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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JUNE 1, 1999
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METRO NETWORKS, INC.
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(Exact Name of Registrant as specified in its charter)
DELAWARE 0-21575 76-0505148
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
METRO NETWORKS, INC., 2800 POST OAK BLVD. HOUSTON, TEXAS 77056
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 407-6000
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On June 1, 1999, Metro Networks, Inc. ("Metro" or the "Registrant"),
Westwood One, Inc. ("Westwood") and Copter Acquisition Corp., a wholly owned
subsidiary of Westwood ("Merger Sub"), entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Merger Sub will be merged
with and into Metro (the "Merger"), with Metro continuing as the surviving
corporation and a wholly owned subsidiary of Westwood. Upon consummation of the
Merger, the separate corporate existence of Merger Sub will cease and the
existing stockholders of Metro will become stockholders of Westwood in
accordance with the terms of the Merger Agreement.
At the effective time of the Merger, each outstanding share of common
stock, par value $.001 per share, of Metro will be converted into the right to
receive 1.5 shares of common stock, par value $.01 per share, of Westwood
("Westwood Common Stock") and each outstanding share of Series A Convertible
Preferred Stock, par value $.001 per share, of Metro will be converted into the
right to receive 1.5 shares of a corresponding series of preferred stock of
Westwood.
The consummation of the Merger is subject to certain conditions,
including the adoption of the Merger Agreement and the approval of the Merger by
the stockholders of Metro and the approval of the issuance of Westwood Common
Stock in the Merger (the "Share Issuance") by the stockholders of Westwood.
Pursuant to the Merger Agreement, Metro and Westwood will prepare and file a
joint proxy statement/prospectus to be mailed to stockholders of Metro and
Westwood in connection with the meetings of the stockholders of Metro and
Westwood to be held to vote on the Merger and the Share Issuance, respectively.
In addition to stockholder approval, the Merger is subject to, among
other conditions, the receipt of all necessary regulatory approvals, including
approvals pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
Copies of the Merger Agreement and the press release announcing the
signing of Merger Agreement are filed herewith as Exhibits 2.1 and 99.1,
respectively.
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Item 7. Financial Statements and Exhibits.
(a) Exhibits.
2.1 Agreement and Plan of Merger dated as of June 1, 1999 by and
among Metro, Westwood One and Merger Sub.
99.1 Press release dated June 2, 1999.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
METRO NETWORKS, INC.
By: /s/ David I. Saperstein
-----------------------------
David I. Saperstein
Chairman of the Board and Chief
Executive Officer
Date: June 9, 1999
S-1
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
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<S> <C>
2.1 Agreement and Plan of Merger dated as of June 1, 1999 by and
among Metro, Westwood One and Merger Sub
99.1 Press release dated June 2, 1999.
</TABLE>
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EXHIBIT 2.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
WESTWOOD ONE, INC.,
COPTER ACQUISITION CORP.
AND
METRO NETWORKS, INC.
================================================================================
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 THE MERGER......................................................................2
1.1 The Merger............................................................................2
1.2 Effective Time........................................................................2
1.3 Closing of the Merger.................................................................2
1.4 Effects of the Merger.................................................................2
1.5 Certificate of Incorporation and Bylaws of the Surviving Corporation..................2
1.6 Directors of the Surviving Corporation................................................3
1.7 Officers of the Surviving Corporation.................................................3
Article 2 CONVERSION OF SHARES; MERGER CONSIDERATION......................................3
2.1 Conversion of Shares..................................................................3
2.2 Exchange Fund.........................................................................4
2.3 Stock Options.........................................................................6
Article 3 REPRESENTATIONS AND WARRANTIES OF COMPANY.......................................7
3.1 Organization and Qualification; Subsidiaries..........................................7
3.2 Capitalization of Company and Its Subsidiaries........................................8
3.3 Authority Relative to This Agreement.................................................10
3.4 SEC Reports; Financial Statements; No Undisclosed Liabilities........................11
3.5 Information Supplied.................................................................11
3.6 Consents and Approvals; No Violations................................................12
3.7 No Default...........................................................................13
3.8 Absence of Changes...................................................................13
3.9 Litigation...........................................................................15
3.10 Compliance with Applicable Law.......................................................15
3.11 Employee Plans.......................................................................16
3.12 Labor and Employment Matters.........................................................17
3.13 Taxes................................................................................18
3.14 Material Contracts...................................................................21
3.15 Insurance............................................................................22
</TABLE>
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<TABLE>
<S> <C> <C>
3.16 Real Property........................................................................22
3.17 Tangible Property....................................................................23
3.18 Intellectual Property................................................................23
3.19 Year 2000............................................................................24
3.20 Books and Records....................................................................24
3.21 Absence of Questionable Payments.....................................................25
3.22 Opinion of Financial Advisor.........................................................25
3.23 Brokers..............................................................................25
3.24 Takeover Statutes; Dissenters' Rights................................................25
3.25 Existing Discussions.................................................................25
Article 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................26
4.1 Organization and Qualification; Subsidiaries.........................................26
4.2 Capitalization of Parent and Its Subsidiaries........................................26
4.3 Authority Relative to This Agreement.................................................28
4.4 SEC Reports; Financial Statements; No Undisclosed Liabilities........................29
4.5 Information Supplied.................................................................29
4.6 Consents and Approvals; No Violations................................................30
4.7 No Default...........................................................................31
4.8 Absence of Changes...................................................................31
4.9 Litigation...........................................................................33
4.10 Compliance with Applicable Law.......................................................33
4.11 Employee Plans.......................................................................33
4.12 Labor and Employment Matters.........................................................35
4.13 Taxes................................................................................36
4.14 Material Contracts...................................................................37
4.15 Insurance............................................................................39
4.16 Real Property........................................................................39
4.17 Tangible Property....................................................................39
4.18 Intellectual Property................................................................40
4.19 Year 2000............................................................................40
</TABLE>
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<TABLE>
<S> <C> <C>
4.20 Books and Records....................................................................40
4.21 Absence of Questionable Payments.....................................................40
4.22 Opinion of Financial Advisor.........................................................41
4.23 Brokers..............................................................................41
4.24 Takeover Statutes; Dissenters' Rights................................................41
4.25 No Prior Activities of Merger Sub....................................................41
4.26 Existing Discussions.................................................................41
4.27 Affiliate Agreements.................................................................42
Article 5 COVENANTS......................................................................42
5.1 Conduct of Business of Company.......................................................42
5.2 Conduct of Business of Parent........................................................45
5.3 Conduct of Business of Merger Sub....................................................49
5.4 Preparation of Joint Proxy Statement; Stockholders Approval..........................49
5.5 No Solicitation by the Company.......................................................51
5.6 Intentionally Omitted................................................................53
5.7 Accountants' Letters.................................................................53
5.8 Access to Information................................................................53
5.9 ADVANCE Additional Agreements; Reasonable Best Efforts...............................54
5.10 Regulatory Reviews...................................................................55
5.11 Public Announcements.................................................................55
5.12 Indemnification; Directors' and Officers' Insurance..................................56
5.13 Notification of Certain Matters......................................................56
5.14 Tax-Free Reorganization Treatment....................................................57
5.15 Company Affiliates...................................................................57
5.16 SEC Filings..........................................................................57
5.17 Employee Benefits....................................................................58
5.18 Parent Board.........................................................................58
5.19 Fees and Expenses....................................................................58
5.20 Antitakeover Statutes................................................................59
Article 6 CONDITIONS TO CONSUMMATION OF THE MERGER.......................................59
6.1 Conditions to Each Party's Obligations to Effect the Merger..........................59
</TABLE>
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<TABLE>
<S> <C> <C>
6.2 Conditions to the Obligations of the Company.........................................60
6.3 Conditions to the Obligations of Parent and Merger Sub...............................61
Article 7 TERMINATION; AMENDMENT; WAIVER.................................................62
7.1 Termination by Mutual Agreement......................................................62
7.2 Termination by Either Parent or the Company..........................................62
7.3 Termination by the Company...........................................................63
7.4 Termination by Parent................................................................64
7.5 Effect of Termination and Abandonment................................................64
7.6 Amendment............................................................................66
7.7 Extension; Waiver....................................................................66
Article 8 MISCELLANEOUS..................................................................66
8.1 Nonsurvival of Representations and Warranties........................................66
8.2 Entire Agreement; Assignment.........................................................66
8.3 Notices..............................................................................67
8.4 Governing Law........................................................................67
8.5 Descriptive Headings.................................................................68
8.6 Parties in Interest..................................................................68
8.7 Severability.........................................................................68
8.8 Specific Performance.................................................................68
8.9 Brokers..............................................................................68
8.11 Counterparts.........................................................................68
8.12 Interpretation.......................................................................68
</TABLE>
EXHIBITS
Exhibit A - Company Stockholders Voting Agreement
Exhibit B - Parent Stockholder Voting Agreement
Exhibit C - Company Affiliate's Letter
Exhibit D - Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 1, 1999 (the
"Agreement"), is among WESTWOOD ONE, INC., a Delaware corporation ("Parent"),
COPTER ACQUISITION CORP. ("Merger Sub"), a Delaware corporation and a direct
wholly owned subsidiary of Parent, and METRO NETWORKS, INC., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of the Company, Parent and Merger Sub
each have determined that the Merger (as defined in Section 1.1) is advisable
and fair to, and in the best interests of, their respective stockholders and
have approved the Merger in accordance with this Agreement;
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger shall qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, concurrently with the execution and delivery of this
Agreement, David I. Saperstein, Charles I. Bortnick and Shane E. Coppola (the
"Company Stockholders") have entered into a voting agreement with Parent in the
form of Exhibit A hereto (the "Company Stockholders Voting Agreement") providing
for, among other things, the agreement of the Company Stockholders to vote any
and all outstanding shares of common stock, par value $.001 per share ("Company
Common Stock") and Series A Convertible Preferred Stock, par value $.001 per
share ("Company Series A Preferred Stock"), that they beneficially own in favor
of the adoption of this Agreement and the Merger; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Infinity Broadcasting Corporation (the "Parent Stockholder") has
entered into a voting agreement in the form of Exhibit B hereto (the "Parent
Stockholder Voting Agreement") providing for, among other things, the agreement
of the Parent Stockholder to vote any and all outstanding shares of common
stock, par value $.01 per share ("Parent Common Stock"), of the Company that it
beneficially owns in favor of the Share Issuance (as defined in Section 4.3(a))
by the Parent; and
WHEREAS, each of Charles I. Bortnick and Shane E. Coppola have entered
into employment agreements with Parent, and David I. Saperstein has entered into
a consulting agreement with Parent, which agreements shall become effective upon
consummation of the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
Company, Parent and Merger Sub hereby agree as follows:
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ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2),
upon the terms and subject to the conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), Merger Sub shall be
merged with and into the Company (the "Merger"). Following the Merger, the
Company shall continue as the surviving corporation under the name "Metro
Networks, Inc." (the "Surviving Corporation") and shall continue its corporate
existence under the DGCL, and the separate corporate existence of Merger Sub
shall cease.
1.2 Effective Time. Subject to the provisions of this Agreement,
Parent, Merger Sub and the Company shall cause the Merger to be consummated by
filing a certificate of merger complying with the DGCL with the Secretary of
State of the State of Delaware as soon as practicable on or after the Closing
Date (as defined in Section 1.3). The Merger shall become effective upon the
later of such filing or at such time thereafter as may be agreed to in writing
by each of the parties hereto and specified in such certificate of merger (the
"Effective Time").
1.3 Closing of the Merger. The closing of the Merger (the "Closing")
will take place at a time and on a date (the "Closing Date") to be specified by
the parties, which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article 6 (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 & Manges LLP, 767 Fifth Avenue, New York, New York 10153, unless
another time, date or place is agreed to in writing by the parties hereto.
1.4 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges,
immunities, powers and franchises of Merger Sub and the Company shall vest in
the Surviving Corporation, and all debts, liabilities, obligations and duties of
Merger Sub and the Company shall become the debts, liabilities, obligations and
duties of the Surviving Corporation.
1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation. The Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation (except that the name of Merger Sub
shall be changed to "Metro Networks, Inc.", until amended in accordance with
such Certificate of Incorporation and the DGCL. The Bylaws of Merger Sub in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, until amended in accordance with such Bylaws and the
DGCL.
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1.6 Directors of the Surviving Corporation. The directors of Merger
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until such
director's successor is duly elected or appointed and qualified or until their
earlier death, resignation or removal.
1.7 Officers of the Surviving Corporation. The officers of Merger Sub
at the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until such officer's
successor is duly elected or appointed and qualified or until their earlier
death, resignation or removal.
ARTICLE 2
CONVERSION OF SHARES; MERGER CONSIDERATION
2.1 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any of the parties hereto or their
respective stockholders:
(a) Common Stock of Merger Sub. Each share of common stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into one fully paid and non-assessable
share of common stock, par value $.01 per share, of the Surviving Corporation.
(b) Common Stock of the Company. Each share of the Company Common
Stock issued and outstanding immediately prior to the Effective Time (each, a
"Share"), other than Shares to be cancelled in accordance with Section 2.1(d),
shall be converted into the right to receive 1.5 fully paid and non-assessable
shares (the "Exchange Ratio") of Parent Common Stock (all such shares of Parent
Common Stock issued, together with any cash in lieu of fractional shares of
Parent Common Stock to be paid pursuant to Section 2.2(f), being referred to as
the "Merger Consideration"), and shall cease to be outstanding and shall
automatically be cancelled and shall cease to exist, and each holder of a
certificate previously evidencing any such Shares (each, a "Certificate") shall
cease to have any rights with respect thereto, except the right to receive, upon
the surrender of such Certificate in accordance with the provisions of Section
2.2, the Merger Consideration with respect to the Shares previously evidenced by
such Certificate.
(c) Preferred Stock of the Company. Each share of the Company
Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time, other than Company Series A Preferred Stock to be cancelled in
accordance with Section 2.1(d), shall be converted into the right to receive 1.5
fully paid and non-assessable shares of a corresponding series of preferred
stock of Parent (the "Parent Series A Preferred Stock") that shall have the
terms set forth in a Certificate of Designations which is substantially
identical to the certificate of designations relating to the Company Series
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A Preferred Stock, except that Parent's name shall be substituted for the
Company's therein and the liquidation preference payable to holders of Parent
Series A Preferred Stock shall be the par value thereof (the "Certificate of
Designations"). Upon surrender at the Closing of a certificate representing
shares of Company Series A Preferred Stock to Parent, together with such
customary instruments of transfer and other documents as Parent may reasonably
request, the holder of such certificate shall be entitled to receive in exchange
therefor certificates or other evidence representing the number of shares of
Parent Series A Preferred Stock which such holder has the right to receive
pursuant to the immediately preceding sentence.
(d) Cancellation of Treasury Shares and Parent-Owned Shares. Each
share of Company Common Stock and Company Series A Preferred Stock that is owned
by the Company, Parent or Merger Sub shall automatically be cancelled and shall
cease to exist, and no consideration shall be delivered or deliverable in
exchange therefor.
2.2 Exchange Fund.
(a) Letter of Transmittal. As soon as reasonably practicable
after the Effective Time, a bank or trust company to be designated by Parent,
which bank or trust company shall be reasonably acceptable to the Company (the
"Exchange Agent"), shall mail to each holder of record of Shares immediately
prior to the Effective Time (excluding any Shares to be cancelled pursuant to
Section 2.1(d)) (i) a letter of transmittal (the "Letter of Transmittal") which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of such Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent shall
reasonably specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration with respect to the
Shares formerly represented thereby.
(b) Deposit of Merger Consideration. Promptly after the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit of the
holders of Shares for exchange in accordance with this Article 2, certificates
or other evidence representing the shares of Parent Common Stock issuable
pursuant to Section 2.1(b). Parent agrees to make available to the Exchange
Agent from time to time as needed, cash sufficient to pay cash in lieu of
fractional shares pursuant to Section 2.2(f) and any dividends or other
distributions pursuant to Section 2.2(e). Any cash and certificates or other
evidence representing shares of Parent Common Stock deposited with the Exchange
Agent shall hereinafter be referred to as the "Exchange Fund."
(c) Surrender of Certificates. Upon surrender of a Certificate to
the Exchange Agent, together with the Letter of Transmittal, duly executed, and
such other customary documents as Parent or the Exchange Agent shall reasonably
request, the holder of such Certificate shall be entitled to receive in exchange
therefor, (i) certificates or other evidence representing the number of whole
shares of Parent Common Stock which such Holder has the right to receive
pursuant to Section 2.1(b), (ii) any cash in lieu of fractional shares of Parent
Common Stock pursuant to Section 2.2(f) and (iii) any
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dividends or other distributions pursuant to Section 2.2(e) (in each case
without interest and less the amount of any required withholding Taxes, if any,
in accordance with Section 2.2(i)).
(d) Rules Governing Exchange. Parent, in consultation with the
Company prior to the Effective Time, shall have the right to make reasonable
rules, not inconsistent with the terms of this Agreement, governing the issuance
and delivery of certificates for, or other evidence of, shares of Parent Common
Stock and Parent Series A Preferred Stock.
(e) Distributions With Respect to Unexchanged Shares of Parent
Common Stock. The shares of Parent Common Stock issuable pursuant to Section
2.1(b) shall be deemed to have been issued at the Effective Time for purposes of
entitlement to dividends or other distributions declared, if any, after the
Effective Time. No dividends or other distributions 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 such holder is entitled to receive until such Certificate is
surrendered by such holder.
(f) Fractional Shares. No scrip or fractional share certificate
for Parent Common Stock will be issued upon the surrender of Certificates, and
an outstanding fractional share interest will not entitle the owner thereof to
vote, to receive dividends or to any rights of a stockholder of Parent with
respect to such fractional share interest. In lieu of the issuance of fractional
shares, Parent shall pay to the Exchange Agent an amount sufficient for the
Exchange Agent to pay each holder of Shares an amount in cash equal to the
product obtained by multiplying (i) the fractional share interest to which such
holder would otherwise be entitled (after taking into account all Shares held at
the Effective Time by such holder) by (ii) the closing price for a share of
Parent Common Stock on the NYSE Composite Transaction Tape on the first business
day immediately following the Effective Time.
(g) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the former holders of Shares for six (6)
months after the Effective Time shall be delivered to Parent, upon demand, and
any former holders of Shares who have not theretofore complied with this Article
2 shall thereafter look only to Parent for, and subject to Section 2.2(h) Parent
shall deliver, the Merger Consideration and any dividends or other distributions
with respect to the Parent Common Stock to which such holder is entitled
pursuant to this Article 2.
(h) No Liability. None of Parent, Merger Sub, the Company or the
Surviving Corporation shall be liable to any former holder of Shares for any
Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(i) Withholding Rights. Parent, the Surviving Corporation and the
Exchange Agent shall be entitled to deduct and withhold from the consideration
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otherwise payable pursuant to this Agreement to any former holder of Shares,
such amounts as Parent, the Surviving Corporation or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local or foreign Tax law. To the extent that
amounts are so withheld by Parent, the Surviving Corporation or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the former holder of the Shares in respect of which such
deduction and withholding was made by Parent, the Surviving Corporation or the
Exchange Agent.
(j) 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 applicable Merger Consideration with respect to the Shares
formerly represented thereby and any unpaid dividends and distributions on
shares of Parent Common Stock deliverable in respect thereof pursuant to Section
2.2(e).
(k) Stock Transfer Books. The stock transfer books of the Company
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of Shares thereafter on the records of the
Company.
(l) Affiliates. Notwithstanding anything to the contrary herein,
no shares of Parent Common Stock or cash shall be delivered to a person who may
be deemed a Company Affiliate in accordance with Section 5.15, until such person
has executed and delivered to Parent a Company Affiliate Letter (as defined in
Section 5.15).
2.3 Stock Options.
(a) Parent and the Company shall take such commercially
reasonable actions as are necessary to provide that (i) at the Effective Time
each outstanding Company Stock Option (as defined in Section 3.2(a)) shall be
adjusted in accordance with the terms thereof and this Agreement to be
exercisable to purchase shares of Parent Common Stock as provided below and (ii)
except as otherwise provided for in this Agreement or in option grants to
non-employee directors of the Company, or as agreed to in writing by Parent, the
vesting of exercisability of any Company Stock Option shall not be accelerated
due to the Merger or this Agreement. Following the Effective Time, each Company
Stock Option shall continue to have, and shall be subject to, the same terms and
conditions (including vesting and transfer restrictions) set forth in the
Company Option Plans (as defined in Section 3.2(a)) or any other agreement
pursuant to which such Company Stock Option was subject immediately prior to the
Effective Time, except that (i) each 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 the Company Common Stock for which such Company
Stock Option was exercisable and (y)
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the Exchange Ratio, rounded down to the nearest whole share, if necessary, (ii)
the per share exercise price of such Company Stock Option shall be the exercise
price immediately prior to the Effective Time divided by the Exchange Ratio
(rounded up to the nearest whole cent) and (iii) in the event an optionee's
(other than David Saperstein's) employment is terminated by the Surviving
Corporation or one of its affiliates without "cause" (as defined in the
optionee's option agreement) within three years following the Effective Time,
Parent shall cause any unvested options held by the optionee which were granted
pursuant to the Company Option Plans prior to the Effective Time to immediately
vest. The adjustments provided herein to any options which are incentive stock
options (as defined in Section 422 of the Code) shall be effected in a manner
consistent with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of the Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective Company Option Plans and
the agreements evidencing the grants of such Company Stock Options and that such
Company Stock Options and agreements shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 2.3) after
giving effect to the Merger and the provisions set forth above. Parent shall
comply with the terms of the Company Option Plans.
(c) 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. 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to each of Parent and
Merger Sub as follows:
3.1 Organization and Qualification; Subsidiaries.
(a) The Company and each of its subsidiaries (as defined in
Section 3.1(b)) is a corporation or legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate, partnership or
similar power and authority to own, lease and operate its properties and to
carry on its businesses as now conducted and proposed by the Company to be
conducted.
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(b) Except as set forth in Section 3.1(b) of the Disclosure
Schedule previously delivered by the Company to Parent (the "Company Disclosure
Schedule"), the Company has no subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity (other
than marketable securities which are held as investments and are reflected as
such on the consolidated financial statements of the Company). The term
"subsidiary" means, when used with reference to any entity, any corporation or
other organization, whether incorporated or unincorporated, (i) of which such
party or any other subsidiary of such party is a general or managing partner or
managing member, (ii) the outstanding voting securities or interests of which,
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization, are directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or (iii)
more than fifty percent (50%) of the value of the outstanding equity securities
or interests (including membership interests) of which are owned directly or
indirectly by such party.
(c) The Company and each of its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company. When used in
connection with any party to this Agreement, the term "Material Adverse Effect"
means, with respect to any entity, any event, change, occurrence, development,
circumstance or effect that is or would reasonably be expected to be materially
adverse to (i) the assets, properties, condition (financial or otherwise),
business or results of operations of such entity and its subsidiaries taken as a
whole or (ii) the ability of such entity to consummate the transactions
contemplated by this Agreement.
(d) The Company has heretofore delivered or made available to
Parent accurate and complete copies of the articles or certificate of
incorporation and by-laws, or other similar organizational documents, as
currently in effect, of the Company and each of its subsidiaries.
3.2 Capitalization of Company and Its Subsidiaries.
(a) The authorized capital stock of the Company consists of: (i)
25,000,000 shares of Company Common Stock, of which, as of May 31, 1999,
16,730,969 shares were issued and outstanding and no shares were held in
treasury and (ii) 10,000,000 shares of Preferred Stock, par value $.001 per
share, of which, as of May 31, 1999, 2,549,750 shares of Company Series A
Preferred Stock were authorized, issued and outstanding. All of the issued and
outstanding shares of the Company Common Stock and Company Series A Preferred
Stock have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of May 31, 1999, (i)
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2,050,123 shares of the Company Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options granted by the Company to purchase shares of the Company
Common Stock (the "Company Stock Options") issued pursuant to the Company stock
option plans listed in Section 3.2(a) of the Company Disclosure Schedule (the
"Company Option Plans") and (ii) 2,549,750 shares of the Company Common Stock
were reserved for issuance and issuable upon or otherwise deliverable in
connection with the conversion of outstanding shares of the Company Series A
Preferred Stock. Since May 31, 1999, no shares of the Company's capital stock
have been issued other than pursuant to the exercise of the Company Stock
Options already in existence on such date and, since May 31, 1999, no Company
Stock Options have been granted. Section 3.2(a) of the Company Disclosure
Schedule sets forth a complete and correct list of all holders of options to
acquire shares of the Company Common Stock, including such person's name, the
number of options (vested, unvested and total) held by such person, the
remaining term for vesting of such options and the exercise price for each such
option. Except as set forth above in this Section 3.2(a), as of the date hereof,
there are outstanding (i) no shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company or its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or its subsidiaries, and no obligations of the Company or its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, or interests in the ownership or
earnings, of the Company or its subsidiaries or other similar rights (including
stock appreciation rights) (collectively, "Company Securities"). There are no
outstanding obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any Company Securities. Except as set forth in Section
3.2(a) of the Company Disclosure Schedule, there are no shareholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party or to which it is bound relating to the voting or disposition of any
shares of capital stock of the Company.
(b) Except as disclosed in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Lien (as defined below) or any other limitation or restriction (including
any restriction on the right to vote or sell the same, except as may be provided
as a matter of law). There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly of, any capital stock or other ownership
interests in, or any other securities of, any subsidiary of the Company. There
are no outstanding contractual obligations of the Company or its subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
or other ownership interests in any subsidiary of the Company. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security), any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset.
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<PAGE> 15
3.3 Authority Relative to This Agreement.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and, subject to obtaining the Company
Requisite Vote (as defined below), to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Board of Directors of the Company (the "Company Board") and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than, with respect to the Merger, the approval and adoption of this
Agreement and the transactions contemplated hereby, including the Merger, by
holders of a majority of the voting stock of the Company (which is comprised
solely of Company Common Stock and Company Series A Preferred Stock) acting as a
single class (the "Company Requisite Vote")). This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally, and the
application of equitable principles (whether considered in a proceeding at law
or in equity).
(b) The Company Board has duly and validly approved, and taken
all corporate actions required to be taken by the Company Board for, the
consummation of the transactions, including the Merger, contemplated hereby and
has resolved (i) to deem this Agreement and the transactions contemplated
hereby, including the Merger, taken together, advisable and fair to, and in the
best interests of, the Company and its stockholders, (ii) to recommend to the
Company's stockholders that they approve and adopt this Agreement and the
transactions contemplated hereby, including the Merger, and (iii) to approve the
Company Stockholders Voting Agreement.
(c) The Company Board has directed that this Agreement be
submitted to the Company's stockholders for their approval and adoption at the
Company Stockholders Meeting (as defined in Section 5.4(c)).
(d) The Company Requisite Vote is the only vote of the holders of
any class or series of capital stock of the Company necessary to adopt this
Agreement and approve the transactions contemplated hereby, including the
Merger. No other vote or consent of the stockholders of the Company is required
by law, the certificate of incorporation or bylaws of the Company or otherwise
in order for the Company to adopt this Agreement or to approve the transactions
contemplated hereby, including the Merger. Based upon the currently outstanding
capital stock of the Company, the Company Stockholders own of record a majority
of the issued and outstanding shares of voting capital stock of the Company.
Based upon the currently outstanding capital stock of the Company, the
affirmative vote of the Company Stockholders will be sufficient to obtain the
Company Requisite Vote.
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3.4 SEC Reports; Financial Statements; No Undisclosed Liabilities.
(a) The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since October
16, 1996 (the "Company SEC Reports"), each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), each as in effect on the dates such forms, reports
and documents were filed. None of the Company SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in the Company SEC
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto in effect on the date when such Company SEC Reports were filed and
fairly present, in all material respects, in conformity with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments that have not been
and are not expected to be material in amount).
(b) Neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and there is no existing condition, situation or set of circumstances
which could be expected to result in such a liability or obligation, except for
liabilities or obligations (i) reflected in the Company SEC Reports filed prior
to the date hereof (the "Filed Company SEC Reports"), (ii) disclosed in the
Company Disclosure Schedule, (iii) incurred in the ordinary course of business
which do not and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company or (iv) incurred in
connection with the transactions contemplated hereby.
(c) The Company has heretofore made available to Parent a
complete and correct copy of any material amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Exchange Act.
3.5 Information Supplied.
(a) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the S-4 (as defined in
Section 5.4), will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state
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<PAGE> 17
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(b) The Joint Proxy Statement/Prospectus (as defined in Section
5.4), will not, at the date first mailed to the Company's stockholders, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. No representation or warranty is made by the Company in this Section
3.5(b) with respect to (i) statements made or incorporated by reference therein
based on information supplied by Parent or any of its subsidiaries for inclusion
or incorporation by reference in the S-4 or (ii) compliance with the
requirements of the Securities Act or the Exchange Act with respect to documents
incorporated by reference in the S-4 from the Parent SEC Reports (as defined in
Section 4.4). The Joint Proxy Statement/Prospectus will comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder.
3.6 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the filing and recordation of a certificate of
merger as required by the DGCL, and as otherwise set forth in Section 3.6 of the
Company Disclosure Schedule, no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Except as set forth in Section 3.6 of the Company Disclosure Schedule,
neither the execution, delivery and performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
certificate or articles of incorporation or bylaws (or similar governing
documents) of the Company or any of its subsidiaries, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party, including, without limitation, station affiliation
agreements, or by which any of them or any of their respective properties or
assets may be bound, or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation ("Law") applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for violations, breaches or defaults which would not reasonably
be expected to have, individually or in the
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<PAGE> 18
aggregate, a Material Adverse Effect on the Company. No rights of first refusal
or first offer, preemptive rights or similar rights of participation are
applicable to the transactions contemplated by this Agreement.
3.7 No Default. Except as disclosed in Section 3.7 of the Company
Disclosure Schedule, none of the Company or its subsidiaries is in default or
violation (and no event has occurred which with or without due notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its certificate or articles of incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is now a party or by which any
of them or any of their respective properties or assets may be bound or (iii)
any order, writ, injunction, decree, law, statute, rule or regulation applicable
to the Company, its subsidiaries or any of their respective properties or
assets, except, in the case of (i), for immaterial defaults with respect to
subsidiaries and, in the case of (ii) or (iii), for violations, breaches or
defaults which do not or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
3.8 Absence of Changes. Except as and to the extent disclosed by the
Company in the Filed Company SEC Reports or as disclosed in Section 3.8 of the
Company Disclosure Schedule, since January 1, 1999, the Company and its
subsidiaries have, in all material respects, conducted their businesses in the
ordinary and usual course consistent with past practice and there has not been:
(a) any event, change, occurrence, development or state of
circumstances or facts which does or would reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on the Company,
excluding, any change, effect, event, development, state of facts or
circumstances or occurrence (i) relating to the United States economy in
general, (ii) relating to events or developments affecting the industry in which
the Company and its subsidiaries operate generally, (iii) with respect to
station affiliation agreements only, arising out of or otherwise resulting from
the announcement of the execution and delivery of this Agreement or (iv) arising
out of or otherwise resulting from any action taken or not taken by the Company
at the direction of Parent or Merger Sub in compliance with the terms and
conditions of this Agreement;
(b) 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
subsidiary of any Company Securities;
(c) any amendment of any term of any outstanding security of the
Company or any subsidiary;
(d) (i) any incurrence or assumption by the Company or any
subsidiary of any indebtedness for borrowed money (A) other than in the ordinary
course of
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<PAGE> 19
business consistent with past practice or (B) in connection with any acquisition
or capital expenditure permitted by Section 5.1 or (ii) any guarantee,
endorsement or other incurrence or assumption of liability (whether directly,
contingently or otherwise) by the Company or any subsidiary for the obligations
of any other person (other than any wholly owned subsidiary of the Company),
other than in the ordinary course of business consistent with past practice;
(e) any creation or assumption by the Company or any subsidiary
of any Lien (other than (i) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; (ii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (iii) statutory Liens of landlords, carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings; (iv) Liens securing
zoning restrictions, easements, rights-of-way, restrictions under governmental
licenses or authorizations, restrictions and other similar charges or
encumbrances or minor defects in title not interfering in any material respect
with the business of such party; (v) Liens incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security or similar legislation; and (vi) Liens which do
not materially interfere with the occupant's use and enjoyment of such real
property or materially detract from or diminish the value thereof (collectively,
"Permitted Liens")) of any kind or nature whatsoever on any material asset of
the Company or any subsidiary other than in the ordinary course of business
consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any subsidiary other than (i) any
acquisition permitted by Section 5.1, (ii) loans, advances or capital
contributions to or investments in wholly owned subsidiaries of the Company or
(iii) loans or advances to employees of the Company or any subsidiary made in
the ordinary course of business consistent with past practice not in excess of
$50,000 individually or $250,000 in the aggregate;
(g) (i) any contract or agreement entered into by the Company or
any subsidiary relating to any material acquisition or disposition of any assets
or business or (ii) any modification, amendment, assignment, termination or
relinquishment by the Company or any subsidiary of any contract, license or
other right (including any insurance policy naming it as a beneficiary or a loss
payee) that does or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, other than, in the case of
(i) and (ii), transactions, commitments, contracts or agreements in the ordinary
course of business consistent with past practice and those contemplated by this
Agreement;
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(h) any material change in any method of accounting or accounting
principles or practice (for financial accounting or tax purposes) by the Company
or any subsidiary, except for any such change required by GAAP;
(i) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any of its subsidiaries other
than, with respect to employees (but not executive officers or directors), in
the ordinary course of business or involving payments not in excess of $25,000
in any one case, or $100,000 in the aggregate or in accordance with the
Company's severance guidelines in effect on the date hereof; (ii) 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 of its subsidiaries; (iii) increase in benefits payable
under any existing severance or termination pay policies or employment
agreements; or (iv) increase in compensation, bonus or other benefits payable to
directors, officers or employees of the Company or any of its subsidiaries other
than, in the case of clauses (ii), (iii) or (iv) the entering into of such
agreements (or amendments thereto) or the payment of increases made prior to the
date hereof in the ordinary and usual course of business consistent with past
practice; or
(j) any action or proceeding commenced or, to the knowledge of
the Company, threatened or proposed, to condemn or take by eminent domain or
other governmental action any real or personal property owned or used by the
Company and its subsidiaries.
3.9 Litigation. Except as disclosed by the Company in the Filed
Company SEC Reports or as disclosed in Section 3.9 of the Company Disclosure
Schedule, (i) there is no suit, claim, action, proceeding or investigation
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries or any of their respective properties or assets and (ii)
none of the Company or its subsidiaries is subject to any outstanding judgment,
order, writ, injunction or decree, which, in the case of either (i) or (ii),
would require the Company to make payments in excess of $250,000 with respect to
any single suit, claim, action, proceeding, investigation, judgment, order,
writ, injunction or decree, or has had or would reasonably be expected to have a
Material Adverse Effect on the Company.
3.10 Compliance with Applicable Law. Except as disclosed by the
Company in the Filed Company SEC Reports or Section 3.10 of the Company
Disclosure Schedule, and except for failures which do not or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, (i) the Company and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Company Permits"), (ii) the Company and its subsidiaries are in
compliance with the terms of the Company Permits, (iii) the businesses of the
Company and its subsidiaries are not being conducted in violation of any Law of
any Governmental Entity, 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
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exposure to hazardous materials (collectively, "Environmental Laws"), and (iv)
except as disclosed in Section 3.13 hereof, no investigation or review by any
Governmental Entity with respect to the Company or its subsidiaries is pending
or, to the knowledge of the Company, threatened, nor, to the knowledge of the
Company, has any Governmental Entity indicated an intention to conduct the same.
3.11 Employee Plans.
(a) Section 3.11(a) of the Company Disclosure Schedule lists all
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other employee
benefit plans or other benefit arrangements, including but not limited to all
employment and consulting agreements and all bonus and other incentive
compensation, deferred compensation, disability, severance, retention, salary
continuation, stock and stock-related award, stock option, stock purchase or
collective bargaining agreements, plans, policies and arrangements which the
Company or any of its subsidiaries maintains, is a party to, contributed to or
has any obligation to or liability for in respect of current or former employees
and directors (each, a "Company Employee Benefit Plan" and collectively, the
"Company Employee Benefit Plans"). None of the Company Employee Benefit Plans
other than a "multiemployer plan" (within the meaning of section 3(37) of ERISA)
is subject to Title IV of ERISA.
(b) True, 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.
(c) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, (i) all payments required to be made by
or under any Company Employee Benefit Plan, any related trusts, insurance
policies or ancillary agreements, or any collective bargaining agreement have
been timely made, (ii) the Company and its subsidiaries have performed all
obligations required to be performed by them under any Company Employee Benefit
Plan, (iii) the Company Employee Benefit Plans have been administered and are in
compliance in all respects with their terms and the requirements of ERISA, the
Code and other applicable laws, and (iv) there are no actions, suits,
arbitrations, claims (other than routine claims for benefits) or administrative
proceedings pending or, to the knowledge of the Company, threatened with respect
to any Company Employee Benefit Plan.
(d) Except as disclosed in Section 3.11(d) of the Company
Disclosure Schedule, each Company Employee Benefit Plan and its related trust
which are intended
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to be "qualified" within the meaning of Sections 401(a) and 501(a) of the Code,
respectively, have been determined by the Internal Revenue Service to be so
"qualified" under such Sections, as amended by the Tax Reform Act of 1986, and
the Company knows of no fact which would adversely affect the qualified status
of any such Company Employee Benefit Plan and its related trust.
(e) Except as disclosed in Section 3.11(e) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will, solely or in
connection with any other event, (i) increase any benefits otherwise payable
under any Company Employee Benefit Plan, or (ii) result in the acceleration of
the time of payment or vesting of any such benefits. Except as disclosed in
Section 3.11(e) of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will, solely or in connection with any other event, result in any payment
becoming due, or increase the compensation due, to any current or former
employee or director of the Company or any of its subsidiaries.
(f) Except as disclosed in Section 3.11(f) of the Company
Disclosure Schedule, none of the Company Employee Benefit 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.
(g) Neither the Company nor any of its subsidiaries has incurred,
nor, to the Company's knowledge is 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 Material
Adverse Effect. The termination of, or withdrawal from, any multiemployer plan
to which the Company or any of its subsidiaries contributes, on or prior to the
Effective Time, will not subject the Company or any of its subsidiaries to any
liability under Title IV of ERISA that would reasonably be expected to have a
Material Adverse Effect on the Company.
3.12 Labor and Employment Matters.
(a) Section 3.12 of the Company Disclosure Schedule sets forth a
list of all employment or severance compensation agreements that require the
Company or its subsidiaries to make payments in excess of $250,000 annually, and
labor or collective bargaining agreements to which the Company or any subsidiary
is party. Except as set forth in Section 3.12 of the Company Disclosure
Schedule, (i) there are no employment or severance compensation agreements that
require the Company or its subsidiaries to make payments in excess of $250,000
annually, (ii) there are no labor or collective bargaining agreements which
pertain to employees of the Company or any of its subsidiaries and (iii) neither
the Company nor any of its subsidiaries is a party to or bound by any agreement
with any employee or consultant pursuant to which such person would be entitled
to receive any additional compensation (including stock options) or an
accelerated payment of compensation (including the accelerated vesting of stock
options)
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<PAGE> 23
as a result of the (A) consummation of the transactions contemplated hereby or
(B) the termination of such employment or consulting following such
consummation. The Company has heretofore made available to Parent true and
complete copies of the agreements listed on Section 3.12 of the Company
Disclosure Schedule, together with all amendments, modifications, supplements
and side letters affecting the duties, rights and obligations of any party
thereunder.
(b) Except as disclosed in Section 3.12 of the Company Disclosure
Schedule, no employees of the Company or any of its subsidiaries are represented
by any labor organization; no labor organization or group of employees of the
Company or any of its subsidiaries has made a pending demand for recognition or
certification; and, to the Company's knowledge, there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. To the Company's knowledge, there are no organizing activities
involving the Company or its subsidiaries pending with any labor organization or
group of employees of the Company or any of its subsidiaries.
(c) Except as disclosed in Section 3.12 of the Company Disclosure
Schedule, there are no material unfair labor practice charges, grievances or
complaints pending before any Government Entity or threatened in writing by or
on behalf of any employee or group of employees of the Company or its
subsidiaries.
(d) Except as disclosed in Section 3.12 of the Company Disclosure
Schedule, there are no material complaints, charges or claims against the
Company or its subsidiaries filed and currently pending, or threatened in
writing to be brought or filed, with any Governmental Entity or arbitrator based
on, arising out of, in connection with, or otherwise relating to the employment
or termination of employment of any individual by the Company or its
subsidiaries.
(e) Except as disclosed in Section 3.12 of the Company Disclosure
Schedule, the Company and each of its subsidiaries is in compliance in all
material respects with all Laws relating to the employment of labor, including
all such Laws and orders relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health workers' compensation and the
collection and payment of withholding and/or Social Security Taxes and similar
Taxes.
3.13 Taxes.
(a) Except as disclosed in Section 3.13 of the Company Disclosure
Schedule:
(i) Each of the Company and its subsidiaries has timely
filed, or has caused to be timely filed on its behalf (taking into account any
extension of time within which to file), all federal income Tax Returns (as
hereinafter defined) and all other material Tax Returns required to be filed by
it, and all such filed Tax Returns are true,
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complete and accurate in all material respects. All Taxes shown to be due on
such Tax Returns have been timely paid.
(ii) The most recent financial statements contained in the
Company SEC Reports reflect an adequate reserve for all Taxes payable by the
Company and its subsidiaries for all Taxable periods and portions thereof
through the date of such financial statements. No deficiency with respect to
Taxes has been proposed, asserted or assessed against the Company or any
subsidiary in excess of $250,000. No liens for Taxes exist with respect to any
asset of Company or any subsidiary of the Company, except for statutory liens
for Taxes not yet due.
(iii) The federal income Tax Returns of the Company and each
subsidiary of the Company have been examined by and settled with the United
States Internal Revenue Service (or the applicable statute of limitations has
expired) for all years through 1994, and the material state income and franchise
Tax Returns and the foreign Tax Returns of the Company and each subsidiary of
the Company have been examined by and settled with the applicable Tax
authorities for the years specified in Section 3.13 of the Company Disclosure
Schedule. All assessments for Taxes due with respect to such completed and
settled examinations or any concluded litigation have been fully paid. Neither
the Company nor its subsidiaries has requested or been granted an extension of
time for filing any Tax Return that has not yet been filed.
(iv) Neither the Company nor any subsidiary of the Company is
a party to a Tax allocation or sharing agreement.
(v) Neither the Company nor any subsidiary of the Company 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.
(vi) Neither the Company nor any subsidiary of the Company
(i) has been a member of an affiliated group of corporations within the meaning
of Section 1504 of the Code, other than the affiliated group of which the
Company is the common parent or (ii) has any liability for the Taxes of any
person (other than the Company and its subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(vii) No audit or other administrative or court proceedings
are pending with respect to federal, state or foreign income or franchise Taxes
of the Company or any subsidiary of the Company and no written notice thereof
has been received. Neither the Company nor any subsidiary has any outstanding
agreements, waivers, or arrangements extending the statutory period of
limitation applicable to any claim for, or the period for the collection or
assessment of, federal, state or foreign income or franchise Taxes due from or
with respect to the Company or any subsidiary for any taxable period.
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(viii) No claim has been made in writing by a Tax authority
in a jurisdiction where neither the Company nor any subsidiary of the Company
files Tax Returns that the Company or any subsidiary of the Company is or may be
subject to taxation in that jurisdiction.
(ix) Neither the Company nor any subsidiary of the Company is
a party to any contract, agreement or other arrangement which provides for the
payment of any amount which would not be deductible by reason of Section 162(m)
or Section 280G of the Code.
(x) The Company has made available to Parent true and
complete copies of (i) all federal, state and foreign income and franchise Tax
Returns of the Company and its subsidiaries for the preceding three Taxable
years and (ii) any audit report issued within the last three years (or otherwise
with respect to any audit or proceeding in progress) relating to Taxes of the
Company or any subsidiary of the Company.
(xi) No subsidiary of the Company owns any Shares.
(xii) None of the Company or any of its subsidiaries has
taken, agreed to take or will take any action that would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
(xiii) The Company and each of its subsidiaries are not
currently, have not been within the last five years, and do not anticipate
becoming, a "United States real property holding corporation" within the meaning
of Section 897(c) of the Code.
(xiv) Neither the Company nor any subsidiary has filed a
consent under Section 341(f) of the Code concerning collapsible corporations.
For purposes of this Agreement:
"Tax" means any and all United States federal, state, county or
local, or foreign or provincial taxes, assessments, duties, levies or similar
charges of any kind including, without limitation, all income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll, value
added, alternative or added minimum, ad valorem or transfer tax, or any other
tax, custom, duty or governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
governmental authority.
"Tax Returns" means all federal, state, local, provincial and
foreign Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
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3.14 Material Contracts.
(a) Section 3.14 of the Company Disclosure Schedule (together
with Section 3.12 of the Company Disclosure Schedule) lists all material
contracts and agreements (and all material amendments, modifications and
supplements thereto and all side letters to which the Company or any of its
subsidiaries is a party materially affecting the obligations of any party
thereunder) to which the Company or any of its subsidiaries is a party or by
which any of its properties or assets are bound including, without limitation,
all: (i) employment, severance, product design or development, personal services
or consulting agreements (other than contracts with affiliates or as identified
in clause (iii) of this Section 3.14) pursuant to which the Company or its
subsidiaries are required to pay more than $250,000 annually, or by which the
Company or its subsidiaries receive more than $1,000,000 annually; (ii) except
for contracts relating to the normal business operations of the Company and its
subsidiaries entered into in the ordinary course of business consistent with
past practice, contracts pursuant to which the Company is obligated to indemnify
any other individual or entity; (iii) contracts and agreements for the sale of
advertising or advertising services or with advertising agencies or
representatives, that contain exclusivity or "most favored nation" provisions
and account, individually or in the aggregate for a series of related contracts
for a single advertising client, for revenues or expenses per annum, as the case
may be, in excess of $1,000,000; (iv) contracts and agreements providing for a
right of first refusal, first negotiation, "tag along" or "drag along" rights
applicable to any capital stock or material assets of the Company or any of its
subsidiaries; (v) partnership, joint venture or cooperative development
agreements pursuant to which the Company could be required to contribute or make
payments in excess of $1,000,000; (vi) contracts and agreements with any
Governmental Entity requiring payments by either party in excess of $500,000;
(vii) material promotion or marketing arrangements; (viii) other than with
respect to intercompany indebtedness or as set forth in the consolidated
financial statements of the Company or the notes thereto, loan or credit
agreements, mortgages, indentures, or other agreements on instruments evidencing
indebtedness for borrowed money by the Company or any of its subsidiaries or any
such agreement or instrument pursuant to which indebtedness for borrowed money
may be incurred, including guaranties; (ix) contracts and agreements providing
for the provision of any services, products or payments to or from any officer,
director, employee or other affiliate of the Company or such officer, director
or employee; (x) contracts and agreements that purport to limit, curtail or
restrict the ability of the Company or any of its subsidiaries, or would
restrict the ability of Parent or any of its subsidiaries, to compete in any
geographic area or line of business; (xi) contracts or agreements that would be
required to be filed as an exhibit to a Form 10-K filed by the Company if such
Form 10-K were required to be filed on the date hereof; and (xii) all
commitments and agreements to enter into any contracts or agreements relating to
any of the foregoing (collectively, together with any such contracts entered
into in accordance with Section 5.1 hereof, the "Company Material Contracts").
The Company has heretofore delivered or made available to Parent true, correct
and complete copies of all Company Material Contracts.
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(b) Each of the Company Material Contracts is valid and
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally, and the application of equitable principles (whether
considered in a proceeding at law or in equity) and there is no default under
any Company Material Contract either by the Company or any of its subsidiaries
or, to the knowledge of the Company, by any other party thereto, and no event
has occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by the Company or any of its subsidiaries
(including the consummation of the Merger) or, to the knowledge of the Company,
any other party, in any such case in which such default or event does, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(c) To the Company's knowledge, no party to any such Company
Material Contract has given notice to the Company or any of its subsidiaries of
or made a claim against the Company or any of its subsidiaries with respect to
any material breach or default thereunder.
(d) To the knowledge of the Company, during the three months
immediately prior to the date hereof, the parties to station affiliation
agreements with the Company or its subsidiaries have not communicated to the
Company or its subsidiaries an intent to terminate or not to renew any of such
affiliation agreements at a rate that is greater than the rate of such
communications during the nine months immediately prior to such three month
period.
3.15 Insurance. The Company and each of its subsidiaries maintains
adequate insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of established
reputations engaged in the same or similar business and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such other corporations.
3.16 Real Property.
(a) Section 3.16(a) of the Company Disclosure Schedule sets forth
all of the real property owned in fee by the Company and its subsidiaries that
is material to the conduct of the business of the Company and its subsidiaries,
taken as a whole. Each of the Company and its subsidiaries has good and
marketable title to each parcel of real property owned by it free and clear of
all Liens, except Permitted Liens.
(b) Section 3.16(b) of the Company Disclosure Schedule sets forth
all leases, subleases and other agreements (the "Company Real Property Leases")
(i) involving payments by the Company or any of its subsidiaries in excess of
$500,000 per year under which the Company or any of its subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property or (ii) that are material to the conduct of the business of the Company
and its subsidiaries, taken as a whole. The Company has heretofore delivered or
made available to Parent true, correct and complete copies of all Company Real
Property Leases (and all material modifications, amendments
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and supplements thereto and all side letters to which the Company or any of its
subsidiaries is a party materially affecting the obligations of any party
thereunder). Each Company Real Property Lease constitutes the valid and legally
binding obligation of the Company or its subsidiaries, enforceable in accordance
with its terms and is in full force and effect, except as enforcement may be
limited by general principles of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally. All rent and
other sums and charges payable by the Company and its subsidiaries as tenants
under each Company Real Property Lease are current, no termination event or
condition or uncured default of a material nature on the part of the Company or
any such subsidiary or, to the Company's knowledge, the landlord, exists under
any Company Real Property Lease. Each of the Company and its subsidiaries has a
good and valid leasehold interest in each parcel of real property leased by it
free and clear of all Liens, except Permitted Liens.
(c) No party to any such Company Real Property Leases has given
written notice to the Company or any of its subsidiaries of or made a claim
against the Company or any of its subsidiaries with respect to any material
breach or default thereunder.
3.17 Tangible Property. With respect to the tangible properties and
assets of the Company and its subsidiaries (excluding real property), the
Company and its subsidiaries have good title to, or hold pursuant to valid and
enforceable leases, all such properties and assets, except where the failure to
have good title or hold valid and enforceable leases does not and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. All of the material assets of the Company and its
subsidiaries have been maintained and repaired for their continued operation and
are in good repair and condition (ordinary wear and tear excepted) in all
material respects.
3.18 Intellectual Property.
(a) Subject to such exceptions which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company, the Company and its subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights copyrights service
marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of the Company and its subsidiaries as currently
conducted or as contemplated to be conducted and, to the Company's knowledge or
as disclosed in Section 3.18 of the Company Disclosure Schedule, there has been
no assertion or claim challenging the validity or enforceability of any of the
foregoing which, individually or in the aggregate, has had or would reasonably
be expected to have a Material Adverse Effect on the Company. Subject to such
exceptions which, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on the Company, there
have been no claims made or
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notices that the conduct of the Company's business has infringed the
intellectual property rights of any third party.
(b) Except as disclosed in Section 3.18 of the Company Disclosure
Schedule, to the knowledge of the Company: (i) the Company owns all right, title
and interest in, or possesses valid licenses or other rights to use, all
computer software programs, including, without limitation, the Metro Source
Software, developed by the Company or by the Company's employees on behalf of
the Company (the "Company Software"), and such programs perform in all material
respects in accordance with the specifications, documentation and other written
materials used in connection therewith and are operational in the business
environment, are in machine readable form, contain all current revisions
thereof, and include all tapes and object and source codes; (ii) neither the
Company nor any employee or agent of the Company has developed or assisted in
the enhancement of the Company Software, except for enhancements which are owned
or licensed by the Company; (iii) no employee of the Company is, or is now
expected to be, in default under any term of any employment contract, agreement
or arrangement relating to the Company Software or any noncompetition
arrangement, or any other contract or any restrictive covenant relating to the
Company Software or its development or exploitation; (iv) the Company has no
obligation to compensate any Person for the development, use, sale or
exploitation of the Company Software nor has the Company granted to any other
Person any license, option or other rights to develop, use, sell or exploit in
any manner the Company Software, whether requiring the payment of royalties or
not; (v) the Company has taken appropriate measures to protect the confidential
and proprietary nature of the Company Software; (vi) there have been no patents
applied for and no copyrights registered for any part of the Company Software;
and (vii) there are no trademark rights of any person or entity (other than the
Company) with respect to any of the Company Software, except in respect of
clauses (i)-(vii) for such exceptions which, individually or in the aggregate,
do not or would not reasonably be expected to have a Material Adverse Effect on
the Company.
3.19 Year 2000. The Company and its subsidiaries have developed and
are executing a plan with respect to Year 2000 readiness (the "Company Year 2000
Plan"). The Company has provided Parent with a copy of the Company Year 2000
Plan and has provided a report on the status of the Company Year 2000 Plan
through April 30, 1999 that is accurate in all material respects. The Company
Year 2000 Plan addresses the Year 2000 issues which, to the knowledge of the
Company, are material to the Company and its subsidiaries, including internal
information systems and process control risks, embedded circuitry risks and
third party risks.
3.20 Books and Records. The books of account, minute books, stock
record books, and other records of the Company and its subsidiaries, all of
which have been made available to Parent, are complete and correct in all
material respects and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act
(regardless of whether the Company and its subsidiaries are subject to that
Section), including the maintenance of and adequate system of internal controls.
The minute books of the Company and its subsidiaries contain accurate and
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complete records (in all material respects) of all meetings held of and
corporate action taken by, the stockholders, the Boards of Directors, and
committees of the Boards of Directors of the Company and its subsidiaries. At
the Closing, all of those books and records will be in the possession of the
Company and its subsidiaries.
3.21 Absence of Questionable Payments. Neither the Company nor any of
its subsidiaries nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
subsidiaries, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Exchange Act. Neither the Company nor any of its subsidiaries nor, to the
Company's knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company or any of its subsidiaries, has accepted or
received any unlawful contributions, payments, gifts, or expenditures.
3.22 Opinion of Financial Advisor. Goldman, Sachs & Co. (the "Company
Financial Advisor") has delivered to the Company Board its opinion, dated the
date of this Agreement, to the effect that, as of such date, the Exchange Ratio
is fair to the holders of Shares from a financial point of view, and such
opinion has not been withdrawn or adversely modified.
3.23 Brokers. No broker, finder or investment banker (other than the
Company Financial Advisor, a true and correct copy of whose engagement agreement
has been provided to Parent) is entitled to any brokerage, finder's or other fee
or commission or expense reimbursement in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any of its affiliates.
3.24 Takeover Statutes; Dissenters' Rights. The Company has taken all
action required to be taken by it in order to exempt this Agreement and the
Company Stockholders Voting Agreement and the transactions contemplated hereby
and thereby from, and this Agreement and the transactions contemplated hereby
and thereby (the "Covered Transactions") are exempt from, the requirements of
any "moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other anti-takeover Laws and regulations
(collectively, "Takeover Statutes") of the State of Delaware, including, without
limitation, Section 203 of the DGCL, and, to the knowledge of the Company, all
other states, or any anti-takeover provision in the Company's certificate of
incorporation. The provisions of Section 203 of the DGCL do not apply to the
Covered Transactions. Holders of Shares do not have dissenters' rights in
connection with the Merger.
3.25 Existing Discussions. Except as disclosed in Section 3.25 of the
Company Disclosure Schedule, as of the date hereof, neither the Company nor any
of its subsidiaries is engaged, directly or indirectly, in any discussions or
negotiations with any
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other party with respect to a Company Acquisition Proposal (as defined in
Section 5.5(c)).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company
as follows:
4.1 Organization and Qualification; Subsidiaries.
(a) Parent and each of its subsidiaries is a corporation or legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization and has all requisite
corporate, partnership or similar power and authority to own, lease and operate
its properties and to carry on its businesses as now conducted and proposed by
Parent to be conducted.
(b) Except as set forth in Section 4.1(b) of the Disclosure
Schedule previously delivered by Parent to the Company (the "Parent Disclosure
Schedule"), Parent has no subsidiaries and does not own, directly or indirectly,
beneficially or of record, any shares of capital stock or other security of any
other entity or any other investment in any other entity (other than marketable
securities which are held as investments and are reflected as such on the
consolidated financial statements of the Company).
(c) Parent and each of its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent.
(d) Parent has heretofore delivered or made available to the
Company accurate and complete copies of the articles or certificate of
incorporation and by-laws, or other similar organizational documents, as
currently in effect, of Parent and each of its subsidiaries.
4.2 Capitalization of Parent and Its Subsidiaries.
(a) The authorized capital stock of Parent consists of: (i)
117,000,000 shares of Parent Common Stock, of which, as of June 1, 1999,
35,054,730 shares were issued and outstanding and 7,058,595 shares were held in
treasury, (ii) 3,000,000 shares of Class B Stock, par value $.01 per share
("Parent Class B Stock"), of the Company, of which, as of June 1, 1999, 351,733
shares were issued and outstanding and (iii) 10,000,000 shares of Preferred
Stock, par value $.01 per share, none of which was
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<PAGE> 32
outstanding as of June 1, 1999. All of the issued and outstanding shares of
Parent Common Stock and Parent Class B Stock have been validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of June 1, 1999, (i)
3,832,500 shares of Parent Common Stock were reserved for issuance and issuable
upon or otherwise deliverable in connection with the exercise of outstanding
options granted by Parent to purchase shares of Parent Common Stock (the "Parent
Stock Options") issued pursuant to the Parent stock option plans listed in
Section 4.2(a) of the Parent Disclosure Schedule (the "Parent Option Plans"),
(ii) 351,733 shares of the Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the conversion of
outstanding shares of Parent Class B Stock and (iii) 4,000,000 shares of the
Parent Common Stock were reserved for issuance upon conversion of warrants
described in Section 4.2(a) of the Parent Disclosure Schedule. Since January 1,
1999, no shares of Parent's capital stock have been issued other than pursuant
to the exercise of Parent Stock Options already in existence on such date and,
since March 10, 1999, no Parent Stock Options have been granted. Section 4.2(a)
of the Parent Disclosure Schedule sets forth a complete and correct list of all
holders of options to acquire shares of Parent Common Stock, including such
person's name, the number of options (vested, unvested and total) held by such
person, the remaining term for vesting of such options and the exercise price
for each such option. Except as set forth above in this Section 4.2(a), as of
the date hereof, there are outstanding (i) no shares of capital stock or other
voting securities of Parent, (ii) no securities of Parent or its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of Parent, (iii) no options or other rights to acquire from Parent or
its subsidiaries, and no obligations of Parent or its subsidiaries to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of Parent, and (iv) no equity
equivalents, or interests in the ownership or earnings, of Parent or its
subsidiaries or other similar rights (including stock appreciation rights)
(collectively, "Parent Securities"). There are no outstanding obligations of
Parent or its subsidiaries to repurchase, redeem or otherwise acquire any Parent
Securities. The Shares of Parent Common Stock and Parent Series A Preferred
Stock to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights and,
with respect to the Parent Common Stock, when issued, be registered under the
Securities Act and the Exchange Act and registered or exempt from registration
under applicable state securities laws. Parent has reserved for issuance shares
of Parent Common Stock, issuable upon conversion of shares of Parent Series A
Preferred Stock. Except as set forth in Section 4.2(a) of the Parent Disclosure
Schedule, there are no shareholder agreements, voting trusts or other agreements
or understandings to which Parent is a party or to which it is bound relating to
the voting or disposition of any shares of capital stock of Parent.
(b) All of the outstanding capital stock of Parent's subsidiaries
is owned by Parent, directly or indirectly, free and clear of any Lien or any
other limitation or restriction (including any restriction on the right to vote
or sell the same, except as may be provided as a matter of law). There are no
securities of Parent or its subsidiaries convertible into or exchangeable for,
no options or other rights to acquire from Parent or
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<PAGE> 33
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly of, any capital stock or other ownership interests in, or
any other securities of, any subsidiary of Parent. There are no outstanding
contractual obligations of Parent or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of Parent.
4.3 Authority Relative to This Agreement.
(a) Each of Parent and Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement and, subject to
obtaining the Parent Requisite Vote (as defined below), to consummate the
transactions contemplated hereby to be performed by it (including, in the case
of Parent, the issuance of shares of Parent Common Stock in the Merger (the
"Share Issuance") and the issuance of shares of Parent Series A Preferred Stock
in the Merger). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby to be performed by it
(including, in the case of Parent, the Share Issuance and the issuance of shares
of Parent Series A Preferred Stock in the Merger) have been duly and validly
authorized and approved by the Board of Directors of Parent (the "Parent
Board"), the Board of Directors of Merger Sub and Parent as the sole stockholder
of Merger Sub and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Share Issuance, the
approval by the holders of a majority of the then outstanding shares of Parent
Common Stock and Parent Class B Stock acting as a single class (the "Parent
Requisite Vote")). This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and constitutes a valid, legal and binding
agreement of Parent and Merger Sub, enforceable against each of them in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and the application of equitable principles (whether considered in a
proceeding at law or in equity).
(b) The Parent Board has duly and validly approved, and taken all
corporate actions required to be taken by the Parent Board for, the consummation
of the transactions, including the Merger, the Share Issuance and the issuance
of shares of Parent Series A Preferred Stock in the Merger, contemplated hereby
and has resolved (i) to deem the Share Issuance advisable and fair to, and in
the best interests of, Parent and its stockholders and (ii) to recommend to
Parent's stockholders that they approve the Share Issuance.
(c) The Parent Board has directed that the Share Issuance be
submitted to Parent's stockholders for their approval at the Parent Stockholders
Meeting (as defined in Section 5.4(d)).
(d) The Parent Requisite Vote is the only vote of the holders of
any class or series of capital stock of Parent necessary to approve the Share
Issuance. No other vote or consent of the stockholders of Parent is required by
law, the certificate of
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<PAGE> 34
incorporation or bylaws of Parent or otherwise in order for Parent to approve
the Share Issuance.
4.4 SEC Reports; Financial Statements; No Undisclosed Liabilities.
(a) Parent has filed all required forms, reports and documents
with the SEC since December 31, 1995 (the "Parent SEC Reports"), each of which
has complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, each as in effect on the dates such forms,
reports and documents were filed. None of the Parent SEC Reports, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Parent included in the
Parent SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto in effect on the date when such Parent SEC Reports were filed
and fairly present, in all material respects, in conformity with GAAP applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments that have
not been and are not expected to be material in amount).
(b) Neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and there is no existing condition, situation or set of circumstances
which could be expected to result in such a liability or obligation, except for
liabilities or obligations (i) disclosed in the Parent Disclosure Schedule, (ii)
reflected in the Parent SEC Reports filed prior to the date hereof (the "Filed
Parent SEC Reports"), (iii) incurred in the ordinary course of business which do
not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or (iv) incurred in connection
with the transactions contemplated hereby.
(c) Parent has heretofore made available to the Company a
complete and correct copy of any material amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Exchange Act.
4.5 Information Supplied.
(a) None of the information supplied or to be supplied by Parent
or Merger Sub for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus will, at the date the Joint Proxy Statement/Prospectus is
mailed to stockholders of the Company, contain any untrue statement of a
material fact or omit to
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state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(b) Neither the S-4 nor any amendment or supplement thereto will,
at the time it becomes effective under the Securities Act or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. No representation or warranty is made by Parent or Merger Sub in
this Section 4.5(b) with respect to (i) statements made or incorporated by
reference therein based on information supplied by the Company or any of its
subsidiaries for inclusion or incorporation by reference in the S-4 or (ii)
compliance with the requirements of the Securities Act or the Exchange Act with
respect to documents incorporated by reference in the S-4 from the Company SEC
Reports. The S-4 will comply as to form in all material respects with the
applicable provisions of the Securities Act and the rules and regulations
thereunder.
4.6 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, the filing and recordation of a
certificate of merger and a certificate of designations relating to the Parent
Series A Preferred Stock as required by the DGCL, and as otherwise set forth in
Section 4.6 of the Parent Disclosure Schedule, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Merger Sub of this
Agreement or the consummation by Parent and Merger Sub of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Except as set forth in Section
4.6 of the Parent Disclosure Schedule, neither the execution, delivery and
performance of this Agreement by Parent or Merger Sub nor the consummation by
Parent or Merger Sub of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective certificate or
articles of incorporation or bylaws (or similar governing documents) of Parent
or any of its subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is a party, including,
without limitation, station affiliation agreements, or by which any of them or
any of their respective properties or assets may be bound, or (iii) violate any
Law applicable to Parent or any of its subsidiaries or any of their respective
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. No rights
of first refusal or first offer, preemptive rights or similar rights of
participation are applicable to the transactions contemplated by this Agreement.
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4.7 No Default. None of Parent or its subsidiaries is in default or
violation (and no event has occurred which with or without due notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its certificate or articles of incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent or any of its subsidiaries is now a party or by which any of
them or any of their respective properties or assets may be bound or (iii) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Parent, its subsidiaries or any of their respective properties or assets,
except, in the case of (i), for immaterial defaults with respect to subsidiaries
and, in the case of (ii) or (iii), for violations, breaches or defaults which do
not or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
4.8 Absence of Changes. Except as and to the extent disclosed by
Parent in the Filed Parent SEC Reports or as disclosed in Section 4.8 of the
Parent Disclosure Schedule, since January 1, 1999, Parent and its subsidiaries
have, in all material respects, conducted their businesses in the ordinary and
usual course consistent with past practice and there has not been:
(a) any event, change, occurrence, development or state of
circumstances or facts which does or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent, excluding
any change, effect, event, development, state of facts or circumstances or
occurrence (i) relating to the United States economy in general, (ii) relating
to events or developments affecting the industry in which Parent and its
subsidiaries operate generally, (iii) with respect to station affiliation
agreements only, arising out of or otherwise resulting from the announcement of
the execution and delivery of this Agreement or (iv) arising out of or otherwise
resulting from any action taken or not taken by Parent or Merger Sub at the
direction of the Company in compliance with the terms and conditions of this
Agreement;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Parent, or any
repurchase, redemption or other acquisition by Parent or any subsidiary of any
Parent Securities;
(c) any amendment of any term of any outstanding security of
Parent or any subsidiary;
(d) (i) any incurrence or assumption by Parent or any subsidiary
of any indebtedness for borrowed money (A) other than in the ordinary course of
business consistent with past practice or (B) in connection with any acquisition
or capital expenditure permitted by Section 5.2 or (ii) any guarantee,
endorsement or other incurrence or assumption of liability (whether directly,
contingently or otherwise) by Parent or any subsidiary for the obligations of
any other person (other than any wholly owned subsidiary of Parent), other than
in the ordinary course of business consistent with past practice;
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(e) any creation or assumption by Parent or any subsidiary of any
Lien (other than Permitted Liens) of any kind or nature whatsoever on any
material asset of Parent or any subsidiary other than in the ordinary course of
business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by Parent or any subsidiary other than (i) any
acquisition permitted by Section 5.2, (ii) loans, advances or capital
contributions to or investments in wholly owned subsidiaries of Parent or (iii)
loans or advances to employees of Parent or any subsidiary made in the ordinary
course of business consistent with past practice not in excess of $50,000
individually or $250,000 in the aggregate;
(g) (i) any contract or agreement entered into by Parent or any
subsidiary relating to any material acquisition or disposition of any assets or
business or (ii) any modification, amendment, assignment, termination or
relinquishment by Parent or any subsidiary of any contract, license or other
right (including any insurance policy naming it as a beneficiary or a loss
payee) that does or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent, other than, in the case of (i)
and (ii), transactions, commitments, contracts or agreements in the ordinary
course of business consistent with past practice and those contemplated by this
Agreement;
(h) any material change in any method of accounting or accounting
principles or practice (for financial accounting or tax purposes) by Parent or
any subsidiary, except for any such change required by GAAP;
(i) any (i) grant of any severance or termination pay to any
director, officer or employee of Parent or any of its subsidiaries other than,
with respect to employees (but not executive officers or directors), in the
ordinary course of business or involving payments not in excess of $25,000 in
any one case, or in the aggregate $100,000; (ii) 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 Parent
or any of its subsidiaries; (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements; or (iv)
increase in compensation, bonus or other benefits payable to directors, officers
or employees of Parent or any of its subsidiaries other than, in the case of
clauses (ii), (iii) or (iv), the entering into of such agreements (or amendments
thereto) or the payment of increases made prior to the date hereof in the
ordinary and usual course of business consistent with past practice; or
(j) any action or proceeding commenced or, to the knowledge of
Parent, threatened or proposed, to condemn or take by eminent domain or other
governmental action any real or personal property owned or used by Parent and
its subsidiaries.
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4.9 Litigation. Except as disclosed by Parent in the Filed Parent SEC
Reports or as disclosed in Section 4.9 of the Parent Disclosure Schedule, (i)
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries or any
of their respective properties or assets and (ii) none of Parent or its
subsidiaries is subject to any outstanding judgment, order, writ, injunction or
decree, which, in the case of either (i) or (ii) would require Parent to make
payments in excess of $250,000 with respect to any single suit, claim, action,
proceeding, investigation, judgment, order, writ, injunction or decree, or has
had or would reasonably be expected to have a Material Adverse Effect on Parent.
4.10 Compliance with Applicable Law. Except as disclosed by Parent in
the Filed Parent SEC Reports or Section 4.10 of the Parent Disclosure Schedule,
and except for failures which do not or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent, (i)
Parent and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Parent Permits"), (ii) Parent and
its subsidiaries are in compliance with the terms of the Parent Permits, (iii)
the businesses of Parent and its subsidiaries are not being conducted in
violation of any Law of any Governmental Entity, including Environmental Laws,
and (iv) except as disclosed in Section 4.13 hereof, no investigation or review
by any Governmental Entity with respect to Parent or its subsidiaries is pending
or, to the knowledge of Parent, threatened, nor, to the knowledge of Parent, has
any Governmental Entity indicated an intention to conduct the same.
4.11 Employee Plans.
(a) Section 4.11(a) of the Parent Disclosure Schedule lists all
"employee benefit plans," as defined in Section 3(3) of ERISA, and all other
employee benefit plans or other benefit arrangements, including but not limited
to all employment and consulting agreements and all bonus and other incentive
compensation, deferred compensation, disability, severance, retention, salary
continuation, stock and stock-related award, stock option, stock purchase or
collective bargaining agreements, plans, policies and arrangements which Parent
or any of its subsidiaries maintains, is a party to, contributed to or has any
obligation to or liability for in respect of current or former employees and
directors (each, a "Parent Employee Benefit Plan" and collectively, the "Parent
Employee Benefit Plans"). None of the Parent Employee Benefit Plans other than a
"multiemployer plan" (within the meaning of section 3(37) of ERISA) is subject
to Title IV of ERISA.
(b) True, correct and complete copies of the following documents,
which are correct and complete in all material respects, with respect to each of
the Parent Plans (other than a multiemployer plan) have been made available to
the Company, 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
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relating to the Parent Plans; and (vi) written descriptions of all material
non-written agreements relating to the Parent Plans.
(c) Except as would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, (i) all payments required to be made by or
under any Parent Employee Benefit Plan, any related trusts, insurance policies
or ancillary agreements, or any collective bargaining agreement have been timely
made, (ii) Parent and its subsidiaries have performed all obligations required
to be performed by them under any Parent Employee Benefit Plan, (iii) the Parent
Employee Benefit Plans have been administered and are in compliance in all
respects with their terms and the requirements of ERISA, the Code and other
applicable laws, and (iv) there are no actions, suits, arbitrations, claims
(other than routine claims for benefits) or administrative proceedings pending
or, to the knowledge of Parent, threatened with respect to any Parent Employee
Benefit Plan.
(d) Except as disclosed in Section 4.11(d) of the Parent
Disclosure Schedule, each Parent Employee Benefit Plan and its related trust
which are intended to be "qualified" within the meaning of Sections 401(a) and
501(a) of the Code, respectively, have been determined by the Internal Revenue
Service to be so "qualified" under such Sections, as amended by the Tax Reform
Act of 1986, and Parent knows of no fact which would adversely affect the
qualified status of any such Parent Employee Benefit Plan and its related trust.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, solely or in
connection with any other event, (i) increase any benefits otherwise payable
under any Parent Employee Benefit Plan, or (ii) result in the acceleration of
the time of payment or vesting of any such benefits. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will, solely or in connection with any other event, result in any payment
becoming due, or increase the compensation due, to any current or former
employee or director of Parent or any of its subsidiaries.
(f) Except as disclosed in Section 4.11(f) of the Parent
Disclosure Schedule, none of the Parent Employee Benefit 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.
(g) Neither Parent nor any of its subsidiaries has incurred, nor,
to Parent's knowledge is 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 Material Adverse Effect. The
termination of, or withdrawal from, any multiemployer plan to which Parent or
any of its subsidiaries contributes, on or prior to the Effective Time, will not
subject Parent or any of its subsidiaries to any liability under Title IV of
ERISA that would reasonably be expected to have a Material Adverse Effect on
Parent.
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4.12 Labor and Employment Matters.
(a) Section 4.12(a) of the Parent Disclosure Schedule sets forth
a list of all employment or severance compensation agreements that require
Parent or its subsidiaries to make payments in excess of $250,000 annually, and
labor or collective bargaining agreements to which Parent or any subsidiary is
party. Except as set forth in Section 4.12(a) of the Parent Disclosure Schedule,
(i) there are no employment or severance compensation agreements that require
Parent or its subsidiaries to make payments in excess of $250,000 annually, (ii)
there are no labor or collective bargaining agreements which pertain to
employees of Parent or any of its subsidiaries and (iii) neither Parent nor any
of its subsidiaries is a party to or bound by any agreement with any employee or
consultant pursuant to which such person would be entitled to receive any
additional compensation (including stock options) or an accelerated payment of
compensation (including the accelerated vesting of stock options) as a result of
the (A) consummation of the transactions contemplated hereby or (B) the
termination of such employment or consulting following such consummation. Parent
has heretofore made available to the Company true and complete copies of the
agreements listed on Section 4.12(a) of Parent Disclosure Schedule, together
with all amendments, modifications, supplements and side letters affecting the
duties, rights and obligations of any party thereunder.
(b) Except as disclosed in Section 4.12(b) of the Parent
Disclosure Schedule, no employees of Parent or any of its subsidiaries are
represented by any labor organization; no labor organization or group of
employees of Parent or any of its subsidiaries has made a pending demand for
recognition or certification; and, to Parent's knowledge, there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. To Parent's knowledge, there are no organizing
activities involving Parent or its subsidiaries pending with any labor
organization or group of employees of Parent or any of its subsidiaries.
(c) Except as disclosed in Section 4.12(c) of the Parent
Disclosure Schedule, there are no material unfair labor practice charges,
grievances or complaints pending before any Governmental Entity or threatened in
writing by or on behalf of any employee or group of employees of Parent or its
subsidiaries.
(d) Except as disclosed in Section 4.12(d) of the Parent
Disclosure Schedule, there are no material complaints, charges or claims against
Parent or its subsidiaries filed and currently pending, or threatened in writing
to be brought or filed, with any Governmental Entity or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by Parent or its subsidiaries.
(e) Except as disclosed in Section 4.12(e) of the Parent
Disclosure Schedule, Parent and each of its subsidiaries are in compliance in
all material respects
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with all Laws relating to the employment of labor, including all such Laws and
orders relating to wages, hours, collective bargaining, discrimination, civil
rights, safety and health workers' compensation and the collection and payment
of withholding and/or Social Security Taxes and similar Taxes.
4.13 Taxes. Except as disclosed in Section 4.13 of the Parent
Disclosure Schedule:
(a) Each of Parent and its subsidiaries has timely filed, or has
caused to be timely filed on its behalf (taking into account any extension of
time within which to file), all federal income Tax Returns (as hereinafter
defined) and other material Tax Returns required to be filed by it, and all such
filed Tax Returns are true, complete and accurate in all material respects. All
Taxes shown to be due on such Tax Returns have been timely paid.
(b) The most recent financial statements contained in the Parent
SEC Reports reflect an adequate reserve for all Taxes payable by Parent and its
subsidiaries for all Taxable periods and portions thereof through the date of
such financial statements. No deficiency with respect to Taxes has been
proposed, asserted or assessed against Parent or any subsidiary in excess of
$250,000. No liens for Taxes exist with respect to any asset of Parent or any
subsidiary or Parent, except for statutory liens for Taxes not yet due.
(c) The federal income Tax Returns of Parent and each subsidiary
of Parent have been examined by and settled with the United States Internal
Revenue Service (or the applicable statute of limitations has expired) for all
years through 1994, and the material state income and franchise Tax Returns and
the foreign Tax Returns of Parent and each subsidiary of Parent have been
examined by and settled with the applicable Tax authorities for the years
specified in Section 4.13(c) of the Parent Disclosure Schedule. All assessments
for Taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid. Neither Parent nor its subsidiaries
has requested or been granted an extension of time for filing any Tax Return
that has not yet been filed.
(d) Neither Parent nor any subsidiary of Parent is a party to a
Tax allocation or sharing agreement.
(e) Neither Parent nor any subsidiary of Parent (i) has been a
member of an affiliated group of corporations within the meaning of Section 1504
of the Code, other than the affiliated group of which Parent is the common
parent or (ii) has any liability for the Taxes of any person (other than Parent
and its subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(f) No audit or other administrative or court proceedings are
pending with respect to federal, state or foreign income or franchise Taxes of
Parent or any
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subsidiary of Parent and no written notice thereof has been received. Neither
Parent nor any subsidiary has any outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, federal, state or
foreign income or franchise Taxes due from or with respect to Parent or any
subsidiary for any taxable period.
(g) No claim has been made in writing by a Tax authority in a
jurisdiction where neither Parent nor any subsidiary of Parent files Tax Returns
that Parent or any subsidiary of Parent is or may be subject to taxation in that
jurisdiction.
(h) Neither Parent nor any subsidiary of Parent is a party to any
contract, agreement or other arrangement which provides for the payment of any
amount which would not be deductible by reason of Section 162(m) of the Code.
(i) Parent has made available to the Company true and complete
copies of (i) all federal, state and foreign income and franchise Tax Returns of
Parent and its subsidiaries for the preceding three Taxable years and (ii) any
audit report issued within the last three years (or otherwise with respect to
any audit or proceeding in progress) relating to Taxes of Parent or any
subsidiary of Parent.
(j) None of Parent or any of its subsidiaries has taken, agreed
to take or will take any action that would prevent the Merger from constituting
a reorganization qualifying under the provisions of Section 368(a) of the Code.
(k) Parent and each of its subsidiaries are not currently, have
not been within the last five years, and do not anticipate becoming, a "United
States real property holding corporation" within the meaning of Section 897(c)
of the Code.
(l) Neither Parent nor any subsidiary has filed a consent under
Section 341(f) of the Code concerning collapsible corporations.
4.14 Material Contracts.
(a) Section 4.14 of the Parent Disclosure Schedule (together with
Sections 4.12(a), (b), (c), (d) and (e) of the Parent Disclosure Schedule) lists
all material contracts and agreements (and all material amendments,
modifications and supplements thereto and all side letters to which Parent or
any of its subsidiaries is a party materially affecting the obligations of any
party thereunder) to which Parent or any of its subsidiaries is a party or by
which any of its properties or assets are bound including, without limitation,
all: (i) employment, severance, personal services or consulting (other than
contracts with affiliates or as identified in clause (iii) of this Section 4.14)
agreements pursuant to which Parent or its subsidiaries are required to pay more
than $250,000 annually, or by which Parent or its subsidiaries receive more than
$1,000,000 annually; (ii) except for contracts relating to the normal business
operations of Parent entered into in the ordinary course of business consistent
with past practice, contracts pursuant to which Parent is obligated to indemnify
any other individual or entity; (iii)
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contracts and agreements providing for a right of first refusal, first
negotiation, "tag along" or "drag along" rights applicable to any capital stock
or material assets of Parent or any of its subsidiaries; (iv) partnership, joint
venture or cooperative development agreements pursuant to which Parent could be
required to contribute or make payments in excess of $1,000,000; (v) contracts
and agreements with any Governmental Entity requiring payments by either party
in excess of $500,000; (vi) material promotion or marketing arrangements; (vii)
other than with respect to intercompany indebtedness or as set forth in the
consolidated financial statements of Parent or the notes thereto, loan or credit
agreements, mortgages, indentures, or other agreements on instruments evidencing
indebtedness for borrowed money by Parent or any of its subsidiaries or any such
agreement or instrument pursuant to which indebtedness for borrowed money may be
incurred, including guaranties; (viii) contracts and agreements providing for
the provision of any services, products or payments to or from any officer,
director, employee or other affiliate of Parent or such officer, director or
employee; (ix) contracts and agreements that purport to limit, curtail or
restrict the ability of Parent or any of its subsidiaries to compete in any
geographic area or line of business; (x) contracts and agreements that would be
required to be filed as an exhibit to a Form 10-K filed by Parent with the SEC
if such Form 10-K were required to be filed on the date hereof; and (xi) all
commitments and agreements to enter into any contracts or agreements relating to
any of the foregoing (collectively, together with any such contracts entered
into in accordance with Section 5.2 hereof, the "Parent Material Contracts").
Parent has heretofore delivered or made available to the Company true, correct
and complete copies of all Parent Material Contracts.
(b) Each of the Parent Material Contracts is valid and
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally, and the application of equitable principles (whether
considered in a proceeding at law or in equity) and there is no default under
any Parent Material Contract either by Parent or any of its subsidiaries or, to
the knowledge of Parent, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default thereunder by Parent or any of its subsidiaries (including the
consummation of the Merger or the Share Issuance) or, to the knowledge of
Parent, any other party, in any such case in which such default or event does,
or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
(c) To Parent's knowledge, no party to any such Parent Material
Contract has given notice to Parent or any of its subsidiaries of or made a
claim against Parent or any of its subsidiaries with respect to any material
breach or default thereunder.
(d) To the knowledge of Parent, during the three months
immediately preceding the date hereof, the parties to station affiliation
agreements with Parent or its subsidiaries have not communicated to Parent or
its subsidiaries an intent to terminate or not to renew any of such affiliation
agreements at a rate that is greater than the rate of such communications during
the nine months immediately prior to such three month period.
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4.15 Insurance. Parent and each of its subsidiaries maintains adequate
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by corporations of established reputations
engaged in the same or similar business and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations.
4.16 Real Property.
(a) Section 4.16(a) of the Parent Disclosure Schedule sets forth
all of the real property owned in fee by Parent and its subsidiaries that is
material to the conduct of the business of Parent and its subsidiaries, taken as
a whole. Each of Parent and its subsidiaries has good and marketable title to
each parcel of real property owned by it free and clear of all Liens, except
Permitted Liens.
(b) Section 4.16(b) of the Parent Disclosure Schedule sets forth
all leases, subleases and other agreements (the "Parent Real Property Leases")
(i) involving payments by Parent or its subsidiaries in excess of $500,000 per
year under which Parent or any of its subsidiaries uses or occupies or has the
right to use or occupy, now or in the future, any real property, or (ii) that
are material to the conduct of the business of Parent and its subsidiaries,
taken as a whole. Parent has heretofore delivered or made available to the
Company true, correct and complete copies of all Parent Real Property Leases
(and all material modifications, amendments and supplements thereto and all side
letters to which Parent or any of its subsidiaries is a party materially
affecting the obligations of any party thereunder). Each Parent Real Property
Lease constitutes the valid and legally binding obligation of Parent or its
subsidiaries, enforceable in accordance with its terms, and is in full force and
effect, except as enforcement may be limited by general principles of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally. All rent and other sums and charges payable by Parent and
its subsidiaries as tenants under each Parent Real Property Lease are current,
no termination event or condition or uncured default of a material nature on the
part of Parent or any such subsidiary or, to Parent's knowledge, the landlord,
exists under any Parent Real Property Lease. Each of Parent and its subsidiaries
has a good and valid leasehold interest in each parcel of real property leased
by it free and clear of all Liens, except Permitted Liens.
(c) No party to any such Parent Real Property Leases has given
written notice to Parent or any of its subsidiaries of or made a claim against
Parent or any of its subsidiaries with respect to any material breach or default
thereunder.
4.17 Tangible Property. With respect to the tangible properties and
assets of Parent and its subsidiaries (excluding real property) Parent and its
subsidiaries have good title to, or hold pursuant to valid and enforceable
leases, all such properties and assets, except where the failure to have good
title or hold valid and enforceable leases does not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent. All of the material assets of Parent and its
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subsidiaries have been maintained and repaired for their continued operation and
are in good repair and condition (ordinary wear and tear excepted) in all
material respects.
4.18 Intellectual Property. Subject to such exceptions which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent, Parent and its
subsidiaries own or possess adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights copyrights service marks, trade secrets, applications for trademarks and
for service marks, know-how and other proprietary rights and information used or
held for use in connection with the business of Parent and its subsidiaries as
currently conducted or as contemplated to be conducted and, to Parent's
knowledge or as disclosed in Section 4.9 of the Parent Disclosure Schedule,
there has been no assertion or claim challenging the validity or enforceability
of any of the foregoing which, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect on Parent.
Subject to such exceptions which, individually or in the aggregate, have not had
and would not reasonably be expected to have a Material Adverse Effect on
Parent, there have been no claims made or notices that the conduct of Parent's
business has infringed the intellectual property rights of any third party.
4.19 Year 2000. Parent and its subsidiaries have developed and are
executing a plan with respect to Year 2000 readiness (the "Parent Year 2000
Plan"). Parent has provided the Company with a report on the status of the
Parent Year 2000 Plan through April 30, 1999 that is accurate in all material
respects. The Parent Year 2000 Plan addresses the Year 2000 issues which, to the
knowledge of Parent, are material to Parent and its subsidiaries, including
internal information systems and process control risks, embedded circuitry risks
and third party risks.
4.20 Books and Records. The books of account, minute books, stock
record books, and other records of Parent and its subsidiaries, all of which
have been made available to the Company, are complete and correct in all
material respects and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act
(regardless of whether the Parent and its subsidiaries are subject to that
Section), including the maintenance of and adequate system of internal controls.
The minute books of Parent and its subsidiaries contain accurate and complete
records (in all material respects) of all meetings held of, and corporate action
taken by, the stockholders, the Boards of Directors, and committees of the
Boards of Directors of Parent and its subsidiaries. At the Closing, all of those
books and records will be in the possession of Parent and its subsidiaries.
4.21 Absence of Questionable Payments. Neither Parent nor any of its
subsidiaries nor, to Parent's knowledge, any director, officer, agent, employee
or other person acting on behalf of Parent or any of its subsidiaries, has used
any corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds in violation of Section 30A of the Exchange Act. Neither Parent
nor any of its subsidiaries nor, to Parent's
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knowledge, any director, officer, agent, employee or other person acting on
behalf of Parent or any of its subsidiaries, has accepted or received any
unlawful contributions, payments, gifts, or expenditures.
4.22 Opinion of Financial Advisor. Donaldson, Lufkin & Jenrette
Securities Corporation (the "Parent Financial Advisor") has delivered to the
Parent Board its opinion, dated the date of this Agreement, to the effect that,
as of such date, the Exchange Ratio is fair to the stockholders of Parent from a
financial point of view, and such opinion has not been withdrawn or adversely
modified.
4.23 Brokers. No broker, finder or investment banker (other than
Parent Financial Advisor, a true and correct copy of whose engagement agreement
has been provided to the Company) is entitled to any brokerage, finder's or
other fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of Parent or any of its affiliates.
4.24 Takeover Statutes; Dissenters' Rights. Parent has taken all
action required to be taken by it in order to exempt this Agreement and the
Covered Transactions from, and this Agreement and the Covered Transactions are
exempt from, the requirements of any Takeover Statutes of the State of Delaware,
including, without limitation, Section 203 of the DGCL, and, to Parent's
knowledge, all other states, or any anti-takeover provision in Parent's
certificate of incorporation. The provisions of Section 203 of the DGCL do not
apply to the Covered Transactions. Parent's stockholders do not have dissenters'
rights in connection with the Merger.
4.25 No Prior Activities of Merger Sub. Except for obligations
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby,
Merger Sub has neither incurred any obligation or liability nor engaged in any
business or activity of any time or kind whatsoever or entered into any
agreement or arrangement with any person.
4.26 Existing Discussions. Except as disclosed in Section 4.26 of the
Parent Disclosure Schedule, as of the date hereof, neither Parent nor any of its
subsidiaries is engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving Parent or any of its subsidiaries: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of a significant portion of the assets of Parent and its
subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for twenty percent (20%)
or more of the outstanding voting capital stock of Parent or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing (any of the
foregoing, a "Parent Acquisition Proposal").
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4.27 Affiliate Agreements. Parent and Infinity Broadcasting
Corporation have duly and validly executed and delivered the Amended and
Restated Representation Agreement, effective as of March 30, 1999, the
Management Agreement, effective as of March 30, 1999, and each of the other
related agreements attached thereto as exhibits or schedules, each such
agreement substantially in the form previously provided to the Company and,
assuming the accuracy of the representations and warranties of Infinity
Broadcasting Corporation set forth therein (other than with respect to
enforceability) are the legal, valid, binding and enforceable obligations of the
parties thereto, subject to applicable bankruptcy, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally, and the
application of equitable principles (whether considered in a proceeding at law
or in equity).
ARTICLE 5
COVENANTS
5.1 Conduct of Business of Company. Except as contemplated by this
Agreement or as permitted by the provisions of this Section 5.1, during the
period from the date hereof to the Effective Time, the Company shall, and shall
cause each of its subsidiaries to, conduct its operations in the ordinary course
of business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, seek to preserve intact its current business
organizations, seek to keep available the service of its current officers and
employees and seek to preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and ongoing
businesses shall be unimpaired in any material respect at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or in Section 5.1 of the Company Disclosure
Schedule, prior to the Effective Time, the Company shall not, and shall not
permit any of its subsidiaries to, without the prior written consent of Parent:
(a) amend its certificate or articles of incorporation or bylaws
(or other similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities or equity equivalents (including,
without limitation, any stock options or stock appreciation rights) or
accelerate the vesting schedule or make any other modifications to the terms of
existing stock options, except for (i) the issuance or sale of shares of Company
Common Stock pursuant to outstanding options granted prior to the date hereof
under the Company Option Plans, (ii) pursuant to the Company's employee stock
purchase plan described in Section 5.1 of the Company Disclosure Schedule or
(iii) the granting of options (having an exercise price not less than the fair
market value of the Company Common Stock at the time of such grant) to purchase
up to 50,000 shares of Company Common Stock under the Company Option Plans;
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(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of any
shares of its capital stock or otherwise make any payments to shareholders in
their capacity as such, or redeem or otherwise acquire any of its securities or
any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries other than the Merger (except that the
Company and/or any subsidiary of the Company may adopt a plan of merger in
connection with (i) a merger of any subsidiary of the Company into the Company
or another subsidiary of the Company or (ii) an acquisition or disposition of a
business or assets otherwise permitted by this Section 5.1);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary, except for any such alteration which would not reasonably be
expected to have a Material Adverse Effect on the Company;
(f) except as may be required by Law (i) enter into, adopt or
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreement, trust, plan, fund, award or other arrangement for the benefit or
welfare of any director, officer or employee in any manner (other than (A)
renewals (following reasonable prior notice to Parent) of employment
arrangements with any officer or manager (or replacement for an officer or
manager) on terms substantially similar to such officer's or manager's (or
replaced officer's or manager's) existing agreement or the entering into of
employment arrangements with talent hired in the ordinary course of business
consistent with past practice or (B) with respect to employees (but not
executive officers or directors), severance or termination arrangements in the
ordinary course of business consistent with past practice or with respect to
payments not in excess of $25,000 in any one case, or $100,000 in the aggregate
or in accordance with the Company's severance guidelines in effect on the date
hereof); or (ii) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company, increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation, the granting of
stock appreciation rights or performance units);
(g) except, (i) for (A) at-will employees (other than officers)
in the ordinary course of business and (B) replacement officers or managers, or
talent, in accordance with Section 5.1(f), or (ii) as set forth on Section
5.1(g) of the Company
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Disclosure Schedule or contemplated hereby, hire or retain any individual as an
employee of or consultant to the Company or any subsidiary of the Company;
(h) except in the ordinary course of business upon prior notice
to Parent, or as set forth on Section 5.1(h) of the Company Disclosure Schedule,
enter into, renew or modify in a manner that could reasonably be expected to
materially adversely affect the rights of the Company any agreement which, if in
effect on the date hereof, would have been required to be disclosed in Section
3.14 of the Company Disclosure Schedule;
(i) except as may be required as a result of a change in Law or
in GAAP, change any of the accounting principles or practices (whether for
financial accounting or tax purposes) used by it;
(j) revalue any of its assets, including, without limitation,
writing up or down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice;
(k) make or revoke any Tax election or settle or compromise any
Tax liability material to the Company and its subsidiaries taken as a whole, or
change (or make a request to any Taxing authority to change) any material aspect
of its method of accounting for Tax purposes;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements as of March 31, 1999 (or
the notes thereto) of the Company and its subsidiaries or incurred in the
ordinary course of business consistent with past practice;
(m) settle or compromise any pending or threatened material suit,
action or claim or initiate or join any material suit, action or claim for an
amount in excess of $250,000;
(n) (i) incur or assume any long-term or short-term debt or issue
any debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company and its
subsidiaries, taken as a whole; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice and in amounts not material to the Company and its
subsidiaries, taken as a whole, and except for obligations of wholly owned
subsidiaries of the Company; (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company or customary loans or advances to employees in
the ordinary course of business consistent with past practice and in amounts not
to exceed $50,000 individually or $250,000 in the aggregate); (iv) pledge or
otherwise encumber shares of
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capital stock of the Company or its subsidiaries; or (v) mortgage or pledge any
of its assets, tangible or intangible, or create or suffer to exist any Lien
thereupon (other than Permitted Liens);
(o) (i) other than as contemplated by Section 5.1(p), acquire,
sell, lease or dispose of any assets outside the ordinary course of business or
any assets which in the aggregate are material to the Company and its
subsidiaries, taken as a whole or (ii) enter into any commitment or transaction
outside the ordinary course of business;
(p) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein, other than acquisitions which
require the Company to pay consideration not in excess of $3,000,000
individually, or $10,000,000 in the aggregate; (ii) authorize any capital
expenditure or expenditures not provided for in the Company's 1999 capital
budget (a true and correct copy of which has been provided to Parent) which,
individually, is in excess of $100,000 or, in the aggregate, are in excess of
$500,000; or (iii) enter into or amend any contract, agreement, commitment or
arrangement providing for the taking of any action that would be prohibited
hereunder;
(q) take any action that would prevent or impede the Merger from
qualifying as a reorganization under Section 368(a) of the Code; or
(r) take, propose to take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.1(a) through 5.1(q) or any
action which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect in any material respect.
5.2 Conduct of Business of Parent. Except as contemplated by this
Agreement or as permitted by the provisions of this Section 5.2, during the
period from the date hereof to the Effective Time, Parent shall, and shall cause
each of its subsidiaries to conduct its operations in the ordinary course of
business consistent with past practice and, to the extent consistent therewith,
with no less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and employees and seek to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired in any material respect at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement or Section 5.2 of the Parent Disclosure Schedule, prior to the
Effective Time, Parent shall not, and shall not permit its subsidiaries to,
without the prior written consent of the Company:
(a) amend its certificate or articles of incorporation or bylaws
(or other similar governing instrument) in a manner which adversely affects the
rights, powers and preferences of the Parent Common Stock, except as expressly
contemplated by this Agreement;
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(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities or equity equivalents (including,
without limitation, any stock options or stock appreciation rights), except for
(i) the issuance or sale of shares of the Parent Common Stock pursuant to
outstanding options granted prior to the date hereof under the Parent Option
Plans, or (ii) the granting of options (having an exercise price not less than
the fair market value of the Parent Common Stock at the time of grant) to
purchase up to 50,000 shares of Parent Common Stock under the Parent Option
Plans
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of any
shares of its capital stock or otherwise make any payments to shareholders in
their capacity as such, or redeem or otherwise acquire any of its securities or
any securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Parent or any of its subsidiaries other than the Merger (except that Parent
and/or any subsidiary of Parent may adopt a plan of merger in connection with
(i) a merger of any subsidiary of Parent into Parent or another subsidiary of
Parent or (ii) an acquisition or disposition of a business or assets otherwise
permitted by this Section 5.2);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
Parent or any of its subsidiaries, except for any such alteration which would
not reasonably be expected to have a Material Adverse Effect on Parent;
(f) except as may be required by Law, (i) enter into, adopt or
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreement, trust, plan, fund, award or other arrangement for the benefit or
welfare of any director, officer or employee in any manner (other than (A)
renewals (following reasonable prior notice to the Company) of employment
arrangements with any officer or manager (or replacement for any officer or
manager) on terms substantially similar to such officer's or manager's (or
replaced officer's or manager's) existing agreement or the entering into of
employment arrangements with talent hired in the ordinary course of business
consistent with past practice or (B) with respect to employees (but not
executive officers or directors), severance or termination arrangements in the
ordinary course of business consistent with past practice or with respect to
payments not in excess of $25,000 in any one case, or $100,000 in the aggregate
or in accordance with Parent's severance guidelines in effect on the date
hereof); or (ii) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or
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compensation expense to Parent, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units);
(g) except (i) for (A) at-will employees (other than officers) in
the ordinary course of business and (B) replacement officers or managers or
talent, in accordance with Section 5.2(f), or (ii) as set forth in Section
5.2(g) of the Parent Disclosure Schedule or contemplated hereby, hire or retain
any individual as an employee of or consultant to Parent or any subsidiary of
Parent;
(h) except in the ordinary course of business upon prior notice
to Parent, or as set forth on Section 5.2(h) of the Parent Disclosure Schedule,
enter into, renew or modify in a manner that could reasonably be expected to
materially adversely affect the rights of Parent any agreement which, if in
effect on the date hereof, would have been required to be disclosed in Section
4.14 of the Parent Disclosure Schedule;
(i) except as may be required as a result of a change in Law or
in GAAP, change any of the accounting principles or practices (whether for
financial accounting or tax purposes) used by it;
(j) revalue any of its assets, including, without limitation,
writing up or down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice;
(k) make or revoke any Tax election or settle or compromise any
Tax liability material to Parent and its subsidiaries taken as a whole, or
change (or make a request to any Taxing authority to change) any material aspect
of its method of accounting for Tax purposes;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements as of March 31, 1999 (or
the notes thereto) of Parent and its subsidiaries or incurred in the ordinary
course of business consistent with past practice;
(m) settle or compromise any pending or threatened material suit,
action or claim or initiate or join any material suit, action or claim for an
amount in excess of $250,000;
(n) (i) incur or assume any long-term or short-term debt or issue
any debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to Parent and its
subsidiaries, taken as a whole; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the
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ordinary course of business consistent with past practice and in amounts not
material to Parent and its subsidiaries, taken as a whole, and except for
obligations of wholly owned subsidiaries of Parent; (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly owned subsidiaries of Parent or customary loans or advances to
employees in the ordinary course of business consistent with past practice and
in amounts not to exceed $50,000 individually or $250,000 in the aggregate);
(iv) pledge or otherwise encumber shares of capital stock of Parent or its
subsidiaries; or (v) mortgage or pledge any of its assets, tangible or
intangible, or create or suffer to exist any Lien thereupon (other than
Permitted Liens);
(o) (i) sell, lease or dispose of any assets outside the ordinary
course of business or any assets which in the aggregate are material to Parent
and its subsidiaries, taken as a whole or (ii) enter into any commitment or
transaction outside the ordinary course of business;
(p) (i) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein, other than acquisitions which
require Parent to pay consideration not in excess of $3,000,000 individually or
$10,000,000 in the aggregate, (ii) authorize any capital expenditure or
expenditures not provided for in Parent's 1999 capital budget (a true and
correct copy of which has been provided to the Company) which, individually, is
in excess of $100,000 or, in the aggregate, are in excess of $500,000; or (iii)
enter into or amend any contract, agreement, commitment or arrangement providing
for the taking of any action that would be prohibited hereunder;
(q) take any action that would prevent or impede the Merger from
qualifying as a reorganization under Section 368(a) of the Code; or
(r) take, propose to take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.2(a) through 5.2(q) or any
action which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect in any material respect.
Notwithstanding anything to the contrary contained in this
Section 5.2, Parent shall be permitted to effect an acquisition of any business,
corporation or other entity (by merger, purchase of stock or other equity
interest, recapitalization or otherwise) or assets of any third party (the
foregoing being hereinafter defined as an "Acquisition") or any business
combination, recapitalization or merger with any third party or any affiliate
thereof (the foregoing being referred to as a "Business Combination") so long as
Parent would not be required to issue in such Acquisitions or Business
Combinations, individually or in the aggregate, a number of shares of Parent
Common Stock greater than 40% of the number of outstanding shares of Parent
Common Stock on the date hereof (on a fully diluted basis) and, in connection
with any such Acquisition or Business Combination, Parent may, to the extent
reasonably required in such transaction, issue equity securities (subject to the
foregoing 40% limitation), assume outstanding stock options, assume obligations
under employee benefit plans, enter into employment
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agreements or assume indebtedness. In addition, to the extent reasonably
necessary to facilitate obtaining the Parent Requisite Vote, the Company will
not unreasonably withhold or delay its consent to the taking of any action
otherwise prohibited by this Section 5.2 that does not adversely affect (other
than by dilution of overall voting interest on a basis that is pari passu with
other holders of Parent Common Stock) the Company or its stockholders.
5.3 Conduct of Business of Merger Sub. During the period from the
date of this Agreement to the Effective Time, Merger Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
5.4 Preparation of Joint Proxy Statement; Stockholders Approval.
(a) As promptly as practicable (and, in any event, within 60
days) following the date hereof, Parent and the Company shall prepare and file
with the SEC a preliminary proxy statement, which shall constitute a joint proxy
statement and a prospectus (such joint proxy statement/prospectus, and any
amendments or supplements thereto, the "Joint Proxy Statement/Prospectus"), and
Parent shall, as promptly as practicable after receipt of notification from the
SEC that it has no further comments on the Joint Proxy Statement/Prospectus, in
cooperation with the Company, prepare and file with the SEC a registration
statement on Form S-4 with respect to the Share Issuance (such registration
statement, and any amendments or supplements thereto, the "S-4"). The Joint
Proxy Statement/Prospectus will be included in the S-4 as Parent's prospectus.
The S-4 and the Joint Proxy Statement/Prospectus shall comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder. Each of Parent and the
Company shall use all reasonable efforts to have the S-4 declared effective by
the SEC as promptly as practicable after filing the S-4 with the SEC and to keep
the S-4 effective as long as is necessary to consummate the Merger and the Share
Issuance. The parties shall promptly provide copies, consult with each other and
prepare written responses with respect to any written comments received from the
SEC with respect to the Joint Proxy Statement/Prospectus and the S-4. The
parties will cooperate in preparing and filing with the SEC any amendment or
supplement to the Joint Proxy Statement/Prospectus or the S-4. No amendment or
supplement to the Joint Proxy Statement/Prospectus shall be filed without the
approval of both parties, which approvals shall not be unreasonably withheld or
delayed. If, at any time prior to the Effective Time, any event with respect to
the Company, Parent, any of their respective officers and directors or any of
their respective subsidiaries should occur which is required to be described in
the Joint Proxy Statement/Prospectus or the S-4 (or an amendment or supplement
thereto), the Company or Parent, as the case may be, shall promptly so advise
the other.
(b) Parent and the Company each hereby (i) consents to the use of
its name and, on behalf of its subsidiaries and affiliates, the names of such
subsidiaries and affiliates, and to the inclusion of financial statements and
business information relating to such party and its subsidiaries and affiliates
(in each case, to the extent required by applicable securities laws), in the S-4
and the Joint Proxy Statement/Prospectus, (ii)
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agrees to use all reasonable efforts to obtain the written consent of any person
or entity retained by it which may be required to be named (as an expert or
otherwise) in the S-4 or the Joint Proxy Statement/Prospectus, and (iii) agrees
to cooperate fully, and agrees to use all reasonable efforts to cause its
subsidiaries and affiliates to cooperate fully, with any legal counsel,
investment banker, accountant or other agent or representative retained by any
of the parties specified in clause (i) above in connection with the preparation
of any and all information required, as determined after consultation with each
party's counsel, to be disclosed by applicable securities laws in the S-4 or the
Joint Proxy Statement/Prospectus.
(c) The Company shall call a meeting of its stockholders to be
held as promptly as practicable for the purpose of voting upon this Agreement
and the Merger (the "Company Stockholders Meeting"), and, subject to such delays
as may be reasonably necessary in order to comply with the time periods set
forth in Section 7.3(a), shall use its reasonable best efforts to cause the
Company Stockholders Meeting to be held, and approval of this Agreement and the
Merger to be obtained, within forty-five (45) days after the date on which the
S-4 is declared effective by the SEC. The Company agrees that its obligations
pursuant to the first sentence of this Section 5.4(c) shall not be affected by
the commencement, public proposal, public disclosure or communication to the
Company of any Company Acquisition Proposal. The Company Board shall recommend
to its stockholders that they approve this Agreement and the Merger and, except
as permitted by Section 5.5(b), the Company Board shall not withdraw, amend or
modify in a manner adverse to Parent such recommendation (or announce publicly
its intention to do so). Notwithstanding the foregoing, regardless of whether
the Company Board has withdrawn, amended or modified its recommendation that its
stockholders approve and adopt this Agreement, unless this Agreement has been
terminated pursuant to the provisions of Article 7, the Company shall be
required to hold the Company Stockholders Meeting.
(d) Parent shall call a meeting of its stockholders to be held as
promptly as practicable for the purpose of voting upon the Share Issuance
(including any adjournments or postponements thereof, the "Parent Stockholders
Meeting") and shall use its reasonable best efforts to cause the Parent
Stockholders Meeting to be held, and approval of the Share Issuance to be
obtained (including, but not limited to, to the extent reasonably required, by
engaging a proxy solicitation firm) within forty-five (45) days after the date
on which the S-4 is declared effective by the SEC. Parent shall be entitled to
adjourn or postpone the Parent Stockholders Meeting for up to forty-five (45)
days to the extent deemed necessary by the Parent Board in order to obtain the
Parent Requisite Vote. Parent agrees that its obligations pursuant to the first
sentence of this Section 5.4(d) shall not be affected by the commencement,
public proposal, public disclosure or communication to Parent of any Parent
Acquisition Proposal. The Parent Board shall recommend to its stockholders that
they approve the Share Issuance and, the Parent Board shall not withdraw, amend
or modify in a manner adverse to the Company such recommendation (or announce
publicly its intention to do so). Notwithstanding the foregoing, regardless of
whether the Parent Board has withdrawn, amended or modified
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its recommendation that its stockholders approve the Share Issuance, unless this
Agreement has been terminated pursuant to the provisions of Article 7, Parent
shall be required to hold the Parent Stockholders Meeting.
(e) The Company and Parent shall coordinate and cooperate with
respect to the timing of such stockholders' meetings and shall use their
reasonable best efforts to hold such meetings on the same day.
5.5 No Solicitation by the Company.
(a) From the date hereof until the termination hereof and except
as expressly permitted by the following provisions of this Section 5.5, the
Company will not, nor will it permit any of its subsidiaries to, nor will it
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant or other advisor or representative of, the Company
or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any Company Acquisition Proposal (as defined in
Section 5.5(c)), (ii) participate in any discussions or negotiations regarding,
or furnish to any person any non-public information with respect to the Company
or any of its subsidiaries, or take any other action to facilitate, any Company
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Company Acquisition
Proposal, (iii) amend or grant any waiver or release under any standstill or
similar agreement with respect to any class of equity securities of the Company,
or (iv) enter into any agreement with respect to a Company Acquisition Proposal
(other than a confidentiality agreement as described below); provided, however,
that nothing contained in this Section 5.5(a) shall prohibit the Company Board
from furnishing information to, or entering into discussions or negotiations
with, any person that makes an unsolicited bona fide written offer or proposal
that constitutes a Company Acquisition Proposal if, and only to the extent that,
(A) such action is taken prior to receipt of the Company Requisite Vote, (B) the
Company Board, after consultation with and based upon the advice of outside
legal counsel, determines in good faith that such action is consistent with its
fiduciary duties to the Company stockholders under applicable Law, (C) the
Company Board determines in good faith, after consultation with an independent,
nationally recognized financial advisor, that such Company Acquisition Proposal,
if accepted, would constitute, or is reasonably likely to lead to, a Company
Superior Proposal (as hereinafter defined), and (D) prior to taking such action,
the Company (x) provides reasonable notice to Parent to the effect that it is
taking such action and (y) receives from such person an executed confidentiality
agreement in reasonably customary form. For purposes of this Agreement, "Company
Superior Proposal" means a bona fide written Company Acquisition Proposal on
terms which a majority of the members of the Company Board determine in their
good faith judgment (after consultation with an independent,
nationally-recognized financial advisor) and after taking into account all
legal, financial, regulatory and other aspects of the Company Acquisition
Proposal, the person making the proposal, the strategic benefits to be derived
from the Merger and the long-term prospects of the Company 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 members of the
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Company Board determine in their good faith judgment (after such consultation)
that financing, to the extent required, is then committed or reasonably
available. Prior to providing any information to or entering into discussions or
negotiations with any person in connection with a Company Acquisition Proposal
by such person, the Company shall notify Parent of any Company Acquisition
Proposal (including, without limitation, the material terms and conditions
thereof and the identity of the person making it) as promptly as practicable
(but in no case later than 36 hours) after its receipt thereof, and shall
thereafter inform Parent on a prompt basis of the status of any discussions or
negotiations with such a third party, and any material changes to the terms and
conditions of such Company Acquisition Proposal, and (with respect to
discussions or negotiations with Parent) the Company shall be entitled to so
inform such third party. Immediately after the execution and delivery of this
Agreement, the Company will, and will cause its subsidiaries and affiliates, and
their respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, cease and terminate any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any possible Company Acquisition Proposal and shall promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 5.5(a).
(b) The Company Board will not withdraw or modify or propose to
withdraw or modify, in a manner adverse to Parent, its approval or
recommendation of this Agreement or the Merger unless (i) the Company has
complied in all material respects with the terms of Section 5.5(a), (ii) a
Company Superior Proposal is pending at the time the Company Board determines to
take any such action, and (iii) the Company Board, after consultation with and
based upon the advice of outside legal counsel, determines in good faith that
such action is consistent with its fiduciary duties to the Company's
stockholders under applicable Law; provided, however, that the Company Board may
not approve or recommend a Company Acquisition Proposal (and in connection
therewith, withdraw or modify its approval or recommendation of this Agreement
or the Merger) unless such a Company Acquisition Proposal is a Company Superior
Proposal (and the Company shall have first complied with its obligations set
forth in Section 7.3(a) and the time period referred to in the last sentence of
Section 7.3(a) has expired) and unless it shall have first consulted with
outside legal counsel and have determined, based upon such advice, that such
action is consistent with its fiduciary duties to the Company stockholders.
Nothing contained in this Section 5.5(b) shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith reasonable judgment of the
Company Board, based on the advice of outside legal counsel, is required under
applicable Law; provided, however, that (i) the Company Board shall not
recommend that the stockholders of the Company tender their shares in connection
with a tender offer except to the extent the Company Board by a majority vote
determines in its good faith that such a recommendation is consistent with the
fiduciary duties of the Company Board to the Company's stockholders under
applicable Law, after receiving the advice of outside legal counsel and (ii)
except as otherwise permitted in this Section
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5.5(b) and Article 7, the Company shall 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, a Company Acquisition Proposal.
Nothing in this Section 5.5(b) shall (i) permit the Company to terminate this
Agreement (except as provided in Article 7 hereof) or (ii) affect any other
obligations of the Company under this Agreement.
(c) "Company Acquisition Proposal" means an inquiry, offer or
proposal regarding any of the following (other than the transactions
contemplated by this Agreement) involving the Company or any of its
subsidiaries: (i) other than as permitted pursuant to Section 5.1(p) hereof or
acquisitions by the Company pursuant to which the Company would not be required
to issue a number of shares of Company Common Stock greater than 20% of the
number of outstanding shares on a fully diluted basis immediately prior to such
issuance, any merger, consolidation, share exchange, recapitalization, business
combination or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of a significant portion of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of related transactions; (iii) any tender offer or
exchange offer for 20% or more of the outstanding voting capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
5.6 Intentionally Omitted.
5.7 Accountants' Letters.
(a) The Company shall use all reasonable best efforts to cause to
be delivered to Parent a letter of KPMG LLP (or its successor firm), the
Company's independent auditors, dated a date within two (2) business days before
the date on which the S-4 shall become effective and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
(b) Parent shall use all reasonable best efforts to cause to be
delivered to the Company a letter of PricewaterhouseCoopers LLP, Parent's
independent auditors, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
5.8 Access to Information.
(a) Between the date hereof and the Effective Time, each party
will give the other parties and their respective authorized representatives
reasonable access
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during normal business hours to all employees (which access shall be coordinated
with such party's executive management), offices and other facilities and to all
books and records of such party and its subsidiaries, will permit such other
parties to make such inspections as such other parties may reasonably require
and will cause such party's officers and those of its subsidiaries to furnish
such other parties with such financial and operating data and other information
with respect to the business, properties and personnel of such party and its
subsidiaries as such other parties may from time to time reasonably request;
provided, however, that no investigation made by any party pursuant to this
Section 5.8(a) shall effect or be deemed to modify any of the representations or
warranties made by any other party in this Agreement.
(b) Between the date hereof and the Effective Time, each party
shall furnish to the other parties (i) within two business days after the
delivery thereof to management, such monthly financial statements and data as
are regularly prepared for distribution to such party's Chief Executive Officer
and (ii) at the earliest time at which they are available and prior to filing
thereof with the SEC, such quarterly and annual financial statements as are
prepared for such party's SEC filings, which shall be in accordance with the
books and records of such party, and drafts of all such party's SEC filings.
(c) Each party will hold and will use its best efforts to cause
its consultants and advisors to hold in confidence all documents and information
concerning the other parties and their respective subsidiaries furnished to such
party in connection with the transactions contemplated by this Agreement to the
extent required by that certain confidentiality agreement entered into between
the Company and Parent dated July 31, 1998 and amended by letter agreement
between the Company and Parent dated May 7, 1999 (the "Confidentiality
Agreement").
5.9 Additional Agreements; Reasonable Best Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable Laws to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) cooperation
in the preparation and filing of the Joint Proxy Statement/Prospectus and the
S-4, any filings that may be required under the HSR Act, and any amendments or
supplements to any thereof, (ii) cooperation in obtaining, prior to the
Effective Time, the approval for listing on the NYSE, effective upon the
official notice of issuance, of the shares of Parent Common Stock into which the
Shares will be converted, into which the Parent Series A Preferred Stock will be
convertible and for which the Company Stock Options may become exercisable
pursuant to Article 2 hereof, (iii) the taking of all action reasonably
necessary, proper or advisable to secure any necessary consents of all third
parties and Governmental Entities, including those relating to existing debt
obligations of the Company and its subsidiaries, (iv) the transfer of existing
Company Permits to the Surviving Corporation, (v) contesting any legal
proceeding relating to the Merger or the Share Issuance and (vi) the execution
of any additional instruments necessary to consummate the transactions
contemplated hereby.
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Subject to the terms and conditions of this Agreement, Parent, Merger Sub and
the Company agree to use all reasonable efforts to cause the Effective Time to
occur as soon as practicable after the Parent Stockholders Meeting. In case at
any time after the Effective Time any further action is necessary to carry out
the purposes of this Agreement, the proper officers and directors of each party
hereto shall use their reasonable best efforts to take all such necessary
action.
5.10 Regulatory Reviews. Each party hereto will use its reasonable
best efforts to (i) file with the U.S. Department of Justice and U.S. Federal
Trade Commission, as soon as practicable and in no event later than fifteen (15)
days after the date hereof, the Notification and Report Form under the HSR Act
and to provide promptly any supplemental information or material requested
pursuant to the HSR Act, and (ii) comply as soon as practicable after the date
hereof with any other Laws of any country under which any consent,
authorization, registration, declaration or other action with respect to the
transactions contemplated herein may be required. Each party hereto shall
furnish to the other such information and assistance as the other may reasonably
request in connection with any filing or other act undertaken in compliance with
the HSR Act or other such laws, and shall keep each other timely apprised of the
status of any communications with, and any inquiries or requests for additional
information from, any Governmental Entity under the HSR Act or other such laws.
Parent, Merger Sub and the Company will each use its reasonable best efforts to
cause termination or expiration of the HSR waiting period(s) in connection with
any review of the transactions contemplated by this Agreement under the HSR Act
and the Company agrees to cooperate fully with Parent and Merger Sub in respect
thereof and to accept, in case of any dispute between the parties regarding
dealings with any Governmental Entity, actions required to effect the
termination or expiration of the HSR waiting period(s) or resolution of any
Governmental Entity's concerns, the decision of Parent and Merger Sub; provided,
however, that Parent agrees, to the extent permitted by applicable Law and as
practicable, to provide prior notice to, and consult with, the Company with
respect to any actions contemplated by Parent in connection with this Section
5.10, and, except to the extent the applicable Governmental Entity requires
otherwise, to include the Company in all substantive communications, meetings,
negotiations and proceedings related thereto. In connection with any litigation
or administrative proceeding instituted to prevent the consummation of the
Merger, Parent, Merger Sub and the Company shall take any and all action
reasonably necessary in connection with such litigation or administrative
proceeding (i) to prevent the entry of any order, preliminary or permanent
injunction, or other legal restraint or prohibition preventing consummation of
the Merger or any related transactions contemplated by this Agreement and (ii)
to vacate any order, injunction or legal restraint or prohibition which would
prevent the consummation of the transactions contemplated by this Agreement.
5.11 Public Announcements. Each of Parent, Merger Sub and the Company
will agree on the text of any press release before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Merger. None
of Parent, Merger Sub or the
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Company shall issue any such press release or make any such public statement
prior to such agreement, except as may be required by applicable Law or by
obligations pursuant to any agreement with the NYSE or NASDAQ, as determined by
Parent or the Company, as the case may be, in which case such release or
statement shall be limited to a factual summary of the material provisions of
this Agreement and the transactions contemplated hereby.
5.12 Indemnification; Directors' and Officers' Insurance.
(a) Parent agrees that all rights to exculpation and
indemnification for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers (the
"Indemnified Parties") of the Company as provided in its certificate of
incorporation or bylaws or in any agreement between the Company and any of the
Indemnified Parties shall survive the Merger and shall continue in full force
and effect in accordance with their terms for a period of six years following
the Effective Time, and accordingly during such period, the Surviving
Corporation shall indemnify the Indemnified Parties to the same extent as such
Indemnified Parties are entitled to indemnification pursuant to the preceding
sentence.
(b) For a period of six (6) years after the Effective Time,
Parent shall cause to be maintained in effect the policies of directors' and
officers' liability insurance maintained by the Company for the benefit of those
persons who are covered by such policies at the Effective Time (or Parent may
substitute therefor policies of at least the same coverage with respect to
matters occurring prior to the Effective Time), to the extent that such
liability insurance can be maintained annually at a cost to Parent not greater
than 150 percent of the annual premium (the "Current Premium") for the current
Company directors' and officers' liability insurance; provided, however, that if
such insurance cannot be so maintained or obtained at such costs, Parent shall
maintain or obtain as much of such insurance as can be so maintained or obtained
at a cost equal to 150 percent of the current annual premiums of the Company for
such insurance. The Company represents and warrants to Parent that the Current
Premium is approximately $140,000 per annum.
(c) To the fullest extent permitted by Law, from and after the
Effective Time, all rights to indemnification now existing in favor of the
employees, agents, directors or officers of the Company and its subsidiaries
with respect to their activities as such prior to the Effective Time, as
provided in the Company's certificate of incorporation or bylaws, in effect on
the date thereof or otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time.
(d) The rights of each Indemnified Party under this Section 5.12
are intended to benefit, and shall be enforceable by, each Indemnified Party.
5.13 Notification of Certain Matters. The Company, on the one hand,
and Parent and Merger Sub, on the other, shall give prompt written notice to
each other upon
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their obtaining knowledge of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of a party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, (iii) any notice of,
or other communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by a party or any of its
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time, under any contract or agreement material to the financial condition,
properties, businesses or results of operations of a party and its subsidiaries
taken as a whole to which it or any of its subsidiaries is a party or is
subject, (iv) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement, (v) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
likely to cause any condition to the obligations of any party to the effect of
the transactions contemplated hereby not to be satisfied, (vi) any notice or
other communication from any Governmental Entity in connection with the Merger
or (vii) any Material Adverse Effect on a party; provided, however, that the
delivery of any notice pursuant to this Section 5.13 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
5.14 Tax-Free Reorganization Treatment. The Company, certain
stockholders of the Company, and Parent shall execute and deliver to Paul,
Hastings, Janofsky & Walker LLP, counsel to the Company, and Weil, Gotshal &
Manges LLP, counsel to Parent and Merger Sub, certificates substantially in the
forms agreed to prior to the date hereof at such time or times as may be
reasonably requested by such law firms in connection with their respective
deliveries of opinions, pursuant to Sections 6.2(e) and 6.3(c) hereof, with
respect to the tax-free reorganization treatment of the Merger. Prior to the
Effective Time, none of the Company, Parent, or Merger Sub shall take or cause
to be taken any action which would cause to be untrue (or fail to take or cause
not to be taken any action which would cause to be untrue) any of the
representations in such certificates. The Company, Parent and Merger Sub agree
to report the Merger on all Tax Returns and other filings as a tax-free
reorganization under Section 368(a) of the Code.
5.15 Company Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying each affiliate (as such term is defined
in Rule 12b-2 under the Exchange Act) of the Company at the time the Merger is
submitted for approval to the stockholders of the Company (each, a "Company
Affiliate") and the Company shall use its reasonable best efforts to cause each
Company Affiliate to deliver to Parent on or prior to the Closing Date, a letter
agreement in the form attached hereto as Exhibit C (each, a "Company Affiliate
Letter").
5.16 SEC Filings. Each of Parent and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by the
other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
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5.17 Employee Benefits. For a period of one year after the Effective
Time, Parent will 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 Employee
Benefit Plans (other than any stock option plans and employee stock purchase
plans). Without limiting the generality of the foregoing, all vacation, holiday,
sickness and personal days accrued by the employees of the Company and of its
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 Parent or any affiliate of Parent or becomes a participant in an
employee benefit plan, program or arrangement maintained by or contributed by
Parent or any affiliate of Parent, Parent shall cause such plan, program or
arrangement to treat the prior service of such employee with the Company or its
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, vacation
time or severance benefits under such plans. 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. 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 Parent and
its respective subsidiaries. Nothing contained in this Section 5.17 shall be
construed as requiring Parent to continue any specific Company Employee Benefit
Plan or to continue the employment of any employee, provided, however, that any
changes that Parent may make to any such Company Employee Benefit Plan are
consistent with the prior parts of this Section 5.17, and are permitted by the
terms of the Company Employee Benefit Plan and under the applicable law.
5.18 Parent Board. Parent shall take all necessary action to cause
Saperstein to be appointed to Class II of the Parent Board and a designee
selected by Saperstein to be appointed to Class III of the Parent Board as of
the close of business on the date on which the Effective Time occurs and to
serve until the next election of directors of the respective class to which such
individual is appointed.
5.19 Fees and Expenses. Whether or not the Merger is consummated, all
Expenses (as hereinafter defined) incurred in connection with this Agreement,
and the transactions contemplated hereby shall be paid by the party incurring
such Expenses, except Expenses incurred in connection with the filing, printing
and mailing of the Joint Proxy Statement/Prospectus and the S-4 and filing fees
incurred pursuant to the requirements of the HSR Act, which shall be shared
equally by the Company and Parent. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by a party or on its behalf in
connection with, or related to, the authorization, preparation, negotiation,
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execution and performance of this Agreement and the transactions contemplated
hereby, including the preparation, filing, printing and mailing of the Joint
Proxy Statement/Prospectus and the S-4.
5.20 Antitakeover Statutes. If any Takeover Statute is or may become
applicable to the Merger, each of the Company and Parent shall take such
commercially reasonable actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of any Takeover Statute on the Merger.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party hereto to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) this Agreement shall have been adopted and the Merger
approved by the Company Requisite Vote;
(b) the Share Issuance shall have been approved by the Parent
Requisite Vote;
(c) no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity and continued in effect which prohibits, restrains, enjoins
or restricts the consummation of the Merger;
(d) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired;
(e) the S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order and Parent shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Parent Common Stock in
exchange for the Shares in the Merger;
(f) the Parent Common Stock issuable in the Merger (or otherwise
as contemplated pursuant to Section 2.3) shall have been authorized for listing
on the NYSE, subject to official notice of issuance; and
(g) (i) all authorizations, consents or approvals of a
Governmental Entity required in connection with the execution and delivery of
this Agreement and the performance of the obligations hereunder shall have been
made or obtained, without any
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limitation, restriction or condition that has or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
(in the case of Parent's obligation to effect the Merger) or Parent (in the case
of the Company's obligation to effect the Merger), except for such
authorizations, consents or approvals, the failure of which to have been made or
obtained does not and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company (in the case of
Parent's obligation to effect the Merger) or Parent (in the case of the
Company's obligation to effect the Merger); and
(ii) there shall not be pending or threatened in writing by
any Governmental Entity any suit, action or proceeding, in each case (A) seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company or Parent any damages that are material in relation to the Company and
its subsidiaries taken as a whole or Parent and its subsidiaries taken as a
whole, as applicable, (B) 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 common stock of the Surviving Corporation, on all matters properly
presented to the stockholders of the Surviving Corporation or (C) which
otherwise could reasonably be expected to have a Material Adverse Effect on the
Company or Parent;
6.2 Conditions to the Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Merger Sub
set forth in this Agreement shall be true and correct (without regard to any
materiality qualifications or references to Material Adverse Effect 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 such representations
and warranties (i) expressly relate to an earlier date (in which case, as of
such date) or (ii) may not be true or accurate by reason of actions taken by
Parent or Merger Sub as permitted by Section 5.2 hereof; provided, however, that
this paragraph (a) shall be deemed satisfied so long as the failure of all such
representations and warranties to be true and correct, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect on Parent and its subsidiaries, taken as a whole, and the Company
shall have received a certificate signed on behalf of Parent by a senior
executive officer of Parent to such effect;
(b) each of the obligations of Parent and Merger Sub to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Merger Sub shall have
delivered to the Company a certificate executed by a senior officer of Parent to
that effect;
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(c) Parent shall have executed and delivered to David Saperstein
a registration rights agreement in the form of Exhibit D hereto (the
"Registration Rights Agreement");
(d) the Certificate of Designations with respect to the Parent
Series A Preferred Stock shall have been filed with the Secretary of State of
the State of Delaware;
(e) the Company shall have received an opinion of Paul, Hastings,
Janofsky & Walker LLP, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, Paul,
Hastings, Janofsky & Walker LLP shall have received and may rely upon the
representations contained in the certificates referred to in Section 5.14;
(f) there shall not have been a material breach of the Parent
Stockholder Voting Agreement by the Parent Stockholder; and
(g) each of the agreements referenced in Section 4.27 shall be in
full force and effect, and there shall exist no claims that would give rise to a
right of termination by either of the parties thereto.
6.3 Conditions to the Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company set forth
in this Agreement shall be true and correct (without regard to any materiality
qualifications or references to Material Adverse Effect 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 such representations and warranties
(i) expressly relate to an earlier date (in which case, as of such date) or (ii)
may not be true or accurate as of the Closing Date by reason of actions taken by
the Company as permitted by Section 5.1 hereof; provided, however, that this
paragraph (a) shall be deemed satisfied so long as the failure of all such
representations and warranties to be true and correct, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company and its subsidiaries, taken as a whole, and Parent
shall have received a certificate signed on behalf of the Company by a senior
executive officer of the Company to such effect;
(b) each of the obligations of the Company to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time
and, at the Closing, the Company shall have delivered to Parent and Merger Sub a
certificate executed by a senior officer of the Company to that effect;
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(c) Parent shall have received an opinion of Weil, Gotshal &
Manges LLP, dated the Closing Date to the effect that the Merger will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, Weil, Gotshal & Manges
LLP shall have received and may rely upon the representations contained in the
certificates referred to in Section 5.14; and
(d) there shall not have been a material breach of the Company
Stockholders Voting Agreement by the Company Stockholders.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
7.1 Termination by Mutual Agreement. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time by the
mutual written consent of Parent and the Company by action of their respective
Board of Directors.
7.2 Termination by Either Parent or the Company. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if:
(a) the Merger shall not have been consummated by the first
anniversary of the date of this Agreement, (the "Termination Date"); provided,
however, that if either Parent or the Company determines that additional time is
necessary in connection with obtaining any consent, registration, approval,
permit or authorization required to be obtained from any Governmental Entity,
the Termination Date may be extended by Parent or the Company from time to time
by written notice to the other party to a date not beyond eighteen months from
the date of this Agreement;
(b) the Company Requisite Vote shall not have been obtained at
the Company Stockholders Meeting;
(c) the Parent Requisite Vote shall not have been obtained at the
Parent Stockholders Meeting; or
(d) any Law permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable;
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.2 shall not be available to any party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure of the Merger to
be consummated.
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7.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action of
the Company Board if:
(a) (i) the Company is not in breach of Section 5.5, (ii) the
Merger shall not have been approved by the Company Requisite Vote, (iii) the
Company Board shall have determined in good faith, based on the advice of
outside legal counsel, that it is consistent with its fiduciary duties to the
Company's stockholders under applicable Law, to terminate this Agreement to
enter into an agreement with respect to or to consummate a transaction
constituting a Company Superior Proposal, (iv) the Company Board authorizes the
Company, subject to complying with the terms of this Agreement, to enter into a
binding written agreement with a third party concerning a transaction that
constitutes a Company Superior Proposal and the Company notifies Parent in
writing (the "Company Notice") that it intends to enter into such an agreement
(it being understood that the Company shall be required to deliver a new Company
Notice in respect of any revised Company Superior Proposal from such third party
or its affiliates that the Company proposes to accept), attaching the most
current version of such agreement to such Company Notice (which version shall be
updated on a current basis), and (v) during the five business day (or, in the
case of any Company Notice with respect to a particular third party other than
the initial Company Notice with respect to such third party's Company
Acquisition Proposal, three business day) period after delivery of the Company
Notice, (A) the Company shall have negotiated in good faith with, and shall have
caused its respective financial and legal advisors to, negotiate in good faith
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 transactions contemplated herein and (B) the Company Board shall have
concluded, after considering the results of such negotiations, that any Company
Superior Proposal giving rise to the Company Notice continues to be a Company
Superior Proposal. The Company may not effect any termination pursuant to this
Section 7.3(a) unless (i) prior thereto or simultaneously therewith, the Company
pays to Parent in immediately available funds the fees required to be paid
pursuant to Section 7.5(b) and (ii) such termination is within 3 business days
after the termination of the five (or, if applicable, three) business day period
referred to in clause (v) above. The Company agrees (x) that it will not enter
into a binding agreement referred to in clause (iii) above until the first
business day after the five (or, if applicable, three) business day period
referred to in clause (v) above, and (y) to notify Parent promptly of its
intention to enter into a written agreement referred to in a Company Notice if
its notification shall change at any time after giving such notification;
(b) the Parent Board, whether or not permitted to do so by this
Agreement, shall have withdrawn or adversely modified its approval or
recommendation of the Share Issuance, or shall have failed to call the Parent
Stockholders Meeting in accordance with Section 5.4(d); or
(c) there is a breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement that
would give rise to a failure of a condition set forth in Section 6.2(a) or
6.2(b), which has not been cured
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within 30 business days following receipt by Parent and Merger Sub of written
notice of such breach.
7.4 Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Parent Board if:
(a) the Company enters into a binding agreement for a Company
Superior Proposal, or the Company Board, whether or not permitted to do so by
this Agreement, shall have withdrawn or adversely modified its approval or
recommendation of this Agreement or the Merger, or shall have failed to call the
Company Stockholders Meeting in accordance with Section 5.4(a); or
(b) there is a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement would give rise to a
failure of a condition set forth in Section 6.3(a) or 6.3(b), which has not been
cured within 30 business days following receipt by the Company of written notice
of such breach.
7.5 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 7, this Agreement (other than
this Section 7.5 and Sections 5.8(c), 5.19 and Article 8) shall become void and
of no effect with no liability on the part of any party hereto (or of any of its
directors, officers, employees, agents, legal and financial advisors or other
representatives); provided, however, neither such termination nor the existence
of any rights provided for in Section 7.5(b) or Section 7.5(c) shall relieve any
party hereto of any liability or eliminate or reduce any damages resulting from
(i) any willful breach of any representations or warranties contained in this
Agreement or fraud or (ii) any breach of any covenant or agreement contained in
this Agreement; and provided, further, that in the event Parent elects to
receive the Company Termination Fee (as defined below) or the Company elects to
receive the payments contemplated by Section 7.5(c)(i) or (ii), as the case may
be, the receipt of such payments and amounts shall be in full satisfaction of
any amount or obligations owed to the recipient by the other party or parties
hereto, and shall be such recipient's sole remedy hereunder (except for cases of
fraud).
(b) (i) In the event that this Agreement is terminated by the
Company pursuant to Section 7.3(a) or by Parent pursuant to Section 7.4(a), then
the Company shall pay Parent a termination fee of $30 million in same-day funds
(the "Company Termination Fee"), on the date of such termination.
(ii) In the event that prior to or at the Company
Stockholders Meeting a Company Acquisition Proposal shall have been made to the
Company or any of its subsidiaries or any of its stockholders, and thereafter
this Agreement is terminated by either Parent or the Company pursuant to Section
7.2(b), then the Company shall reimburse Parent for its documented expenses
incurred in connection with the
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transactions contemplated hereby, up to a maximum reimbursemetnt of $1.0 million
(the "Parent Expenses"), promptly upon presentment of statements documenting
such expenses.
(iii) In the event that this Agreement is terminated by
Parent pursuant to Section 7.4(b) as a result of a willful breach and, within 12
months of any such termination, any Company Acquisition Proposal (whether
received prior to or after such termination) is entered into, agreed to or
consummated by the Company, then the Company shall pay to Parent the Company
Termination Fee, on the earlier of the date an agreement is entered into with
respect to a Company Acquisition Proposal or a Company Acquisition Proposal is
consummated.
(c) (i) In the event that this Agreement is terminated by the
Company pursuant to Section 7.3(b), then Parent shall pay the Company a fee of
$30 million in same-day funds (the "Parent Termination Fee"), on the day of such
termination.
(ii) In the event that this Agreement is terminated by the
Company or Parent pursuant to Section 7.2(c), then (A) Parent shall pay the
Company a fee of $10 million, on the date of such termination, and (B) Parent
shall promptly thereafter purchase from the Company unregistered shares of
Company Common Stock for an aggregate purchase price equal to $10 million (based
on a per share price equal to the greater of $50 and the average closing price
of Company Common Stock on the Nasdaq National Market during the 30 trading days
immediately prior to the date of the Parent Stockholders Meeting).
The provisions of Section 7.5(c)(ii) shall automatically be of
no further force or effect if holders of shares of Parent Common Stock or Parent
Class B Stock enter into one or more voting agreements in favor of the Company
substantially to the effect of the Parent Stockholders Voting Agreement (other
than Section 2 thereof) such that the aggregate number of votes represented by
such agreements is adequate to obtain the Parent Requisite Vote.
(d) The Company and Parent acknowledge that the agreements
contained in Sections 7.5(b) and 7.5(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Sub and the Company, as the case may be, would not have entered into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to Section 7.5(b) or Parent fails to pay promptly the amount due
pursuant to Section 7.5(c), and, in order to obtain such payment, Parent or the
Company, as the case may be, commences a suit which results in a judgment
against the Company or Parent for the fee set forth in this Section 7.5, the
Company shall pay to Parent, or Parent shall pay to the Company, as the case may
be, its costs and expenses (including attorney's fees) in connection with such
suit, together with interest from the date of termination of this Agreement on
the amounts owed at the prime rate of Citibank, N.A. in effect from time to time
during such period plus two percent.
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<PAGE> 71
7.6 Amendment. This Agreement may be amended by action taken by the
Company, Parent and Merger Sub at any time before or after approval of the
Merger by the stockholders of the Company but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable Law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
7.7 Extension; Waiver. At any time prior to the Effective Time, each
party hereto (for these purposes, Parent and Merger Sub shall together be deemed
one party and the Company shall be deemed the other party) may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other party with any
of the agreements or conditions contained herein. Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
either party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE 8
MISCELLANEOUS
8.1 Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
8.2 Entire Agreement; Assignment. This Agreement:
(a) constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof; and
(b) shall not be assigned by operation of law or otherwise;
provided, however, that Parent may assign any or all of its rights and
obligations under this Agreement to any direct wholly owned subsidiary of
Parent, but any representation, warranty or covenant of Parent contained in this
Agreement shall remain a representation, warranty or covenant of Parent and no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations. Any assignment in violation of this
Section 8.2(b) shall be void ab initio.
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<PAGE> 72
8.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, confirmed facsimile or telex, or by first class mail (postage prepaid,
return receipt requested), to the other party as follows:
if to Parent or Merger Sub to: Westwood One, Inc.
9540 Washington Boulevard
Culver City, California 90232
Attention: Joel Hollander
Facsimile: (310) 840-4059
with copies to: Infinity Broadcasting Corporation
40 West 57th Street
New York, New York 10019
Attention: Farid Suleman
Facsimile: (212) 314-9336
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Howard Chatzinoff, Esq.
Facsimile: (212) 310-8007
if to the Company to: Metro Networks, Inc.
681 Fifth Avenue, 10th Floor
New York, New York 10022
Attention: Gary Worobow, Esq.
Facsimile: (212) 750-5393
with a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey, Esq.
Facsimile: (212) 319-4090
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
8.4 Governing Law. Except to the extent that Delaware Law is
mandatorily applicable to the Merger and the rights of the stockholders of the
Company, this Agreement shall be governed by and construed in accordance with
the Laws of the State of New York, without regard to the principles of conflicts
of Law thereof.
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<PAGE> 73
8.5 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
8.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 5.12, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
8.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
8.8 Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
8.9 Brokers. The Company agrees to indemnify and hold harmless Parent
and Merger Sub, and Parent agrees to indemnify and hold harmless the Company,
from and against any and all liability to which Parent and Merger Sub, on the
one hand, or the Company, on the other hand, may be subjected by reason of any
broker's, finder's or similar fees or expenses with respect to the transactions
contemplated by this Agreement to the extent such similar fees and expenses are
attributable to any action undertaken by or on behalf of the Company, or Parent
or Merger Sub, as the case may be.
8.10 Disclosure Generally. The parties acknowledge and agree that (i)
the Company Disclosure Schedule and Parent Disclosure Schedule may include
certain items and information solely for informational purposes for the
convenience of the parties hereto and (ii) the disclosure of any matter in the
Company Disclosure Schedule or Parent Disclosure Schedule shall not be deemed to
constitute an acknowledgement by the Company or Parent, as the case may be, that
the matter is material or required to be disclosed pursuant to the provisions of
this Agreement.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
8.12 Interpretation.
(a) The words "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole
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and not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless otherwise specified.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time, amended, qualified
or supplemented, including (in the case of agreements and instruments) by waiver
or consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
(b) The phrases "the date of this Agreement," "the date hereof"
and terms of similar import, unless the context otherwise requires, shall be
deemed to refer to June 1, 1999. "Know" or "knowledge" means, (i) with respect
to the Company, the actual knowledge of David I. Saperstein, Charles I.
Bortnick, Shane E. Coppola or Gary Worobow, and (ii) with respect to Parent, the
actual knowledge of Farid Suleman, Joel Hollander or Gary Yusko.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
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SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed on its behalf as of the day and year first above written.
WESTWOOD ONE, INC.
By: /s/ FARID SULEMAN
------------------------------------
Name: Farid Suleman
Title: Executive Vice President,
Chief Financial Officer and
Secretary
COPTER ACQUISITION CORP.
By: /s/ JOEL HOLLANDER
------------------------------------
Name: Joel Hollander
Title: Vice President and Secretary
METRO NETWORKS, INC.
By: /s/ DAVID I. SAPERSTEIN
------------------------------------
Name: David I. Saperstein
Title: Chief Executive Officer
<PAGE> 76
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Terms Page Number
<S> <C>
Acquisition.............................................................................................49
Agreement................................................................................................1
Business Combination....................................................................................49
Certificate..............................................................................................3
Certificate of Designations..............................................................................4
Closing..................................................................................................2
Closing Date.............................................................................................2
Code.....................................................................................................1
Company..................................................................................................1
Company Acquisition Proposal............................................................................53
Company Affiliate.......................................................................................58
Company Affiliate Letter................................................................................58
Company Board...........................................................................................10
Company Common Stock.....................................................................................1
Company Disclosure Schedule..............................................................................8
Company Employee Benefit Plan...........................................................................16
Company Employee Benefit Plans..........................................................................16
Company Financial Advisor...............................................................................25
Company Material Contracts..............................................................................22
Company Notice..........................................................................................64
Company Option Plans.....................................................................................9
Company Permits.........................................................................................16
Company Real Property Leases............................................................................23
Company Requisite Vote..................................................................................10
Company SEC Reports.....................................................................................11
Company Securities.......................................................................................9
Company Series A Preferred Stock.........................................................................1
Company Software........................................................................................24
Company Stock Options....................................................................................9
Company Stockholder......................................................................................1
Company Stockholder Voting Agreement.....................................................................1
Company Stockholders Meeting............................................................................50
Company Superior Proposal...............................................................................52
Company Termination Fee.................................................................................65
Company Year 2000 Plan..................................................................................25
Confidentiality Agreement...............................................................................55
Covered Transactions....................................................................................26
Current Premium.........................................................................................57
DGCL.....................................................................................................2
</TABLE>
<PAGE> 77
<TABLE>
<S> <C>
Effective Time...........................................................................................2
Environmental Laws......................................................................................16
ERISA...................................................................................................16
Exchange Act............................................................................................11
Exchange Agent...........................................................................................4
Exchange Fund............................................................................................4
Exchange Ratio...........................................................................................3
Expenses................................................................................................59
Filed Company SEC Reports...............................................................................12
Filed Parent SEC Reports................................................................................30
GAAP....................................................................................................11
Governmental Entity.....................................................................................12
HSR Act.................................................................................................12
Indemnified Parties.....................................................................................56
Joint Proxy Statement/Prospectus........................................................................50
Law.....................................................................................................13
Letter Transmittal.......................................................................................4
Lien....................................................................................................10
Material Adverse Effect..................................................................................8
Merger...................................................................................................2
Merger Consideration.....................................................................................3
Merger Sub...............................................................................................1
Parent...................................................................................................1
Parent Acquisition Proposal.............................................................................42
Parent Board............................................................................................28
Parent Class B Stock....................................................................................27
Parent Common Stock......................................................................................1
Parent Disclosure Schedule..............................................................................26
Parent Employee Benefit Plan............................................................................34
Parent Employee Benefit Plans...........................................................................34
Parent Expenses.........................................................................................65
Parent Financial Advisor................................................................................41
Parent Material Contracts...............................................................................39
Parent Option Plans.....................................................................................27
Parent Permits..........................................................................................33
Parent Real Property Leases.............................................................................39
Parent Requisite Vote...................................................................................28
Parent SEC Reports......................................................................................29
Parent Securities.......................................................................................27
Parent Series A Preferred Stock..........................................................................4
Parent Stock Options....................................................................................27
Parent Stockholder Voting Agreement......................................................................1
Parent Stockholders......................................................................................1
Parent Stockholders Meeting.............................................................................51
Parent Year 2000 Plan...................................................................................41
</TABLE>
<PAGE> 78
<TABLE>
<S> <C>
Permitted Liens.........................................................................................14
Registration Rights Agreement...........................................................................61
SEC.....................................................................................................11
Securities Act..........................................................................................11
Share....................................................................................................3
Share Issuance..........................................................................................28
subsidiary...............................................................................................8
Surviving Corporation....................................................................................2
Takeover Statutes.......................................................................................26
Tax.....................................................................................................21
Tax Returns.............................................................................................21
Termination Date........................................................................................63
</TABLE>
<PAGE> 1
EXHIBIT 99.1
WEDNESDAY JUNE 2, 10:40 AM EASTERN TIME
COMPANY PRESS RELEASE
SOURCE: Westwood One, Inc.
WESTWOOD ONE, INC. TO ACQUIRE METRO NETWORKS, INC.
COMPANIES COMBINE TO FORM WORLD'S PREMIER LOCAL CONTENT AND INFORMATION
SERVICES COMPANY TO THE BROADCAST INDUSTRY
NEW YORK, June 2/PRNewswire/ -- Westwood One, Inc. (NYSE: WON - news) and Metro
Networks, Inc. (Nasdaq: MTNT - news) today announced a definitive agreement by
which Metro Networks, Inc. will merge into Westwood One in exchange for
approximately $900 million in Westwood One common stock.
The transaction was announced today by Mel Karmazin, Chairman and Chief
Executive Officer of Infinity Broadcasting Corporation, and David Saperstein,
Chairman and Chief Executive Officer of Metro Networks, Inc.
Under the terms of the definitive merger agreement, which was approved by the
Boards of Directors of Westwood One, Inc. and Metro Networks, Inc., each share
of Metro common stock will be converted into the right to receive 1.50 shares
of Westwood One common stock. Under the terms of the agreement, there are no
floors or ceilings in determining the exchange ratio. Infinity, which manages
Westwood One pursuant to a management agreement and owns 5 million shares of
Westwood One and warrants to acquire an additional 5 million shares, has agreed
to vote its interest in Westwood One in favor of this transaction. Mr.
Saperstein, who beneficially owns approximately 53% of Metro's voting stock,
also has agreed to vote in favor of the transaction.
Westwood will therefore issue approximately 26 million shares valued at $900
million, based on a Westwood share price of $35. Metro has no outstanding debt.
Upon closing of the acquisition, Mr. Saperstein will join the Board of Directors
of Westwood One, Inc. Metro's President, Charles Bortnick, will become
President/Chief Operating Officer of the combined operations of Metro Networks
and Westwood's Shadow Broadcasting Services, and Metro's Executive Vice
President, Shane Coppola, will become Executive Vice President of the combined
operations. Mr.
<PAGE> 2
Saperstein will also enter into a consulting agreement with the Company.
Mel Karmazin said: "The merger of Westwood One and Metro Networks will help
create the premier local content and information services company in the world.
Mr. Karmazin added that, "The resources of the combined traffic operations of
the merged company will enable Westwood One to invest in improved local content
and information gathering systems as well as develop new markets for its
content from both its existing and future distribution systems."
David Saperstein, Chairman, Chief Executive Officer, and founder of Metro
Networks, Inc. stated: "The merger with Westwood represents the best
opportunity for both companies to continue to grow rapidly and develop new
products and services for our broadcast affiliates." Mr. Saperstein added: "As
the largest individual shareholder of the combined company, I am excited about
the benefits that will accrue to our shareholders, affiliates, advertisers, and
employees."
Joel Hollander, President and Chief Executive Officer of Westwood One, Inc.
said: "The merger between Westwood One and Metro creates outstanding
opportunities to further serve our affiliates as well as provide new and
improved platforms for our advertisers. Metro is a world class information
services organization with great management, and the merger will create two
great traffic organizations, Shadow Traffic as well as Metro Traffic to serve
our combined companies' affiliate base." Further, Mr. Hollander said that
combining Westwood's worldwide news resources and affiliate distribution base
with the new Metro Source distribution system provides significant growth
opportunities into the new millennium.
The transaction is subject to certain closing conditions, including the
expiration of the Hart-Scott-Rodino waiting period and the approval of Metro
and Westwood shareholders, and is expected to close in the fall of 1999.
Westwood One, Inc. is America's largest radio network, providing over 150 news,
sports, music, talk, entertainment programs, features, live events, 24-hour
formats and Shadow Broadcast Services including Shadow Traffic, News and
Sports. Westwood One services more than 5,000 radio stations around the world.
Westwood One, Inc. is managed by Infinity Broadcasting Corporation.
Metro Networks, Inc. is the largest provider of traffic reporting services and
a leading supplier of local news, sports, weather and video news services to
the television and radio broadcast industries. Metro Networks, Inc. operates in
over 80 markets nationally and services more than 2000 radio and television
station affiliates in six countries.
Donaldson, Lufkin & Jenrette Securities Corporation advised Westwood One, Inc.
with respect to the transaction and provided the Board of Directors of Westwood
One, Inc. with a fairness opinion regarding the transaction.
Goldman Sachs & Co. advised Metro Networks, Inc. with respect to the
transaction and provided the Board of Directors of Metro Networks, Inc. with a
fairness opinion regarding the transaction.
Note: Certain statements in this press release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Companies to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Reference is made to the Companies' Annual Reports
on Form 10-K for the 1998 year filed with the Securities and Exchange
Commission for additional information concerning such risks and uncertainties.
