valid claims, individually or in the aggregate,
would have or would reasonably be expected to have a Company Material Adverse
Effect. The Company is not aware as of the date hereof of any events, facts or
other circumstances that would result in a material adverse change in the
aggregate amount of accounts receivable reflected on the Company's consolidated
balance sheet at November 30, 1998.
(ii) The producer advances reflected on the Company's
latest consolidated balance sheet furnished or otherwise made available to the
Parent arose from, and the producer advances existing at the Effective Time will
have arisen from, bona fide transactions consistent with the applicable
provisions of the Contracts pursuant to which such producer advances have been
or will be made, as the case may be, and, to the Company's knowledge, the
Company has and will have rights of recoupment in respect of such producer
advances in accordance with the applicable provisions of the Contracts pursuant
to which such producer advances have been or will be made, except in each case
to the extent that not more than 10% in aggregate principal amount of such
producer advances have not so arisen, do not so arise or are not subject to such
rights of recoupment.
SECTION 3.8 Absence of Certain Changes or Events. (a) Except as set
forth in Section 3.8 of the Company Disclosure Letter, as contemplated by this
15
Agreement or as disclosed in any Company SEC Report, since August 31, 1998, (i)
the Company and the Company Subsidiaries have conducted their respective
businesses only in the ordinary course, consistent with past practice and (ii)
there has not occurred or arisen any change, effect, event or occurrence that,
individually or in the aggregate, has had or would reasonably be expected to
have a Company Material Adverse Effect excluding any change, effect, event or
occurrence resulting primarily from (A) changes in general economic, financial,
regulatory, political or market conditions or (B) events or developments
generally affecting the industry in which the Company operates.
(b) Except as set forth in Section 3.8(b) of the Company
Disclosure Letter or as permitted pursuant to Section 5.1, since August 31,
1998, there has not been:
(i) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
the Company, or any repurchase, redemption or other acquisition by the Company
or any Company Subsidiary of any Company securities;
(ii) (A) any incurrence or assumption by the Company
or any Company Subsidiary of any indebtedness for borrowed money or (B) any
guarantee, endorsement or other incurrence or assumption of material liability
(whether directly, contingently or otherwise) by the Company or any Company
Subsidiary for the obligations of any other person (other than any wholly owned
Company Subsidiary), other than in the ordinary course of business consistent
with past practice;
(iii) any creation or assumption by the Company or
any Company Subsidiary of any Lien on any material asset of the Company or any
Company Subsidiary, other than in the ordinary course of business, consistent
with past practice;
(iv) any making of any loan, advance or capital
contribution to or investment in any person by the Company or any Company
Subsidiary, other than in the ordinary course of business, consistent with past
practice and in any event in excess of $100,000;
(v) (A) any contract or agreement entered into by the
Company or any Company Subsidiary on or prior to the date hereof relating to any
material acquisition or disposition of any assets or business, (B) any
modification, amendment, assignment or termination of or relinquishment by the
Company or any Company Subsidiary of any rights under any Material Distribution
Agreement or (C) any modification, amendment, assignment or termination of or
relinquishment by the Company or any Company Subsidiary of any rights under any
other Contract (including any insurance policy naming it as a beneficiary or a
loss payable payee)
16
that does or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect other than in the case of (A) and
(C), transactions, commitments, contracts or agreements in the ordinary course
of business consistent with past practice or those contemplated by this
Agreement;
(vi) any material change in any method of accounting
or accounting principles or practice by the Company or any Company Subsidiary,
except for any such change required by reason of a change in GAAP; or
(vii) any (A) grant of any severance or termination
pay to any director, officer or employee of the Company or any Company
Subsidiary; (B) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any Company Subsidiary; (C)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements; or (D) increase in compensation, bonus or
other benefits payable to directors, officers or employees of the Company or any
Company Subsidiary who are not parties to employment agreements with the Company
or any Company Subsidiary in effect prior to such date, other than, in the case
of clauses (A) through (D), with respect to any directors, officers and
employees that are not parties to employment agreements with the Company or any
Company Subsidiary, in the ordinary course of business consistent with past
practices or, in the case of clauses (A) through (D) with respect to any
directors, officers or employees who are parties to employment agreements, in
accordance with their respective employment agreements.
SECTION 3.9 Litigation. Except as disclosed in Section 3.9 of the
Company Disclosure Letter or in the Company SEC Reports, there are no claims,
suits, actions or proceedings pending or, to the Company's knowledge, threatened
or contemplated, nor are there any investigations or reviews by any Governmental
Entity pending or, to the Company's knowledge, threatened or contemplated,
against, relating to or affecting the Company or any of the Company
Subsidiaries, which, individually or in the aggregate, would have or would
reasonably be expected to have a Company Material Adverse Effect, nor is there
any judgment, decree, order, injunction, writ or rule of any court or
Governmental Entity outstanding against the Company or any Company Subsidiary
which has or would reasonably be expected to have any Company Material Adverse
Effect.
SECTION 3.10 Registration Statement and Statement/Prospectus. The
information supplied or to be supplied by the Company for inclusion in (i) the
Registration Statement (as defined in Section 6.7) will not, either at the time
the Registration Statement is filed with the SEC, at the time any amendment
thereof or supplement thereto is filed with the SEC, at the time it becomes
effective under the Securities Act or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to
17
make the statements therein not misleading and (ii) the Proxy
Statement/Prospectus (as defined in Section 6.7), including any amendments and
supplements thereto, will not, either at the date mailed to the Company's
stockholders or at the time of the Company Meeting (as defined in Section 6.6),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The Proxy Statement/Prospectus, as to information supplied by the Company, any
Company Subsidiary or their respective Representatives, will comply in all
material respects with all applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder, and the
Registration Statement will comply in all material respects with the provisions
of the Securities Act and the rules and regulations promulgated thereunder.
SECTION 3.11 Employee Benefit Plans. (a) Section 3.11 of the Company
Disclosure Letter sets forth a list of each material pension, retirement,
savings, disability, dental, health, life, death benefit, group insurance,
profit-sharing, deferred compensation, stock option, bonus, incentive, severance
pay or other employee benefit plan, trust, arrangement, contract, commitment,
agreement or policy (collectively, "Benefit Plans") sponsored or maintained by
the Company or its Subsidiaries, in which present or former employees of the
Company or any Subsidiary participate (collectively, the "Company Plans").
Correct and complete copies of the following documents, which are correct and
complete in all material respects, with respect to each of the Company Plans
(other than a multiemployer plan (as defined below)), have been made available
to Parent, to the extent applicable: (i) any plans, all material amendments
thereto and related trust documents, and amendments thereto; (ii) the most
recent Forms 5500 and all schedules thereto and the most recent actuarial
report, if any; (iii) the most recent IRS determination letter; (iv) summary
plan descriptions; (v) material written communications to employees relating to
the Company Plans; and (vi) written descriptions of all material non-written
agreements relating to the Company Plans.
(b) No Company Plan is subject to Title IV of ERISA (as
defined below). Except as set forth in Section 3.11 of the Company Disclosure
Letter and except as, individually or in the aggregate, would not or would not
reasonably be expected to have a Company Material Adverse Effect: (A) the
Company Plans have been administered and are in compliance with the terms of
such plan and all applicable Laws, (B) no "reportable event" (as such term is
used in Section 4043 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (other than those events for which the 30 day notice has been
waived pursuant to the regulations), "prohibited transaction" (as such term is
used in Section 406 of ERISA or Section 4975 of the Code) or "accumulated
funding deficiency" (as such term is used in Section 412 or 4971 of the Code)
has heretofore occurred with respect to any Company Plan and (C) each Company
Plan intended to qualify under Section 401(a) of the Code has received a
favorable determination from the IRS regarding its
18
qualified status and no notice has been received from the IRS with respect to
the revocation of such qualification. None of the Company Plans provides for
post- employment life or health insurance, benefits or coverage for any
participant or any beneficiary of a participant, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and at
the expense of the participant or the participant's beneficiary.
(c) There is no litigation or administrative or other
proceeding involving any Company Plan nor has the Company or any Company
Subsidiary received notice that any such proceeding is threatened, in each case
that would have or would reasonably be expected to have a Company Material
Adverse Effect. Neither the Company nor any Company Subsidiary has incurred,
nor, to the Company's knowledge, is reasonably likely to incur any withdrawal
liability with respect to any "multiemployer plan" (within the meaning of
section 3(37) of ERISA) which remains unsatisfied in an amount which would have
a Company Material Adverse Effect. The termination of, or withdrawal from, any
Company Plan or multiemployer plan to which the Company or any Company
Subsidiaries contributes, on or prior to the Closing Date, will not subject the
Company or any Company Subsidiary to any liability under Title IV of ERISA that
would have a Company Material Adverse Effect.
SECTION 3.12 Board Approval. The Board of Directors of the Company by
resolutions duly adopted by a unanimous vote of the entire Board of Directors at
a meeting duly called and held, has approved and declared advisable this
Agreement and the Stockholders Agreement and, subject to Section 6.6,
recommended that the stockholders of the Company adopt this Agreement.
SECTION 3.13 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote (the
"Required Company Vote") is the only vote or approval of the holders of any
class or series of the Company's capital stock necessary to adopt this Agreement
(assuming that neither Parent nor any of its affiliates or associates (as
defined in Section 203 of the DGCL) are "interested stockholders" of the Company
under Section 203 of the DGCL immediately before the execution and delivery of
this Agreement and the Stockholders Agreement).
SECTION 3.14 Opinion of Financial Advisor. The Company's Board of
Directors has received the opinion of Xxxxx & Company Incorporated, dated March
31, 1999, to the effect that, as of such date, the Merger Consideration to be
received by the stockholders of the Company is fair, from a financial point of
view, to such stockholders. The Company has delivered to the Parent true and
correct copies of its engagement agreement with Xxxxx & Company Incorporated.
SECTION 3.15 Brokers. Except as set forth in Section 3.15 of the
Company Disclosure Letter, no broker, finder or investment banker (other than
19
Xxxxx & Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transaction, based upon arrangements made by
or on behalf of the Company.
SECTION 3.16 Taxes. (a) Except as set forth in Section 3.16(a) of the
Company Disclosure Letter:
(i) The Company and each Company Subsidiary have
timely filed (or have had timely filed on their behalf) or, with respect to Tax
Returns not yet due, will file or cause to be timely filed, all material Tax
Returns required by applicable Law to be filed by any of them prior to or as of
the Effective Time. All such Tax Returns and amendments thereto are, or with
respect to Tax Returns not yet due, will be true, complete and correct in all
material respects.
(ii) The Company and each Company Subsidiary have
paid (or have had paid on their behalf), or have established (or have had
established on their behalf and for their sole benefit and recourse), or where
payment is not yet due, will establish or cause to be established on or before
the Effective Time, an adequate accrual for the payment of, all material Taxes
due, with respect to any period ending prior to or as of the Effective Time.
(iii) The Federal income Tax Returns of the Company
for periods ending on or prior to August 31, 1995 have been audited and all
assessments arising therefrom have been fully satisfied. Section 3.16(a)(iii) of
the Company Disclosure Letter sets forth the taxable years that are currently
under Audit, and the Company has not been notified that any other Audit by a
Taxing Authority will commence with respect to any material Taxes due from the
Company or any Company Subsidiary. There are no outstanding waivers extending
the statutory period of limitations relating to the payment of material Taxes
due from the Company or any Company Subsidiary for any taxable period ending
prior to the Effective Time which are expected to be outstanding as of the
Effective Time.
(iv) No deficiency or adjustment for any material
Taxes has been proposed, asserted or assessed against the Company or any Company
Subsidiary that has not been resolved or paid or for which an adequate accrual
has not been established in accordance with generally accepted accounting
principles. There are no material Liens for Taxes upon the assets of the Company
or any Company Subsidiary, except Liens for current Taxes not yet due.
(v) Section 3.16(a)(v) of the Company Disclosure
Letter sets forth all Tax sharing agreements, Tax indemnity agreements and
similar agreements to which the Company or any Company Subsidiary is a party.
20
(vi) No "consent" within the meaning of Section
341(f) of the Code has been filed with respect to the Company or any Company
Subsidiary.
(vii) Neither the Company nor any Company Subsidiary
has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of this Agreement or (ii) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(viii) Neither the Company nor any Company Subsidiary
is a party to any contract, agreement or other arrangement currently in effect
(or which will be in effect prior to the Effective Time) which provides (or will
provide) for the payment of any amount which would not be deductible by reason
of Section 280G or Section 162(m) of the Code, solely taking into account the
Transactions contemplated by this Agreement.
(b) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Audit" shall mean any audit, assessment of
Taxes, other examination by any Tax Authority, proceeding or appeal of such
proceeding relating to Taxes.
(ii) "Taxes" shall mean all Federal, state, local and
foreign taxes, and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax, or
penalties applicable thereto.
(iii) "Tax Authority" shall mean the Internal Revenue
Service and any other domestic or foreign governmental authority responsible for
the administration of any Taxes.
(iv) "Tax Returns" shall mean all Federal, state,
local and foreign tax returns, declarations, statements, reports, schedules,
forms and information returns and any amended tax return relating to Taxes.
SECTION 3.17 Real Property. Neither the Company nor any Company
Subsidiary owns any fee interest in real estate.
SECTION 3.18 Labor Matters. (a) Section 3.18 of the Company Disclosure
Letter sets forth a list of all employment agreements currently in effect
providing for annual base salary in excess of $200,000 and any labor or
collective
21
bargaining agreements to which the Company or any Company Subsidiary is a party.
The Company has heretofore made available to Parent true and complete copies of
(i) the employment agreements listed on Section 3.18 of the Company Disclosure
Letter and (ii) the labor or collective bargaining agreements listed on Section
3.18 of the Company Disclosure Letter, together with all amendments,
modifications, supplements and side letters affecting the duties, rights and
obligations of any party thereunder.
(b) Neither the Company nor any Company Subsidiaries are the
subject of any suit, action or proceeding which is pending or, to the knowledge
of the Company, threatened, asserting that the Company or any Company
Subsidiaries have committed an unfair labor practice (within the meaning of the
National Labor Relations Act or applicable state statutes) or seeking to compel
the Company or any Company Subsidiaries to bargain with any labor organization
as to wages and conditions of employment, in any such case, that is reasonably
expected to result in a material liability of the Company and the Company
Subsidiaries. No strike or other labor dispute involving the Company or any
Company Subsidiaries is pending or, to the knowledge of the Company, threatened,
and, to the knowledge of the Company, there is no activity involving any
employees of the Company or any Company Subsidiaries seeking to certify a
collective bargaining unit or engaging in any other organizational activity,
except for any such dispute or activity which would not have or would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.19 State Takeover Statutes. The Company Board has approved
the terms of this Agreement and the Stockholders Agreement and the consummation
of the Merger and the other Transactions contemplated by this Agreement and the
Stockholders Agreement, and such approval is sufficient to render inapplicable
to the Merger and the other transactions contemplated by this Agreement and the
Stockholders Agreement the restrictions on "business combinations" (as defined
in Section 203 of the DGCL) set forth in Section 203 of the DGCL.
SECTION 3.20 Material Contracts. (a) The Company has heretofore made
available to Parent correct and complete copies in all material respects of all
Contracts (and all amendments, modifications and supplements thereto and all
side letters to which the Company or any Company Subsidiary is a party affecting
the obligations of any party thereunder) to which the Company or any Company
Subsidiary is a party or by which any of its properties or assets are bound that
are material to the business, properties or assets of the Company and its
subsidiaries taken as a whole, including, without limitation, all: (i)
agreements relating to the development, production and distribution of
television programming ("Distribution Agreements") and all Program Licenses (as
defined below); (ii) partnership or joint venture agreements; (iii) agreements
for the acquisition, sale or lease of material properties or assets of the
Company (by merger, purchase or sale of assets or stock or otherwise) entered
into since August 31, 1996; (iv) contracts or agreements with any Governmental
Entity other than those entered into in the ordinary course of business
22
consistent with past practice; (v) loan or credit agreements, mortgages,
indentures or other agreements or instruments evidencing indebtedness of the
Company or any Company Subsidiary for borrowed money or any such agreement
pursuant to which indebtedness for borrowed money may be incurred; (vi)
agreements that purport to limit, curtail or restrict in any material respect
the ability of the Company or any Company Subsidiaries to compete in any
geographic area or line of business other than those entered into in the
ordinary course of business consistent with past practice under Program Licenses
or Distribution Agreements; (vii) contracts or agreements that would be required
to be filed as an exhibit to a Form 10-K filed by the Company with the SEC on
the date hereof; and (viii) commitments and agreements to enter into any of the
foregoing (collectively, the "Material Contracts").
(b) Each of the Material Contracts constitutes the valid and
legally binding obligation of the Company or Company Subsidiaries, enforceable
in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and is in full force and
effect, except to the extent the failure to be so valid, binding or enforceable,
individually or in the aggregate, would not and would not reasonably be expected
to have a Company Material Adverse Effect. There is no default under any
Material Contract either by the Company or, to the Company's knowledge, by any
other party thereto, and, to the Company's knowledge, no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder by the Company or, to the Company's knowledge, any other
party, except any such default or defaults that individually or in the aggregate
would not and would not reasonably be expected to have a Company Material
Adverse Effect. Section 3.20(b) of the Company Disclosure Letter sets forth a
list of each of the Material Distribution Agreements and the Distribution
Agreement pursuant to which the Company acquired "Hollywood Squares" from Orion
Pictures Corporation (and its successor-in-interest to such agreement,
Metro-Xxxxxxx-Xxxxx, Inc.), together with a list of each modification,
supplement or other amendment to any such Distribution Agreement that materially
affects the obligations of any party to any such Distribution Agreement. As of
the date hereof, the Company has received no written or, to the knowledge of
Company senior management listed in Section 3.20(b) of the Company Disclosure
Letter, oral notice from any party to a Material Distribution Agreement that,
solely as a result of or in connection with the execution of this Agreement or
the consummation of the Merger, (i) such party intends to terminate such
Material Distribution Agreement, (ii) such party has a right to terminate such
Material Distribution Agreement or (iii) such party's consent is required.
(c) Attached to Section 3.20 of the Company Disclosure Letter
is a schedule dated March 22, 1999 (the "Program License Schedule") that has
been prepared and maintained by the Company in the ordinary course of business
and that lists certain information regarding Program Licenses (as defined below)
pursuant
23
to which programs distributed by the Company pursuant to the Material
Distribution Agreements or the television series "Hollywood Squares," "Inside
Edition" and "The Xxxxxxxx Show" are licensed to broadcasters in the United
States. For purposes of this Agreement, "Program License" shall mean any
executory agreement pursuant to which the Company grants to any broadcaster a
license, right or privilege to broadcast via over-the-air television any program
distributed by the Company. As of March 22, 1999, (x) the Company is not aware
of any material inaccuracies on the Program License Schedule and (y) there are
no inaccuracies in the Program License Schedule that, individually or in the
aggregate, would have or would reasonably be expected to have a Company Material
Adverse Effect. As of the date hereof, the number of units of barter advertising
time that the Company retains under the Program Licenses for any broadcast
season of any television series are not less than the number of units of such
time that the Company retains under the Program Licenses for the preceding
broadcast season of that television series.
(d) Neither the Company nor any Company Subsidiary is in
breach under one or more Program Licenses which breaches are reasonably likely
to result in a loss of revenues in excess of 10% of all revenues generated by
all Program Licenses.
(e) The Company has furnished to the Parent an accurate
description of all claims or other disputes that remain unresolved arising from
any Program License that are known to the Company on the date hereof except for
disputes involving amounts of less than $5,000,000 on an individual basis with
any one party or $15,000,000 on an aggregate basis.
SECTION 3.21 Insurance. Section 3.21 of the Company Disclosure Letter
sets forth a list of insurance policies maintained by the Company or any Company
Subsidiary, which policies have been issued by insurers, which, to the Company's
knowledge, are reputable and financially sound and the Company has heretofore
made available to Parent complete and correct copies in all material respects of
such policies.
SECTION 3.22 Intellectual Property. (a) The Company and Company
Subsidiaries own or possess adequate licenses or other valid rights to use (in
each case, free and clear of any Liens) all Intellectual Property used or held
for use in connection with the business of the Company and the Company
Subsidiaries as currently conducted or as contemplated to be conducted and that
are material to the business and operation of the Company and the Company
Subsidiaries as a whole.
(b) The use of any Intellectual Property by the Company and
Company Subsidiaries does not infringe on or otherwise violate the rights of any
person and is in accordance with any applicable license pursuant to which the
Company or any Company Subsidiary acquired the right to use any Intellectual
Property, except for any such infringement or violation that, individually or in
the
24
aggregate, would not or would not reasonably be expected to have a Company
Material Adverse Effect.
(c) No person is challenging, infringing on or otherwise
violating any right of the Company or any Company Subsidiary with respect to any
Intellectual Property owned by and/or licensed to the Company or Company
Subsidiaries, except for such challenges, infringements or violations that,
individually or in the aggregate, would not or would not reasonably be expected
to have a Company Material Adverse Effect.
For purposes of this Agreement, "Intellectual Property" means
(i) all trademarks, trademark rights, trade names, trade name rights, trade
dress and other indications of origin, corporate names, brand names, logos,
certification rights, service marks, applications for trademarks and for service
marks, know-how and other proprietary rights and information, the goodwill
associated with the foregoing and registration in any jurisdiction of, and
applications in any jurisdictions to register, the foregoing, including any
extension, modification or renewal of any such registra tion or application;
(ii) all inventions, discoveries and ideas (whether patentable or unpatentable
and whether or not reduced to practice), in any jurisdiction, all improvements
thereto, and all patents, patent rights, applications for patents (including,
without limitation, divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; (iii) non-public information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; (iv) writings and other works, whether copyrightable or
not, in any jurisdiction, and all registrations or applications for registration
of copyrights in any jurisdiction, and any renewals or extensions thereof; (v)
all mask works and all applications, registrations and renewals in connection
therewith, in any jurisdiction; (vi) all computer software (including data and
related documentation); (vii) any similar intellectual property or proprietary
rights; and (viii) all copies and tangible documentation thereof and any claims
or causes of action arising out of or relating to any infringement or
misappropriation of any of the foregoing.
(d) The Company has developed a plan (the "Company Y2K Plan")
intended to ensure that all computer hardware and software used in and material
to the business of the Company and the Company Subsidiaries is designed to be
Year 2000 Compliant. The Company Y2K Plan includes reasonable steps to determine
whether the failure of any suppliers or customers with which the Company or any
Company Subsidiary has a material relationship to be Year 2000 Compliant would
have or would reasonably be expected to have a Company Material Adverse Effect
and assuming the consummation of the Company Y2K Plan, the occurrence of
calendar year 2000 will not cause or will not reasonably be expected to have a
Company Material Adverse Effect. For purposes of this Agreement, "Date Data"
means any data of any kind that includes date information or which is otherwise
derived from, dependent on or related to date information; "Date-Sensitive
System"
25
means any software, microcode or hardware system or component, including any
electronic or electronically controlled system or component that processes any
Date Data and that is installed, in development or on order, for internal or
external use, or the provision or operation of which provides a benefit to
customers, vendors, suppliers or any other party; and "Year 2000 Compliant"
means (i) with respect to Date Data, that such data is in proper format and
accurate for all dates in the twentieth and twenty-first centuries, and (ii)
with respect to Date-Sensitive Systems, that each such system accurately
processes all Date Data, including for the twentieth and twenty-first centuries,
without loss of any functionality or performance, including, without limitation,
calculating, comparing, sequencing, storing and displaying such Date Data
(including all leap year considerations), when used as a stand-alone system or
in combination with other software or hardware. The matters set forth in this
subsection (d) are subject to disclosures relating to Year 2000 matters in the
Company SEC Reports.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
The Parent and Merger Sub hereby represent and warrant to the Company
that:
SECTION 4.1 Organization and Qualifications; Subsidiaries. (a) Each of
the Parent and each Material Parent Subsidiary (as defined below) is a
corporation, partnership or other legal entity duly incorporated or organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure for any Material Parent Subsidiary to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals, individually or in the aggregate, would not or would not
reasonably be expected to have a Parent Material Adverse Effect (as defined
below). The Parent and each Material Parent Subsidiary is duly qualified or
licensed as a foreign corporation to transact business, 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 for such failures to be so qualified or licensed and
in good standing that, individually or in the aggregate, would not or would not
reasonably be expected to have a Parent Material Adverse Effect. For purposes of
this Agreement, a "Parent Material Adverse Effect" shall mean any change,
effect, event or occurrence (i) that is materially adverse to the business,
assets, financial or other condition, or results of operations of the Parent and
the Parent's Subsidiaries, taken as a whole, or (ii) that adversely affects the
ability of the Parent to consummate
26
the transactions contemplated by this Agreement in any material respect, or that
would prevent or delay in any material respect consummation of the Merger.
(b) Merger Sub and each other Subsidiary of the Parent (each,
a "Parent Subsidiary") that (i) constitutes a Significant Subsidiary of the
Parent within the meaning of Rule 1-02 of Regulation S-X of the SEC, or (ii) is
otherwise material to the business and operations of the Parent and the Parent
Subsidiaries, taken as a whole, is referred to herein as a "Material Parent
Subsidiary."
SECTION 4.2 Certificate of Incorporation and Bylaws. The Parent has
heretofore made available to the Company a complete and correct copy of the
certificate of incorporation and the bylaws or equivalent organizational
documents, each as amended to the date hereof, of the Parent and each Material
Parent Subsidiary. Such certificates of incorporation, bylaws and equivalent
organizational documents are in full force and effect. The Parent is not in
violation of any provision of its certificate of incorporation or bylaws. No
Material Parent Subsidiary, is in violation of any provision of its certificate
of incorporation, bylaws or equivalent organizational documents, except for such
violations as, individually or in the aggregate, would not or would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.3 Capitalization. (a) The authorized capital stock of the
Parent consists of 1,100,000,000 shares of Parent Common Stock, and 25,000,000
shares of preferred stock, par value of $1.00 per share (the "Parent Preferred
Stock"). As of March 26, 1999, (i)(A) 695,524,666 shares of Parent Common Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable, (B) 695,524,666 common stock purchase rights issued pursuant to a
Rights Agreement dated as of December 28, 1995, between Parent and First Chicago
Trust Company of New York, as Rights Agent ("Rights Agreement") were issued and
outstanding and (C) no shares of Preferred Stock were issued or outstanding; and
(ii) (A) 57,105,516 shares of Parent Common Stock were reserved for issuance
with respect to stock option plans set forth in the Parent SEC Reports (as
defined in Section 4.7) (collectively, the "Parent Stock Option Plans") and
other stock-based plans of Parent and (B) 5,304,657 shares were reserved for
issuance upon exercise of options available for grant under the Parent Stock
Option Plans. Except as set forth above, except upon the exercise of the Parent
stock options outstanding on March 26, 1999 and except the 5,000,000 shares of
Parent Preferred Stock denominated as Series A Participating Preferred Stock
(subject to increase and adjustment as set forth in the Rights Agreement and the
Certificate of Designation attached as an Exhibit thereto), and the shares
reserved with respect to the Parent's Dividend Reinvestment Plan, as of the date
hereof, no shares of capital stock or other voting securities of the Parent were
issued, reserved for issuance or outstanding. Except as set forth in this
Section 4.3 or in Section 4.3 of the Disclosure Letter previously delivered by
the Parent to the Company (the "Parent Disclosure Letter"), as of the date
hereof, there are no options relating to the issued or unissued capital stock of
the Parent or any
27
Parent Subsidiary (other than Infinity Broadcasting Corporation), or obligating
the Parent, or any Parent Subsidiary (other than Infinity Broadcasting
Corporation) to issue, transfer, grant or sell any shares of capital stock of,
or other equity interests in, or securities convertible into or exchangeable for
any capital stock or other equity interests in, the Parent or any Parent
Subsidiary (other than Infinity Broadcasting Corporation). All shares of Parent
Common 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 Section 4.3 of the Parent Disclosure Letter, as of the date hereof,
there are no outstanding contractual obligations of the Parent or any Parent
Subsidiary other than Infinity Broadcasting Corporation to repurchase, redeem or
otherwise acquire any shares of Parent Common Stock or Parent Preferred Stock or
any other shares of capital stock of the Parent or any Parent Subsidiary other
than Infinity Broadcasting Corporation, or make any material investment (in the
form of a loan, capital contribution or otherwise) in, any Parent Subsidiary
(other than a wholly-owned Parent Subsidiary) or any other person.
(b) Each outstanding share of capital stock of each Material
Parent Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Parent or another Parent
Subsidiary is free and clear of all Liens.
(c) Each share of Parent Common Stock included in the Merger
Consideration will be, when issued, in accordance with the terms of this
Agreement, duly authorized, validly issued, fully paid and nonassessable.
SECTION 4.4 Authority Relative to This Agreement. Each of the Parent
and Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by the Parent and
Merger Sub and the consummation by the Parent and Merger Sub of the Transactions
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the Transactions (other
than the Merger Filing). This Agreement has been duly and validly executed and
delivered by the Parent and Merger Sub and, assuming the due authorization,
execution and delivery thereof by the Company, constitutes the legal, valid and
binding obligation of the Parent and Merger Sub, enforceable against the Parent
and Merger Sub in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 4.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Parent and Merger Sub do not,
and
28
the performance of their respective obligations under this Agreement and the
consummation of the Transactions by the Parent and Merger Sub will not, (i)
conflict with or violate the articles of incorporation or bylaws or equivalent
organizational documents of the Parent or any Material Parent Subsidiary, (ii)
subject to making the filings and obtaining the approvals identified in Section
4.5(b), conflict with or violate any Law applicable to the Parent or any Parent
Subsidiary or by which any property or asset of the Parent or any Parent
Subsidiary is bound or affected, or (iii) subject to making the filings and
obtaining the approvals identified in Section 4.5(b), conflict with or result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss or modification
in a manner adverse to the Parent and the Parent Subsidiaries of a material
right or benefit under, or give to others any right of termination, amendment,
acceleration, repurchase or repayment, increased payments or cancellation of, or
result in the creation of a Lien or other encumbrance on any property or asset
of the Parent or any Parent Subsidiary pursuant to, any Contract to which the
Parent or any Parent Subsidiary is a party or by which the Parent or any Parent
Subsidiary or any property or asset of the Parent or any Parent Subsidiary is
bound, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which, individually or in
the aggregate, would not or would not reasonably be expected to have a Parent
Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Parent
and Merger Sub do not, and the performance of their respective obligations under
this Agreement and the consummation of the Transactions by the Parent and Merger
Sub will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (i) for (A)
applicable requirements, if any, of the Exchange Act, the Securities Act or the
Blue Sky laws, (B) the premerger notification requirements of the HSR Act, and
(C) the Merger Filing, and (ii) where the 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 delay in any material
respect the consummation of the Merger, or otherwise prevent the Parent or
Merger Sub from performing its respective obligations under this Agreement in
any material respect, and, individually or in the aggregate, would not or would
not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.6 Compliance. Except as set forth in Section 4.6 of the
Parent Disclosure Letter or the Parent SEC Reports, neither the Parent nor any
Parent Subsidiary is in conflict with, or in default or violation of (nor to the
Parent's knowledge does there exist any condition which upon the passage of time
or the giving of notice would cause such a conflict with or default or violation
of) (i) any Law applicable to the Parent or any Parent Subsidiary or by which
any property or asset of the Parent or any Parent Subsidiary is bound or
affected, including Laws relating to the protection of natural resources, the
environment and public and employee health and safety or pollution for the
release of or exposure to hazardous
29
materials, or (ii) any Contract to which the Parent or any Parent Subsidiary is
a party or by which the Parent or any Parent Subsidiary or any property or asset
of the Parent or any Parent Subsidiary is bound, except for any such conflicts,
defaults or violations that would not, individually or in the aggregate, have a
Parent Material Adverse Effect. Each of the Parent and each Material Parent
Subsidiary has in effect all federal, state and local governmental Permits
necessary for it to own, lease or operate its properties and assets and to carry
on its business as now conducted, and there has occurred no default under any
such Permit, except for the lack of Permits and for defaults under Permits which
lack or default individually or in the aggregate would not or would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.7 SEC Reports and Financial Statements; Undisclosed
Liabilities. Each form, report, schedule, registration statement and definitive
proxy statement filed by the Parent with the SEC since December 31, 1996 and
prior to the date hereof (as such documents have been amended prior to the date
hereof, the "Parent SEC Reports"), as of their respective dates, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations thereunder. None of the Parent SEC
Reports, as of their respective dates, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Parent has made available to the
Company true, accurate and complete copies of all of the Parent SEC Reports. The
consolidated financial statements of the Parent and the Parent Subsidiaries
included in such reports comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited interim financial statements, as permitted by Form 10-Q of
the SEC) and fairly present in all material respects (subject, in the case of
the unaudited interim financial statements, to normal, year-end audit
adjustments) the consolidated financial position of the Parent and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Since December 31, 1998,
neither the Parent nor any of its Subsidiaries has incurred any material
liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature, except material liabilities, obligations or contingencies (a) which are
reflected on the audited balance sheet of the Parent and its Subsidiaries as at
December 31, 1998 (including the notes thereto), or (b) which (i) were incurred
in the ordinary course of business after December 31, 1998 and consistent with
past practices, or (ii) are disclosed in the Parent SEC Reports filed after
December 31, 1998. Since December 31, 1996, the Parent has timely filed with the
SEC all forms, reports and other documents required to be filed by the Parent
prior to the date hereof, and no Parent Subsidiary has filed, or been required
to file, any form, report or other document with the SEC, in each
30
case, pursuant to the Securities Act, the Exchange Act or the rules and
regulations thereunder. Prior to the Effective Time, the Parent will timely file
all forms, reports, schedules and registration statements required to be filed
by the Securities Act or Exchange Act and the rules and regulations thereunder
("Future Parent SEC Reports"). All such Future Parent SEC Reports and the
consolidated financial statements included therein shall comply in all material
respects with the representations and warranties made by the Parent in this
Section 4.7 with respect to the Parent SEC Reports.
SECTION 4.8 Absence of Certain Changes or Events. Except as set forth
in Section 4.8 of the Parent Disclosure Letter, as contemplated by this
Agreement, or as disclosed in any Parent SEC Report, since December 31, 1998,
(i) the Parent and the Parent Subsidiaries have conducted their respective
businesses only in the ordinary course, consistent with past practice, and (ii)
there has not occurred or arisen any change, effect, event or occurrence that,
individually or in the aggregate, has had or would reasonably be expected to
have a Parent Material Adverse Effect excluding any change, effect, event or
occurrence resulting primarily from (A) changes in general economic, financial,
regulatory, political or market conditions or (B) events or developments
generally affecting the industry in which the Parent operates.
SECTION 4.9 Litigation. Except as disclosed in Section 4.9 of the
Parent Disclosure Letter or in the Parent SEC Reports, there are no claims,
suits, actions or proceedings pending or, to the Parent's knowledge, threatened
or contemplated, nor are there any investigations or reviews by any Governmental
Entity pending or, to the Parent's knowledge, threatened or contemplated,
against, relating to or affecting the Parent or any of the Parent Subsidiaries,
which, individually or in the aggregate, would have or would reasonably be
expected to have a Parent Material Adverse Effect, nor is there any judgment,
decree, order, injunction, writ or rule of any Governmental Entity outstanding
against the Parent or any Parent Subsidiary which has or would reasonably be
expected to have any such Parent Material Adverse Effect.
SECTION 4.10 Registration Statement and Proxy Statement/ Prospectus.
The information supplied or to be supplied by the Parent or any Parent
Subsidiary for inclusion in (i) the Registration Statement will not, either at
the time the Registration Statement is filed with the SEC, at the time any
amendment thereof or supplement thereto is filed with the SEC, at the time it
becomes effective under the Securities Act or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (ii) the Proxy Statement/Prospectus, including any amendments and
supplements thereto, will not, either at the date mailed to the Company
stockholders, or at the time of the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
31
circumstances under which they were made, not misleading. The Proxy Statement/
Prospectus, as to information supplied by the Parent or any Parent Subsidiary,
will comply as to form in all material respects with all applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder, and the Registration Statement will comply in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated thereunder.
SECTION 4.11 Board Approval. Each of the Board of Directors of the
Parent and the Merger Sub, by resolutions duly adopted at a meeting duly called
and held or by unanimous written consent in lieu of a meeting, has approved this
Agreement, the Merger and the other transactions contemplated hereby.
SECTION 4.12 Vote Required. No vote of the holders of any class or
series of the Parent's capital stock is necessary to adopt this Agreement and
approve the transactions contemplated hereby.
SECTION 4.13 Brokers. No broker, finder or investment banker (other
than Chase Securities Inc.) is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Parent.
SECTION 4.14 No Arrangements Triggering Section 203 of the DGCL.
Assuming the accuracy of the Company's representation and warranty set forth in
Section 3.12, neither the Parent nor, to the best of Parent's knowledge, any of
its affiliates or associates (each as defined in Section 203 of the DGCL) is the
"owner" (as defined in Section 203 of the DGCL) of Company Common Stock or is
party to any contract, agreement or other arrangement, that would cause Section
203 of the DGCL to apply to this Agreement or the Merger.
SECTION 4.15 Y2K Compliance. The Parent has developed a plan (the
"Parent Y2K Plan") intended to ensure that all computer hardware and software
used in and material to the business of the Parent and the Parent Subsidiaries
is designed to be Year 2000 Compliant. The Parent Y2K Plan includes reasonable
steps to determine whether the failure of any suppliers or customers with which
the Company or any Company Subsidiary has a material relationship to be Year
2000 Compliant would have or would reasonably be expected to have a Parent
Adverse Material Effect and, assuming the consummation of the Xxxxxx X0X Plan,
the occurrence of calendar year 2000 will not or will not reasonably be expected
to cause a Parent Material Adverse Effect. The matters set forth in this Section
4.15 are subject to the disclosures relating to Year 2000 matters in the Parent
SEC Reports.
SECTION 4.16 Merger Sub. Neither Merger Sub nor any assignee of Merger
Sub permitted by Section 1.1(b) has conducted any activities other than in
connection with its organization, the negotiation and execution of this
Agreement, and
32
the consummation of the transactions contemplated hereby. Neither Merger Sub
nor such entity has any Subsidiaries.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger. The
Company covenants and agrees that, except as expressly permitted by this
Agreement or as set forth in Section 5.1 of the Company Disclosure Letter, until
the Effective Time, unless the Parent shall otherwise agree in writing prior to
the taking of any action otherwise prohibited by the terms of this Section 5.1,
the Company shall, and shall cause each Company Subsidiary to, conduct its
operations and business in the ordinary and usual course of business and
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its business organizations' goodwill, keep
available the services of its present officers and key employees, and preserve
the goodwill and business relationships with suppliers, distributors, customers
and others having business relationships with it, with the intent that such
goodwill and ongoing business relationships shall be unimpaired in all material
respects at the Effective Time. The Company agrees that it will maintain its
cash management policies in effect on the date hereof in the ordinary course of
business consistent with past practice and that it will continue to maintain
insurance of the types and in the amounts in effect on the date hereof as long
as such insurance is available to the Company on commercially reasonable terms,
including at comparable rates. Without limiting the generality of the foregoing,
and except as otherwise expressly permitted by this Agreement or as set forth in
Section 5.1 of the Company Disclosure Letter, prior to the Effective Time,
without the prior written consent of the Parent, the Company will not, and will
cause each Company Subsidiary not to:
(a) except to the extent required by Law or the rules and
regulations of the NYSE, amend or otherwise change the certificate of
incorporation or bylaws of the Company;
(b) issue or authorize or propose the issuance of, sell,
pledge or dispose of, grant or otherwise create, or agree to issue or authorize
or propose the issuance, sale, pledge or disposition of, grant or otherwise
create any additional shares of, or any options to acquire any shares of, its
capital stock or any debt or equity securities convertible into or exchangeable
for such capital stock or, except as otherwise agreed to by Parent or except
pursuant to their terms in effect on the date hereof, accelerate the vesting
schedule of or make any other modification to the terms of any Company Stock
Option outstanding on the date thereof, other than (i) any such issuance
pursuant to the exercise of Company Stock Options granted prior to the date
hereof under the Company Option Plans or the agreements pursuant to which
certain
33
Company Stock Options were issued, in accordance with their respective terms as
in effect on the date hereof, (ii) the issuance of shares of capital stock of a
Company Subsidiary to the Company or any wholly owned Company Subsidiary, (iii)
the issuance in the ordinary course of business consistent with past practice to
persons other than directors or executive officers of the Company of Options to
purchase in the aggregate up to 75,000 shares of Company Common Stock pursuant
to the Company Option Plans as in effect on the date hereof or (iv) the issuance
of shares of Company Common Stock in connection with acquisitions permitted by
Section 5.1(h);
(c) purchase, redeem or otherwise acquire or retire, or offer
to purchase, redeem or otherwise acquire or retire, (i) any shares of its
capital stock (including any Options with respect to its capital stock and any
security convertible or exchangeable into its capital stock), other than
transactions between the Company and its wholly owned Subsidiaries, or (ii) any
long-term debt;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to,
any of its capital stock, except dividends declared and paid by a wholly owned
Company Subsidiary or subdivide, reclassify, recapitalize, split, combine or
exchange any of its shares of capital stock;
(e) incur or become contingently liable with respect to any
indebtedness for borrowed money or guarantee any such indebtedness or issue any
debt securities;
(f) except as may be required by applicable Law, or as
contemplated by this Agreement, (i) increase the compensation payable or to
become payable to, or enter into any employment agreement with any of its
executive officers or employees, except, with respect to any such executive
officer in accordance with the terms of any such agreement, or with respect to
any other employees in the ordinary course of business consistent with past
practice; (ii) grant any severance or termination pay to any employee (other
than an executive officer) of the Company or any Company Subsidiary, except in
the ordinary course of business or pursuant to practices listed in Section 3.11
of the Company Disclosure Letter or to any executive officer or director, except
as provided in any agreement with such executive officer or director; (iii)
enter into any severance agreement with any employee (other than an executive
officer), except in the ordinary course of business or pursuant to practices
listed in Section 3.11 of the Company Disclosure Letter or with any executive
officer or director, except as provided in any agreement with such executive
officer or director; or (iv) establish, adopt, enter into, terminate, withdraw
from or amend or take action to accelerate any rights or benefits under any
collective bargaining agreement, any stock option plan, any employee benefit
plan, parachute arrangement or policy;
34
(g) take any action, including making any change in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including Tax accounting policies, procedures
and elections relating to Taxes), except as may be required by GAAP, or settle
any material Audit or, except as required by Law, amend in any material respect
any material Tax Return; PROVIDED, that, in any such case the Company shall
consult with Parent prior to taking any such action that it reasonably believes
is required by GAAP or applicable Law;
(h) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business entity, involving purchase prices for
all transactions that, in the aggregate, are in excess of $10.0 million;
(i) mortgage or otherwise encumber or subject to any Lien, or
sell, lease, license, transfer or otherwise dispose of, any of its properties or
assets, other than encumbrances and Liens that are incurred in the ordinary
course of business and consistent with past practice and sales, leases,
licenses, transfers and dispositions of properties and assets in the ordinary
course of business and consistent with past practice;
(j) (i) extend or otherwise amend or waive any rights under
any Material Distribution Agreement or (ii) extend or otherwise amend on terms
less favorable to the Company or waive any rights under any Contract if, but
only with respect to this clause (ii), such extensions or amendments,
individually or in the aggregate, would be or would reasonably be expected to be
materially adverse to the business of the Company and the Company Subsidiaries
taken as a whole;
(k) take any action that would reasonably be expected to
result in the conditions contained in Section 7.2(a) or 7.2(b) not to be
satisfied;
(l) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiaries (other than the
Merger);
(m) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any Company Subsidiary;
(n) except as set forth in Section 5.1 of the Company
Disclosure Letter, authorize any new development, production or distribution
projects or capital expenditures or similar expenditures which, individually, is
in excess of $50,000 or, in the aggregate, are in excess of $1,000,000;
35
(o) (i) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) other than in the ordinary course of business
consistent with past practices, or (ii) waive the benefits of, or agree to
modify in any manner any confidentiality, standstill or similar agreement to
which the Company or any Company Subsidiary is a party with any third party
which relates to the Company Common Stock or a transaction having effects
substantially similar to the Merger;
(p) settle or compromise any pending or threatened suit,
action or claim relating to the Transactions contemplated hereby, without
Parent's prior written consent, which will not be unreasonably withheld, delayed
or conditioned;
(q) enter into any agreement or arrangement that materially
limits or otherwise restricts the Company or any Company Subsidiary or any
successor thereto, or that would, after the Effective Time, limit or restrict
the Surviving Corporation and its affiliates (including Parent) or any successor
thereto, from engaging or competing in any line of business or in any geographic
area, other than in the ordinary course of business consistent with past
practices;
(r) make any loan to or other investment in any person which,
in the aggregate, is in excess of $500,000; or
(s) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 5.2 Conduct of Business of the Parent Pending the Merger. Prior
to the Effective Time, without the prior written consent of the Company, the
Parent will not, and will cause each Parent Subsidiary not to:
(a) except to the extent required by Law or the rules and
regulations of NYSE, amend its certificate of incorporation or bylaws in any
manner that would be materially adverse to the holders of Parent Common Stock;
(b) purchase, redeem or otherwise acquire or retire, or offer
to purchase, redeem or otherwise acquire or retire, any shares of its capital
stock (other than any shares of capital stock of any Parent Subsidiary) in
excess of the publicly announced Parent Common Stock repurchase program
currently in effect, except for other transactions between the Parent and its
wholly owned Subsidiaries;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, other than dividends or distributions by Parent
Subsidiaries;
36
(d) liquidate or adopt a plan of liquidation, except for
liquidations of any wholly owned Parent Subsidiaries;
(e) take any action that would reasonably be expected to
result in the conditions contained in Section 7.3(a) or 7.3(b) not to be
satisfied; or
(f) authorize any of, or commit or agree to take any of, the
foregoing actions.
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.1 Access to Information. (a) From the date hereof to the
Effective Time, the Company shall (and shall cause the Company Subsidiaries and
officers, directors, employees, auditors, counsel and agents to) afford the
officers, employees, auditors, counsel and agents (the "Representatives") of the
other party reasonable access at all reasonable times to its officers,
employees, agents, properties, offices, plants and other facilities, books,
records and Tax Returns, and shall furnish such Representatives with all
financial, operating and other data and information as may be reasonably
requested.
(b) From the date hereof to the Effective Time, the Parent
shall comply with the reasonable requests of the Company to make officers
available to respond to the reasonable inquiries of the Company in connection
with the Transactions and to make available information regarding Parent and the
Material Parent Subsidiaries as the Company may reasonably request.
(c) All information obtained pursuant to (a) or (b) will be
subject to the Confidentiality Agreement, dated January 14, 1999, between the
Company and the Parent (the "Confidentiality Agreement").
(d) No investigation prior to the date hereof or pursuant to
this Section 6.1 shall affect any representation or warranty in this Agreement
of any party hereto or any condition to the obligations of the parties hereto.
SECTION 6.2 No Solicitation. (a) From the date hereof until the
termination of this Agreement, except as permitted hereby, the Company shall
not, nor shall it permit any Company Subsidiary, or any officer, director,
employee, agent or Representative of the Company or a Company Subsidiary
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or a Company Subsidiary), to, directly or indirectly,
(i) initiate, solicit or knowingly encourage any inquiries, offers or proposals
that constitute, or could reasonably be expected to lead to, a proposal or offer
for (x) any merger, consolidation, share
37
exchange, recapitalization, business combination or similar transaction, (y) any
sale, lease, exchange, mortgage, transfer or other disposition, in a single
transaction or series of related transactions, of assets representing a material
portion of the assets of the Company and the Company Subsidiaries, taken as a
whole, or (z) sale of shares of capital stock representing, individually or in
the aggregate, 15% or more of the voting power of the Company other than to the
Company or a Company Subsidiary, including, without limitation, by way of a
tender offer or exchange offer by any person (other than the Company or a
Company Subsidiary) for shares of capital stock representing 15% or more of the
voting power of the Company, other than the Transactions (any of the foregoing
inquiries, offers or proposals being referred to in this Agreement as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning,
or provide to any person or entity any information or data relating to the
Company or any Company Subsidiary for the purposes of making, or take any other
action to facilitate, any Acquisition Proposal, (iii) agree to, approve or
recommend any Acquisition Proposal or (iv) take any other action materially
inconsistent with the obligations and commitments assumed by the Company
pursuant to this Section 6.2; PROVIDED, HOWEVER, that, subject to the Company's
compliance with this Section 6.2, nothing contained in this Agreement shall
prevent the Company or its Board of Directors from, prior to receipt of the
Required Company Vote, (A) entering into a definitive agreement providing for
the implementation of a Superior Proposal (as defined below) if the Company or
the Board of Directors is simultaneously terminating this Agreement pursuant to
Section 8.1(f), (B) furnishing non-public information to, entering into
customary confidentiality agreements with, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal to the Company or its stockholders, if the
Board of Directors of the Company, by action of a majority of the entire Board
of Directors of the Company, determines in good faith after consultation with
nationally-recognized independent financial advisors that such Acquisition
Proposal, if accepted, constitutes, or is reasonably likely to lead to, a
Superior Proposal or (C) taking and disclosing to its stockholders a position
with respect to such Acquisition Proposal contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or making any other public disclosure that,
in the opinion of the Company's counsel, is required by applicable Law,
PROVIDED, FURTHER, that except as otherwise permitted in this Section 6.2, the
Company does not withdraw or modify, or propose to withdraw or modify, its
position with respect to the Merger or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal. For purposes of this Agreement,
"Superior Proposal" means a bona fide written Acquisition Proposal on terms
which a majority of the members of the Board of Directors of the Company
determine in their good faith judgment (after consultation with
nationally-recognized independent financial advisors) and after taking into
account all legal, financial, regulatory and other material aspects of the
Acquisition Proposal, the person making the proposal, the strategic benefits to
be derived from the Merger and the long-term prospects of Parent and its
Subsidiaries, to be more favorable from a financial point of view to the
Company's stockholders than the Merger, and for which the Board of Directors of
the Company determines in their
38
good faith judgment (after such consultation) that financing, to the extent
required, is then committed or reasonably available. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations by the Company or its Representatives with any
parties conducted heretofore with respect to any of the foregoing, and will
promptly inform the individuals or entities referred to in the first sentence of
this Section 6.2(a) of the obligations undertaken in this Section 6.2(a). For
purposes of this Agreement, an Acquisition Proposal shall not be deemed to exist
solely as a result of a person filing a report on Schedule 13G to report
ownership of the Company Common Stock.
(b) The Company shall (i) promptly notify the Parent orally
and in writing after receipt by the Company (or its advisors) of any Acquisition
Proposal or any inquiries indicating that any person is considering making or
wishes to make, or which could reasonably be expected to lead to, an Acquisition
Proposal, including the material terms and conditions thereof and the identity
of the person making it, (ii) promptly notify the Parent orally and in writing
after receipt of any request for non-public information relating to it or any of
the Company Subsidiaries or for access to its or any of the Company
Subsidiaries' properties, books or records by any person that, to the Company's
knowledge, may be considering making, or has made, an Acquisition Proposal,
(iii) receive from any person who may make or has made an Acquisition Proposal
and that requests non-public information relating to the Company and/or any
Company Subsidiary, an executed confidentiality letter in reasonably customary
form and containing terms that are as stringent in all material respects as
those contained in the Confidentiality Agreement prior to delivery of any such
non-public information, and (iv) keep the Parent advised on a prompt basis of
the status of any such Acquisition Proposal, indication or request (including
any material changes to the terms and conditions of any Acquisition Proposal).
(c) The Company Board will not withdraw or modify, or propose
to withdraw or modify, in any manner adverse to Parent, its approval or
recommendation of this Agreement or the Merger except in connection with a
Superior Proposal and then only upon or after the termination of this Agreement
pursuant to Section 8.1(f).
SECTION 6.3 Directors and Officers Indemnification and Insurance. (a)
From and after the Effective Time, the Parent shall cause the Surviving
Corporation to and the Surviving Corporation shall indemnify, defend and hold
harmless the present and former officers, directors, employees and agents of the
Company (each a "Covered Person") against all losses, expenses, claims, damages,
liabilities or amounts ("Losses") that are paid in settlement (provided that,
with respect to amounts paid in settlement, such settlement has been approved by
the Parent, such approval not to be unreasonably withheld or delayed) of, or
otherwise in connection with, any claim, action, suit, proceeding or
investigation (a "Claim") based in whole or in part on the fact that such person
is or was a director, officer, employee or agent of the Company and arising out
of actions or omissions occurring
39
at or prior to the Effective Time (including, without limitation, the
Transactions), in each case to the full extent permitted under the DGCL and the
Company's certificate of incorporation and bylaws as in effect on the date of
this Agreement. The Surviving Corporation shall pay, when and as such expenses
are incurred by a Covered Person, any expenses in advance of the final
disposition of any such Claim to each Covered Person to the fullest extent
permitted under the DGCL upon receipt from the Covered Person to whom expenses
are advanced of any undertaking to repay such advances required under the DGCL.
The Surviving Corporation shall cooperate in the defense of any such matter.
(b) The Parent shall cause the Surviving Corporation to keep
in effect provisions in its certificate of incorporation and bylaws providing
for exculpation of director liability, advancement of expenses prior to
disposition of any Claim and indemnification of the Covered Persons, in each
case to the fullest extent permitted under the DGCL, which provisions shall not
be amended except as required by applicable Law or except to make changes
permitted by law that would enlarge the right of indemnification of the Covered
Persons.
(c) For a period of six (6) years after the Effective Time,
the Parent shall cause the Surviving Corporation to maintain in effect the
current policies of directors and officers liability insurance maintained by the
Company covering persons who are currently covered by the Company's directors
and officers liability insurance policies with respect to actions or omissions
occurring at or prior to the Effective Time to the extent that such policies are
available; PROVIDED, that policies of at least the same coverage containing
terms and conditions which are no less advantageous to the insureds may be
substituted therefor, PROVIDED, FURTHER, that in no event shall the Surviving
Corporation be required to expend amounts for premiums per annum in excess of
200% of the annual premiums prevailing during the twelve-month period ended
August 31, 1998 (such annual premiums, the "Maximum Premium") to maintain or
procure insurance coverage pursuant to this Section 6.3, or, if the cost of such
coverage exceeds the Maximum Premium, the maximum amount of coverage that can be
purchased for the Maximum Premium. The Company represents to the Parent that the
Maximum Premium is $441,452.
(d) The provisions of this Section 6.3 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Covered Persons.
SECTION 6.4 Notification of Certain Matters. The Parent shall give
prompt notice to the Company, and the Company shall give prompt notice to the
Parent, of (a) the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied, (b)
any failure of the Parent or the Company, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder
40
and (c) the receipt of a notice of the type described in the last sentence of
Section 3.20(b) or the occurrence of a dispute arising after the date hereof of
the type and amounts described in Section 3.20(e); PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 6.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
SECTION 6.5 Tax Treatment. Each of the Parent and the Company shall
take such actions, or refrain from taking such actions, as may be reasonably
necessary so that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code and to obtain the opinions of counsel
referred to in Sections 7.2(d) and 7.3(h).
SECTION 6.6 Company Stockholder Meeting. Subject to Section 6.2, the
Company shall, as promptly as practicable following the date of this Agreement,
duly call, give notice of and convene and hold a meeting of its stockholders
(the "Company Meeting") for the purpose of considering and voting upon the
adoption of this Agreement. The vote required for such approval shall be the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock. Without limiting the generality of the foregoing, the
Company agrees that, subject to Section 6.2, its obligations pursuant to the
first sentence of this Section 6.6 shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Acquisition Proposal. The Company will, through its Board of Directors,
recommend to its stockholders the adoption of this Agreement, except to the
extent that the Company Board shall have withdrawn or modified its approval or
recommendation of this Agreement or the Merger and terminated this Agreement in
accordance with Sections 6.2(c) and 8.1(f).
SECTION 6.7 Registration Statement, Proxy Statement/Prospectus. (a) As
promptly as practicable after the execution of this Agreement, (i) the Company
shall prepare and file with the SEC a proxy statement relating to the Company
Meeting to be held in connection with the Transactions (together with any
amendments thereof or supplements thereto, the "Proxy Statement/Prospectus") and
(ii) the Parent shall prepare and file with the SEC a registration statement
(together with all amendments thereto, the "Registration Statement") in which
the Proxy Statement/Prospectus shall be included as a prospectus, in connection
with the registration under the Securities Act of the shares of Parent Common
Stock to be issued pursuant to the Merger. Each of the Parent and the Company
(i) shall cause the Proxy Statement/Prospectus and the Registration Statement to
comply as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder, (ii)
shall use commercially reasonable efforts to have or cause the Registration
Statement to become effective as promptly as practicable, and (iii) shall take
all or any action required under any applicable federal or state securities laws
in connection with the issuance of shares of Parent Common Stock in connection
with the Merger. The Company and the Parent shall furnish to the other all
information concerning the Company and the Parent as
41
the other may reasonably request in connection with the preparation of the
documents referred to herein. As promptly as practicable after the Registration
Statement shall have become effective, the Parent and the Company shall mail the
Proxy Statement/ Prospectus to stockholders of the Company.
(b) The information supplied by each of the Company and the
Parent for inclusion in the Registration Statement and the Proxy Statement/
Prospectus shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement/Prospectus (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Company, (iii) the time of the Company Meeting, or (iv) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. If, at any time prior to the Effective Time, any event
or circumstance relating to the Company, any Company Subsidiary, the Parent, any
Parent Subsidiary, or their respective officers or directors, should be
discovered by such party which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement/ Prospectus, such
party shall promptly inform the other thereof and take appropriate action in
respect thereof.
SECTION 6.8 Letters of Accountants. The Parent and the Company shall
use their commercially reasonable efforts to cause to be delivered to the other
"comfort" letters of KPMG Peat Marwick LLP, the Parent's independent public
accountants, and of Xxxxxx Xxxxxxxx LLP, the Company's independent public
accountants, in each case, dated and delivered on the date on which the
Registration Statement shall become effective and as of the Effective Time, and
addressed to the Boards of Directors of the Company and the Parent, in form and
substance reasonably satisfactory to the other and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 6.9 Further Action, Reasonable Efforts. (a) Upon the terms and
subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions, and (ii) use
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws and regulations to consummate and make effective
the Transactions in the most expeditious manner practicable, including, without
limitation, using commercially reasonable efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Entities (such filings under the HSR Act to be made by the parties
no later than ten (10) days after the date hereof), making all filings and
required submissions with Governmental Entities, including foreign filings and
submissions, obtaining all consents and approvals from parties to Contracts with
the Company and the Parent and their respective Subsidiaries as are necessary
for the
42
consummation of the Transactions and defending any lawsuit or legal challenges,
whether judicial or administrative, challenging this Agreement or the
Transactions. In case at any time after the Effective Time any other action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable efforts to take all such action.
(b) Each party shall use its reasonable commercial efforts not
to take any action, or enter into any transaction, which would result in a
breach of any covenant made by it in this Agreement.
SECTION 6.10 Public Announcements. The Company and the Parent shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any of the Transactions and
shall not issue any such press release or make any such public statement without
the prior consent of the other party, which consent shall not be unreasonably
withheld or delayed; PROVIDED, HOWEVER, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may be required by Law or any listing agreement or arrangement to
which the Company or the Parent is a party with a national securities exchange
if it has used all reasonable efforts to consult with the other party and to
obtain such party's consent but has been unable to do so in a timely manner.
SECTION 6.11 Blue Sky. The Parent shall use its best efforts to obtain
prior to the Effective Time all approvals or permits required to carry out the
transactions contemplated hereby under applicable Blue Sky Laws in connection
with the issuance of shares of Parent Common Stock in connection with the Merger
and as contemplated by this Agreement; PROVIDED, HOWEVER, that with respect to
such qualifications neither the Parent nor the Company shall be required to
register or qualify as a foreign corporation or to take any action which would
subject it to general service of process or taxation in any jurisdiction where
any such entity is not now so subject.
SECTION 6.12 NYSE. The Parent shall promptly prepare and submit to the
NYSE applications covering the shares of Parent Common Stock to be issued in
connection with the Merger, and shall use commercially reasonable efforts to
cause such shares to be approved for listing on the NYSE prior to the Effective
Time, subject to official notice of issuance.
SECTION 6.13 Affiliates. Within 30 days after the date of this
Agreement, (a) the Company shall deliver to the Parent a letter identifying all
persons who may be deemed to be affiliates of the Company under Rule 145 of the
Securities Act as of the record date for the Company Meeting, including, without
limitation, all of its directors and executive officers (the "Rule 145
Affiliates") and (b) the Company shall advise the persons identified in such
letter of the resale restrictions imposed by applicable securities laws and
shall use commercially reasonable efforts to obtain from
43
each person identified in such letter a written agreement, substantially in the
form of Exhibit A hereto (a "Rule 145 Affiliate Agreement").
SECTION 6.14 Employee Benefits. For a period of one year after the
Effective Time, the Parent will (a) cause to remain in effect for the benefit of
the employees of the Company and the Company Subsidiaries (and, to the extent
applicable, former employees) all Company Plans in effect on the date of this
Agreement or (b) provide each employee (and, to the extent applicable, former
employees) of the Surviving Corporation and its Subsidiaries with benefits that,
with respect to such employee (or former employee), are at least substantially
equivalent on an aggregate basis to the benefits of such Company Benefit Plans
(other than any stock option plans). Without limiting the generality of the
foregoing, all vacation, holiday, sickness and personal days accrued by the
employees of the Company and of the Company Subsidiaries shall be honored. In
the event that any employee of the Surviving Corporation or one of its
Subsidiaries is at any time after the Effective Time transferred to the Parent
or any affiliate of the Parent or becomes a participant in an employee benefit
plan, program or arrangement maintained by or contributed by the Parent or any
affiliate of the Parent, the Parent shall cause such plan, program or
arrangement to treat the prior service of such employee with the Company and the
Company Subsidiaries, to the extent prior service is generally recognized under
the comparable plan, program or arrangement of the Company, as service rendered
to the Parent or such affiliates for purposes of eligibility, vesting or
entitlement to early retirement benefits, vacation time or severance benefits
under such plans. The Parent shall cause to be waived any pre-existing condition
limitation under their welfare plans that might otherwise apply to such employee
or, to the extent applicable, a former employee. The Parent agrees to recognize
(or cause to be recognized) the dollar amount of all expenses incurred by such
employees or, to the extent applicable, former employees, during the calendar
year in which the Effective Time occurs for purposes of satisfying the calendar
year deductibles, co-payment limitations and lifetime maximums for such year
under the relevant benefit plans of the Parent and their respective
Subsidiaries. Nothing contained in this Section 6.14 shall be construed as
requiring Parent to continue any specific Company Plan or to continue the
employment of any Employee, PROVIDED, HOWEVER, that any changes that Parent may
make to any such Company Plan are consistent with the prior parts of this
Section 6.14, and are permitted by the terms of the Company Plan and under any
applicable law.
SECTION 6.15 Tax Matters. The parties hereto agree to (i) prepare or
cause to be prepared all Tax Returns or other governmental filings and reports
and applicable books and records in accordance with the treatment of the Merger
as a reorganization under section 368(a) of the Code, unless otherwise required
by Law, and (ii) take such other actions, or refrain from taking any action, as
may be reasonably necessary so that the Merger will qualify for such treatment;
PROVIDED, HOWEVER, that such actions or inactions must be consistent with the
terms of this Agreement.
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ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the following conditions:
(a) The Company shall have received the Required Company Vote.
(b) All consents, approvals and action of any Governmental
Entity required to permit the consummation of the Transactions shall have been
obtained or made, free of any condition that would have or reasonably would be
expected to have a Parent Material Adverse Effect or a Company Material Adverse
Effect.
(c) No statute, rule, regulation, executive order, judgment,
decree, or injunction shall have been enacted, entered, promulgated or enforced
(and not repealed, superseded, lifted or otherwise made inapplicable), by any
court of competent jurisdiction or Government Entity which restrains, enjoins or
otherwise prohibits the consummation of the Transactions contemplated by this
Agreement (each party agreeing to use its commercially reasonable efforts to
avoid the effect of any such statute, rule, regulation or order or to have any
such order, judgment, decree or injunction lifted) or that would have or would
reasonably be expected to have a Parent Material Adverse Effect.
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order pending
such effectiveness shall have been issued and remain in effect. The Parent shall
have received all state securities or "blue sky" permits and other
authorizations necessary to issue the Parent Common Stock pursuant to this
Agreement.
(e) The shares of Parent Common Stock to be issued as Merger
Consideration shall have been approved for listing on the NYSE, subject only to
official notice of issuance.
(f) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(g) The Effective Time shall have occurred at or before the
close of business in New York City on December 31, 1999 (the "Outside Date").
45
SECTION 7.2 Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by the Company:
(a) (i) The representations and warranties of the Parent and
Merger Sub set forth in this Agreement (other than Section 4.3) shall be true
and correct (for all purposes of this Section 7.2(a)(i) without giving effect to
any "materiality" or "material adverse effect" limitations contained therein) as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except to the extent a representation or warranty
expressly relates to an earlier date (in which case as of such date), and except
to the extent the failure of any such representation and warranty to be true and
correct, in the aggregate, would not or would not reasonably be expected to have
a Parent Material Adverse Effect and (ii) the representations and warranties of
the Parent set forth in Section 4.3 shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent a representation and
warranty expressly relates to an earlier date (in which case as of such date).
(b) The Parent and Merger Sub shall have performed, in all
material respects, all obligations and complied in all material respects, with
all covenants required by this Agreement to be performed or complied with by
them prior to the Effective Time.
(c) The Parent shall have delivered to the Company a
certificate, dated the Effective Time and signed by an executive officer of
Parent, evidencing compliance with Sections 7.2(a) and (b).
(d) The Company shall have received an opinion from Xxxx,
Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, based upon representation letters and
certificates substantially in the form previously agreed upon by the Parent and
the Company and dated the Closing Date, to the effect that the Merger will
qualify as a reorganization under the provisions of section 368(a) of the Code.
SECTION 7.3 Conditions to Obligations of the Parent and Merger Sub to
Effect the Merger. The obligations of the Parent and Merger Sub to effect the
Merger are subject to the satisfaction of the following conditions, unless
waived by the Parent and Merger Sub:
(a) (i) The representations and warranties of the Company set
forth in this Agreement (other than Sections 3.3, 3.7(b), 3.8(b)(i) and 3.20(d))
shall be true and correct (for all purposes of this Section 7.3(a)(i) without
giving effect to any "materiality" or "material adverse effect" limitations
contained therein) as of the date of this Agreement and as of the Closing Date
as though made on and as of the Closing Date, except to the extent a
representation and warranty expressly
46
relates to an earlier date (in which case as of such date), and except to the
extent the failure of such representations and warranties to be true and
correct, in the aggregate, would not or would not reasonably be expected to have
a Company Material Adverse Effect, (ii) the representations and warranties of
the Company set forth in Sections 3.3, 3.7(b)(i) and 3.8(b)(i) shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
a representation and warranty expressly relates to an earlier date (in which
case as of such date) and (iii) the representations and warranties of the
Company set forth in Section 3.7(b)(ii) and 3.20(d) shall be true and correct as
of the date of this Agreement and the Closing Date as though made on and as of
the Closing Date.
(b) The Company shall have performed, in all material
respects, all obligations and complied, in all material respects, with all
covenants required by this Agreement to be performed or complied with by it
prior to the Effective Time.
(c) The Company shall have delivered to the Parent a
certificate, dated the Effective Time and signed by an executive officer of the
Company, evidencing compliance with Sections 7.3(a) and (b).
(d) The Parent shall have received from each Rule 145
Affiliate of the Company an executed copy of a Rule 145 Affiliate Agreement from
each Rule 145 Affiliate as contemplated by Section 6.13 hereof.
(e) The employment agreements entered into between the Company
and each of Mr. Xxxxxxx Xxxx and Mr. Xxxxx Xxxx, as amended on the date hereof,
shall be in full force and effect on the Closing Date and neither Mr. Xxxxxxx
Xxxx nor Mr. Xxxxx Xxxx shall have died, become incapacitated or otherwise not
be in a position to perform his obligations thereunder; PROVIDED, HOWEVER, that
if as a result of any event, change or occurrence, Parent determines that this
condition cannot or will not be satisfied by the Closing Date, it shall promptly
and in any event within five (5) Business Days after it receives written notice
from the Company of the happening of any such event, change or occurrence, so
notify the Company of its determination whether or not it will waive the
condition set forth in this subsection (e) or, if no such notification is
furnished to the Company within such time period, the Parent shall be deemed to
have waived the failure of this condition to be satisfied prior to the Closing
Date as a result of such event, change or occurrence; PROVIDED, FURTHER, that if
the Parent shall so notify the Company that it will not consummate the Merger,
the Company shall have the right, exercisable at any time within 45 days of its
receipt of such a notice from the Parent, to terminate this Agreement by written
notice to the Parent and further, if the Company does not exercise such
termination right, the Parent shall have the right to terminate this Agreement
following the expiration of such 45-day period by written notice to the Company.
47
(f) There shall not be pending by any Governmental Entity any
suit, action or proceeding which has a reasonable likelihood of success (i)
seeking to restrain or prohibit the consummation of the Merger or that would
materially adversely effect the Transactions contemplated by this Agreement
taken as a whole or seeking to obtain from the Company or Parent any damages
that are material in relation to the Company and the Company Subsidiaries taken
as a whole or Parent and the Parent Subsidiaries taken as a whole, as applicable
(ii) seeking to prohibit or limit the ownership or operation by the Company,
Parent or any of their respective Subsidiaries of any material portion of the
business or assets of the Company and Company Subsidiaries, taken as a whole, or
Parent and the Parent Subsidiaries, taken as a whole, as applicable, or to
compel the Company, Parent or any of their respective Subsidiaries to dispose of
or hold separate any material portion of the business or assets of the Company
and Company Subsidiaries, taken as a whole, or Parent and the Parent
Subsidiaries, taken as a whole, as applicable, as a result of the Merger or any
of the other Transactions contemplated by this Agreement, (iii) seeking to
impose limitations on the ability of Parent to acquire or hold, or exercise full
rights of ownership of, any shares of capital stock of the Company or the
Surviving Corporation, including the right to vote the Company Common Stock, or
common stock of the Surviving Corporation, on all matters properly presented to
the stockholders of the Company or the Surviving Corporation, respectively, (iv)
seeking to prohibit Parent and its subsidiaries from effectively controlling in
any material respect the business or operations of the Company and Company
Subsidiaries, taken as a whole, or (v) which otherwise would have or would
reasonably be expected to have a Company Material Adverse Effect or a Parent
Material Adverse Effect.
(g) As of the Closing (i) each of the Material Distribution
Agreements shall be, in all material respects, in full force and effect and
enforceable, (ii) there shall exist no fact or circumstance that individually or
in the aggregate is reasonably likely to result in a termination of any Material
Distribution Agreement or to permit any party other than the Company to withhold
or refrain from performance by it of any material covenant in any material
respect, (iii) except as set forth in Section 7.3(g) of the Company Disclosure
Letter, each of the parties to such Material Distribution Agreement shall have
performed all material obligations required to have theretofore been performed
by it in accordance with the terms of such Material Distribution Agreement, as
of such date in all material respects, and (iv) no party to any Material
Distribution Agreement (other than the Company) shall have taken any action or
omitted to take any action that, individually or in the aggregate, has resulted
in or is reasonably likely to result in a material impairment of the value of
such Material Distribution Agreement to the Company or the Surviving
Corporation.
(h) Parent shall have received an opinion from Weil, Gotshal &
Xxxxxx LLC, based upon representation letters and certificates substantially in
the form previously agreed upon by the Parent and the Company and dated the
Closing Date, to the effect that the Merger will qualify as a reorganization
under the provisions of section 368(a) of the Code.
48
ARTICLE VIII
TERMINATION WAIVER, AMENDMENT AND CLOSING
SECTION 8.1 Termination. This Agreement may be terminated and abandoned
at any time prior to the Effective Time, whether before or after approval of
this Agreement, the Merger and the other Transactions by the stockholders of the
Company:
(a) by the mutual written consent of the Company and the
Parent;
(b) by the Company or the Parent, if (i) the Effective Time
shall not have occurred on or before the Outside Date, (ii) any Governmental
Entity, the consent of which is a condition to the obligations of the Company
and the Parent to consummate the Transactions, shall have determined not to
grant its consent and all appeals of such determination shall have been taken
and have been unsuccessful or (iii) any court of competent jurisdiction shall
have issued an order, judgment or decree (other than a temporary restraining
order) restraining, enjoining or otherwise prohibiting the Merger and such
order, judgment or decree shall have become final and nonappealable; PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant to clause (i) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date and PROVIDED FURTHER, HOWEVER, that the
passage of such period shall be tolled for any part thereof (but not exceeding
60 calendar days in the aggregate) during which any party shall be subject to a
nonfinal order, injunction, decree, ruling or action restraining, enjoining or
otherwise prohibiting the consummation of the Merger or the calling or holding
of the Company Meeting;
(c) by the Company or the Parent, if, upon a vote at the
Company Meeting (including any adjournment or postponement thereof) called
pursuant to Section 6.7 hereof, the Required Company Vote shall not have been
obtained;
(d) by the Company, if there has been a material breach by the
Parent of any representation, warranty, covenant or agreement set forth in this
Agreement which (x) would give rise to the failure of a condition set forth in
Section 7.2(a) or (b) and (y) which breach has not been cured within thirty (30)
Business Days following receipt by the Parent of written notice of such breach
from the Company; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this Section 8.1(d) shall not be available to the Company if the
Company, at such time, is in material breach of any representation, warranty,
covenant or agreement set forth in this Agreement;
49
(e) by the Parent, if there has been a material breach by the
Company of any representation, warranty, covenant or agreement set forth in this
Agreement which (x) would give rise to a failure of a condition set forth in
Section 7,.3(a) or (b) and (y), which breach has not been cured within thirty
(30) Business Days following receipt by the Company of written notice of such
breach from the Parent; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this Section 8.1(e) shall not be available to the Parent
if the Parent, at such time, is in material breach of any representation,
warranty, covenant or agreement set forth in this Agreement;
(f) by the Company, if prior to the Required Company Vote the
Board of Directors of the Company shall concurrently approve, and the Company
shall concurrently enter into, a definitive agreement providing for the
implementation of a Superior Proposal; PROVIDED, HOWEVER, that (i) the Company
is not then in breach of Section 6.2, (ii) the Company's Board of Directors
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies the Parent in writing
that it intends to enter into such an agreement, attaching the most current
version of such agreement to such notice, (iii) during the two-Business Day
period after the Company's notice, (A) the Company shall have offered to
negotiate with (and, if accepted, negotiate with), and shall have caused its
respective financial and legal advisors to have offered to negotiate with (and,
if accepted, negotiate with) Parent to attempt to make such commercially
reasonable adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the Merger and the other Transactions and (B)
the Board of Directors of the Company shall have concluded, after considering
the results of such negotiations and the revised proposals made by the Parent,
if any, that any Superior Proposal giving rise to the Company's notice continues
to be a Superior Proposal; (iv) such termination is within five (5) Business
Days following the two (2) Business Day period referred to above, and (v) no
termination pursuant to this Section 8.1(f) shall be effective unless the
Company shall simultaneously make the payment required by Section 8.3; and
(g) by the Company or the Parent, pursuant to Section 7.3(e)
of this Agreement.
SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement by the Company or the Parent as provided in Section 8.1 hereof, this
Agreement shall forthwith become void (except for (A) the last sentence of
Section 6.1(a), (B) Sections 8.3, 9.2, 9.4, 9.6 and 9.7 and (C) this Section
8.2) and there shall be no liability on the part of the Company, the Parent,
Merger Sub or their respective officers or directors, except for any breach of a
party's obligations under the last sentence of Section 6.1(a), Sections 8.3,
9.2, 9.4, 9.6 and 9.7 and this Section 8.2. Notwithstanding the foregoing, no
party hereto shall be relieved from liability for any willful breach of this
Agreement.
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SECTION 8.3 Termination Fee. (a) If this Agreement is to be terminated
pursuant to Section 8.1(c), Section 8.1(e) or Section 8.1(f), and if the Company
is not entitled to terminate this Agreement by reason of Section 8.1(b) or
8.1(d), then, the Company shall (x) on the date specified in the penultimate
sentence of this Section 8.3 in the case of a termination of this Agreement
pursuant to Section 8.1(c) or 8.1(e), or (y) simultaneously with a termination
of this Agreement by the Company pursuant to Section 8.1(f), pay to the Parent
(by wire transfer of immediately available funds to an account designated by the
Parent) a termination fee of $90,000,000 plus, subject to the last sentence of
this Section 8.3(a), the reimbursement of all of Parent's actual and documented
out-of-pocket expenses (including all investment banking, legal, accounting and
other similar expenses) up to a maximum reimbursable amount of $10,000,000 (the
"Parent Expenses"); PROVIDED, HOWEVER, that the Company shall not be obligated
to pay such fee to the Parent if this Agreement is terminated pursuant to
Section 8.1(c) or Section 8.1(e) unless (i) at the time of the Company Meeting
in the case of termination pursuant to Section 8.1(c) or on the date the Parent
terminates this Agreement pursuant to Section 8.1(e), the Company has received a
bona fide alternative Acquisition Proposal or a third party has made or publicly
announced its intention to make a bona fide Acquisition Proposal, and (ii)
within sixteen months after the termination of this Agreement, the Company
enters into a definitive agreement providing for an alternative Acquisition
Proposal with any third party or an alternative Acquisition Proposal is
consummated with any third party. If a termination fee becomes payable as a
result of a termination pursuant to Section 8.1(c) or 8.1(e), then in either
such case, such termination fee shall be paid promptly (and in any event within
two (2) days of receipt by Company of a written notice from Parent) following
the earlier of the execution of such definitive agreement providing for an
alternative Acquisition Proposal or the consummation of an alternative
Acquisition Proposal, as the case may be. In addition, in the event the Company
terminates this Agreement pursuant to Section 8.1(c) and at the time of the
Company Meeting the Company has received a bona fide alternative Acquisition
Proposal or a third party has made or publicly announced its intention to make a
bona fide Acquisition Proposal, the Company shall promptly on demand reimburse
all of the Parent Expenses and thereafter be obligated to pay the termination
fee only in the event such fee is payable pursuant to this Section 8.3(a).
(b) The Company acknowledges that the agreements contained in
Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent and Merger Sub would not
have entered into this Agreement. Accordingly, if the Company fails to pay
promptly any amounts due pursuant to Section 8.3, and, in order to obtain such
payment, Parent commences a suit which results in a judgment against the Company
for the fee or expense reimbursement set forth in this Section 8.3, the Company
shall pay to Parent its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest from the date of termination
of this Agreement on the amounts
51
so owed at the prime rate of Chase Manhattan Bank in effect from time to time
during such period plus four percent (4%).
SECTION 8.4 Amendment or Supplement. At any time before or after
approval of this Agreement by the stockholders of the Company and prior to the
Effective Time, this Agreement may be amended or supplemented in writing by the
Company and the Parent with respect to any of the terms contained in this
Agreement, except that following approval by the stockholders of the Company
there shall be no amendment or supplement which by Law requires further approval
by such stockholders without further approval by the stockholders of the
Company.
SECTION 8.5 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, the Company and the Parent may:
(a) extend the time for the performance of any of the
obligations or acts of the other party;
(b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto; or
(c) waive compliance with any of the agreements or conditions
of the other party contained herein; PROVIDED, HOWEVER, that no failure or delay
by the Company or the Parent in exercising any right hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of a party hereto to any extension or waiver
contemplated by this Section 8.5 shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 No Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger or the termination of this
Agreement pursuant to Article VIII.
SECTION 9.2 Expenses. Except as provided in Article VIII, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Transactions shall be paid by the party incurring
such expenses, except that the expenses incurred in connection with printing the
Proxy
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Statement/Prospectus and any expenses incurred by the Parent relating to the
issuance and registration of the Parent Common Stock to be issued in the Merger
and the qualification thereof under Blue Sky laws, shall be paid in equal shares
by the Company and the Parent.
SECTION 9.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered the same agreement.
SECTION 9.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
SECTION 9.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered by hand, mailed by
registered or certified mail (return receipt requested) or sent by prepaid
overnight courier (with proof of service) or confirmed to facsimile to the
parties as follows (or at such other addresses for a party as shall be specified
by like notice) and shall be deemed given on the date on which so
hand-delivered, mailed, delivered or sent by confirmed telecopier:
To the Parent or Merger Sub:
CBS Corporation
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxxx
Xxxxxxx X. Xxxxx
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To the Company:
King World Productions, Inc.
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxxx Xxxxxxxx, Esq.
with a copy (which shall not constitute notice) to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxx
SECTION 9.6 Miscellaneous. This Agreement:
(a) together with the Confidentiality Agreement, the Exhibits,
the Company Disclosure Letter and the Parent Disclosure Letter constitutes the
entire agreement, and supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and thereof, and
(b) except for the provisions of Sections 2.4 and 6.3, is not
intended to and shall not confer upon any person other than the parties hereto
any rights or remedies hereunder or by reason hereof, and
(c) shall not, nor shall any of the rights or interests
hereunder, be assigned by any party hereto or assignable by operation of law or
otherwise without the prior written consent of the other parties.
The headings contained in this Agreement are for reference purposes and
shall not affect in any way the meaning or interpretation of this Agreement. Any
references to the "date hereof" shall mean the date of this Agreement.
SECTION 9.7 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad
54
as to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
SECTION 9.8 Specific Performance. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at Law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the Transactions contemplated hereby, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the Transactions contemplated hereby
in any court other than a federal or state court sitting in the State of
Delaware.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
KING WORLD PRODUCTIONS, INC.
By:__________________________________
Name:
Title:
CBS CORPORATION
By:__________________________________
Name:
Title:
K ACQUISITION CORP.
By:__________________________________
Name:
Title:
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