UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
-----------------------
PLD TELEKOM INC.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
6934OT10
(CUSIP Number)
Arnold L. Wadler
Executive Vice President, General Counsel and Secretary
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
(201) 531-8000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
-----------------------
May 18, 1999
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
PAGE 1 of 11
<PAGE>
CUSIP NO. 6934OT10 PAGE 2 OF 11
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Metromedia International Group, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO(1)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 18,436,149 (1)
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON WITH 10 SHARED DISPOSITIVE POWER
18,436,149 (1)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
18,436,149 (1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
44.0% (based on 37,846,789 shares of Common Stock outstanding)
14 TYPE OF REPORTING PERSON
CO
- ----------------------------------
(1) No shares of PLD Telekom Inc. have been purchased, directly or
indirectly, by the reporting entity. Rather, the reporting entity may
be deemed to have beneficial ownership of the shares reported herein
pursuant to a voting agreement (as described in the Introduction and
in Items 3 and 4 of this Schedule 13D), entered into in connection
with a proposed merger with PLD Telekom Inc. Any such beneficial
ownership is expressly denied by the reporting entity.
<PAGE>
CUSIP NO. 6934OT10 PAGE 3 OF 11
Introduction.
No shares of PLD Telekom Inc., a Delaware corporation (the
"Issuer"), have been purchased directly or indirectly by Metromedia
International Group, Inc. ("Metromedia"). Metromedia is making this
filing solely because it may be deemed to have beneficial ownership of
the shares reported herein pursuant to the Voting Agreement (as
described below).
On May 18, 1999, Metromedia and the Issuer executed an
agreement and plan of merger (the "Merger Agreement") pursuant to which
the Issuer agreed to merge (the "Merger") with a wholly owned
subsidiary of Metromedia. In the Merger, each share of the common
stock, par value $.01 per share, of PLD Telekom Inc. (the "Common
Stock") will be exchanged for a number of shares of common stock, par
value $1.00 per share, of Metromedia based on an exchange ratio to be
determined based on the average stock price of Metromedia's common
stock before the consummation of the Merger. The specific terms of the
exchange are included in the Merger Agreement, Article 2, Section 2.1,
Paragraph (a), a copy of which is attached hereto as exhibit 99.1.
Capitalized terms used in this Schedule 13D without definition have the
meanings given to them in the Merger Agreement.
The completion of the Merger is subject to a number of
conditions, including the approval of the Merger Agreement by the
holders of Common Stock of the Issuer. In connection therewith, News
America Incorporated and News PLD LLC (each a "Shareholder" and,
collectively, the "Shareholders"), who collectively own 14,381,780
shares of Common Stock of the Issuer representing approximately 38% of
the Issuer's outstanding Common Stock, notes convertible into 3,804,369
shares of Common Stock and warrants to purchase 250,000 shares of
Common Stock (collectively, the "Shares"), have entered into a Voting
Agreement, dated as of May 18, 1999, in the form attached hereto as
Exhibit 99.2, with Metromedia (the "Voting Agreement"). Under the
Voting Agreement, each Shareholder has agreed that at any meeting of
the holders of Common Stock, or in connection with any written consent
of the holders of the Common Stock, such Shareholder shall vote or
cause to be voted the Shares of Common Stock held of record or
beneficially owned by such Shareholder (i) in favor of the Merger, the
Merger Agreement (as amended from time to time) and the transactions
contemplated by the Merger Agreement and (ii) against any proposal for
any extraordinary corporate transaction, such as a recapitalization,
dissolution, liquidation, or sale of assets of the Issuer or any
merger, consolidation or other business combination (other than the
Merger) between the Issuer and any Person (other than Metromedia or a
subsidiary of Metromedia) or any other action or agreement that is
intended or which reasonably could be expected to (a) result in a
breach of any covenant, representation or warranty or any other
obligation or agreement of the Issuer under the Merger Agreement, (b)
result in any of the conditions to the Issuer's obligations under the
Merger Agreement not being fulfilled or (c) impede, interfere with,
delay, postpone or materially adversely affect the Merger and the
transactions contemplated by the Merger Agreement.
Each Shareholder further agreed (i) that, except as
contemplated by the Voting Agreement and the Merger Agreement, such
Shareholder has not and shall not, and shall not permit any Person
under such Shareholder's control (including any record holder) to,
enter into any voting agreement or grant a proxy or power of attorney
with respect to the Shares of
<PAGE>
CUSIP NO. 6934OT10 PAGE 4 OF 11
the Issuer's Common Stock held of record or beneficially owned by such
Shareholder which, in either case, is inconsistent with the Voting
Agreement; (ii) that such Shareholder will not, prior to the
termination of the Voting Agreement, either directly or indirectly,
offer or otherwise agree to sell, assign, pledge, hypothecate,
transfer, exchange, or dispose of any of its Shares or options,
warrants or other convertible securities to acquire or purchase shares
of the Issuer's Common Stock (collectively, the "Derivative
Securities") or any other securities or rights convertible into or
exchangeable for shares of the Issuer's Common Stock, owned either
directly or indirectly by such Shareholder or with respect to which
such Shareholder has the power of disposition, whether now or hereafter
acquired, without the prior written consent of Metromedia (provided
nothing contained therein will be deemed to restrict the exercise or
conversion of Derivative Securities outstanding on the date thereof),
unless the Person to whom Shares or Derivative Securities have been
sold, assigned, pledged, hypothecated, transferred, exchanged or
disposed agrees to be bound by the Voting Agreement as if a party
hereto; (iii) and consented to the entry of stop transfer instructions
by the Issuer against the transfer of any shares of the Issuer's Common
Stock inconsistent with paragraph (ii) above.
The Voting Agreement will terminate upon the earlier to occur
of (i) the closing of the transactions contemplated by the Merger
Agreement and (ii) the termination of the Merger Agreement in
accordance with its terms.
If subsequent to the date of the Voting Agreement, the
Shareholders, as a group or individually, acquire additional shares of
Common Stock of the Issuer, under the terms of the Voting Agreement,
these additional shares, will be subject to the terms of the Voting
Agreement.
The description of the transactions summarized above are
qualified in their entirety by reference to the Exhibits attached
hereto.
Item 1. Security and Issuer.
The class of securities to which this Schedule 13D relates is
the Common Stock, $.01 par value (defined above as the "Common Stock"),
of PLD Telekom Inc., a Delaware corporation (defined above as the
"Issuer"), whose principal executive offices are located at 505 Park
Avenue, 21st Floor, New York, New York 10022.
Item 2. Identity and Background.
Metromedia International Group, Inc. ("Metromedia") is a
Delaware corporation whose principal place of business is One
Meadowlands Plaza, East Rutherford, New Jersey, 07073-2137. Metromedia
is a global communications company engaged in the development and
operation of a variety of communications businesses, including cellular
telecommunications, fixed telephony, international and long distance
telephony, cable television, paging and radio broadcasting, in Eastern
Europe, the republics of the former Soviet Union, the People's Republic
of China and other selected emerging markets.
The response to Items 2(d) and (e) of this Schedule is
negative with respect to Metromedia.
The directors and executive officers of Metromedia are as
follows:
<PAGE>
CUSIP NO. 6934OT10 PAGE 5 OF 11
John W. Kluge is the Chairman of the Board of Directors of
Metromedia, the Chairman, President and Chief Executive Officer of
Metromedia Company, and a citizen of the United States. Mr. Kluge's
principal business address is c/o Metromedia Company, One Meadowlands
Plaza, East Rutherford, NJ 07073-2137 and his principal occupation is
serving as the Chairman, President and Chief Executive Officer of
Metromedia Company.
Stuart Subotnick is the President and Chief Executive Officer,
and Vice Chairman of the Board of Directors of Metromedia, the
Executive Vice President of Metromedia Company, and a citizen of the
United States. Mr. Subotnick's principal business address is c/o
Metromedia Company, One Meadowlands Plaza, East Rutherford, NJ
07073-2137 and his principal occupation is serving as the Executive
Vice President of Metromedia Company.
Silvia Kessel is Executive Vice President, Chief Financial
Officer, Director and Treasurer of Metromedia and a citizen of the
United States. Ms. Kessel's principal business address is c/o
Metromedia Company, One Meadowlands Plaza, East Rutherford, NJ 07073-
2137, and her principal occupation is serving as an executive of
Metromedia.
Arnold L. Wadler is Executive Vice President, the General
Counsel, Director, and Secretary of Metromedia, Senior Vice President,
Secretary, and General Counsel of Metromedia Company, and a citizen of
the United States. Mr. Wadler's principal business address is c/o
Metromedia Company, One Meadowlands Plaza, East Rutherford, NJ 07073-
2137, and his principal occupation is serving as an executive of
Metromedia.
Robert A. Maresca is Senior Vice President of Metromedia and a
citizen of the United States. Mr. Maresca's principal business address
is c/o Metromedia Company, One Meadowlands Plaza, East Rutherford, NJ
07073-2137, and his principal occupation is serving as an executive of
Metromedia.
Vincent D. Sasso, Jr. is Vice President of Financial Reporting
of Metromedia and a citizen of the United States. Mr. Sasso's principal
business address is c/o Metromedia Company, One Meadowlands Plaza, East
Rutherford, NJ 07073-2137, and his principal occupation is serving as
an executive of Metromedia.
John P. Imlay, Jr. is a director of Metromedia and a citizen
of the United States. Mr. Imlay's principal business address is Imlay
Investments, 945 East Paces Ferry Road, Suite 2450, Atlanta, GA 30326,
and his principal occupation is as a private investor.
Clark A. Johnson is a director of Metromedia and a citizen of
the United States. Mr. Johnson's principal business address is 11736
Lost Tree Way, North Palm Beach, FL 33408 and his principal occupation
is as a private investor.
Carl E. Sanders is a director of Metromedia and a citizen of
the United States. Gov. Sanders's principal business address is
Troutman Sanders, 5200 NationsBank Plaza, 600 Peach Tree Street, North
East Atlanta, GA 30308 and his principal occupation is as a partner in
the law firm of Troutman Sanders.
Richard J. Sherwin is a director of Metromedia and a citizen
of the United States. Mr. Sherwin's principal business address is
Metromedia International Telecommunications, Inc., 333 Ludlaw Street,
Stamford, CT 06902 and his principal occupation is Co-President of
Metromedia International Telecommunications, Inc.
<PAGE>
CUSIP NO. 6934OT10 PAGE 6 OF 11
Leonard White is a director of Metromedia and a citizen of the
United States. Mr. White's principal business address is 29131
Cliffside Drive, Malibu, CA 90265 and his principal occupation is as
principal of Rigal Enterprises, a management and private investment
firm.
The response to Items 2(d) and (e) of this Schedule is
negative with respect to each of Messrs. Kluge, Subotnick, Wadler,
Maresca, Sasso, Imlay, Johnson, Sanders, Sherwin and White and Ms.
Kessel.
Item 3. Source and Amount of Funds or Other Consideration.
No shares of the Issuer's Common Stock have been purchased
directly or indirectly by any of the entities reporting herein. Rather,
as an inducement for and a condition to Metromedia's entering into the
Merger Agreement, Metromedia and the Shareholders have entered into the
Voting Agreement, pursuant to which the Shareholders have agreed to
vote their respective shares of Common Stock of the Issuer in favor of
the Merger and against any action which would be inconsistent with the
Merger (as more fully described in the Introduction to this Schedule
13D, which is incorporated by reference herein).
Item 4. Purpose of Transaction.
No shares of the Issuer's Common Stock have been purchased
directly or indirectly by Metromedia. Metromedia and the Shareholders
have entered into the Voting Agreement as a condition and an inducement
for the execution by Metromedia of the Merger Agreement.
Following the Merger, the Issuer will become a wholly owned
subsidiary of Metromedia. The shares of Common Stock will be delisted
from the securities exchanges and will cease to be authorized to be
quoted on the NASDAQ and other over-the-counter markets where they it
is currently listed or traded and will cease to be registered under the
Securities Exchange Act of 1934, as amended.
Item 5. Interest in Securities of the Issuer.
(a) Metromedia could be deemed to have "acquired" beneficial
ownership of the shares of Common Stock to which this Schedule 13D
relates only in the sense that it and the Shareholders have entered
into the Voting Agreement (as described in the Introduction and in Item
3 of this Schedule 13D, which are incorporated by reference herein) in
order to facilitate the Merger pursuant to the Merger Agreement.
Reference is made to Items 11 and 13 on the cover page to this Schedule
13D and to Item 2 of this Schedule 13D, which are incorporated by
reference herein, for the aggregate number and percentage (based on
information received from the Issuer) of the Common Stock which may be
deemed to be beneficially owned by Metromedia. Metromedia herein
disclaims beneficial ownership over any shares of the Common Stock,
including the power to vote, to dispose, or to direct the disposition
of, any shares of Common Stock of the Issuer. To the knowledge of
Metromedia, none of the persons named in Item 2, other than Metromedia,
beneficially own any securities of the Issuer. Metromedia disclaims
membership in any group with respect to the Common Stock, by virtue of
the Voting Agreement or otherwise.
<PAGE>
CUSIP NO. 6934OT10 PAGE 7 OF 11
(b) Reference is made to Items 7 through 10 on the cover page
to this Schedule 13D on page 2 and Item 2 of this Schedule 13D, which
are incorporated herein, for a description of the beneficial ownership
of Metromedia.
The Shareholders share the power to vote the Common Stock
beneficially owned by Metromedia. The following paragraphs provide the
applicable information required by Item 2 with respect to each of the
Shareholders, which information is based solely on information
disclosed by the Issuer in its public filings with the Securities and
Exchange Commission:
K. Rupert Murdoch is a United States citizen, with his
principal business address at 10201 West Pico Boulevard, Los Angeles,
CA 90035. Mr. Murdoch's principal occupation is serving as the Chairman
and Chief Executive of News Corporation Limited.
News Corporation Limited, a South Australia, Australia
corporation ("News Corporation") has its principal executive office
located at 2 Holt Street, Sydney, New South Wales 2010, Australia. News
Corporation is a diversified international communications company
principally engaged in the production and distribution of motion
pictures and television programming, television broadcasting,
publication of newspapers, books, magazines and promotional
free-standing inserts, developing digital broadcasting, conditional
access and subscription management systems and promoting computer
information services. News Corporation owns indirectly 100% of the
outstanding common stock of News America Incorporated.
News America Incorporated is a Delaware corporation ("NAI")
whose principal business address is 1211 Avenue of the Americas New
York, New York 10036. As the principal U.S. subsidiary of News
Corporation, NAI's principal business is conducting, together with its
affiliates and subsidiaries, a substantial portion of the U.S.
activities of News Corporation. NAI owns directly and through an
intermediary 100% of the outstanding membership interests in News PLD
LLC.
News PLD LLC, a Delaware limited liability company ("News PLD
LLC"), has its principal business address at 1211 Avenue of the
Americas, New York, New York 10036. News PLD LLC's principal business
is holding, managing and otherwise dealing with News Corporation's
investment in PLD.
To the knowledge of Metromedia, none of the persons or
entities listed in response to this Item 5(b) nor any executive
officer, director or controlling person of any of them, has, during the
last five years, been convicted in any criminal proceeding, excluding
traffic violations or similar misdemeanors.
To the knowledge of Metromedia, none of the persons or
entities listed in response to Item 5(b) nor any executive officer,
director, or controlling person of any of them, has, during the last
five years, been a party to a civil proceeding or a judicial or
administrative body of competent jurisdiction as a result of which it
was or is subject to a judgment, decree, or final order enjoining
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws, or finding any violation with respect
to such laws.
(c) On March 22, 1999, NAI agreed to increase the amount it
would advance to the Issuer under its Revolving Credit Agreement dated
November 30, 1998 with the Issuer to $9.1 million. The advances are
evidenced by notes which are convertible at NAI's option into shares of
<PAGE>
CUSIP NO. 6934OT10 PAGE 8 OF 11
Common Stock of the Issuer at conversion rates determined as of the
date of issue of the applicable notes. On April 22, 1999, NAI agreed to
a further increase in the amount it would advance to the Issuer under
its Revolving Credit Agreement to a total of $9.55 million. In
addition, NAI may guarantee obligations of the Issuer. A note
convertible into Common Stock of the Issuer will be issued for each
guarantee made to reflect the Issuer's reimbursement obligation. Of the
$9.55 million notes issued, $3.1 million have been issued in respect of
guarantees. Notes issued in respect of advances are convertible into
3,804,369 shares of Common Stock of the Issuer, according to the last
amendment to Schedule 13-D filed by NAI. Except as set forth above,
none of Metromedia nor, to Metromedia's knowledge, any of the persons
or entities named in response to Item 5(a) has effected any
transactions in the Issuer's Common Stock during the past 60 days,
except as set forth in this Schedule 13-D.
(d) To the knowledge of Metromedia, only the Shareholders have
the right to receive and the power to direct the receipt of dividends
from, or the proceeds from the sale of, the Shares of Common Stock of
the Issuer.
(e) Paragraph (e) of Item 5 is inapplicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Reference is made to the Introduction to this Schedule 13D,
which is incorporated by reference herein, for the description of the
contracts, arrangements, understandings, or relationships (legal or
otherwise) among the persons listed in Item 2 and between such persons
and any person with respect to any securities of the Issuer, including
but not limited to the transfer or voting of any of the securities,
finder fees, joint ventures, loan or option agreements, puts or calls,
guarantees of profits, ventures, loan or option agreements, puts or
calls, guarantees of profits, division of profits or loss, or the
giving the giving or withholding of proxies.
In connection with the Merger, Metromedia and News America
Incorporated have also entered into a letter agreement pursuant to
which News America has agreed that it will not exercise its rights upon
the occurrence of any defaults of the Issuer under its revolving credit
agreement, dated as of September 30, 1998, with the Issuer until the
earlier of the completion of the Merger or the termination or
expiration of the Merger Agreement. News America Incorporated has also
agreed not to exercise any rights that it may have to convert its loans
under the credit agreement into shares of Common Stock of the Issuer
between the signing of the Merger Agreement and the closing of the
Merger. At closing, all principal and accrued interest, payable at a
reduced interest rate will be payable in full and News America
Incorporated will also be release from its obligations under $3.1
million of guarantees made of amounts outstanding under the Travelers
credit agreement described below.
In the Merger Agreement, Metromedia has agreed to increase the
size of its Board of Directors in connection with the consummation of
the Merger from 9 members to 11 members and to cause the designation of
two persons specified by the Issuer (one of which will be designated by
NAI).
Also in connection with the Merger, Metromedia and the Issuer
entered into a letter agreement with The Travelers Insurance Company
and The Travelers Indemnity Company (together, "Travelers") pursuant to
which Travelers agreed to waive certain events of default and the
Issuer agreed to repay Travelers $8.5 million of amounts due under its
revolving credit and
<PAGE>
CUSIP NO. 6934OT10 PAGE 9 OF 11
warrant agreement dated November 26, 1997 with the Issuer. The Issuer
has agreed to repay the remaining $4.92 million due under this
agreement on the earlier of August 30, 2000 or the date that is one
year from the completion of the Merger. In addition, at the closing of
the Merger, Travelers will be entitled to receive at the closing of the
Merger, among other things, 100,000 shares of Common Stock of the
Issuer (which will be converted in the Merger into shares of common
stock of Metromedia at the applicable exchange ratio) and 10-year
warrants to purchase 700,000 shares of common stock of Metromedia at a
price to be determined in December 2000 that will be between $10 and
$15 per share. Travelers will also maintain its existing security
interests in certain assets of the Issuer and its debt will be
guaranteed by Metromedia and three of the Issuer's subsidiaries. A copy
of the letter agreement is attached as Exhibit 99.3 hereto and is
incorporated herein by reference.
In connection with the Merger, certain holders of the Issuer's
14% Senior Discount Notes due 2004 and of the Issuer's 9% Convertible
Subordinated Notes due 2006 (together, the "PLD Notes") have agreed
under an agreement to exchange and consent to exchange their PLD Notes
for new 10 1/2% Senior Discount Notes due 2007 of Metromedia. The
noteholders have also agreed to waive certain events of default under
the PLD Notes that would result from the consummation of the Merger as
well as the payment of certain amounts to become due under the PLD
Notes until the earlier of the termination of the Merger Agreement or
October 31, 1999. A copy of the agreement to exchange and consent is
attached as Exhibit 99.4 hereto and is incorporated herein by
reference.
Item 7. Material to be filed as Exhibits.
The following shall be filed as exhibits:
Document Exhibit No.
-------- -----------
Agreement and Plan of Merger, dated as 99.1
of May 18, 1999, by and among the
Issuer, Metromedia and Moscow
Communications, Inc.
Voting Agreement, dated as of May 18, 99.2
1999, by and among Metromedia,
Metromedia Company and the
Shareholders
Letter Agreement, dated as of May 18, 99.3
1999, by and among Metromedia and
News America Incorporated
Letter Agreement, dated as of May 18, 99.4
1999, by and among the Issuer,
Metromedia and Travelers.
Agreement to Exchange and Consent, 99.5
dated as of May 18, 1999, by and
among Metromedia, the Issuer and
holders of the PLD Notes.
<PAGE>
CUSIP NO. 6934OT10 PAGE 10 OF 11
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Dated: May 27, 1999
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Arnold L. Wadler
--------------------
Name: Arnold L. Wadler
Title: Executive Vice President,
General Counsel and Secretary
<PAGE>
CUSIP NO. 6934OT10 PAGE 11 OF 11
Exhibit Index
Document Exhibit No.
-------- -----------
Agreement and Plan of Merger, dated as 99.1
of May 18, 1999, by and among the
Issuer, Metromedia and Moscow
Communications, Inc.
Voting Agreement, dated as of May 18, 99.2
1999, by and among Metromedia,
Metromedia Company and the
Shareholders
Letter Agreement, dated as of May 18, 99.3
1999, by and among Metromedia and
News America Incorporated
Letter Agreement, dated as of May 18, 99.4
1999, by and among the Issuer,
Metromedia and Travelers.
Agreement to Exchange and Consent, 99.5
dated as of May 18, 1999, by and
among Metromedia, the Issuer and
holders of the PLD Notes.
================================================================================
AGREEMENT AND PLAN OF MERGER
among
PLD TELEKOM INC.,
METROMEDIA INTERNATIONAL GROUP, INC.
and
MOSCOW COMMUNICATIONS, INC.
Dated as of May 18, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
RECITALS.......................................................................1
ARTICLE 1 THE MERGER...............................................2
Section 1.1 The Merger...............................................2
Section 1.2 Closing..................................................2
Section 1.3 Effective Time...........................................2
Section 1.4 The Certificate of Incorporation.........................2
Section 1.5 The By-Laws..............................................2
Section 1.6 Directors of Surviving Corporation.......................2
Section 1.7 Officers of Surviving Corporation........................3
ARTICLE 2 EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES.................................3
Section 2.1 Effect on Capital Stock..................................3
Section 2.2 Exchange of Certificates for Shares......................6
Section 2.3 No Appraisal Rights.....................................10
Section 2.4 Adjustments to Prevent Dilution.........................10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.................................................10
Section 3.1 Organization and Qualification; Subsidiaries............10
Section 3.2 Certificate of Incorporation and By-Laws................11
Section 3.3 Capitalization..........................................11
Section 3.4 Authority...............................................13
Section 3.5 No Conflict.............................................13
Section 3.6 Governmental Required Filings and Consents..............14
Section 3.7 Permits; Compliance with Law............................14
Section 3.8 Securities and Exchange Commission ("SEC") Filings;
Financial Statements....................................15
Section 3.9 Absence of Certain Changes or Events....................16
Section 3.10 Employee Benefit Plans..................................17
Section 3.11 Accounting and Tax Matters..............................17
Section 3.12 Contracts; Debt Instruments.............................18
Section 3.13 Litigation..............................................18
Section 3.14 Environmental Matters...................................18
Section 3.15 Intellectual Property...................................20
Section 3.16 Taxes...................................................23
Section 3.17 Non-Competition Agreements..............................24
Section 3.18 Certain Agreements......................................24
Section 3.19 Investment Company Act..................................24
Section 3.20 Opinion of Financial Advisor............................24
Section 3.21 Brokers.................................................24
Section 3.22 Certain Statutes........................................25
<PAGE>
Page
Section 3.23 Information.............................................25
Section 3.24 Vote Required...........................................25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB............................26
Section 4.1 Organization and Qualification; Subsidiaries............26
Section 4.2 Certificate of Incorporation and By-Laws................26
Section 4.3 Capitalization..........................................27
Section 4.4 Authority...............................................28
Section 4.5 No Conflict.............................................28
Section 4.6 Governmental Required Filings and Consents..............29
Section 4.7 Permits; Compliance with Law............................29
Section 4.8 SEC Filings; Financial Statements.......................30
Section 4.9 Absence of Certain Changes or Events....................31
Section 4.10 Employee Benefit Plans..................................32
Section 4.11 Accounting and Tax Matters..............................32
Section 4.12 Contracts; Debt Instruments.............................32
Section 4.13 Litigation..............................................33
Section 4.14 Environmental Matters...................................33
Section 4.15 Intellectual Property...................................34
Section 4.16 Taxes...................................................35
Section 4.17 Non-Competition Agreements..............................36
Section 4.18 Investment Company Act..................................37
Section 4.19 Opinion of Financial Advisor............................37
Section 4.20 Brokers.................................................37
Section 4.21 Certain Statutes........................................37
Section 4.22 Information.............................................37
Section 4.23 Vote Required...........................................38
Section 4.24 Interim Operations of Merger Sub........................38
ARTICLE 5 COVENANTS...............................................38
Section 5.1 Conduct of Business of the Company......................38
Section 5.2 Conduct of Business of the Parent.......................40
Section 5.3 Other Actions...........................................42
Section 5.4 Updated Letters; Notification of Certain Matters........42
Section 5.6 Stockholders Meetings...................................45
Section 5.7 Access to Information; Confidentiality..................45
Section 5.8 No Solicitation.........................................46
Section 5.9 Affiliates..............................................48
Section 5.10 Directors' and Officers' Indemnification and Insurance..48
Section 5.11 Letters of Accountants..................................49
Section 5.12 Reasonable Best Efforts.................................49
Section 5.13 Consents; Filings; Further Action.......................50
Section 5.14 Plan of Reorganization..................................51
Section 5.15 Public Announcements....................................51
<PAGE>
Page
Section 5.16 Obligations of Merger Sub...............................51
Section 5.17 Stock Exchange Listings and De-Listings.................52
Section 5.18 Expenses................................................52
Section 5.19 Takeover Statutes.......................................52
Section 5.20 Board of Directors......................................52
ARTICLE 6 CONDITIONS..............................................52
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger..................................................52
(a) Stockholder Approval....................................52
(b) Listing.................................................53
(c) Governmental Consents...................................53
(d) Litigation..............................................53
(e) Registration Statement..................................53
(f) Accountants' Letters....................................53
Section 6.2 Conditions to Obligations of the Parent and Merger Sub..53
(a) Representations and Warranties..........................54
(b) Performance of Obligations of the Company...............54
(c) Material Adverse Effect.................................54
(d) Consents Under Agreements...............................54
(e) Affiliate Letters.......................................54
(f) The Travelers Revolving Credit Note and
Warrant Agreement.......................................54
(g) Exchange Offer..........................................54
(h) Technocom Limited Put/Call Agreements...................55
(i) News Arrangements.......................................55
(j) Certain Payments........................................55
Section 6.3 Conditions to Obligation of the Company.................55
(a) Representations and Warranties..........................55
(b) Performance of Obligations of the Parent and
Merger Sub..............................................56
(c) Tax Opinion.............................................56
(d) Material Adverse Effect.................................56
ARTICLE 7 TERMINATION.............................................56
Section 7.1 Termination.............................................56
Section 7.2 Effect of Termination...................................57
Section 7.3 Amendment...............................................58
Section 7.4 Waiver..................................................58
Section 7.5 Expenses following Termination..........................58
ARTICLE 8 MISCELLANEOUS...........................................59
Section 8.1 Certain Definitions.....................................59
Section 8.2 Non-Survival of Representations, Warranties and
Agreements..............................................60
Section 8.3 Counterparts............................................61
<PAGE>
Page
Section 8.4 GOVERNING LAW AND VENUE; WAIVER OF JURY
TRIAL...................................................61
Section 8.5 Notices.................................................62
Section 8.6 Entire Agreement........................................62
Section 8.7 No Third Party Beneficiaries............................63
Section 8.8 Obligations of the Parent and of the Company............63
Section 8.9 Severability............................................63
Section 8.10 Interpretation..........................................63
Section 8.11 Assignment..............................................63
Section 8.12 Specific Performance....................................64
EXHIBITS
Exhibit A Company Voting Agreements
Exhibit B Travelers Note and Warrant Modification Agreement
Exhibit C Agreement to Exchange and Consent
Exhibit D Technocom Put/Call Arrangement
Exhibit E News Letter Agreement
COMPANY DISCLOSURE LETTER
Section 3.1(b) Company Subsidiaries
Section 3.3(b) Other Stock Option Agreements
Section 3.3(c) Liens on Capital Stock; Material Obligations
Section 3.5(b) Conflicts
Section 3.6 Governmental Consents
Section 3.8(a) Filing Subsidiaries
Section 3.9(e) Certain Changes
Section 3.10(a) Benefit Plans
Section 3.12 Material Contracts
Section 3.14 Environmental Matters
Section 3.15(a)(i) Intellectual Property
Section 3.15(a)(ii) Licenses
Section 3.15(a)(iii) Proposed Intellectual Property Agreements
Section 3.16(a) Taxes
Section 3.16(b) Tax Extensions
Section 3.16(c) Tax Claims
Section 3.17 Non-Competition Agreements
Section 3.18 Certain Agreements
Section 5.1 Conduct of Business
Section 5.1(f) Asset Transactions
Section 6.2(j) Waivers
<PAGE>
Page
PARENT DISCLOSURE LETTER
Section 4.1(a) Organization
Section 4.1(b) Parent Subsidiaries
Section 4.3(b) Other Stock Option Agreements
Section 4.3(c) Liens on Capital Stock; Material Obligations
Section 4.5(a)(i) Violations
Section 4.5(b) Conflicts
Section 4.6 Governmental Consents
Section 4.7 Permits
Section 4.10(a) Benefit Plans
Section 4.12 Material Contracts; Changes in Indebtedness
Section 4.14 Environmental Matters
Section 4.15(a)(i) Intellectual Property
Section 4.15(a)(ii) Licenses
Section 4.15(a)(iii) Proposed Intellectual Property Agreements
Section 4.16(a) Taxes
Section 4.16(c) Tax Extensions
Section 4.16(d) Tax Claims
Section 4.17 Non-Competition Agreements
Section 5.2 Conduct of Business
Section 5.2(d) Asset Transactions
Section 5.5 Terms of New Notes; Terms of Exchange Offer
<PAGE>
INDEX OF DEFINED TERMS
Term Section
affiliate................................................... 8.1(a)
Affiliate Letters........................................... 5.9
Agreement................................................... Title
Average Parent Stock Price.................................. 2.1(a)(i)
Benefit Plans............................................... 3.10(a)
Blue Sky Laws............................................... 3.6
Bridge Loan Agreement....................................... 5.1(g)
business day................................................ 8.1(b)
Certificate................................................. 2.1(a)(i)
Certificate of Merger....................................... 1.3
Claims...................................................... 3.13
Closing..................................................... 1.2
Closing Date................................................ 1.2
Code........................................................ Recitals
Company..................................................... Title
Company Benefit Plans....................................... 3.10(a)
Company Charter Documents................................... 3.2
Company Common Stock........................................ 2.1(a)(i)
Company Disclosure Letter................................... 3.1(b)
Company Financial Advisor................................... 3.20
Company Governmental Consents............................... 3.6
Company Permits............................................. 3.7
Company Preferred Shares.................................... 2.1(a)(ii)
Company Preferred Stock..................................... 3.3(a)
Company Required Consents................................... 3.5(b)
Company SEC Reports......................................... 3.8(a)
Company Senior Notes........................................ 5.5(a)
Company Series II Preferred Stock........................... 2.1(a)(ii)
Company Series III Preferred Stock.......................... 2.1(a)(ii)
Company Share............................................... 2.1(a)
Company Shares.............................................. 2.1(a)
Company Stock Option........................................ 2.1(b)
Company Stockholders Meeting................................ 5.5(a)
Company Subsidiaries........................................ 3.1(a)
Company Voting Agreement.................................... Recitals
Company Warrant............................................. 2.1(b)
Company's Option Plan....................................... 3.3(b)
Confidentiality Agreement................................... 5.7(b)
Contracts................................................... 3.5(a)(iii)
control..................................................... 8.1(a)
controlled by............................................... 8.1(a)
controlling................................................. 8.1(a)
<PAGE>
Term Section
Convertible Notes........................................... 2.1(b)
Effective Time.............................................. 1.3
Environment................................................. 3.14
Environmental Claims........................................ 3.14
ERISA....................................................... 3.10(a)
Excess Parent Shares........................................ 2.2(d)(i)
Exchange Act................................................ 3.6
Exchange Agent.............................................. 2.2(a)(i)
Exchange Offer.............................................. 5.5(a)
Exchange Offer Registration Statement....................... 5.5(a)
Exchange Ratio ............................................. 2.1(a)(i)
Exchange Trust.............................................. 2.2(d)(i)
Excluded Company Shares..................................... 2.1(a)(i)
Expenses.................................................... 7.5(a)
FCPA........................................................ 3.7
GAAP........................................................ 3.8(b)
GCL......................................................... Recitals
Governmental Entity......................................... 3.6
group....................................................... 8.1(d)
Hazardous Substance......................................... 3.14
HSR Act..................................................... 3.6
including................................................... 8.1(c)
Indemnified Parties......................................... 5.10(a)
Intellectual Property....................................... 3.15(a)(ii)
Investment Company Act...................................... 3.19
IP Licenses................................................. 3.15(a)(ii)
Law......................................................... 3.5(a)(ii)
Liens....................................................... 3.3(c)
Material Adverse Effect on the Company...................... 3.1(a)
Material Adverse Effect on the Parent....................... 4.1(a)
Merger...................................................... Recitals
Merger Consideration........................................ 2.1(a)(i)
Merger Sub.................................................. Title
Merging Parties............................................. 3.14
MIG Form 10K................................................ 4.2
New Parent Notes............................................ 5.5(a)
News........................................................ 6.2(i)
News Notes.................................................. 3.3(b)
PLD Form 10K................................................ 3.2
Parent...................................................... Title
Parent Benefit Plans........................................ 4.10(a)
Parent Charter Documents.................................... 4.2
Parent Common Stock......................................... 2.1(a)(i)
Parent Disclosure Letter.................................... 4.1(b)
<PAGE>
Term Section
Parent Financial Advisor.................................... 4.18
Parent Governmental Consents................................ 4.6
Parent Material Contract.................................... 4.12
Parent Permits.............................................. 4.7
Parent Preferred Stock...................................... 4.3(a)
Parent SEC Reports.......................................... 4.8(a)
Parent Stock Options........................................ 4.3(b)
Parent Stockholders Meeting................................. 5.5(a)
Parent Subsidiaries......................................... 4.1(a)
Parent's Option Plan........................................ 4.3(b)
Permits..................................................... 3.14
person...................................................... 8.1(d)
Proposed Intellectual Property Agreements................... 3.15(a)(iii)
Proxy Materials............................................. 5.5(a)
Proxy Statement............................................. 5.5(a)
Qualified Transaction Proposal.............................. 5.8(a)
Redemption Payment.......................................... 2.1(a)(ii)
Registration Statement...................................... 5.5(a)
Registration Statement Effective Date....................... 5.5(a)
Release..................................................... 3.14
Representatives............................................. 5.7(a)
Requisite Company Vote...................................... 3.4(a)
Requisite Parent Vote....................................... 4.4
Safety and Environmental Laws............................... 3.14
SEC......................................................... 3.8
Securities Act.............................................. 3.6
7 1/4% Preferred Stock......................................... 4.3(a)
Shareholders................................................ Recitals
Software.................................................... 3.15(a)(ii)
Sub Common Stock............................................ 4.3(d)
subsidiary.................................................. 8.1(e)
subsidiaries................................................ 8.1(e)
Superior Acquisition Proposal............................... 5.8(b)
Surviving By-Laws........................................... 1.5
Surviving Charter........................................... 1.4
Surviving Corporation....................................... 1.1
Systems..................................................... 3.15(g)
Takeover Statute............................................ 3.22
Taxes....................................................... 3.16
Technology.................................................. 3.15(a)(ii)
Terminating Company Breach.................................. 7.1(f)
Terminating Parent Breach................................... 7.1(g)
Termination Amount.......................................... 7.5(b)
Termination Notice.......................................... 2.1(a)(i)(D)
<PAGE>
Term Section
Topped-Up Exchange Ratio.................................... 2.1(a)(i)(D)
Top-Up Request Notice....................................... 2.1(a)(i)(D)
Transaction Proposals....................................... 5.8(a)
under common control with................................... 8.1(a)
Year 2000 Compliant......................................... 3.15(g)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of May 18,
1999, among PLD Telekom Inc., a Delaware corporation (the "COMPANY"), Metromedia
International Group, Inc., a Delaware corporation (the "PARENT"), and Moscow
Communications, Inc., a Delaware corporation and a wholly owned subsidiary of
the Parent ("MERGER SUB").
RECITALS
WHEREAS, the respective boards of directors of each of the Parent,
Merger Sub and the Company have determined that it is in the best interests of
their respective stockholders to combine the respective businesses of the Parent
and the Company, and consequently have approved the merger of Merger Sub with
and into the Company (the "MERGER") and approved and adopted the Merger, in
accordance with the General Corporation Law of the State of Delaware (the "GCL")
and upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "CODE"), and the rules and
regulations promulgated under the Code;
WHEREAS, concurrently with the execution of this Agreement, as a
condition to the willingness of the Parent to enter into this Agreement, (i)
certain holders (the "SHAREHOLDERS") of Company Shares (as defined below) are
entering into the Voting Agreement with the Parent, a copy of which is attached
to this Agreement as Exhibit A (the "COMPANY VOTING AGREEMENT"), providing for,
among other things, the agreement of the Shareholders to vote their respective
Company Shares in favor of approval and adoption of this Agreement and the
Merger at the Company Shareholders Meeting (as defined below);
WHEREAS, certain terms used in this Agreement which are not capitalized
have the meanings specified in Section 8.1; and
WHEREAS, the Company, the Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
<PAGE>
2
ARTICLE 1
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time, Merger Sub shall be merged
with and into the Company and the separate corporate existence of Merger Sub
shall cease. The Company shall be the surviving corporation in the Merger
(sometimes referred to as the "SURVIVING CORPORATION") and shall continue to be
governed by the laws of the State of Delaware, and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Merger shall have the
effects set forth in Section 259 of the GCL.
SECTION 1.2 CLOSING. The closing of the Merger (the "CLOSING") shall
take place (a) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York at 10:00 A.M. on the business day on which the last to be
fulfilled or waived 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) shall be satisfied or waived
in accordance with this Agreement or (b) at such other place and time and/or on
such other date as the Company and the Parent may agree in writing (the "CLOSING
DATE").
SECTION 1.3 EFFECTIVE TIME. As soon as practicable following the
Closing, the Company and the Parent will cause a Certificate of Merger (the
"CERTIFICATE OF MERGER") to be signed, acknowledged and delivered for filing
with the Secretary of the State of Delaware as provided in Section 251 of the
GCL. The Merger shall become effective at the time when a Certificate of Merger
has been duly filed with the Secretary of State of the State of Delaware or such
other time as shall be agreed upon by the parties and set forth in the
Certificate of Merger and in accordance with the GCL (the "EFFECTIVE TIME").
SECTION 1.4 THE CERTIFICATE OF INCORPORATION. The certificate of
incorporation of Merger Sub in effect immediately prior to the Effective Time
shall, from and after the Effective Time, be the certificate of incorporation of
the Surviving Corporation (the "SURVIVING CHARTER"), until duly amended as
provided in the Surviving Charter or by applicable law.
SECTION 1.5 THE BY-LAWS. The by-laws of Merger Sub in effect at the
Effective Time shall, from and after the Effective time, be the by-laws of the
Surviving Corporation (the "SURVIVING BY-LAWS"), until duly amended as provided
in the Surviving By-Laws or by applicable law.
SECTION 1.6 DIRECTORS OF SURVIVING CORPORATION. The directors of Merger
Sub at the Effective Time shall, from and after the Effective Time, be the
<PAGE>
3
directors of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Charter and the Surviving By-Laws.
SECTION 1.7 OFFICERS OF SURVIVING CORPORATION. The officers of the
Company at the Effective Time shall, from and after the Effective Time, be the
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Charter and the Surviving By-Laws.
ARTICLE 2
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, as a result
of the Merger and without any action on the part of the holder of any capital
stock of the Company:
(a) MERGER CONSIDERATION.
(i) Each share (each a "COMPANY SHARE" and together
the "COMPANY SHARES") of the common stock, par value $.01 per share, of the
Company (the "COMPANY COMMON STOCK") issued and outstanding immediately prior to
the Effective Time (other than Company Shares that are owned by the Parent,
Merger Sub or any other Parent Subsidiary or Company Shares that are owned by
the Company or any Company Subsidiary and in each case not held on behalf of
third parties (collectively, "EXCLUDED COMPANY SHARES")) shall be converted by
virtue of the Merger and without any action on the part of the holder thereof
into the right to receive and become exchangeable for a number of shares of
common stock, par value $1.00 per share, of the Parent ("PARENT COMMON STOCK"),
equal to the "EXCHANGE RATIO" determined in the manner set forth below:
(A) If the Average Parent Stock Price (as
defined below) is less than $6.25 and equal to or greater than $5.25,
then the "Exchange Ratio" shall be equal to the quotient (rounded to
four decimal points) obtained by dividing (I) $3.50 by (II) the Average
Parent Stock Price;
(B) If the Average Parent Stock Price is
equal to or greater than $6.25 and less than or equal to $8.00, then
the "Exchange Ratio" shall be .56;
(C) If the Average Parent Stock Price is
greater than $8.00, then the "Exchange Ratio" shall be equal to the
quotient
<PAGE>
4
(rounded to four decimal points) obtained by dividing (x) $4.48 by (y)
the Average Parent Stock Price; or
(D) If the Average Parent Stock Price is
less than $5.25, then the "Exchange Ratio" shall be .6667; provided,
that the Company shall have the right to give written notice to Parent
(the "TOP-UP REQUEST NOTICE") requesting that the Exchange Ratio be
increased to equal the quotient (rounded to four decimal points)
obtained by dividing (x) $3.50 by (y) the Average Parent Stock Price
(the "TOPPED-UP EXCHANGE RATIO"); provided further that, if the Average
Parent Stock Price is less than $4.00, then the Company also has the
right to give a Termination Notice (as defined below) to Parent in the
manner provided below that states that the Company elects to terminate
this Agreement in accordance with Section 7.1(h). The Top-Up Request
Notice shall be delivered to and received by Parent no later than 2:00
p.m. on the second Business Day prior to the Company Stockholders
Meeting. Parent, may, in its sole discretion, agree or not agree to
increase the Exchange Ratio to the Topped-Up Exchange Ratio. Within 24
hours of receiving the Top-Up Request Notice, Parent shall provide the
Company written notice of its determination with respect thereto. If
Parent agrees to increase the Exchange Ratio to the Topped-Up Exchange
Ratio, the Exchange Ratio shall be equal to the Topped-Up Exchange
Ratio for purposes of this Agreement. If Parent does not agree in its
sole discretion that the Exchange Ratio shall be increased to be the
Topped-Up Exchange Ratio (which disagreement shall be deemed to have
occurred if Parent does not respond to the Top-Up Request Notice within
the 24 hour period specified above), the Company shall either (x) agree
that the Exchange Ratio shall be .6667 or (y) give written notice (the
"TERMINATION NOTICE") to the Parent that the Company elects to
terminate this Agreement. Any Termination Notice shall be delivered to
Parent no later than 5:00 p.m. on the Business Day prior to the Company
Stockholders Meeting; provided, that if the Termination Notice has not
been received by Parent by such time, the Company shall be deemed to
have accepted .6667 as the Exchange Ratio and the Company shall have no
further right to terminate this Agreement pursuant to this Section
2.1(a)(i)(D) or Section 7.1(h).
For purposes of this Agreement, the "AVERAGE PARENT STOCK PRICE" means
the average of the daily closing prices of the Parent Common Stock as reported
on the American Stock Exchange Composite Transactions Tape (as reported by The
Wall Street Journal (national edition)) for the twenty (20) consecutive trading
days ending on the third business day (including such third business day in the
determination) immediately prior to the Company Stockholders Meeting.
The number of shares of Parent Common Stock issuable pursuant to this
Section 2.1(a)(i) shall be subject to adjustment as provided in Section 2.4 and
such shares, together with cash in lieu of fractional shares of Parent Common
Stock,
<PAGE>
5
if any, payable pursuant to Section 2.2(d) shall collectively be referred to as
the "MERGER CONSIDERATION." At the Effective Time, all Company Shares shall no
longer be outstanding, shall be canceled and retired and shall cease to exist,
and each certificate (a "CERTIFICATE") formerly representing any Company Shares
(other than Excluded Company Shares) shall thereafter represent only the right
to receive the Merger Consideration and any distribution or dividend under
Section 2.2(b).
(ii) Each share of the Series II preferred stock, par
value $.01 per share, of the Company (the "COMPANY SERIES II PREFERRED STOCK")
and each share of the Series III Preferred Stock, par value $.01 per share, of
the Company ("the COMPANY SERIES III PREFERRED STOCK" and collectively, with the
Company Series II Preferred Stock, the "COMPANY PREFERRED SHARES") issued and
outstanding immediately prior to the Effective Time shall at the Effective Time
be redeemed as provided in the Company Charter Documents (as defined below) at a
redemption price of Cdn $1.00 per share (the "REDEMPTION PAYMENT"). At the
Effective Time, all Company Preferred Shares shall no longer be outstanding,
shall be canceled and retired and shall cease to exist, and each certificate
formerly representing any Company Preferred Shares shall thereafter represent
only the right to receive the Redemption Payment.
(b) STOCK OPTIONS, WARRANTS, CONVERTIBLE NOTES, ETC. At the
Effective Time, each outstanding option to purchase shares of Company Common
Stock (a "COMPANY STOCK OPTION") issued pursuant to the Company's Option Plan
(as defined below) and each outstanding warrant to acquire shares of Company
Common Stock (a "COMPANY WARRANT") issued pursuant to a warrant agreement or
otherwise appearing on the Company's Schedule of Warrants, Options and
Conversions dated as of April 30, 1999, whether vested or unvested, shall be
assumed by Parent and any remaining outstanding 9% Convertible Subordinated
Notes due 2006 (the "CONVERTIBLE NOTES") that have not been tendered in the
Exchange Offer (as defined below) shall be assumed by the Parent. Each Company
Stock Option and Company Warrant shall be deemed, without further action on the
part of Parent or the holders of such Company Stock Options and Company
Warrants, to constitute an option or a warrant, as the case may be, to acquire,
on the same terms and conditions as were applicable under such Company Stock
Option or Company Warrant (except to the extent that such terms and conditions
may be altered in accordance with their terms as a result of the transactions
contemplated hereby), and the Convertible Notes after the Effective Time shall
be convertible for, shares of Parent Common Stock in such amount and at the
exercise price provided below:
(i) the number of shares of Parent Common Stock to be
subject to the option, warrant or Convertible Note (as adjusted) shall be equal
to the product of (x) the number of shares of Company Common Stock subject to
the original option, warrant or Convertible Note and (y) the Exchange Ratio
(rounded to four decimal points);
<PAGE>
6
(ii) the exercise price per share of Parent Common
Stock under the option, warrant or Convertible Note (as adjusted) shall be equal
to (x) the exercise price per share of Company Common Stock under the original
option, warrant or Convertible Note divided by (y) the Exchange Ratio (rounded
to the nearest $0.01); and
(iii) fractional shares of any assumed Company Stock
Options or Company Warrants resulting from the adjustments set forth in this
Section 2.1(b) shall be eliminated.
In the case of any option to which section 421 of the Code
applies by reason of its qualification under any of sections 422-424 of the
Code, the exercise price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be effected
in a manner consistent with the requirements of section 424(a) of the Code.
(c) CANCELLATION OF SHARES. Each Excluded Company Share issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder of such Excluded Company
Share, no longer be outstanding, shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.
(d) MERGER SUB. At the Effective Time, 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 validly
issued, fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation, and the Surviving Corporation shall be a
wholly owned subsidiary of the Parent.
SECTION 2.2 EXCHANGE OF CERTIFICATES FOR SHARES.
(a) EXCHANGE PROCEDURES.
(i) LETTER OF TRANSMITTAL. Promptly after the
Effective Time, the Surviving Corporation shall cause an exchange agent selected
by the Parent and reasonably acceptable to the Company (the "EXCHANGE AGENT") to
mail to each holder of record of a Certificate (other than Certificates in
respect of Excluded Company Shares) (A) a letter of transmittal specifying that
delivery shall be effected, and that risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates (or affidavits of loss in
lieu of Certificates) to the Exchange Agent, in a form and with other provisions
reasonably acceptable to both the Parent and the Company, and (B) instructions
for exchanging the Certificates for (1) certificates representing shares of
Parent Common Stock, and (2) cash in lieu of fractional shares.
<PAGE>
7
(ii) SURRENDER OF CERTIFICATES. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of that Certificate shall be entitled to
receive in exchange (A) a certificate representing that number of whole shares
of Parent Common Stock that the holder is entitled to receive under this Article
2, (B) a check in the amount (after giving effect to any required tax
withholding) of any cash in lieu of fractional shares that such holder has the
right to receive under the provisions of this Article 2, and the Certificate so
surrendered shall immediately be canceled. No interest will be paid or accrued
on any amount payable upon due surrender of the Certificates.
(iii) UNREGISTERED TRANSFEREES. In the event of a
transfer of ownership of Company Shares that is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Parent Common Stock, together with a check for any cash to be paid upon the
surrender of the Certificate and any other dividends or distributions in respect
of those shares, may be issued or paid to such a transferee if the Certificate
formerly representing such Company Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect the transfer and to
evidence that any applicable stock transfer taxes have been paid. If any
certificate for shares of Parent Common Stock is to be issued in a name other
than that in which the surrendered Certificate is registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in a name other than that of the registered
holder of the surrendered Certificate, or shall establish to the satisfaction of
the Parent or the Exchange Agent that such tax has been paid or is not
applicable.
(iv) NO OTHER RIGHTS. Until surrendered as
contemplated by this Section 2.2(a), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive the
certificate representing shares of Parent Common Stock and cash in lieu of any
fractional shares of Parent Common Stock, as contemplated by this Section
2.2(a). All shares of Parent Common Stock, together with any cash paid under
Section 2.2(b) or Section 2.2(d) issued upon the surrender for or exchange of
Certificates in accordance with the terms of this Agreement, shall be deemed to
have been issued in full satisfaction of all rights pertaining to the Company
Shares formerly represented by such Certificates.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. Whenever
a dividend or other distribution is declared by the Parent in respect of Parent
Common Stock and the record date for that dividend or other distribution is at
or after the Effective Time, that declaration shall include dividends or other
distributions in respect of all shares issuable under this Agreement. No
dividends or other distributions in respect of the Parent Common Stock shall be
paid to any holder of any unsurrendered Certificate until that Certificate is
surrendered for exchange in accordance with this Article 2. Subject to the
effect of applicable laws, following
<PAGE>
8
surrender of any such Certificate, there shall be issued or paid to the holder
of the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
dividends or other distributions with a record date after the Effective Time and
a payment date on or prior to the date of issuance of such whole shares of
Parent Common Stock and not previously paid, and (ii) at the appropriate payment
date, the dividends or other distributions payable with respect to such whole
shares of Parent Common Stock with a record date after the Effective Time but
with a payment date subsequent to surrender. For purposes of dividends or other
distributions in respect of shares of Parent Common Stock, all shares of Parent
Common Stock to be issued pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time.
(c) NO FURTHER TRANSFERS. After the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers on the records of the Company of the Company Shares or
Company Preferred Shares that were outstanding immediately prior to the
Effective Time.
(d) FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle its owner to
vote, to receive dividends or to any other rights of a stockholder of the
Parent. Notwithstanding any other provision of this Agreement, each holder of
Company Shares exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Certificates delivered by such holder) shall receive from the
Exchange Agent, in accordance with the provisions of this Article 2, a cash
payment in lieu of such fractional shares of Parent Common Stock, as applicable,
representing such holder's proportionate interest, if any, in the net proceeds
from the sale by the Exchange Agent in one or more transactions (which sale
transactions shall be made at such times, in such manner and on such terms as
the Exchange Agent shall determine in its reasonable discretion) on behalf of
all such holders of the aggregate of the fractional shares of Parent Common
Stock, as applicable, which would otherwise have been issued (the "EXCESS PARENT
SHARES"). The sale of the Excess Parent Shares by the Exchange Agent shall be
executed on the American Stock Exchange and shall be executed in round lots to
the extent practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Certificates, the Exchange Agent will hold such
proceeds in trust (the "EXCHANGE TRUST") for the holders of Certificates. All
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent, incurred in connection with
this sale of the Excess Parent Shares shall be paid out of the Exchange Trust
prior to the distribution of proceeds therefrom to holders of Certificates. As
soon as practicable after the determination of the amount of cash, if any, to be
paid to holders
<PAGE>
9
of Certificates in lieu of any fractional shares of Parent Common Stock, the
Exchange Agent shall make available such amounts to such holders of Certificates
without interest. The Exchange Agent shall determine the portion of such net
proceeds to which each holder of Company Shares shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds by a fraction the numerator
of which is the amount of the fractional share interest to which such holder of
Company Shares is entitled (after taking into account all Company Shares then
held by such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Certificates representing
Company Shares are entitled.
(ii) Notwithstanding the provisions of subsection (i)
of this Section 2.2(d), the Parent may elect, at its option exercised prior to
the Effective Time and in lieu of the issuance and sale of Excess Shares and the
making of the payments contemplated in such subsection, to pay to the Exchange
Agent an amount in cash sufficient for the Exchange Agent to pay each holder of
Company Shares an amount in cash equal to the product obtained by multiplying
(A) the fractional share interest to which such holder would otherwise be
entitled (after taking into account all Company Shares held at the Effective
Time by such holder) by (B) the closing price for a share of Parent Common Stock
on the American Stock Exchange on the first business day immediately following
the Effective Time and, in such case, the Exchange Fund, all references in this
Agreement to the cash proceeds of the sale of the Excess Shares and similar
references shall be deemed to mean and refer to the payments calculated as set
forth in this Section 2.2(d)(ii).
(e) TERMINATION OF EXCHANGE PERIOD; UNCLAIMED STOCK. Any
shares of Parent Common Stock and any portion of the Exchange Fund or of
dividends or other distributions with respect to the Parent Common Stock
deposited by the Parent with the Exchange Agent (including the proceeds of any
investments of those funds) that remains unclaimed by the stockholders of the
Company 180 days after the Effective Time shall be paid to the Parent. Any
former stockholders of the Company who have not theretofore complied with this
Article 2 shall thereafter look only to the Parent for payment of their Merger
Consideration and any dividends and other distributions issuable or payable
pursuant to Section 2.1 and Section 2.2(b) upon due surrender of their
Certificates (or affidavits of loss in lieu of Certificates), in each case,
without any interest. Notwithstanding the foregoing, none of the Parent, the
Surviving Corporation, the Exchange Agent or any other person shall be liable to
any former holder of Company Shares for any amount properly delivered to a
public official under applicable abandoned property, escheat or similar laws. If
any Certificates shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity), any amounts payable in respect
of such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled to those amounts.
<PAGE>
10
(f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event 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 the posting by such person of a bond in the form
customarily required by the Parent as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock, any unpaid dividends or other distributions and any cash payment
in lieu of a fractional share in respect of that Certificate issuable or payable
under this Article 2 upon due surrender of and deliverable in respect of the
Company Shares represented by such Certificate under this Agreement, in each
case, without interest.
SECTION 2.3 NO APPRAISAL RIGHTS. In accordance with Section 262(b)(1)
of the GCL, no appraisal rights shall be available to holders of Company Shares
in connection with the Merger.
SECTION 2.4 ADJUSTMENTS TO PREVENT DILUTION. In the event that prior to
the Effective Time there is a change in the number of Company Shares or shares
of Parent Common Stock or securities convertible or exchangeable into or
exercisable for Company Shares or shares of Parent Common Stock issued and
outstanding as a result of a distribution, reclassification, stock split
(including a reverse stock split), stock dividend or distribution or other
similar transaction, the Exchange Ratio shall be equitably adjusted to eliminate
the effects of that event.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger Sub that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and each subsidiary of the Company
other than dormant subsidiaries that are immaterial to the business and
operations of the Company (collectively, the "COMPANY SUBSIDIARIES") has been
duly organized and is validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, as the case may be, and
has the requisite power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted. Each of the Company and each Company Subsidiary is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or
<PAGE>
11
licensed and in good standing that, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Material Adverse
Effect on the Company. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT
ON THE COMPANY" means any change in or effect on the business, assets,
properties, results of operations or financial condition of the Company or any
Company Subsidiaries that is or could reasonably be expected to be materially
adverse to the Company and the Company Subsidiaries, taken as a whole, or that
could reasonably be expected to materially impair the ability of the Company to
perform its obligations under this Agreement or consummate the Merger and the
other transactions contemplated hereby.
(b) Section 3.1(b) of the Disclosure Letter delivered to the
Parent and Merger Sub by the Company prior to the execution of this Agreement
(the "COMPANY DISCLOSURE LETTER") sets forth a complete and correct list of all
of the Company Subsidiaries. Except as set forth in Section 3.1(b) of the
Company Disclosure Letter, neither the Company nor any Company Subsidiary holds
any interest in any person other than the Company Subsidiaries so listed.
SECTION 3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The copies of the
Company's certificate of incorporation and by-laws, each as amended through the
date of this Agreement (collectively, the "COMPANY CHARTER DOCUMENTS") that are
incorporated by reference in, as exhibits to, the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, as amended by its filing on Form
10K/A (the "PLD FORM 10K"), and all comparable corporate organizational
documents of the Company Subsidiaries made available to the Parent by the
Company are complete and correct copies of those documents. Except as set forth
in Section 3.2 of the Company Disclosure Letter, the Company Charter Documents
and all comparable corporate organizational documents of the Company
Subsidiaries are in full force and effect. The Company is not in violation of
any of the provisions of the Company Charter Documents.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
(i) 100,000,000 shares of Company Common Stock and (ii) 100,000,000 shares of
Preferred Stock, par value $.01 per share (the "COMPANY PREFERRED STOCK"). As of
April 30, 1999, (i) 37,846,789 shares of Company Common Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and not subject to preemptive rights, (ii) 405,217 shares of Series II Preferred
Stock and 41,667 shares of Series III Preferred Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and not subject to preemptive rights, (iii) 4,550,333, 5,453,800 and 9,910,462
shares of Company Common Stock were reserved for issuance upon exercise of
outstanding Company Stock Options, Company Warrants or convertible debentures or
notes, respectively.
<PAGE>
12
(b) Between April 30, 1999 and the date of this Agreement, no
Company Stock Options have been granted by the Company under the PLD Equity
Compensation Plan (the "COMPANY'S OPTION PLAN"). Except for (i) Company Stock
Options to purchase an aggregate of 4,550,333 shares of Company Common Stock
outstanding or available for grant under the Company's Option Plan, or under
agreements or arrangements set forth in Section 3.3(b) of the Company Disclosure
Letter, (ii) Company Warrants to purchase an aggregate of 5,453,800 shares of
Company Common Stock and (iii) $26,500,000 principal amount of the Convertible
Notes and $9,550,000 principal amount of outstanding obligations in respect of
guarantees or loans advanced by News America Incorporated ("NEWS NOTES")
convertible for 3,840,580 and 6,069,882 shares of Company Common Stock,
respectively, there are no options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights or other rights,
agreements, arrangements or commitments of any character to which the Company is
a party or by which the Company is bound relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary. Section 3.3(b)
of the Company Disclosure Letter sets forth, as of the date of this Agreement,
(w) the persons to whom Company Stock Options have been granted or Company
Warrants, Convertible Notes or News Notes have been issued, (x) the aggregate
principal amount of Convertible Notes and News Notes outstanding and the
applicable conversion prices thereof, (y) the exercise prices for the Company
Stock Options and Company Warrants held by each such person and (z) whether such
Company Stock Options are subject to vesting and, if subject to vesting, the
dates on which each of those Company Stock Options vest.
(c) All shares of Company Common Stock subject to issuance,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments under which they are issuable, will be duly authorized,
validly issued, fully paid, nonassessable and will not be subject to preemptive
rights. Except as set forth in Section 3.3(c) of the Company Disclosure Letter,
there are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any capital stock of any Company Subsidiary. Except as set forth
in Section 3.3(c) of the Company Disclosure Letter, each outstanding share of
capital stock of each Company Subsidiary is duly authorized, validly issued,
fully paid, nonassessable and not subject to preemptive rights and each such
share owned by the Company or a Company Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever
(collectively, "LIENS"). Except as set forth in Section 3.3 of the Company
Disclosure Letter there are no outstanding material contractual obligations of
the Company or any Company Subsidiary to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Company Subsidiary that is not wholly owned by the Company or in any other
person.
<PAGE>
13
SECTION 3.4 AUTHORITY.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated by this Agreement to be consummated by the Company. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of such transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate such
transactions, other than, with respect to the Merger, the adoption of this
Agreement by stockholders of the Company representing a majority of the Company
Common Stock entitled to vote hereon (the "REQUISITE COMPANY VOTE"). This
Agreement has been duly authorized and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) The Board of Directors of the Company (i) has unanimously
adopted the plan of merger set forth in this Agreement and approved this
Agreement and the other transactions contemplated by this Agreement and (ii) has
declared that the Merger and this Agreement and the other transactions
contemplated by this Agreement are advisable.
SECTION 3.5 NO CONFLICT.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not:
(i) conflict with or violate any provision of any
Company Charter Document or any equivalent organizational documents of
any Company Subsidiary;
(ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.5(b) of the
Company Disclosure Letter have been obtained and all filings and
obligations described in Section 3.5(b) of the Company Disclosure
Letter have been made, conflict with or violate any foreign or domestic
law, statute, ordinance, rule, regulation, order, judgment or decree
("LAW") applicable to the Company or any Company Subsidiary or by which
any property or asset of the Company or any Company Subsidiary is or
may be bound or affected; or
(iii) except as set forth in Section 3.5(b) of the
Company Disclosure Letter, result in any breach of or constitute a
default (or an event which with or without notice or lapse of time or
both would become a default) under, or give to others any right of
termination, amendment,
<PAGE>
14
acceleration or cancellation of, or result in the creation of a Lien on
any property or asset of the Company or any Company Subsidiary under
any note, bond, mortgage, indenture, contract, agreement, commitment,
lease, license, permit, franchise or other instrument or obligation
(collectively, "CONTRACTS") to which the Company or any Company
Subsidiary is a party or by which any of them or their assets or
properties is or may be bound or affected, except for such breaches,
defaults or other occurrences which, individually or in the aggregate,
have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Company.
(b) Section 3.5(b) of the Company Disclosure Letter sets forth
a correct and complete list of all Contracts to which the Company or any Company
Subsidiaries are a party or by which they or their assets or properties is or
may be bound or affected under which consents or waivers are or may be required
prior to consummation of the transactions contemplated by this Agreement
(collectively, the "COMPANY REQUIRED CONSENTS").
SECTION 3.6 GOVERNMENTAL REQUIRED FILINGS AND CONSENTS. The execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any domestic or
foreign national, federal, state, provincial or local governmental, regulatory
or administrative authority, agency, commission, court, tribunal or arbitral
body or self- regulated entity (each, a "GOVERNMENTAL ENTITY"), except (i) for
those consents or approvals set forth in Section 3.6 of the Company Disclosure
Letter (the "COMPANY GOVERNMENTAL CONSENTS"), (ii) for applicable requirements
of the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "EXCHANGE ACT"), and the Securities Act
of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "SECURITIES ACT"), (iii) applicable requirements of state
securities or "blue sky" laws ("BLUE SKY LAWS"), (iv) the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
ACT"), and (v) for the filing of the Certificate of Merger as required by the
GCL.
SECTION 3.7 PERMITS; COMPLIANCE WITH LAW. Each of the Company and the
Company Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
Company Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (collectively, the "COMPANY PERMITS"),
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits, individually or in the aggregate, has not resulted and
could not reasonably be expected to result in a Material Adverse Effect on the
Company, and, as of the date of this Agreement, no suspension or cancellation of
any of the Company Permits is pending or, to the knowledge of the Company,
threatened,
<PAGE>
15
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits, individually or in the aggregate, has not resulted and
could not reasonably be expected to result in a Material Adverse Effect on the
Company or except as otherwise set forth in Section 3.7 of the Company
Disclosure Letter. Neither the Company nor any Company Subsidiary is in conflict
with, or in default or violation of, (i) any Law applicable to the Company or
any Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is or may be bound or affected or (ii) any Company Permits,
in either case, except where such conflict, default or violation could not
reasonably be expected to result in a Material Adverse Effect on the Company. To
the Company's knowledge, the business of the Company is not being conducted in
violation of any portion of the Foreign Corrupt Practices Act, Pub. L. No.
95-213, 91 Stat.1494 (December 19, 1977), as amended (the "FCPA"), or any
regulation promulgated thereunder, and there are not pending any investigations,
reviews or inquiries made by any Governmental Entity of the Company, any Company
Subsidiaries or any of their respective affiliates with respect to the FCPA, nor
to the knowledge of the Company has any Governmental Entity threatened to
conduct the same.
SECTION 3.8 SECURITIES AND EXCHANGE COMMISSION ("SEC") FILINGS;
FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, statements and
other documents (including all exhibits, annexes, supplements and amendments to
such documents) required to be filed by it under the Exchange Act and the
Securities Act since January 1, 1996 (collectively, including any such documents
filed subsequent to the date of this Agreement, the "COMPANY SEC REPORTS") and
the Company has made available to the Parent each Company SEC Report filed with
the SEC. The Company SEC Reports, including any financial statements or
schedules included or incorporated by reference, (i) comply and will comply with
the requirements of the Exchange Act or the Securities Act or both, as the case
may be, applicable to those Company SEC Reports and (ii) did not and will not at
the time filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated or necessary in order to make the
statements made in those Company SEC Reports, in the light of the circumstances
under which they were made, not misleading. Except as set forth in Section
3.8(a) of the Company Disclosure Letter, no Company Subsidiary is subject to the
periodic reporting requirements of the Exchange Act or is otherwise required to
file any documents with the SEC or any national securities exchange or quotation
service or comparable Governmental Entity.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Company SEC Reports (including the related
notes and schedules) fairly presented or will fairly present, in all material
respects, the consolidated financial position of the Company as of the dates set
forth in those consolidated balance sheets. Each of the consolidated statements
of income and of cash flows included in or incorporated by reference into the
Company SEC Reports
<PAGE>
16
(including any related notes and schedules), fairly presented or will fairly
present, in all material respects, the consolidated results of operations and
cash flows, as the case may be, of the Company and the consolidated Company
Subsidiaries for the periods set forth in those consolidated statements of
income and of cash flows (subject, in the case of unaudited quarterly
statements, to notes and normal year-end audit adjustments that will not be
material in amount or effect), in each case in conformity with United States
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited quarterly statements, as permitted by Form 10-Q of the SEC)
consistently applied throughout the periods indicated.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Company Subsidiaries as of
December 31, 1998 including the related notes, neither the Company nor any
Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in the related notes prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 31, 1998 that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Company.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998, and except as otherwise disclosed in the PLD Form 10-K, the Company and
the Company Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been:
(a) any Material Adverse Effect on the Company;
(b) any damage, destruction or other casualty loss with
respect to any asset or property owned, leased or otherwise used by it or any
Company Subsidiaries, whether or not covered by insurance, which damage,
destruction or loss, individually or in the aggregate, has resulted or could
reasonably be expected to result in a Material Adverse Effect on the Company;
(c) any material change by the Company in its or any Company
Subsidiary's accounting methods, principles or practices;
(d) any declaration, setting aside or payment of any dividend
or distribution in respect of Company Shares or any redemption, purchase or
other acquisition of any of the Company's securities;
(e) Except as described in Section 3.9(e) of the Company
Disclosure Letter any increase in the compensation or benefits or establishment
of any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other
<PAGE>
17
employee benefit plan, or any other increase in the compensation payable or to
become payable to any executive officers of the Company or any Company
Subsidiary except in the ordinary course of business consistent with past
practice or except as required by applicable Law.
SECTION 3.10 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 3.10 of the Company
Disclosure Letter and except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company: (A)
each pension, retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, profit sharing, deferred compensation, stock
option, bonus, incentive, severance pay, or other employee benefit plan, trust,
arrangement, contract, commitment, agreement or policy (each a "BENEFIT PLAN")
of the Company or any Company Subsidiary (the "COMPANY BENEFIT PLANS") has been
administered and is in compliance with the terms of such plan and all applicable
laws, rules and regulations, (B) no "reportable event" (as such term is used in
section 4043 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (other than those events for which the 30 day notice has been waived
pursuant to the regulations), "prohibited transaction" (as such term is used in
section 406 of ERISA or sec tion 4975 of the Code) or "accumulated funding
deficiency" (as such term is used in section 412 or 4971 of the Code) has
heretofore occurred with respect to any Company Benefit Plan and (C) each
Company Benefit Plan intended to qualify under Section 401(a) of the Code has
received a favorable determination from the IRS regarding its qualified status
and no notice has been received from the IRS with respect to the revocation of
such qualification.
(b) There is no litigation or administrative or other
proceeding involving any Company Benefit Plan nor has the Company or any Company
Subsidiary received notice that any such proceeding is threatened, in each case
where an adverse determination could reasonably be expected to have a Material
Adverse Effect on the Company. Neither the Company nor any Company Subsidiary
has incurred, nor, to the Company's knowledge, is reasonably likely to incur any
withdrawal liability with respect to any "multiemployer plan" (within the
meaning of section 3(37) of ERISA) which remains unsatisfied in an amount which
could reasonably be expected to have a Material Adverse Effect on the Company.
The termination of, or withdrawal from, any Company Benefit Plan or
multiemployer plan to which the Company or any Company Subsidiaries contributes,
on or prior to the Closing Date, will not subject the Company or any Company
Subsidiary to any liability under Title IV of ERISA that could reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 3.11 ACCOUNTING AND TAX MATTERS. Neither the Company nor, to
the knowledge of the Company, any of its affiliates has taken or agreed to take
any action, nor is the Company aware of any agreement, plan or other
<PAGE>
18
circumstance that would prevent the Merger from constituting a transaction
qualifying as a reorganization under Section 368(a) of the Code.
SECTION 3.12 CONTRACTS; DEBT INSTRUMENTS. Except as set forth in
Section 3.12 of the Company Disclosure Letter there is no Contract that is
material to the business, financial condition or results of operations of the
Company and the Company Subsidiaries taken as a whole. Neither the Company nor
any Company Subsidiary is in violation of or in default under (nor does there
exist any condition which with the passage of time or the giving of notice would
cause such a violation of or default under) any Contract to which it is a party
or by which it or any of its properties or assets is or may be bound or
affected, except for violations or defaults that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Company. Set forth in Section 3.12 of the Company
Disclosure Letter is a description of any material changes to the amount and
terms of the indebtedness of the Company and the consolidated Company
Subsidiaries as described in the notes to the financial statements set forth as
incorporated by reference in the PLD Form 10K.
SECTION 3.13 LITIGATION. There is no suit, claim, action, proceeding or
investigation (collectively, "CLAIMS") pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary before any
Governmental Entity that, if adversely determined, individually or in the
aggregate, has resulted or could reasonably be expected to result in a Material
Adverse Effect on the Company. Neither the Company nor any Company Subsidiary is
subject to any outstanding order, writ, injunction or decree which, individually
or in the aggregate, has resulted or could reasonably be expected to result in a
Material Adverse Effect on the Company.
SECTION 3.14 ENVIRONMENTAL MATTERS. Except as disclosed on Section 3.14
of the Company Disclosure Letter and except as could not reasonably be expected
to have a Material Adverse Effect on the Company:
(a) Neither the Company nor any Company Subsidiary is or has
been in violation in any material respect of any applicable Safety and
Environmental Law (as hereafter defined).
(b) The Company and each Company Subsidiary have all Permits
(as hereafter defined) required pursuant to Safety and Environmental Laws that
are material to the conduct of the business of the Company or any Company
Subsidiary, all such Permits are in full force and effect, no action or
proceeding to revoke, limit or modify any of such Permits is pending, and the
Company and each Company Subsidiary is in compliance in all material respects
with all terms and conditions thereof.
<PAGE>
19
(c) Neither the Company nor any Company Subsidiary has
received, or expects to receive due to the consummation of the Agreement, any
material Environmental Claim (as hereafter defined).
(d) To the Company's knowledge, there is not now and has not
been at any time in the past a Release or threatened Release (as hereafter
defined) of Hazardous Substances into the Environment for which the Company or
any Company Subsidiary may be directly or indirectly responsible.
(e) To the Company's knowledge, there is not now and has not
been at any time in the past at, on or in any of the real properties owned,
leased or operated by the Company or any Company Subsidiary, and, to the
Company's knowledge, was not at, on or in any real property previously owned,
leased or operated by the Company or any Company Subsidiary or any predecessor:
(i) any generation, use, handling, Release, treatment, recycling, storage or
disposal of any Hazardous Substances, (ii) any underground storage tank, surface
impoundment, lagoon or other containment facility (past or present) for the
temporary or permanent storage, treatment or disposal of Hazardous Substances,
(iii) any asbestos-containing material in a condition requiring abatement, (iv)
any Release or threatened Release, or any visible signs of Releases or
threatened Releases, of a Hazardous Substance to the Environment in form or
quantity requiring remedial action under Safety and Environmental Laws, or (v)
any Hazardous Substances present at such property, excepting such quantities as
are handled in accordance with all applicable manufacturer's instructions and
Safety and Environmental Laws and in proper storage containers, and as are
necessary for the operations of the Company and the Company Subsidiaries.
For purposes of this Agreement, the following terms have the following
meanings:
(a) "ENVIRONMENT" means navigable waters, waters of the
contiguous zone, ocean waters, natural resources, surface waters, ground water,
drinking water supply, land surface, subsurface strata, ambient air, both inside
and outside of buildings and structures, man-made buildings and structures, and
plant and animal life on earth.
(b) "ENVIRONMENTAL CLAIMS" means any notification, whether
direct or indirect, formal or informal, written or oral, pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the Environment or health and safety, that any of the current or past
operations of any of the Parent, any Parent Subsidiary, or the Company, or any
Company Subsidiary (collectively, the "MERGING PARTIES"), as the case may be, or
any by-product thereof, or any of the property currently or formerly owned,
leased or operated by any of the Merging Parties, or the operations or property
of any predecessor of any of the Merging Parties is or may be implicated in or
subject to any proceeding, action,
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20
investigation, claim, lawsuit, order, agreement or evaluation by any
Governmental Entity or any other person.
(c) "HAZARDOUS SUBSTANCE" means any toxic waste, pollutant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance or waste, petroleum or petroleum-derived substance or waste,
radioactive substance or waste, or any constituent of any such substance or
waste, or any other substance regulated under or defined by any Safety and
Environmental Law.
(d) "PERMITS" means all licenses, permits, orders or approvals
of, and all required registrations with, any Governmental Entity.
(e) "RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into or through the indoor or outdoor Environment or into, through or
out of any property, including the movement of Hazardous Substances through or
in the air, soil, surface water, ground water or property.
(f) "SAFETY AND ENVIRONMENTAL LAWS" means all federal, state
and local laws and orders relating to pollution, protection of the Environment,
public or worker health and safety, or the emission, discharge, release or
threatened release of pollutants, contaminants or industrial, toxic or hazardous
substances or wastes into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or industrial, toxic or
hazardous substances or wastes, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.,
the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 42 U.S.C.
ss. 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. ss. 121 et seq., the Occupational Safety and Health Act, 29 U.S.C. ss.
651 et seq., the Asbestos Hazard Emergency Response Act, 15 U.S.C. ss. 2601 et
seq., the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq., the Oil Pollution
Act of 1990 and analogous state acts.
SECTION 3.15 INTELLECTUAL PROPERTY.
(a) DISCLOSURE.
(i) Section 3.15(a)(i) of the Company Disclosure
Letter sets forth all material United States and foreign patents and patent
applications, trademark and service mark registrations and applications,
Internet domain name registrations and applications, and copyright registrations
and applications owned or licensed by the Company, specifying as to each item,
as applicable: (A) the nature of the item, including the title; (B) the owner of
the item; (C) the jurisdictions in which
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21
the item is issued or registered or in which an application for issuance or
registration has been filed; and (D) the issuance, registration or application
numbers and dates.
(ii) Section 3.15(a)(ii) of the Company Disclosure
Letter sets forth all material licenses, sublicenses, and other agreements or
permissions ("IP LICENSES") under which the Company is a licensor or licensee or
otherwise is authorized to use or practice any Intellectual Property. For
purposes of this Agreement, "INTELLECTUAL PROPERTY" means all of the following
as they exist in all jurisdictions throughout the world, in each case, to the
extent owned by, licensed to, or otherwise used by the Company or the Parent:
(A) patents, patent applications, and other patent rights (including any
divisions, continuations, continuations-in-part, substitutions, or reissues
thereof, whether or not patents are issued on any such applications and whether
or not any such applications are modified, withdrawn, or resubmitted); (B)
trademarks, service marks, trade dress, trade names, brand names, Internet
domain names, designs, logos, or corporate names, whether registered or
unregistered, and all registrations and applications for registration thereof;
(C) copyrights, including all renewals and extensions, copyright registrations
and applications for registration, and non-registered copyrights; (D) trade
secrets, concepts, ideas, designs, research, processes, procedures, techniques,
methods, know-how, data, mask works, discoveries, inventions, modifications,
extensions, improvements, and other proprietary rights (whether or not
patentable or subject to copyright, mask work, or trade secret protection)
(collectively, "TECHNOLOGY"); and (E) computer software programs, including all
source code, object code, and documentation related thereto (the "SOFTWARE").
(iii) Section 3.15(a)(iii) of the Company Disclosure
Letter sets forth and describes the status of any material agreements involving
Intellectual Property currently in negotiation or proposed by the Company
("PROPOSED INTELLECTUAL PROPERTY AGREEMENTS").
(b) OWNERSHIP. The Company owns, free and clear of all Liens,
and has the unrestricted right to use, sell, or license, all Intellectual
Property set forth in Section 3.15(a)(i) and, as applicable, Section 3.15(a)(ii)
of the Company Disclosure Letter, except for failures that, individually or in
the aggregate, have not resulted and could not reasonably be expected to result
in a Material Adverse Effect on the Company.
(c) CLAIMS. The Company has not been, during the three years
preceding the date of this Agreement, a party to any Claim, nor, to the
knowledge of the Company, is any Claim threatened, that challenges the validity,
enforceability, ownership, or right to use, sell, or license any Intellectual
Property owned or licensed by the Company, except for Claims that, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Company. To the knowledge of the
Company, no third party is infringing upon any Intellectual Property, except for
infringements that,
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22
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Company.
(d) ADMINISTRATION AND ENFORCEMENT. The Company has taken all
necessary and desirable actions to maintain and protect each item of Intellec
tual Property owned by the Company, except for failures to take such actions
that, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.
(e) PROTECTION OF TRADE SECRETS AND TECHNOLOGY. The Company
has taken all reasonable precautions to protect the secrecy, confidentiality,
and value of its trade secrets and the proprietary nature and value of the
Technology, except for failures to take such precautions that, individually or
in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Company.
(f) SOFTWARE. All material Software is described in Section
3.15(a)(ii) of the Company Disclosure Letter. The Software performs in
conformance with its documentation and is fully and freely transferable to the
Parent without any third party consents, except for failures to perform or to be
fully and freely transferable that, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Material Adverse
Effect on the Company.
(g) YEAR 2000 COMPLIANCE. All Software, hardware, databases,
and embedded control systems (collectively, the "SYSTEMS") used by the Company
are Year 2000 Compliant and to the Company's knowledge the Systems used by the
Company's material suppliers are Year 2000 Compliant, except in each case for
failures to be Year 2000 Compliant that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Company and except as set forth in Section 3.15(g) of the
Company Disclosure Letter. For purposes of this Agreement, "YEAR 2000 COMPLIANT"
means that the Systems (i) accurately process date and time data (including
calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, the years 1999 and 2000, and leap year calculations
and (ii) operate accurately with other software and hardware that use standard
date format (4 digits) for representation of the year.
(h) EFFECT OF TRANSACTION. The Company is not, nor, as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, will be, in violation of any agreement
relating to any Intellectual Property, except for violations that, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Company. After the completion of the
transactions contemplated by this Agreement, the Parent will own directly or
indirectly all right, title, and interest in and to or have a license to use all
Intellectual Property on identical terms and conditions as the Company or a
Company Subsidiary enjoyed immediately prior to
<PAGE>
23
such transactions, except for failures to own or have available for use that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Company.
SECTION 3.16 TAXES. (a) Except as set forth on Section 3.16(a) of the
Company Disclosure Letter, (i) the Company and each Company Subsidiary has
timely filed (after giving effect to any extensions of the time to file which
were obtained) prior to the date of this Agreement, and will file prior to the
Effective Time, all returns required to be filed prior to the date of this
Agreement and/or required to be filed prior to the Effective Time by any of them
with respect to, and has paid (or the Company has paid on its behalf), or has or
will set up an adequate reserve for the payment of, all federal, state, local,
foreign and other taxes, together with interest and penalties thereon ("TAXES"),
required to be paid prior to the date of the Agreement or the Effective Time, as
the case may be, and the most recent financial statements contained in the
Company SEC Reports reflect an adequate reserve for all Taxes payable by the
Company and the Company Subsidiaries accrued through the date of such financial
statements and (ii) no deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or any Company Subsidiary other than those which
are being contested in good faith and by proper proceedings by the Company,
except in the case of clauses (i) and (ii) above, any of the foregoing which do
not and will not have a Material Adverse Effect on the Company.
(b) Except as set forth on Section 3.16(b) of the Company
Disclosure Letter, none of the Company, any Company Subsidiary, or to the
Company's knowledge, any group of which the Company or any Company Subsidiary is
now or ever was a member, has filed or entered into any election, consent or
extension agreement that extends any applicable statute of limitations or the
time within which a return must be filed which statute of limitations has not
expired or return has not been timely filed, except, in the case of Company
Subsidiaries organized under the laws of jurisdictions outside the United States
and Canada, as has not and could not reasonably be expected to have a Material
Adverse Effect on the Company.
(c) Except as set forth on Section 3.16(c) of the Company
Disclosure Letter, (i) none of the Company, any Company Subsidiary or, to the
Company's knowledge, any group of which the Company or any Company Subsidiary is
now or ever was a member, is a party to any action or proceeding pending or, to
the Company's knowledge, threatened by any governmental authority for assessment
or collection of Taxes, (ii) no unresolved claim for assessment or collection of
Taxes has, to the Company's knowledge, been asserted, (iii) no audit or
investigation of the Company or any Company Subsidiary by any governmental
authority is pending or, to the Company's knowledge, threatened and (iv) no such
matters are under discussion with any governmental authority which, in the case
of clauses (i-iv), could have a Material Adverse Effect on the Company.
<PAGE>
24
SECTION 3.17 NON-COMPETITION AGREEMENTS. Except as set forth in Section
3.17 of the Company Disclosure Letter, neither the Company nor any Company
Subsidiary is a party to any agreement which purports to restrict or prohibit in
any material respect the Company and the Company Subsidiaries collectively from,
directly or indirectly, engaging in any business involving telecommunications
currently engaged in by the Company, any Company Subsidiary or any other persons
affiliated with the Company. None of the Company's officers, directors or key
employees is a party to any agreement which, by virtue of such person's
relationship with the Company, restricts in any material respect the Company or
any Company Subsidiary or affiliate of either of them from, directly or
indirectly, engaging in any of the businesses described above.
SECTION 3.18 CERTAIN AGREEMENTS. Except as set forth in Section 3.18 of
the Company Disclosure Letter, and except for this Agreement, as of the date of
this Agreement, neither the Company nor any of the Company Subsidiaries is a
party to any oral or written (i) agreement with any executive officer or other
key employee of the Company or Company Subsidiary the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature contemplated by this
Agreement, or agreement with respect to any executive officer of the Company
providing any term of employment or compensation guarantee (x) extending for a
period longer than one year after the Effective Time or (y) for the payment of
in excess of $100,000 per annum or (ii) plan, including any stock option plan,
stock appreciation right plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
SECTION 3.19 INVESTMENT COMPANY ACT. Each of the Company and the
Company Subsidiaries either (i) is not an "investment company," or a company
"controlled" by, or an "affiliated company" with respect to, an "investment
company," within the meaning of the Investment Company Act of 1940, as amended
(the "INVESTMENT COMPANY ACT") or (ii) satisfies all conditions for an exemption
from the Investment Company Act, and, accordingly, neither the Company nor any
of the Company is required to be registered under the Investment Company Act.
SECTION 3.20 OPINION OF FINANCIAL ADVISOR. Salomon Smith Barney Inc.
(the "COMPANY FINANCIAL ADVISOR") has delivered to the Board of Directors of the
Company its oral opinion to the effect that, as of the date of this Agreement,
the Exchange Ratio is fair to holders of Company Common Stock from a financial
point of view, a copy of the written opinion of which will be delivered to the
Parent after receipt thereof by the Company.
SECTION 3.21 BROKERS. No broker, finder or investment banker other than
the Company Financial Advisor is entitled to any brokerage, finder's or other
fee
<PAGE>
25
or commission in connection with the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. Prior to the date of this Agreement, the Company has made available
to the Parent a complete and correct copy of all agreements between the Company
and the Company Financial Advisor under which the Company Financial Advisor
would be entitled to any payment relating to the Merger or any other
transactions.
SECTION 3.22 CERTAIN STATUTES. The Board of Directors of the Company
has taken or will take all appropriate and necessary actions to ensure that the
restrictions on business combinations in Section 203 of the GCL will not have
any effect on the Merger or the other transactions contemplated by this
Agreement. No "fair price," "moratorium," "control share acquisition" or other
similar state or federal anti-takeover statute or regulation (each a "TAKEOVER
STATUTE") is, as of the date of this Agreement, applicable to the Merger or any
other transactions contemplated by this Agreement.
SECTION 3.23 INFORMATION. None of the information to be supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement, the
Registration Statement or the Exchange Offer Registration Statement will, in the
case of the Registration Statement and the Exchange Offer Registration
Statement, at the time it becomes effective and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary to make the
statements in that Registration Statement or the Exchange Offer Registration
Statement, as the case may be, not misleading, or, in the case of the Proxy
Statement or any amendments or supplements of the Proxy Statement, at the time
of the mailing of the Proxy Statement and any amendments or supplements of the
Proxy Statement and at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated in the Proxy Statement or necessary in order to make the statements
in the Proxy Statement, in light of the circumstances under which they are made,
not misleading. The Proxy Statement (except for those portions of the Proxy
Statement that relate only to Parent or subsidiaries or affiliates of the
Parent) will comply as to form in all material respects with the provisions of
the Exchange Act.
SECTION 3.24 VOTE REQUIRED. The Requisite Company Vote is the only vote
of the holders of any class or series of the Company's capital stock necessary
(under the Company Charter Documents, the GCL, other applicable Law or
otherwise) to approve this Agreement, the Merger or the other transactions
contemplated by this Agreement.
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26
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
Each of the Parent and Merger Sub represents and warrants to the
Company that:
SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Except as set forth in Section 4.1(a) of the Parent
Disclosure Letter, each of the Parent, Merger Sub, and each other subsidiary of
the Parent other than dormant subsidiaries that are immaterial to the business
and operations of the Parent (collectively, the "PARENT SUBSIDIARIES") has been
duly organized and is validly existing and in good standing under the laws of
its jurisdiction of its incorporation or organization, as the case may be, and
has the requisite power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted. Each of the Parent, Merger Sub and each other Parent
Subsidiary is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that, individually or in the aggregate, have not resulted
and could not reasonably be expected to result in a Material Adverse Effect on
the Parent. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT ON THE
PARENT" means any change in or effect on the business, assets, properties,
results of operations or financial condition of the Parent or any Parent
Subsidiaries that is or could reasonably be expected to be materially adverse to
the Parent and the Parent Subsidiaries, taken as a whole, or that could
reasonably be expected to materially impair the ability of the Parent or Merger
Sub to perform its obligations under this Agreement or to consummate
transactions contemplated hereby.
(b) Section 4.1(b) of the Disclosure Letter delivered to the
Company by the Parent and Merger Sub prior to the execution of this agreement
(the "PARENT DISCLOSURE LETTER") sets forth a complete and correct list of all
of the Parent Subsidiaries. Except as set forth in Section 4.1(b) of the Parent
Disclosure Letter, neither the Parent nor any Parent Subsidiary holds any
interest in any other person other than the Parent Subsidiaries so listed.
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The copies of the
Parent's certificate of incorporation and by-laws, each as amended through the
date of this Agreement (collectively, the "PARENT CHARTER DOCUMENTS") that are
incorporated by reference in, as exhibits to, the Parent's Annual Report on Form
10-K for the year ended December 31, 1998, as amended by its filing on Form
10K/A (the "MIG FORM 10K"), and all comparable corporate organizational
documents of the Parent Subsidiaries made available to the Company by the Parent
<PAGE>
27
are complete and correct copies of those documents. Except as set forth in
Section 4.2 of the Parent Disclosure Letter, the Parent Charter Documents and
all comparable corporate organizational documents of the Parent Subsidiaries are
in full force and effect. The Parent is not in violation of any of the
provisions of the Parent Charter Documents.
SECTION 4.3 CAPITALIZATION.
(a) The authorized capital stock of the Parent consists of (i)
400,000,000 shares of Parent Common Stock and (ii) 70,000,000 shares of
Preferred Stock, par value $1.00 per share ("PARENT PREFERRED STOCK"). As of
April 30, 1999, (A) 69,161,937 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and not subject to preemptive rights, (B) 4,140,000 shares of 7 1/4% Cumulative
Convertible Preferred Stock (the "7 1/4% PREFERRED STOCK") were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and not subject to preemptive rights, (C) no shares of Parent Common Stock were
held in the treasury of the Parent or by the Parent Subsidiaries, and (D)
22,785,658 shares of Parent Common Stock were reserved for issuance upon
exercise of outstanding Parent Stock Options or conversion of shares of 7 1/4%
Preferred Stock. The shares of Parent Common Stock included in the Merger
Consideration, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
(b) Between April 30, 1999 and the date of this Agreement, no
options to purchase shares of Parent Common Stock ("PARENT STOCK OPTIONS") have
been granted by the Parent under the Metromedia International Group, Inc. 1996
Incentive Stock Option Plan (the "PARENT'S OPTION PLAN"). Except for (i) Parent
Stock Options to purchase an aggregate of 2,442,188 shares of Parent Common
Stock outstanding or available for grant under the Parent's Option Plan, (ii)
under agreements or arrangements set forth in Section 4.3(b) of the Parent
Disclosure Letter or (iii) 13,800,000 shares of Parent Common Stock issuable
upon conversion of shares of 7 1/4% Preferred Stock, there are no options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights or other rights, agreements, arrangements or commitments of
any character to which the Parent is a party or by which the Parent is bound
relating to the issued or unissued capital stock of the Parent or any Parent
Subsidiary or obligating the Parent or any Parent Subsidiary to issue or sell
any shares of capital stock of, or other equity interests in, the Parent or any
Parent Subsidiary.
(c) Except as set forth in Section 4.3(c) of the Parent
Disclosure Letter, there are no outstanding contractual obligations of the
Parent or any Parent Subsidiary to repurchase, redeem or otherwise acquire any
shares of Parent Common Stock or any capital stock of any Parent Subsidiary.
Except as set forth in Section 4.3(c) of the Parent Disclosure Letter, each
outstanding share of capital stock of each Parent Subsidiary is duly authorized,
validly issued, fully paid, nonassessable and not subject to preemptive rights
and each such share owned by the
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28
Parent or a Parent Subsidiary is free and clear of all Liens. Except as set
forth in Section 4.3(c) of the Parent Disclosure Letter, there are no material
outstanding contractual obligations of the Parent or any Parent Subsidiary to
provide funds in excess of $1 million to, or make any investment in excess of $1
million (in the form of a loan, capital contribution or otherwise) in, any
Parent Subsidiary that is not wholly owned by the Parent or in any other person.
(d) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $.01 per share ("SUB COMMON STOCK"). All
of the issued and outstanding shares of Sub Common Stock are (A) owned by the
Parent or another Parent Subsidiary wholly owned by the Parent and (B) duly
authorized, validly issued, fully paid and nonassessable.
SECTION 4.4 AUTHORITY.
(a) Each of the Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated hereby
to be consummated by it. The execution and delivery of this Agreement by each of
the Parent and Merger Sub and the consummation by each of the Parent and Merger
Sub of such transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Parent or
Merger Sub are necessary to authorize this Agreement or to consummate such
transactions, other than, with respect to the approval of the issuance by the
Parent of the Parent Common Stock to be issued in the Merger, by a majority of
the outstanding shares of Parent Common Stock (the "REQUISITE PARENT VOTE").
This Agreement has been duly authorized and validly executed and delivered by
each of the Parent and Merger Sub and constitutes a legal, valid and binding
obligation of each of the Parent and Merger Sub, enforceable against each of the
Parent and Merger Sub in accordance with its terms.
(b) The Board of Directors of each of the Parent and Merger
Sub (i) has unanimously adopted the plan of merger set forth in this Agreement
and approved this Agreement and the other transactions contemplated by this
Agreement and (ii) has declared that the Merger and this Agreement and the other
transactions contemplated by this Agreement are advisable.
SECTION 4.5 NO CONFLICT. (a) The execution and delivery of this
Agreement by the Parent and Merger Sub do not, and the performance of this
Agreement by each of the Parent and Merger Sub will not:
(i) conflict with or violate any provision of any
Parent Charter Document or any equivalent organizational documents of any Parent
Subsidiary except as set forth in Section 4.5(a) of the Parent Disclosure
Letter;
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29
(ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.5(b) of the Parent
Disclosure Letter have been obtained and all filings and obligations described
in Section 4.5(b) of the Parent Disclosure Letter have been made, conflict with
or violate any foreign or domestic Law applicable to the Parent, Merger Sub or
any other Parent Subsidiary or by which any property or asset of the Parent or
any Parent Subsidiary is or may be bound or affected; or
(iii) except as set forth in Section 4.5(b) of the
Parent Disclosure Letter, result in any breach of or constitute a default (or an
event which with or without notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Parent, Merger Sub, or any other
Parent Subsidiary under, any Contract to which the Parent, Merger Sub or any
other Parent Subsidiary is a party or by which any of them or their assets or
Properties is or may be bound or affected, except for any such breaches,
defaults or other occurrences which, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Material Adverse
Effect on the Parent;
(b) Section 4.5(b) of the Parent Disclosure Letter sets forth
a correct and complete list of all Contracts to which Parent or any Parent
Subsidiaries are a party or by which they or their assets or properties is or
may be bound or affected under which consents or waivers are or may be required
prior to consummation of the transactions contemplated by this Agreement.
SECTION 4.6 GOVERNMENTAL REQUIRED FILINGS AND CONSENTS. The execution
and delivery of this Agreement by the Parent and Merger Sub do not, and the
performance of this Agreement by the Parent and Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Government Entity except for (i) those consents or approvals set forth
in Section 4.6 of the Parent Disclosure Letter (the "PARENT GOVERNMENTAL
CONSENTS"), (ii) applicable requirements of the Exchange Act and the Securities
Act, (iii) applicable requirements of Blue Sky Laws, (iv) the rules and
regulations of the American Stock Exchange, Inc., (v) the pre-merger
notification requirements of the HSR Act, and (vi) the filing of the Certificate
of Merger as required by the GCL.
SECTION 4.7 PERMITS; COMPLIANCE WITH LAW. Except as set forth in
Section 4.7 of the Parent Disclosure Letter, each of the Parent and the Parent
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Parent or any
Parent Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (collectively, the "PARENT PERMITS"),
except where the failure to have, or the suspension or cancellation of, any of
the Parent Permits, individually or in the aggregate, has not resulted and could
not reasonably be expected to result in a
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Material Adverse Effect on the Parent, and, as of the date of this Agreement, no
suspension or cancellation of any of the Parent Permits is pending or, to the
knowledge of the Parent, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Parent Permits, individually or in the
aggregate, has not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Parent. Neither the Parent nor any Parent
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to the Parent or any Parent Subsidiary or by which any property or
asset of the Parent or any Parent Subsidiary is or may be bound or affected or
(ii) any Parent Permits, in either case, except where such conflict, default or
violation could not reasonably be expected to result in a Material Adverse
Effect on the Parent. To the Parent's knowledge, the business of the Parent is
not being conducted in violation of any portion of the FCPA, or any regulation
promulgated thereunder, and there are not pending any investigations, reviews or
inquiries made by any Governmental Entity of the Parent, any Parent Subsidiaries
or any of their respective affiliates with respect to the FCPA, nor to the
knowledge of the Parent has any Governmental Entity threatened to conduct the
same.
SECTION 4.8 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Parent has filed all forms, reports, statements and
other documents (including all exhibits, annexes, supplements and amendments to
such documents) required to be filed by it under the Exchange Act and the
Securities Act since January 1, 1996 through the date of this Agreement
(collectively, including any such documents filed subsequent to the date of this
Agreement, the "PARENT SEC REPORTS") and the Parent has made available to the
Company each Parent SEC Report. The Parent SEC Reports, including any financial
statements or schedules included or incorporated by reference, (i) comply and
will comply with the requirements of the Exchange Act or the Securities Act or
both, as the case may be, applicable to those Parent SEC Reports and (ii) did
not and will not at the time filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated or necessary in
order to make the statements made in those Parent SEC reports, in the light of
the circumstances under which they were made, not misleading. No Parent
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or is otherwise required to file any documents with the SEC or any national
securities exchange or quotation service or comparable Governmental Entity.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Parent SEC Reports (including the related
notes and schedules) fairly presented or will fairly present, in all material
respects, the consolidated financial position of the Parent as of the dates set
forth in those consolidated balance sheets. Each of the consolidated statements
of income and of cash flows included in or incorporated by reference into the
Parent SEC Reports (including any related notes and schedules) fairly presented
or will fairly present, in all material respects, the consolidated results of
operations and cash flows, as the case may be, of the Parent and the
consolidated Parent Subsidiaries for the periods set
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31
forth in those consolidated statements of income and of cash flows (subject, in
the case of unaudited quarterly statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in each case in
conformity with GAAP (except, in the case of unaudited quarterly statements, as
permitted by Form 10-Q of the SEC) consistently applied throughout the periods
indicated.
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Parent and the consolidated Parent Subsidiaries as of
December 31, 1998, including the related notes, neither the Parent nor any
Parent Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in the related notes prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 31, 1998, that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Parent.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30,
1998 (or, with respect to Snapper, Inc., December 31, 1998), and except as
otherwise disclosed in the MIG Form 10K, the Parent and the Parent Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been:
(a) any Material Adverse Effect on the Parent;
(b) any damage, destruction or other casualty loss with
respect to any asset or property owned, leased or otherwise used by it or any
Parent Subsidiaries, whether or not covered by insurance, which damage,
destruction or loss, individually or in the aggregate, has resulted or could
reasonably be expected to result in a Material Adverse Effect on the Parent;
(c) any material change by the Parent in its or any Parent
Subsidiary's accounting methods, principles or practices;
(d) any declaration, setting aside or payment of any dividend
or distribution in respect of Parent Shares or any redemption, purchase or other
acquisition of any of the Parent's securities; or
(e) any increase in the compensation or benefits or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, the granting of
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of the
Parent or any Parent Subsidiary except in the ordinary course of business
consistent with past practice or except as required by applicable Law.
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SECTION 4.10 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 4.10 of the Parent
Disclosure Letter and except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Parent: (A) each
Benefit Plan of the Parent or any Parent Subsidiary (the "PARENT BENEFIT PLANS")
has been administered and is in compliance with the terms of such plan and all
applicable laws, rules and regulations, (B) no "reportable event" (as such term
is used in section 4043 of ERISA) (other than those events for which the 30 day
notice has been waived pursuant to the regulations), "prohibited transaction"
(as such term is used in sec tion 406 of ERISA or section 4975 of the Code) or
"accumulated funding deficiency" (as such term is used in section 412 or 4971 of
the Code) has heretofore occurred with respect to any Parent Benefit Plan and
(C) each Parent Benefit Plan intended to qualify under Section 401(a) of the
Code has received a favorable determination from the IRS regarding its qualified
status and no notice has been received from the IRS with respect to the
revocation of such qualification.
(b) There is no litigation or administrative or other
proceeding involving any Parent Benefit Plan nor has the Parent or any Parent
Subsidiary received notice that any such proceeding is threatened, in each case
where an adverse determination could reasonably be expected to have a Material
Adverse Effect on the Parent. Neither the Parent nor any Parent Subsidiary has
incurred, nor, to the Parent's knowledge, is reasonably likely to incur any
withdrawal liability with respect to any "multiemployer plan" (within the
meaning of section 3(37) of ERISA) which remains unsatisfied in an amount which
could reasonably be expected to have a Material Adverse Effect on the Parent.
The termination of, or withdrawal from, any Parent Benefit Plan or multiemployer
plan to which the Parent or any Parent Subsidiaries contributes, on or prior to
the Closing Date, will not subject the Parent or any Parent Subsidiary to any
liability under Title IV of ERISA that could reasonably be expected to have a
Material Adverse Effect on the Parent.
SECTION 4.11 ACCOUNTING AND TAX MATTERS. Neither the Parent nor Merger
Sub, nor to the knowledge of the Parent, any of Parent's affiliates has taken or
agreed to take any action, nor is the Parent aware of any agreement, plan or
other circumstance, that would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
SECTION 4.12 CONTRACTS; DEBT INSTRUMENTS. Except as set forth in
Section 4.12 of the Parent Disclosure Letter, there is no Contract that is
material to the business, financial condition or results of operations of the
Parent and the Parent Subsidiaries taken as a whole (each, a "PARENT MATERIAL
CONTRACT"). Neither the Parent nor any Parent Subsidiary is in violation of or
in default under (nor does there exist any condition which with the passage of
time or the giving of notice would cause such a violation of or default under)
any Contract to which it is a party or by which it or any of its properties or
assets is or may be bound or affected, except for violations or defaults that,
individually or in the aggregate, have not resulted and could not
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33
reasonably be expected to result in a Material Adverse Effect on the Parent. Set
forth in Section 4.12 of the Parent Disclosure Letter is a description of any
material changes to the amount and terms of the indebtedness of the Parent and
the consolidated Parent Subsidiaries as described in the notes to the financial
statements set forth as incorporated by reference in the MIG Form 10K.
SECTION 4.13 LITIGATION. There is no Claim pending or, to the knowledge
of the Parent, threatened against the Parent or any Parent Subsidiary before any
Governmental Entity that, individually or in the aggregate, has resulted or
could reasonably be expected to result in a Material Adverse Effect on the
Parent. Neither the Parent nor any Parent Subsidiary is subject to any
outstanding order, writ, injunction or decree which, individually or in the
aggregate, has resulted or could reasonably be expected to result in a Material
Adverse Effect on the Parent.
SECTION 4.14 ENVIRONMENTAL MATTERS. Except as disclosed on Section 4.14
of the Parent Disclosure Letter or in the Parent SEC Reports and except as could
not reasonably be expected to have a Material Adverse Effect on the Parent:
(a) Neither the Parent nor any Parent Subsidiary is or has
been in violation in any material respect of any applicable Safety and
Environmental Law.
(b) The Parent and each Parent Subsidiary have all Permits
required pursuant to Safety and Environmental Laws that are material to the
conduct of the business of the Parent or any Parent Subsidiary, all such Permits
are in full force and effect, no action or proceeding to revoke, limit or modify
any of such Permits is pending, and the Parent and each Parent Subsidiary is in
compliance in all material respects with all terms and conditions thereof.
(c) Neither the Parent nor any Parent Subsidiary has received,
or expects to receive due to the consummation of the Agreement, any material
Environmental Claim.
(d) To the Parent's knowledge, there is not now and has not
been at any time in the past a Release or threatened Release of Hazardous
Substances into the Environment for which the Parent or any Parent Subsidiary
may be directly or indirectly responsible.
(e) To the Parent's knowledge, there is not now and has not
been at any time in the past at, on or in any of the real properties owned,
leased or operated by the Parent or any Parent Subsidiary, and, to the Parent's
knowledge, was not at, on or in any real property previously owned, leased or
operated by the Parent or any Parent Subsidiary or any predecessor: (i) any
generation, use, handling, Release, treatment, recycling, storage or disposal of
any Hazardous Substances, (ii) any underground storage tank, surface
impoundment, lagoon or other containment facility (past or present) for the
temporary or permanent storage, treatment or disposal
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of Hazardous Substances, (iii) any asbestos-containing material in a condition
requiring abatement, (iv) any Release or threatened Release, or any visible
signs of Releases or threatened Releases, of a Hazardous Substance to the
Environment in form or quantity requiring remedial action under Safety and
Environmental Laws, or (v) any Hazardous Substances present at such property,
excepting such quantities as are handled in accordance with all applicable
manufacturer's instructions and Safety and Environmental Laws and in proper
storage containers, and as are necessary for the operations of the Parent and
the Parent Subsidiaries.
SECTION 4.15 INTELLECTUAL PROPERTY.
(a) DISCLOSURE.
(i) Section 4.15(a)(i) of the Parent Disclosure
Letter sets forth all material United States and foreign patents and patent
applications, trademark and service mark registrations and applications,
Internet domain name registrations and applications, and copyright registrations
and applications owned or licensed by the Parent, specifying as to each item, as
applicable: (A) the nature of the item, including the title; (B) the owner of
the item; (C) the jurisdictions in which the item is issued or registered or in
which an application for issuance or registration has been filed; and (D) the
issuance, registration, or application numbers and dates.
(ii) Section 4.15(a)(ii) of the Parent Disclosure
Letter sets forth all material IP Licenses under which the Parent is a licensor
or licensee or otherwise is authorized to use or practice any Intellectual
Property.
(iii) Section 4.15(a)(iii) of the Parent Disclosure
Letter sets forth and describes the status of any material Proposed Intellectual
Property Agreements.
(b) OWNERSHIP. The Parent owns, free and clear of all Liens,
and has the unrestricted right to use, sell, or license, all Intellectual
Property set forth in Section 4.15(a)(i) and, as applicable, Section 4.15(a)(ii)
of the Parent Disclosure Letter, except for failures that, individually or in
the aggregate, have not resulted and could not reasonably be expected to result
in a Material Adverse Effect on the Parent.
(c) CLAIMS. The Parent has not been, during the three years
preceding the date of this Agreement, a party to any Claim, nor, to the
knowledge of the Company, is any Claim threatened, that challenges the validity,
enforceability, ownership, or right to use, sell, or license any Intellectual
Property owned or licensed by the Parent, except for Claims that, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Parent. To the knowledge of the
Parent, no third party is infringing upon any Intellectual Property, except for
infringements that, individually or in the aggregate,
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35
have not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Parent.
(d) ADMINISTRATION AND ENFORCEMENT. The Parent has taken all
necessary and desirable actions to maintain and protect each item of Intellec
tual Property owned by the Parent, except for failures to take such actions
that, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Parent.
(e) PROTECTION OF TRADE SECRETS AND TECHNOLOGY. The Parent has
taken all reasonable precautions to protect the secrecy, confidentiality, and
value of its trade secrets and the proprietary nature and value of the
Technology, except for failures to take such precautions that, individually or
in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Parent.
(f) SOFTWARE. All material Software is described in Section
4.15(a)(ii) of the Parent Disclosure Letter. The Software performs in
conformance with its documentation, except for failures to perform that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Parent.
(g) YEAR 2000 COMPLIANCE. All Systems used by the Parent are
Year 2000 Compliant and to the Parent's knowledge the systems used by the
Parent's material suppliers are Year 2000 Compliant, except in each case for
failures to be Year 2000 Compliant that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Parent and except as set forth in Section 4.15(g) of the
Parent Disclosure Letter.
(h) EFFECT OF TRANSACTION. The Parent is not, nor, as a result
of the execution and delivery of this Agreement or the performance of its
obligations under this agreement, will be, in violation of any agreement
relating to any Intellectual Property, except for violations that, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Parent.
SECTION 4.16 TAXES. (a) Except as set forth on Section 4.16(a) of the
Parent Disclosure Letter, (i) the Parent and each Parent Subsidiary has timely
filed (after giving effect to any extensions of the time to file which were
obtained) prior to the date of this Agreement, and will file prior to the
Effective Time, all returns required to be filed prior to the date of this
Agreement and/or required to be filed prior to the Effective Time by any of them
with respect to, and has paid (or the Parent has paid on its behalf), or has or
will set up an adequate reserve for the payment of, all Taxes required to be
paid prior to the date of the Agreement or the Effective Time, as the case may
be, and the most recent financial statements contained in the Parent SEC Reports
reflect an adequate reserve for all Taxes payable
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by the Parent and the Parent Subsidiaries accrued through the date of such
financial statements and (ii) no deficiencies for any Taxes have been proposed,
asserted or assessed against the Parent or any Parent Subsidiary other than
those which are being contested in good faith and by proper proceedings by the
Parent, except in the case of clauses (i) and (ii) above, any of the foregoing
which do not and will not have a Material Adverse Effect on the Parent.
(b) The Federal income tax returns of the Parent and each
Parent Subsidiary consolidated in such returns have been examined by and settled
with the IRS, or the statute of limitations with respect to such years has
expired, for all years through 1994.
(c) Except as set forth on Section 4.16(c) of the Parent
Disclosure Letter, none of the Parent, any Parent Subsidiary, or to the Parent's
knowledge, any group of which the Parent or any Parent Subsidiary is now or ever
was a member, has filed or entered into any election, consent or extension
agreement that extends any applicable statute of limitations or the time within
which a return must be filed which statute of limitations has not expired or
return has not been timely filed except, in the case of Parent Subsidiaries
organized under the laws of jurisdictions outside the United States, as has not
and could not reasonably be expected to result in a Material Adverse Effect on
the Parent.
(d) Except as set forth on Section 4.16(d) of the Parent
Disclosure Letter, (i) none of the Parent, any Parent Subsidiary or, to the
Parent's knowledge, any group of which the Parent or any Parent Subsidiary is
now or ever was a member, is a party to any action or proceeding pending or, to
the Parent's knowledge, threatened by any governmental authority for assessment
or collection of Taxes, (ii) no unresolved claim for assessment or collection of
Taxes has, to the Parent's knowledge, been asserted, (iii) no audit or
investigation of the Parent or any Parent Subsidiary by any governmental
authority is pending or, to the Parent's knowledge, threatened and (iv) no such
matters are under discussion with any governmental authority which, in the case
of clauses (i-iv), could have a Material Adverse Effect on the Parent.
SECTION 4.17 NON-COMPETITION AGREEMENTS. Except as set forth in Section
4.17 of the Parent Disclosure Letter, neither the Parent nor any Parent
Subsidiary is a party to any agreement which purports to restrict or prohibit in
any material respect the Parent and the Parent Subsidiaries collectively from,
directly or indirectly, engaging in any business involving telecommunications
currently engaged in by the Parent, any Parent Subsidiary, any other persons
affiliated with the Parent, or the Company or any Company Subsidiaries. None of
the Parent's officers, directors or key employees is a party to any agreement
which, by virtue of such person's relationship with the Parent, restricts in any
material respect the Parent or any Parent Subsidiary or affiliate of either of
them from, directly or indirectly, engaging in any of the businesses described
above.
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SECTION 4.18 INVESTMENT COMPANY ACT. Each of Parent and each Parent
Subsidiary either (i) is not an "investment company," or a company "controlled"
by, or an "affiliated company" with respect to, an "investment company," within
the meaning of the Investment Company Act or (ii) satisfies all conditions for
an exemption from the Investment Company Act, and, accordingly, neither the
Parent nor any Parent Subsidiary is required to be registered under the
Investment Company Act.
SECTION 4.19 OPINION OF FINANCIAL ADVISOR. Donaldson, Lufkin & Jenrette
Securities Corporation (the "PARENT FINANCIAL ADVISOR") has delivered to the
Board of Directors of the Parent its oral opinion to the effect that, as of the
date of this Agreement, the Exchange Ratio is fair to the Parent from a
financial point of view, a copy of the written opinion of which will be
delivered to the Company after receipt thereof by the Parent.
SECTION 4.20 BROKERS. No broker, finder or investment banker other than
the Parent Financial Advisor is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the other transactions
contemplated hereby based upon arrangements made by or on behalf of the Parent
or Merger Sub. The Parent has heretofore made available to the Company a
complete and correct copy of all agreements between the Parent and the Parent
Financial Advisor pursuant to which the Parent Financial Advisor would be
entitled to any payment relating to the Merger or such other transactions.
SECTION 4.21 CERTAIN STATUTES. The Board of Directors of the Parent has
taken or will take all appropriate and necessary actions such that the
restrictions on business combinations in Section 203 of the GCL will not have
any effect on the Merger or the other transactions contemplated hereby. No
Takeover Statute is, as of the date hereof, applicable to the Merger or such
other transactions.
SECTION 4.22 INFORMATION. None of the information to be supplied by the
Parent or Merger Sub for inclusion or incorporation by reference in the
Registration Statement, the Exchange Offer Registration Statement or the Proxy
Statement will, in the case of the Registration Statement and the Exchange Offer
Registration Statement, at the time it becomes effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated in that Registration Statement or the
Exchange Offer Registration Statement, as the case may be, or necessary to make
the statements in the Registration Statement or the Exchange Offer Registration
Statement, as the case may be, not misleading, or, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto and at
the time of the Parent Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated in that
Proxy Statement or necessary in order to make the statements in that Proxy
Statement, in light of the circumstances under which they are made, not
misleading. The Proxy Statement (except for such portions thereof that
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relate only to the Company or the Company Subsidiaries or affiliates of the
Company) and the Registration Statement and the Exchange Offer Registration
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the Securities Act, respectively.
SECTION 4.23 VOTE REQUIRED. The Requisite Parent Vote is the only vote
of the holders of any class or series of the Parent's capital stock necessary
(under the rules and regulations of the American Stock Exchange, Inc., the
Parent Charter Documents, the GCL, other applicable Law or otherwise to approve
this Agreement, the issuance of Parent Common Stock in the Merger and the other
transactions contemplated by this Agreement.
SECTION 4.24 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or conducted any
operations other than in connection with the transactions contemplated by this
Agreement.
ARTICLE 5
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated
by this Agreement or with the prior written consent of the Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will use its best efforts to cause each of the Company Subsidiaries to,
conduct its operations only in the ordinary course of business consistent with
past practice and will use its reasonable best efforts to, and to use its best
efforts to cause each Company Subsidiary to, preserve intact the business
organization of the Company and each of the Company Subsidiaries, to keep
available the services of the present officers and key employees of the Company
and the Company Subsidiaries, and to preserve the good will of customers,
suppliers and all other persons having business relationships with the Company
and the Company Subsidiaries. Without limiting the generality of the foregoing,
and except as otherwise contemplated by this Agreement or disclosed in Section
5.1 of the Company Disclosure Letter, prior to the Effective Time, the Company
will not, and will not permit any Company Subsidiary (or with respect to clauses
(e) and (h) below, use its best efforts not to permit any Company Subsidiary
that is not a wholly-owned Company Subsidiary) to, without the prior written
consent of the Parent:
(a) adopt any amendment to the Company Charter Documents or
the comparable organizational documents of any Company Subsidiary;
(b) except for issuances of capital stock of Company
Subsidiaries to the Company or a wholly owned Company Subsidiary, issue, reissue
or sell, or authorize the issuance, reissuance or sale of (i) additional shares
of capital
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39
stock of any class, or securities convertible into capital stock of any class,
or any rights, warrants or options to acquire any convertible securities or
capital stock, other than the issue of Company Shares, in accordance with the
terms of the instruments governing such issuance on the date hereof, pursuant to
the exercise of Company Stock Options or Company Warrants or the conversion of
Convertible Notes outstanding on the date hereof, or (ii) any other securities
in respect of, in lieu of, or in substitution for, Company Shares outstanding on
the date hereof;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock other than
between the Company and any Company Subsidiary;
(d) split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities, except for a
redemption of the Company Preferred Shares in accordance with the terms of this
Agreement;
(e) except for (i) increases in salary, wages and benefits of
officers or employees of the Company or the Company Subsidiaries in the ordinary
course of business and in accordance with past practice, (ii) increases in
salary, wages and benefits granted to officers and employees of the Company or
the Company Subsidiaries in conjunction with new hires, promotions or other
changes in job status in the ordinary course of business and consistent with
past practices, increase the compensation or fringe benefits payable or to
become payable to its directors, officers or employees (whether from the Company
or any Company Subsidiaries), or pay any benefit not required by any existing
plan or arrangement (including the granting of stock options, stock appreciation
rights, shares of restricted stock or performance units) or grant any severance
or termination pay to (except pursuant to existing agreements, plans or
policies), or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any Company Subsidiaries
or establish, adopt, enter into, or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, savings, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or current or
former employees, except in each case to the extent required by applicable Law;
PROVIDED, HOWEVER, that nothing in this Agreement will be deemed to prohibit the
payment of benefits existing on the date hereof as they become payable;
(f) except as set forth in Section 5.1(f) of the Company
Disclosure Letter, acquire, sell, lease, license, transfer, pledge, encumber,
grant or dispose of (whether by merger, consolidation, purchase, sale or
otherwise) any assets, including capital stock of Company Subsidiaries (other
than the acquisition and sale of inventory or the disposition of used or excess
equipment and the purchase of raw materials, supplies and equipment, in either
case in the ordinary course of business
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consistent with past practice), with a value in excess of $100,000 or enter into
any material commitment or transaction outside the ordinary course of business,
other than transactions between a wholly owned Company Subsidiary and the
Company or another wholly owned Company Subsidiary;
(g) (i) incur, assume or prepay any long-term indebtedness or
incur or assume any short-term indebtedness (including, in either case, by
issuance of debt securities), except that the Company and the Company
Subsidiaries may incur, assume or prepay indebtedness in the ordinary course of
business consistent with past practice and except for loans made by the Parent
to the Company pursuant to the Bridge Loan Agreement dated as of the date hereof
between the Company and the Parent (the "Bridge Loan Agreement"), (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, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person except in the ordinary
course of business and except for loans, advances, capital contributions or
investments between any wholly owned Company Subsidiary and the Company or
another wholly owned Company Subsidiary;
(h) terminate, cancel or request any material change in, or
agree to any material change in any Contract which is material to the Company
and the Company Subsidiaries taken as a whole, or enter into any Contract which
would be material to the Company and the Company Subsidiaries taken as a whole,
in either case other than in the ordinary course of business consistent with
past practice; or make or authorize any capital expenditure, other than capital
expenditures that are not, in the aggregate, for any fiscal year, in excess of
the capital expenditures provided for in the Company's budget for the Company
and the Company Subsidiaries taken as a whole for such fiscal year (a copy of
which budget has been provided to the Parent);
(i) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice or as required pursuant to applicable Law or GAAP;
(j) make any Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability; or
(k) authorize or enter into any formal or informal written or
other agreement or otherwise make any commitment to do any of the foregoing.
SECTION 5.2 CONDUCT OF BUSINESS OF THE PARENT. Except as contemplated
by this Agreement or with the prior written consent of the Company, during the
period from the date of this Agreement to the Effective Time, the Parent will,
and will use its best efforts to cause each of the Parent Subsidiaries to,
conduct its operations only in the ordinary course of business consistent with
past practice and will use its reasonable best efforts to, and to use its best
efforts to cause each Parent
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Subsidiary to, preserve intact the business organization of the Parent and each
of the Parent Subsidiaries, to keep available the services of the present
officers and key employees of the Parent and the Parent Subsidiaries, and to
preserve the good will of customers, suppliers and all other persons having
business relationships with the Parent and the Parent Subsidiaries. Without
limiting the generality of the foregoing, and except as otherwise contemplated
by this Agreement or disclosed in Section 5.2 of the Parent Disclosure Letter,
prior to the Effective Time, the Parent will not, and will not permit any Parent
Subsidiary to, without the prior written consent of the Company:
(a) adopt any amendment to the Parent Charter Documents;
(b) except for dividends on the 7 1/4% Preferred Stock and pro
rata dividends set aside or paid by any Parent Subsidiary to the holders of its
equity interests, declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock other than between the Parent and
any Parent Subsidiary;
(c) split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities, except for a
redemption of shares of Parent Preferred Stock;
(d) except as set forth in Section 5.2 (d) of the Parent
Disclosure Letter, sell, lease, transfer or dispose of (whether by merger,
consolidation, purchase, sale or otherwise) all or substantially all the
Parent's and the Parent Subsidiaries' assets and properties;
(e) (i) incur, assume or prepay any long-term indebtedness or
incur or assume any short-term indebtedness (including, in either case, by
issuance of debt securities), except that the Parent and the Parent Subsidiaries
may incur, assume or prepay indebtedness in the ordinary course of business
consistent with past practice, (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,
or (iii) make any loans, advances or capital contributions to, or investments
in, any other person except in the ordinary course of business and except for
loans, advances, capital contributions or investments between any Parent
Subsidiary and the Parent or another Parent Subsidiary; provided, however, that
this subsection shall not prohibit the Parent from providing interim financing
to the Company or any Company Subsidiary from the date hereof until the closing
date;
(f) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice or as required pursuant to applicable Law or GAAP; or
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42
(g) authorize or enter into any formal or informal written or
other agreement or otherwise make any commitment to do any of the foregoing.
SECTION 5.3 OTHER ACTIONS. During the period from the date hereof to
the Effective Time, the Company and the Parent shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in any of the conditions to the Merger
set forth in Article 6 hereof not being satisfied.
SECTION 5.4 UPDATED LETTERS; NOTIFICATION OF CERTAIN MATTERS. The
Parent and the Company shall each deliver, on the Closing Date, updated copies
of the Parent Disclosure Letter and Company Disclosure Letter, respectively,
setting forth any changes to such letters from the date hereof through the
Business Day prior to the Closing Date (it being understood and agreed that such
updated letters are being provided for information purposes only and any matters
discussed on such updated letters shall not cure any breach or default of any
representation, warranty, covenant or condition in this Agreement). The Parent
and the Company shall promptly notify each other of (a) the occurrence or
non-occurrence of any fact or event which could reasonably be expected (i) to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, (ii) to cause any material covenant, condition or agreement
hereunder not to be complied with or satisfied in all material respects or (iii)
to result in, in the case of Parent, a Material Adverse Effect on the Parent;
and, in the case of the Company, a Material Adverse Effect on the Company, (b)
any failure of the Company or the Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder in any material respect; PROVIDED, HOWEVER, that no such
notification shall affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder, (c) any notice or other
material communications from any Governmental Entity in connection with the
transactions contemplated by this Agreement and (d) the commencement of any
suit, action or proceeding that seeks to prevent or seek damages in respect of,
or otherwise relates to, the consummation of the transactions contemplated by
this Agreement.
SECTION 5.5 PROXY STATEMENT, REGISTRATION STATEMENTS.
(a) As promptly as practicable after the execution of this
Agreement, (i) the Parent and the Company shall jointly prepare and file with
the SEC a single document that will constitute (A) the proxy statement of the
Company relating to the special meeting of the Company's stockholders (the
"COMPANY STOCKHOLDERS MEETING") to be held to consider approval and adoption of
this Agreement and the Merger, (B) the proxy statement of the Parent relating to
the special meeting of the Parent's stockholders (the "PARENT STOCKHOLDERS
MEETING") to be held to consider approval of the issuance of the Parent Common
Stock to be issued in the Merger, (C) the registration statement on Form S-4 of
the Parent (together with all amendments thereto, the "REGISTRATION STATEMENT"),
in connection with the
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43
registration under the Securities Act of the Parent Common Stock to be issued to
the stockholders of the Company in connection with the Merger and the prospectus
included in the Registration Statement (such single document, together with any
amendments thereof or supplements thereto, the "PROXY STATEMENT") and (ii) the
Parent shall prepare and file with the SEC the registration statement on Form
S-4 of the Parent or a shelf registration statement on Form S-3, as the case may
be (together with all amendments thereto, the "EXCHANGE OFFER REGISTRATION
STATEMENT"), providing for the offer to exchange and consent solicitation by
Parent and registration under the Securities Act of certain of its new 10 1/2%
Senior Notes due 2007 (the "NEW PARENT NOTES") to holders of each of the
Company's 14 1/2% Senior Discount Notes due 2004 (the "COMPANY SENIOR NOTES")
and Convertible Notes, which New Parent Notes will have the terms substantially
as specified in Section 5.5 of the Parent Disclosure Letter and which exchange
offer and consent solicitation will be commenced on the basis and with the terms
substantially as specified in Section 5.5 of the Parent Disclosure Letter (the
"EXCHANGE OFFER"). Substantially contemporaneously with the filing of the Proxy
Statement with the SEC, copies of the Proxy Statement shall be provided to
NASDAQ and the American Stock Exchange. The Parent and the Company each shall
use its reasonable best efforts to cause the Registration Statement and the
Exchange Offer Registration Statement to become effective as promptly as
practicable, and, prior to the effective date of the Registration Statement (the
"REGISTRATION STATEMENT EFFECTIVE DATE"), the Parent shall take all or any
action required under any applicable Law in connection with the issuance of
Parent Common Stock pursuant to the Merger. The Parent or the Company, as the
case may be, shall furnish all information concerning the Parent or the Company
as the other party may reasonably request in connection with such actions and
the preparation of the Proxy Statement, the Registration Statement and the
Exchange Offer Registration Statement. As promptly as practicable after the
Registration Statement Effective Date, the proxy statements and prospectus
included in the Proxy Statement (collectively, the "PROXY MATERIALS") will be
mailed to the stockholders of the Parent and the Company and the Exchange Offer
will be commenced. The Parent and the Company shall cause the Proxy Statement to
comply as to form and substance in all material respects with the applicable
requirements of (i) the Exchange Act, including Sections 14(a) and 14(d) thereof
and the respective regulations promulgated thereunder, (ii) the Securities Act,
(iii) the rules and regulations of the American Stock Exchange and NASDAQ and
(iv) the GCL.
(b) The Proxy Statement shall include the unanimous and
unconditional recommendation of the Board of Directors of the Company to the
stockholders of the Company that they vote in favor of the adoption of this
Agreement and the Merger; PROVIDED, HOWEVER, that the Board of Directors of the
Company may, at any time prior to the Effective Time, withdraw, modify or change
any such recommendation solely in accordance with the provisions of Section
5.8(b) hereof. In addition, the Proxy Statement and the Proxy Materials will
include a copy of the written opinions of the Company Financial Advisor and the
Parent Financial Adviser referred to in Sections 3.20 and 4.19 respectively.
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44
(c) No amendment or supplement to the Proxy Statement will be
made without the approval of each of the Parent and the Company, which approval
shall not be unreasonably withheld or delayed.
(d) The information supplied by the Company for inclusion in
the Proxy Statement, the Registration Statement or the Exchange Offer
Registration Statement, as the case may be, shall not, at (i) the time the
Registration Statement or Exchange Offer Registration Statement is declared
effective, (ii) the time the Proxy Materials (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of each of the Parent
and the Company, (iii) the time of the Company Stockholders Meeting, (iv) the
time of the Parent Stockholders Meeting and (v) the Effective Time, contain any
untrue statement of a material fact or fail to state any material fact required
to be stated in the Proxy Statement, the Registration Statement or the Exchange
Offer Registration Statement, as the case may be, or necessary in order to make
the statements in the Proxy Statement, the Registration Statement or the
Exchange Offer Registration Statement, as the case may be, not misleading. If at
any time prior to the Effective Time any event or circumstance relating to the
Company or any Company Subsidiary, or their respective officers or directors,
should be discovered by the Company that should be set forth in an amendment or
a supplement to the Proxy Statement, the Registration Statement or the Exchange
Offer Registration Statement, the Company shall promptly inform the Parent. All
documents that the Company is responsible for filing with the SEC in connection
with the transactions contemplated hereby will comply as to form and substance
in all material respects with the applicable requirements of the GCL, the
Securities Act and the Exchange Act.
(e) The information supplied by the Parent for inclusion in
the Proxy Statement, the Registration Statement or the Exchange Offer
Registration Statement, as the case may be, shall not, at (i) the time the
Registration Statement or the Exchange Offer Registration Statement is declared
effective, (ii) the time the Proxy Materials (or any amendment of or supplement
to the Proxy Materials) are first mailed to the stockholders of each of the
Parent and the Company, (iii) the time of the Company Stockholders Meeting, (iv)
the time of the Parent Stockholders Meeting and (v) the Effective Time, contain
any untrue statement of a material fact or fail to state any material fact
required to be stated in the Proxy Statement, the Registration Statement or the
Exchange Offer Registration Statement, as the case may be, or necessary in order
to make the statements in the Proxy Statement, the Registration Statement or the
Exchange Offer Registration Statement, as the case may be, not misleading. If,
at any time prior to the Effective Time, any event or circumstance relating to
the Parent or any Parent Subsidiary, or their respective officers or directors,
should be discovered by the Parent that should be set forth in an amendment or a
supplement to the Proxy Statement, the Registration Statement or the Exchange
Offer Registration Statement, the Parent shall promptly inform the Company. All
documents that the Parent is responsible for filing in connection with the
transactions contemplated by this Agreement will comply as to form and substance
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45
in all material aspects with the applicable requirements of the GCL, the
Securities Act and the Exchange Act.
SECTION 5.6 STOCKHOLDERS MEETINGS.
(a) The Company shall call and hold the Company Stockholders
Meeting as promptly as practicable after the Registration Statement Effective
Date for the purpose of voting upon the adoption of this Agreement and the
Parent and the Company will cooperate with each other to cause the Company
Stockholders Meeting to be held as soon as practicable following the mailing of
the Proxy Materials to the stockholders of the Company. The Company shall use
its reasonable best efforts (through its agents or otherwise) to solicit from
its stockholders proxies in favor of the adoption of this Agreement, and shall
take all other action necessary or advisable to secure Requisite Company Vote,
except to the extent that the Board of Directors of the Company determines in
good faith that doing so would cause the Board of Directors of the Company to
breach its fiduciary duties to the Company's stockholders under applicable Law
after receipt of advice to such effect from independent legal counsel (who may
be the Company's regularly engaged independent legal counsel). In addition, the
Company shall use its reasonable best efforts to solicit, as directed by the
Parent and at the Parent's expense, acceptance of the Exchange Offer by holders
of Company Senior Notes and Convertible Notes.
(b) The Parent shall call and hold the Parent Stockholders
Meeting as promptly as practicable after the Registration Statement Effective
Date for the purpose of voting upon the approval of the issuance of the Parent
Common Stock to be issued in the Merger and the Parent and the Company will
cooperate with each other to cause the Parent Stockholders Meeting to be held as
soon as practicable following the mailing of the Proxy Materials to the
stockholders of the Parent. The Parent shall use its reasonable best efforts
(through its agents or otherwise) to solicit from its stockholders proxies in
favor of the adoption of such issuance, and shall take all other action
necessary or advisable to secure the Requisite Parent Vote. In addition, the
Parent shall use its reasonable best efforts to solicit acceptance of the
Exchange Offer by holders of Company Senior Notes and Convertible Notes.
SECTION 5.7 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Except as required under any confidentiality agreement or
similar agreement or arrangement to which the Parent or the Company or any of
their respective subsidiaries is a party or under applicable Law or the
regulations or requirements of any securities exchange or quotation service or
other self regulatory organization with whose rules the parties are required to
comply, from the date of this Agreement to the Effective Time, the Parent and
the Company shall (and shall cause their respective subsidiaries to): (i)
provide to the other (and its officers, directors, employees, accountants,
consultants, legal counsel, financial advisors, investment bankers, agents and
other representatives (collectively, "REPRESENTATIVES")) access at reasonable
times upon prior notice to the officers, employees, agents, properties,
<PAGE>
46
offices and other facilities of the other and its subsidiaries and to the books
and records thereof; and (ii) furnish promptly such information concerning the
business, properties, Contracts, assets, liabilities, personnel and other
aspects of the other party and its subsidiaries as the other party or its
Representatives may reasonably request. No investigation conducted under this
Section 5.7 shall affect or be deemed to modify any representation or warranty
made in this Agreement.
(b) The parties shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement, dated October, 1998 (the "CONFIDENTIALITY
AGREEMENT"), between the Parent and the Company with respect to the information
disclosed under this Section 5.7.
SECTION 5.8 NO SOLICITATION.
(a) Neither the Company nor any of the Company Subsidiar ies
shall, nor shall it or any of Company Subsidiaries authorize or permit any of
their respective directors, officers, employees, investment bankers, attorneys
or other agents or representatives, directly or indirectly to, (i) solicit,
initiate, encourage (including by way of furnishing information or assistance)
or take any other action to facilitate, any inquiry or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
acquisition or purchase of a substantial amount of assets of, or any equity
interest in, the Company or any of its Subsidiaries or any tender offer
(including a self tender offer) or exchange offer, merger, consolidation,
business combination, sale of substantially all assets, sale of securities,
recap italization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries (other than the transactions contemplated by
this Agreement) or any other material corporate transaction the consummation of
which would or could reasonably be expected to impede, interfere with, prevent
or materially delay the Merger (collectively, "TRANSACTION PROPOSALS") or agree
to or endorse any Transac tion Proposal or (ii) propose, enter into or
participate in any discussions or negotiations regarding any of the foregoing,
or furnish to any other Person any information with respect to its business,
properties or assets or any of the foregoing, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to do or seek any of the forego ing; provided,
however, that the foregoing clauses (i) and (ii) shall not prohibit the Company
from, prior to the Company Stockholders Meeting (A) furnishing information
pursuant to an appropriate confidentiality letter concerning the Company and its
businesses, properties or assets to a third party which has made an unsolicited
Qualified Transaction Proposal (as defined below), (B) engaging in discussions
or negotiations with such a third party which has made an unsolicited Qualified
Transac tion Proposal or (C) following receipt of an unsolicited Qualified
Transaction Proposal, taking and disclosing to its shareholders a position with
respect to such Qualified Transaction Proposal, but in each case referred to in
the foregoing clauses (A) through (C) only after the Board of Directors of the
Company concludes in good faith, following receipt of a written opinion
addressed to the Company from outside
<PAGE>
47
counsel, that such action is necessary for the Board of Directors of the Company
to comply with its fiduciary obligations to stockholders under applicable law.
If the Board of Directors of the Company receives a Transaction Proposal, then
the Company shall immediately (and in any event within 24 hours) inform Parent
of the material terms and conditions of such proposal and the identity of the
person making it and shall keep the Parent fully informed regarding any
significant details or developments with respect to any such Transaction
Proposal and of all significant steps it is taking in response to such
Transaction Proposal. For purposes of this Agreement, the term "QUALIFIED
TRANSACTION PROPOSAL" shall mean a Transaction Proposal for which financing is
then fully committed or which the Board of Directors of the Company determines
in good faith after consultation with its outside financial advisors, is
reasonably capable of being financed and is not subject to any material
contingencies relating to financing. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section
5.8(a) by (or at the direction of) an officer, director of or any investment
banker, attorney, accountant, agent or other advisor or representative of the
Company or any Company Subsidiary, whether or not such person is purporting to
act on behalf of the Company, and the Company Subsidiary or otherwise, shall be
deemed to be a breach of this section by the Company. The Company immediately
shall cease and cause to be terminated all existing discussions or negotiations
with any persons conducted heretofore with respect to, or that could reasonably
be expected to lead to, any Qualified Transaction Proposal.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Parent, the recommendation or any approval or
recommendation by the Board of Directors of the Company or any committee thereof
of this Agreement or the Merger or (ii) approve or recommend, or propose to
approve or recommend, any Qualified Transaction Proposal. Notwithstanding the
foregoing, the Board of Directors of the Company, to the extent it concludes in
good faith, following receipt of a written opinion addressed to the Company from
outside counsel, that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary obligations to stockholders under
applicable law, may recommend (and, in connection therewith, withdraw or modify
its recommendation or its approval of this Agreement or the Merger) a Superior
Acquisition Proposal (as defined below); provided, that, neither the Company nor
the Board of Directors of the Company may in such instance terminate this
Agreement but instead the Company, at the option of the Parent, shall,
notwithstanding such withdrawal or modification of the recommendation or
approval of this Agreement or the Merger by the Company's Board of Directors
and/or the recommendation by the Company's Board of Directors that the Company's
stockholders reject this Agreement or the Merger, submit approval of this
Agreement and the Merger to a vote of the holders of Company Common Stock at the
Company Stockholders Meeting, as contemplated by this Agreement, it being
understood and agreed that, Parent, Company and Merger Sub elect this Agreement
to be governed by the provisions of Section 251(c) of the GCL. For purposes of
this Agreement, "SUPERIOR ACQUISITION PROPOSAL" means a bona fide
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48
written proposal made by a third party to acquire the Company pursuant to a
tender or exchange offer, a merger, a share exchange, a sale of all or
substantially all of its assets or otherwise, in any such case, on terms which a
majority of the members of the Board of Directors of the Company determines in
their good faith judgment (after consultation with independent financial
advisors) to be more favorable to the Company and its stockholders than the
Merger and for which financing, to the extent required, is then fully committed
or which, in the good faith judgment of a majority of such members (after
consultation with independent financial advisors), is reasonably capable of
being financed by such third party.
SECTION 5.9 AFFILIATES. Concurrently with the execution of this
Agreement, the Company is delivering to Parent (i) a letter identifying all
persons who, to the knowledge of the Company, may be deemed to be "affiliates"
of the Company under Rule 145 under the Securities Act, including, without
limitation, all directors and executive officers of the Company, and (ii) not
later than 30 days prior to the Company Stockholders Meeting copies of letter
agreements, each in the form prepared by Parent and reasonably acceptable to the
Company, executed by each such Person so identified as an "affiliate" of the
Company (the letters described in clauses (i) and (ii) being collectively
referred to as "AFFILIATE LETTERS").
SECTION 5.10 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Parent agrees that all rights to indemnification now
existing in favor of any employee, agent, director or officer of the Company and
the Company Subsidiaries (the "INDEMNIFIED PARTIES") as provided in their
respective charters or by-laws, in an agreement between an Indemnified Party and
the Company or one of the Company Subsidiaries, 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; PROVIDED that
in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims. The Parent
also agrees to indemnify all Indemnified Parties to the fullest extent permitted
by applicable law with respect to all acts and omissions arising out of such
individuals' services as officers, directors, employees or agents of the Company
or any of the Company Subsidiaries or as trustees or fiduciaries of any plan for
the benefit of employees, or otherwise on behalf of, the Company or any of the
Company Subsidiaries, occurring prior to the Effective Time including the
transactions contemplated by this Agreement. Without limiting of the foregoing,
in the event any such Indemnified Party is or becomes involved in any capacity
in any action, proceeding or investigation in connection with any matter,
including the transactions contemplated by this Agreement, occurring prior to,
and including, the Effective Time, the Parent will pay as incurred such
Indemnified Party's legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith.
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49
(b) The Parent agrees that the Company and, from and after the
Effective Time, the Surviving Corporation shall cause to be maintained in effect
for not less than six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company; PROVIDED
that the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous and
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
PROVIDED, FURTHER, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 100% of the last annual premium paid by the
Company prior to the date hereof and if the Surviving Corporation is unable to
obtain the insurance required by this Section 5.10(b) it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
SECTION 5.11 LETTERS OF ACCOUNTANTS.
(a) The Company shall use its reasonable best efforts to cause
to be delivered to the Parent "comfort" letters of KPMG LLP ("KPMG"), the
Company's independent public accountants, dated and delivered on each applicable
Registration Statement Effective Date and as of the Effective Time, and
addressed to the Parent in form and substance reasonably satisfactory to the
Parent and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions contemplated
hereby.
(b) The Parent shall use its reasonable best efforts to cause
to be delivered to the Company "comfort" letters of KPMG, the Parent's
independent public accountants, dated and delivered on each applicable
Registration Statement Effective Date and as of the Effective Time, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions contemplated
hereby.
SECTION 5.12 REASONABLE BEST EFFORTS. Subject to the terms and
conditions provided in this Agreement and to applicable legal requirements, 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, in the case of
the Company, consistent with the fiduciary duties of the Company's Board of
Directors, and to assist and cooperate with the other parties hereto in doing,
as promptly as practicable, all things necessary, proper or advisable under
applicable laws and regulations to ensure that the conditions set forth in
Article 6 are satisfied and to consummate and make effective the transactions
contemplated by this Agreement. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
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50
SECTION 5.13 CONSENTS; FILINGS; FURTHER ACTION.
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use its reasonable best efforts to (i) take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the Merger and the other transactions contemplated
hereby, (ii) obtain from Governmental Entities any Company Governmental Consents
and Parent Governmental Consents and any other consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
the Parent or the Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby, and (iii) make all
necessary filings, and thereafter make any other submissions either required or
deemed appropriate by each of the parties, with respect to this Agreement and
the Merger and the other transactions contemplated hereby required under (A) the
Securities Act, the Exchange Act and any other applicable federal or Blue Sky
Laws, (B) the HSR Act and any applicable other foreign antitrust, anti-monopoly
or similar Laws, (C) the GCL, (D) any other applicable Law and (E) the rules and
regulations of NASDAQ, the American Stock Exchange and the Toronto Stock
Exchange. The parties hereto shall cooperate and consult with each other in
connection with the making of all such filings, including by providing copies of
all such documents to the nonfiling party and its advisors prior to filing, and
none of the parties will file any such document if any of the other parties
shall have reasonably objected to the filing of such document. No party to this
Agreement shall consent to any voluntary extension of any statutory deadline or
waiting period or to any voluntary delay of the consummation of the Merger and
the other transactions contemplated hereby at the behest of any Governmental
Entity without the consent and agreement of the other parties to this Agreement,
which consent shall not be unreasonably withheld or delayed.
(b) Without limiting the generality of Section 5.13(a), each
party hereto shall promptly inform the others of any material communication from
the Federal Trade Commission, the Department of Justice or any other domestic or
foreign government or governmental or multinational authority regarding any of
the transactions contemplated by this Agreement. If any party or any affiliate
thereof receives a request for additional information or documentary material
from any such government or authority with respect to the transactions
contemplated by this Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. The Parent will advise the Company promptly in respect of any
understandings, undertakings or agreements (oral or written) which the Parent
proposes to make or enter into with the Federal Trade Commission, the Department
of Justice or any other domestic or foreign government or governmental or
multinational authority in connection with the transactions contemplated by this
Agreement. In furtherance and not in limitation of the foregoing, the Parent
shall use its reasonable best efforts to resolve such objections, if
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51
any, as may be asserted with respect to the transactions contemplated by this
Agreement under any antitrust, competition or trade regulatory laws, rules or
regulations of any domestic or foreign government or governmental authority or
any multinational authority. Notwithstanding the foregoing, nothing in this
Section 5.13 shall require, or be construed to require, the Parent or the
Company, in connection with the receipt of any regulatory approval, to proffer
to, or agree to (A) sell or hold separate and agree to sell, divest or to
discontinue to or limit, before or after the Effective Time, any assets,
businesses, or interest in any assets or businesses of the Parent, the Company
or any of their respective affiliates (or to the consent to any sale, or
agreement to sell, or discontinuance or limitation by the Parent or the Company,
as the case may be, of any of its assets or businesses) or (B) agree to any
conditions relating to, or changes or restriction in, the operations of any such
asset or businesses which, in either case, could reasonably be expected to
result in a Material Adverse Effect on the Parent or a Material Adverse Effect
on the Company or to materially and adversely impact the economic or business
benefits to such party of the transactions contemplated by this Agreement.
SECTION 5.14 PLAN OF REORGANIZATION. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable best efforts to cause the Merger to qualify, and will not,
without the prior written consent of the parties hereto, knowingly take any
actions or cause any actions to be taken which could prevent the Merger from
qualifying, as a reorganization under the provisions of Section 368(a) of the
Code. Following the Effective Time, and consistent with any such consent, none
of the Surviving Corporation, the Parent or any of their affiliates shall
knowingly take any action or knowingly cause any action to be taken which would
cause the Merger to fail to so qualify as a reorganization under Section 368(a)
of the Code.
SECTION 5.15 PUBLIC ANNOUNCEMENTS. The initial press release concerning
the Merger shall be a joint press release and, thereafter, the Parent and Merger
Sub and the Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or any of the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except to the extent required by applicable Law or the requirements of NASDAQ,
the American, Toronto, Berlin or Frankfurt Stock Exchanges, in which case the
issuing party shall use its reasonable best efforts to consult with the other
parties before issuing any such release or making any such public statement.
SECTION 5.16 OBLIGATIONS OF MERGER SUB. The Parent shall take all
actions necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
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SECTION 5.17 STOCK EXCHANGE LISTINGS AND DE-LISTINGS. The Parent shall
use its reasonable best efforts to cause the shares of Parent Common Stock to be
issued in the Merger to be approved for listing on the American Stock Exchange,
subject to official notice of issuance, prior to the Effective Time. The parties
shall use their reasonable best efforts to cause the Surviving Corporation to
cause the Company Common Stock to be de-listed from NASDAQ and the Toronto,
Berlin and Frankfurt Stock Exchanges and de-registered under the Exchange Act as
soon as practicable following the Effective Time.
SECTION 5.18 EXPENSES. Except as otherwise provided in Section 7.5(b),
whether or not the Merger is consummated, all Expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated
hereby shall be paid by the party incurring such Expense, except that Expenses
incurred in connection with the filing fee for the Proxy Statement and printing
and mailing the Proxy Materials and the filing fee under the HSR Act shall be
shared equally by the Parent and the Company.
SECTION 5.19 TAKEOVER STATUTES. If any Takeover Statute is or may
become applicable to the Merger or the other transactions contemplated hereby,
each of the Parent and the Company and its board of directors shall grant such
approvals and take such actions as are necessary so that such transactions may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such statute
or regulation on such transactions.
SECTION 5.20 BOARD OF DIRECTORS. Parent shall take such action as is
required to expand the size of its Board of Directors to eleven (11) members and
to cause the designation of two persons specified by the Company (one of which
shall be designated by News America Incorporated) in writing prior to the
Effective Time to fill such vacancies.
ARTICLE 6
CONDITIONS
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger and consummate the
other transactions contemplated hereby to be consummated on the Closing Date is
subject to the satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and consummation of
the Merger shall have been duly approved by holders of outstanding Company
Shares by the Requisite Company Vote and shall have been duly approved by the
Parent as sole stockholder of Merger Sub, and the issuance of Parent Common
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Stock in the Merger shall have been duly approved by the holders of outstanding
shares of Parent Common Stock by the Requisite Parent Vote.
(b) LISTING. The shares of Parent Common Stock issuable to the
Company's stockholders pursuant to this Agreement shall have been authorized for
listing on the American Stock Exchange upon official notice of issuance.
(c) GOVERNMENTAL CONSENTS. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated and other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or the Parent or any of their respective subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by, the Company or the Parent or any of
their respective subsidiaries from, any Governmental Entity in connection with
the execution and delivery of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby (including, without limitation,
all Company Governmental Consents and Parent Governmental Consents) shall have
been made or obtained (as the case may be) upon terms and conditions that could
not reasonably be expected to result in Material Adverse Effect on the Parent or
a Material Adverse Effect on the Company.
(d) LITIGATION. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law, order injunction or decree (whether temporary, preliminary or permanent)
that is in effect and restrains, enjoins or otherwise prohibits consummation of
the Merger or the other transactions contemplated hereby or that, individually
or in the aggregate with all other such Laws, orders injunctions or decrees,
could reasonably be expected to result in a Material Adverse Effect on the
Parent or a Material Adverse Effect on the Company, and no Governmental Entity
shall have instituted any proceeding or threatened to institute any proceeding
seeking any such Law, order injunction or decree.
(e) REGISTRATION STATEMENTS. The Registration Statement and
the Exchange Offer Registration Statement shall have become effective under the
Securities Act. No stop order suspending the effectiveness of such registration
statements shall have been issued, and no proceedings for that purpose shall
have been initiated or be threatened by the SEC.
(f) ACCOUNTANTS' LETTERS. The Parent and the Company shall
have received the "comfort" letters described in Section 5.11.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF THE PARENT AND MERGER SUB. The
obligations of each of the Parent and Merger Sub to effect the Merger and
consummate the other transactions contemplated hereby to be consummated on the
Closing Date are also subject to the satisfaction or waiver by the Parent at or
prior to the Effective Time of the following conditions:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case 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 the representation or warranty is expressly limited
by its terms to another date, and the Parent shall have received a certificate
(which certificate may be qualified by knowledge to the same extent as the
representations and warranties of the Company contained in this Agreement are so
qualified) signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Parent shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
there shall have been no Material Adverse Effect on the Company, and the Parent
shall have received a certificate of an executive officer of the Company to such
effect.
(d) CONSENTS UNDER AGREEMENTS. The Company shall have obtained
the Company Required Consents and the consent, approval or waiver of each person
whose consent, approval or waiver shall be required in order to consummate the
transactions contemplated by this Agreement, except those for which the failure
to obtain such consent, approval or waiver, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect on the
Company.
(e) AFFILIATE LETTERS. The Parent shall have received the
Affiliate Letters referred to in Section 5.9 hereof.
(f) THE TRAVELERS REVOLVING CREDIT NOTE AND WARRANT AGREEMENT.
The Parent and the Company shall have consummated the transactions contemplated
by the Note and Warrant Modification Agreement dated as of the date hereof, with
each of The Travelers Insurance Company and The Travelers Indemnity Company, a
copy of which is attached as Exhibit B hereto, in accordance with the terms of
such Agreement.
(g) EXCHANGE OFFER. At least 95% in aggregate principal amount
of each of the Senior Company Notes and the Convertible Notes shall have
properly and validly tendered and not withdrawn their Company Senior Notes and
Convertible Notes, respectively, and consented to the consent solicitation, in
each case in accordance with the terms of the Agreement to Exchange and Consent,
a copy of which is attached as Exhibit C hereto.
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(h) TECHNOCOM LIMITED PUT/CALL AGREEMENTS. The Parent and the
Company shall have consummated the purchase of the shares of Technocom Limited
in accordance with each of the Elite Option Modification Agreement and the
Plicom Option Modification Agreement, each dated the date hereof, with each of
Elite International Limited and Plicom Limited, copies of which are attached
hereto as Exhibits D-1 and D-2.
(i) NEWS ARRANGEMENTS. The Parent and News America
Incorporated ("News") shall have consummated the transactions contemplated by
the News Letter Agreement dated as of the date hereof with News, a copy of which
is attached as Exhibit E hereto, in accordance with the terms of such Letter
Agreement, and News shall have received (i) the full proceeds of the repayment
of the Loans (as defined in the News Letter Agreement) and interest thereon to
and including the date of repayment, as specified in the News Letter Agreement,
and (ii) written releases in form and substance satisfactory to News in respect
of the Guarantees (as defined in the News Letter Agreement) and all obligations
thereunder.
(j) CERTAIN PAYMENTS. Each of the officers and other employees
listed in Section 6.2 of the Company Disclosure Letter shall have agreed to (i)
waive the acceleration of any amounts due as a result of the Merger under the
relevant employment or other compensation agreement that such person is a party
to with the Company or a Company Subsidiary as specified in Section 6.2 of the
Company Disclosure Letter and (ii) waive the acceleration of any unvested
Company Stock Options at the Effective Time which would otherwise accelerate as
a result of the consummation of the Merger, in each case in a manner reasonably
satisfactory to the Parent.
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger and consummate the other transactions
contemplated hereby to be consummated on the Closing Date is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each of the Parent and Merger Sub set forth in this Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of the Parent and Merger Sub set forth in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case 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 the
representation or warranty is expressly limited by its terms to another date,
and the Company shall have received a certificate (which certificate may be
qualified by knowledge to the same extent as the representations and warranties
of each of the Parent and Merger Sub contained in this Agreement are so
qualified) signed on behalf of each of the Parent and Merger Sub by an executive
officer of the Parent to such effect.
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(b) PERFORMANCE OF OBLIGATIONS OF THE PARENT AND MERGER SUB.
Each of the Parent and Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received a certificate signed on
behalf of the Parent and Merger Sub by an executive officer of the Parent to
such effect.
(c) TAX OPINION. The Company shall have received the opinion
of Morgan, Lewis & Bockius, LLP, counsel to the Company, 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.
(d) MATERIAL ADVERSE EFFECT. Since the date of this Agreement,
there shall have been no Material Adverse Effect on the Parent, and the Company
shall have received a certificate of an executive officer of the Parent to such
effect.
ARTICLE 7
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent of the Parent and the Company
duly authorized by their respective boards of directors;
(b) by either the Parent or the Company, if the Effective Time
shall not have occurred on or before October 31, 1999; PROVIDED, HOWEVER, that
(i) the right to terminate this Agreement under this Section 7.1(b) shall not be
available to the party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; and (ii) if the applicable
federal or foreign antitrust authority shall seek an order, injunction or decree
with respect to the legality of the Merger under applicable antitrust Laws, this
Agreement may be extended prior to the termination hereof by written notice of
either the Parent or the Company to the other to the date that is 30 days
following the date on which a ruling with respect to such an order injunction or
decree is entered by a trial court or administrative body;
(c) by either the Parent or the Company, if any order
injunction or decree preventing the consummation of the Merger shall have been
entered by any court of competent jurisdiction or Governmental Entity and shall
have become final and nonappealable;
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57
(d) by the Parent, if (i) the Board of Directors of the
Company withdraws, modifies or changes its approval or recommendation of this
Agreement in a manner adverse to the Parent or shall have resolved to do so,
(ii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company a Transaction Proposal or shall have resolved to do
so or the Company shall have entered into an agreement with respect to a
Qualified Transaction Proposal, or (iii) a tender offer or exchange offer for
any outstanding shares of capital stock of the Company is commenced and the
Board of Directors of the Company fails to recommend against acceptance of such
tender offer or exchange offer by its stockholders (including by taking no
position with respect to the acceptance of such tender offer or exchange offer
by its stockholders);
(e) by the Parent or the Company, if this Agreement shall fail
to receive the requisite vote for adoption at either the Company Stockholders
Meeting or the Parent Stockholders Meeting or any adjournment or postponement
thereof;
(f) by the Parent, upon a breach of any material
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.2(a) or 6.2(b) would not be satisfied (a "TERMINATING
COMPANY BREACH"); PROVIDED, HOWEVER, that, if such Terminating Company Breach is
curable by the Company through the exercise of its reasonable best efforts and
for so long as the Company continues to exercise such reasonable best efforts,
the Parent may not terminate this Agreement under this Section 7.1(f);
(g) by the Company, upon breach of any material
representation, warranty, covenant or agreement on the part of the Parent set
forth in this Agreement, or if any representation or warranty of the Parent
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.3(a) or 6.3(b) would not be satisfied (a "TERMINATING PARENT
BREACH"); PROVIDED, HOWEVER, that, if such Terminating Parent Breach is curable
by the Parent through its reasonable best efforts and for so long as the Parent
continues to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 7.1(g); or
(h) by the Company in the manner specified in Section
2.1(a)(i)(D).
SECTION 7.2 EFFECT OF TERMINATION. Except as provided in Section 8.2,
in the event of termination of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of the Parent, Merger Sub or the Company or any of their
respective Representatives, and all rights and obligations of each party hereto
shall cease, subject to the remedies of the parties set forth in Sections 7.5(b)
and (c);
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PROVIDED, HOWEVER, that nothing in this Agreement shall relieve any party from
liability for the wilful breach of any of its representations and warranties or
the breach of any of its covenants or agreements set forth in this Agreement
which shall survive any such termination.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED that, after the approval of
this Agreement by the stockholders of the Company, no amendment may be made that
would reduce the amount or change the type of consideration into which each
Company Share shall be converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 7.4 WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained in this Agreement or in any document delivered pursuant
hereto, and (c) waive compliance with any agreement or condition contained in
this Agreement. Any waiver of a condition set forth in Section 6.1, or any
determination that such a condition has been satisfied, will be effective only
if made in writing by each of the Company and the Parent and, unless otherwise
specified in such writing, shall thereafter operate as a waiver (or
satisfaction) of such conditions for any and all purposes of this Agreement. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
SECTION 7.5 EXPENSES FOLLOWING TERMINATION.
(a) Except as set forth in this Section 7.5, all Expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid in accordance with the provisions of Section 5.18. For
purposes of this Agreement, "EXPENSES" consist of all out-of-pocket expenses
(including, 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, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Proxy Statement and/or the
Proxy Materials (as the case may be), the solicitation of stockholder approvals
and all other matters related to the closing of the transactions contemplated
hereby.
(b) The Company agrees that, if (i) the Parent shall terminate
this Agreement pursuant to Section 7.1(d), (ii) (A) Parent shall terminate this
Agreement pursuant to Section 7.1(e) due to the failure to obtain the approval
of the Company's stockholders at the Company Stockholders Meeting and (B) at the
time of such failure, any person shall have made a public announcement or
otherwise communicated to the Company and its stockholders with respect to a
Transaction
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Proposal with respect to the Company, or (iii) the Parent shall terminate this
Agreement pursuant to Section 7.1(f) and such termination is the result of a
material breach of any representation, warranty, covenant or agreement contained
herein and if at such time the agreement is solely terminable for any or all
such reasons, then in accordance with Section 7.5(c), after such termination, or
in the case of clause (ii) after the consummation of such Transaction Proposal,
the Company shall pay to Parent an amount equal to Parent's documented Expenses
in connection with this Agreement and the transactions contemplated hereby (not
to exceed $1 million) and a termination fee in the amount of $6,250,000
(collectively, such Expenses and such fee, the "TERMINATION AMOUNT"), which
Termination Amount shall be exclusive of any Expenses paid pursuant to Section
5.18. The Parent agrees that if the Company shall terminate this Agreement (i)
pursuant to Section 7.1(e) due to the failure to obtain the approval of the
Parent's Stockholders at the Parent Stockholders Meeting or (ii) pursuant to
Section 7.1(g) and such termination is the result of a material breach of any
representation, warranty, covenant or agreement contained herein, and if at such
time the Agreement is terminable solely for either or both such reasons, then
the Parent shall pay to the Company an amount equal to the Company's documented,
out-of-pocket expenses (not to exceed $500,000) incurred in connection with this
Agreement and the transactions contemplated hereby.
(c) Any payment required to be made pursuant to Section 7.5(b)
shall be made to the Parent by the Company, or by the Company to the Parent, as
applicable, not later than two Business Days after delivery to the Company by
the Parent of notice of demand for payment and shall be made by wire transfer of
immediately available funds to an account designated by the Parent.
(d) The Company acknowledges that the agreements contained in
this Section 7.5 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Parent would not enter into
this Agreement; accordingly, if the Company fails to pay promptly the
Termination Amount, and, in order to obtain such payment, the Parent commences a
suit which results in a judgment against the Company for the Termination Amount,
the Company shall pay the Parent's Expenses in connection with such suit,
together with interest on the amount of the Termination Amount at the prime rate
of The Chase Manhattan Bank in effect on the date such payment was required to
be made.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) The term "AFFILIATE," as applied to any person, means any
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "CONTROL"
(including,
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with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as applied to any person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that person, whether through the ownership of voting securities,
by contract or otherwise.
(b) The term "BUSINESS DAY" means any day, other than
Saturday, Sunday or a federal holiday, and shall consist of the time period from
12:01 a.m. through 12:00 midnight Eastern time. In computing any time period
under this Agreement, the date of the event which begins the running of such
time period shall be included EXCEPT that if such event occurs on other than a
business day such period shall begin to run on and shall include the first
business day thereafter.
(c) The term "INCLUDING" means, unless the context clearly
requires otherwise, including but not limited to the things or matters named or
listed after that term.
(d) The term "PERSON" shall include individuals, corporations,
limited and general partnerships, trusts, limited liability companies,
associations, joint ventures, Governmental Entities and other entities and
groups (which term shall include a "GROUP" as such term is defined in Section
13(d)(3) of the Exchange Act).
(e) The term "SUBSIDIARY" or "SUBSIDIARIES" means, with
respect to the Parent, the Company or any other person, any entity of which the
Parent, the Company or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
stock or other equity interests the holders of which are generally entitled to
more than 50% of the vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 8.2 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement and in any
certificate delivered under this Agreement shall terminate at the Effective Time
or upon the termination of this Agreement under Section 7.1, as the case may be,
except that the agreements set forth in Articles 1 and 2 and Sections 5.10, 5.18
and 5.20 and this Article 8 shall survive the Effective Time, those set forth in
Sec tions 5.7(b), 5.18, 7.2 and 7.5 and this Article 8 shall survive termination
of this Agreement. Each party agrees that, except for the representations and
warranties contained in this Agreement, the Company Disclosure Letter and the
Parent Disclosure Letter, no party to this Agreement has made any other
representations and warranties, and each party disclaims any other
representations and warranties, made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
Representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated by this Agreement, notwithstanding the
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delivery of disclosure to any other party or any party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
SECTION 8.3 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
SECTION 8.4 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES, EXCEPT THAT DELAWARE LAW SHALL APPLY TO THE EXTENT REQUIRED IN
CONNECTION WITH THE EFFECTUATION OF THE MERGER. The parties irrevocably submit
to the jurisdiction of the federal courts of the United States of America
located in the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated by this
Agreement and by those documents, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the interpretation or
enforcement of this Agreement or of any such document, that it is not subject to
this Agreement or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a federal court.
The parties hereby consent to and grant any such court jurisdiction over the
person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 8.5 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDI
TIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARIS ING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSAC TIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
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SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 8.4.
SECTION 8.5 NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile:
IF TO THE PARENT OR MERGER SUB:
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
Attention: Arnold L. Wadler, Esq.
Fax: (201) 531-2803
WITH COPIES TO:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Douglas A. Cifu, Esq.
Fax: (212) 757-3990
IF TO THE COMPANY:
PLD Telekom, Inc.
505 Park Avenue, 21st Floor
New York, NY 10022
Attention: General Counsel
Fax: (212) 527-3995
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
SECTION 8.6 ENTIRE AGREEMENT. This Agreement (including any exhibits
and annexes to this Agreement), the Company Disclosure Letter and the Parent
Disclosure Letter constitute the entire agreement and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, among the parties, with respect to the subject matter of this Agreement.
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SECTION 8.7 NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to confer upon any person other than the parties to this Agreement any
rights or remedies under this Agreement.
SECTION 8.8 OBLIGATIONS OF THE PARENT AND OF THE COMPANY. Whenever this
Agreement requires a Parent Subsidiary to take any action, that requirement
shall be deemed to include an undertaking on the part of the Parent to cause
that Parent Subsidiary to take that action if it is a wholly-owned Subsidiary or
use its best efforts to cause the Subsidiary to take that action if it is not a
wholly-owned Subsidiary. Whenever this Agreement requires a Company Subsidiary
to take any action, that requirement shall be deemed to include an undertaking
on the part of the Company to cause that Company Subsidiary to take that action
and, after the Effective Time, on the part of the Surviving Corporation to cause
that Company Subsidiary to take that action if it is a wholly-owned Subsidiary
or use its best efforts to cause the Subsidiary to take that action if it is not
a wholly-owned Subsidiary.
SECTION 8.9 SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability or the other provisions of this
Agreement. If any provision of this Agreement, or the application of that
provision to any person or any circumstance, is invalid or unenforceable, (a) a
suitable and equitable provision shall be substituted for that provision in
order to carry out, so far as may be valid and enforceable, the intent and
purpose of the invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of the provision to other persons or circumstances
shall not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of the
provision, or the application of that provision, in any other jurisdiction.
SECTION 8.10 INTERPRETATION. The table of contents and headings in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement. Where a reference in this Agreement is made to a
section, exhibit or annex, that reference shall be to a section of or exhibit or
annex to this Agreement unless otherwise indicated. Wherever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
SECTION 8.11 ASSIGNMENT. This Agreement shall not be assignable by
operation of law or otherwise, except that the Parent may designate, by written
notice to the Company, another Parent Subsidiary that is wholly owned directly
or indirectly by the Parent to be merged with and into the Company in lieu of
Merger Sub, in which event all references in this Agreement to Merger Sub shall
be deemed references to such other Parent Subsidiary, and in that case, all
representations and warranties made in this Agreement with respect to Merger Sub
as of the date of this Agreement shall be deemed representations and warranties
made with respect to such other Parent Subsidiary as of the date of such
designation.
<PAGE>
64
SECTION 8.12 SPECIFIC PERFORMANCE. The parties to this Agreement agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise reached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
<PAGE>
65
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties to this Agreement as of the date
first written above.
PLD TELEKOM, INC.
By: /s/ James R.S. Hatt
-------------------
Name: James R.S. Hatt
Title: Chairman, President and Chief
Executive Officer
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Chief Financial Officer,
Executive Vice President,
Treasurer and Director
MOSCOW COMMUNICATIONS, INC.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Vice President, Treasurer
VOTING AGREEMENT
VOTING AGREEMENT, dated as of May 18, 1999 (this "Agreement"), by and
among Metromedia International Group, Inc., a Delaware corporation ("Buyer"),
News America Incorporated, a Delaware corporation, News PLD LLC, a Delaware
limited liability company (each, a "Shareholder" and, collectively, the
"Shareholders"), and for purposes of Section 5.5 only, Metromedia Company, a
Delaware general partnership ("Metromedia").
WHEREAS, PLD Telekom, Inc., a Delaware corporation (the "Company"), and
Buyer propose to enter into an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement"), which provides for, among other things,
the merger of a wholly-owned subsidiary of Buyer with and into the Company (the
"Merger");
WHEREAS, as of the date hereof, the Shareholders are holders of record
or Beneficially Own (as defined herein) shares of common stock, par value $.01
per share ("Company Common Stock"), of the Company; and
WHEREAS, as a condition to the willingness of Buyer to enter into the
Merger Agreement, Buyer has required that each Shareholder agrees, and in order
to induce Buyer to enter into the Merger Agreement, each Shareholder has agreed,
to enter into this Agreement with respect to all of the shares of Company Common
Stock now held of record or Beneficially Owned and which may hereafter be
acquired by such Shareholder (collectively, the "Shares").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 General. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement.
Section 1.2 Beneficial Ownership. For purposes of this Agreement,
"Beneficially Own" or "Beneficial Ownership" with respect to any securities
shall mean "beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same securities
by the same holder,
<PAGE>
2
securities Beneficially Owned by a Person shall include securities Beneficially
Owned by all other Persons with whom such Person would constitute a "group"
within the meaning of Section 13(d) of the Exchange Act.
ARTICLE II
Section 2.1 Voting Agreement. Each of the Shareholders hereby agrees as
follows:
(a) to appear, or cause the holder of record on any applicable
record date with respect to any Shares Beneficially Owned by such
Shareholder (the "Record Holder") to appear, for the purpose of
obtaining a quorum at any annual or special meeting of stockholders of
the Company and at any adjournment thereof at which matters relating to
the Merger, Merger Agreement or any transaction contemplated thereby
are considered; and
(b) at any meeting of the stockholders of the Company, however
called, and in any action by consent of the stockholders of the
Company, to vote, or cause to be voted by the Record Holder, the Shares
held of record or Beneficially Owned by such Shareholder: (i) in favor
of the Merger, the Merger Agreement (as amended from time to time) and
the transactions contemplated by the Merger Agreement and (ii) against
any proposal for any extraordinary corporate transaction, such as a
recapitalization, dissolution, liquidation, or sale of assets of the
Company or any merger, consolidation or other business combination
(other than the Merger) between the Company and any Person (other than
Buyer or a subsidiary of Buyer) or any other action or agreement that
is intended or which reasonably could be expected to (x) result in a
breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement, (y)
result in any of the conditions to the Company's obligations under the
Merger Agreement not being fulfilled or (z) impede, interfere with,
delay, postpone or materially adversely affect the Merger and the
transactions contemplated by the Merger Agreement.
Section 2.2 No Ownership Interest. Except as set forth in Section 2.1,
nothing contained in this Voting Agreement shall be deemed to vest in Buyer any
direct or indirect ownership or incidence of ownership of or with respect to any
Shares. All rights, ownership and economic benefits of and relating to the
Shares shall remain and belong to the Shareholders, and Buyer shall have no
authority to manage, direct, restrict, regulate, govern, or administer any of
the policies or operations of the Company or exercise any power or authority to
direct the Shareholders in the voting of any of the Shares except as otherwise
provided herein, or the performance of the Shareholders' duties or
responsibilities as stockholders of the Company.
<PAGE>
3
Section 2.3 Evaluation of Investment. Each Shareholder, by reason of
its knowledge and experience in financial and business matters, believes itself
capable of evaluating the merits and risks of the investment in shares of common
stock, par value $.01 per share, of Buyer, contemplated by the Merger Agreement.
Each of the Shareholders acknowledges receipt and review of a copy of the Merger
Agreement and all reports, registration statements, proxy statements and other
filings made by Buyer with the Securities Exchange Commission since January 1,
1996.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
Each of the Shareholders hereby represents and warrants, severally and
not jointly, to Buyer as follows:
Section 3.1 Authority Relative to This Agreement. Such Shareholder has
all necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. Where such Shareholder is a corporation, partnership or
other entity, the execution and delivery of this Agreement by such Shareholder
and the consummation by such Shareholder of the transactions contemplated hereby
have been duly and validly authorized by the board of directors or other
governing body of such Shareholder, and no other proceedings on the part of such
Shareholder are necessary to authorize this Agreement or to consummate such
transactions and where such Shareholder is an individual, such individual has
the capacity to enter into this Agreement. This Agreement has been duly and
validly executed and delivered by such Shareholder and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes a
legal, valid and binding obligation of such Shareholder, enforceable against
such Shareholder in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally or by general principles
governing the availability of equitable remedies.
Section 3.2 No Conflict. (a) The execution and delivery of this
Agreement by such Shareholder does not, and the performance of this Agreement by
such Shareholder shall not, (i) where such Shareholder is a corporation,
partnership or other entity, conflict with or violate the organizational
documents of such Shareholder, (ii) conflict with or violate any agreement,
arrangement, law, rule, regulation, order, judgment or decree to which such
Shareholder is a party or by which such Shareholder (or the Shares held of
record or Beneficially Owned by such Shareholder) is bound or affected or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse or time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the Shares held of
<PAGE>
4
record or Beneficially Owned by such Shareholder pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Shareholder is a party or by which
such Shareholder (or the Shares held of record or Beneficially Owned by such
Shareholder) is bound or affected, except, in the case of clauses (ii) and (iii)
of this Section 3.2, for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay the performance by such
Shareholder of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such
Shareholder does not, and the performance of this Agreement by such Shareholder
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental entity except for applicable
requirements, if any, of the Exchange Act and except where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay the performance by such Shareholder of
its obligations under this Agreement.
Section 3.3 Title to the Shares. As of the date hereof, such
Shareholder is the record or Beneficial Owner of the Shares listed opposite the
name of such Shareholder on Schedule 1 hereto. The Shares listed opposite the
name of such Shareholder on Schedule 1 hereto are all the securities of the
Company either held of record or Beneficially Owned by such Shareholder. Such
Shareholder has not appointed or granted any proxy, which appointment or grant
is still effective, with respect to the Shares held of record or Beneficially
Owned by such Shareholder. The Shares listed opposite the name of such
Shareholder on Schedule 1 hereto are owned free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreement,
limitations on such Shareholder's voting rights, charges and other encumbrances
of any nature whatsoever.
ARTICLE IV
COVENANTS OF THE SHAREHOLDER
Section 4.1 No Inconsistent Agreements. Each Shareholder hereby
represents, warrants, covenants and agrees that, except as contemplated by this
Agreement and the Merger Agreement, such Shareholder has not and shall not, and
shall not permit any Person under such Shareholder's control (including any
Record Holder) to, enter into any voting agreement or grant a proxy or power of
attorney with respect to the Shares held of record or Beneficially Owned by such
Shareholder which, in either case, is inconsistent with this Agreement.
Section 4.2 Transfer of Title. Each Shareholder hereby covenants and
agrees that such Shareholder will not, prior to the termination of this Voting
Agreement, either directly or indirectly, offer or otherwise agree to sell,
assign,
<PAGE>
5
pledge, hypothecate, transfer, exchange, or dispose of any Shares or options,
warrants or other convertible securities to acquire or purchase Company Common
Stock (collectively "Derivative Securities") or any other securities or rights
convertible into or exchangeable for shares of Company Common Stock, owned
either directly or indirectly by such Stockholder or with respect to which such
Stockholder has the power of disposition, whether now or hereafter acquired,
without the prior written consent of Buyer (provided nothing contained herein
will be deemed to restrict the exercise or conversion of Derivative Securities
outstanding on the date hereof), unless the Person to whom Shares or Derivative
Securities have been sold, assigned, pledged, hypothecated, transferred,
exchanged or disposed agrees to be bound by this Voting Agreement as if a party
hereto. Each Shareholder hereby agrees and consents to the entry of stop
transfer instructions by the Company against the transfer of any Shares
consistent with the terms of this Section 4.2.
ARTICLE V
MISCELLANEOUS
Section 5.1 No Solicitation. From the date hereof until the Effective
Time or, if earlier, the termination of the Merger Agreement in accordance with
its terms, the Shareholders (a) shall not have, or shall immediately terminate
any discussions with, any third party concerning a Transaction Proposal and (b)
shall not, and shall not permit any officer, director, employee, controlled
Affiliate, investment banker or other agent (in such agency capacity) of the
Shareholder to, directly or indirectly, (i) solicit, engage in discussions or
negotiate with any Person (whether such discussions or negotiations are
initiated by the Shareholder or otherwise) or take any other action intended or
designed to facilitate the efforts of any Person, other than Buyer, relating to
a Transaction Proposal, (ii) provide information with respect to the Company or
any of its subsidiaries to any Person, other than Buyer, relating to a possible
Transaction Proposal by any person other than Buyer, (iii) enter into an
agreement with any person, other than Buyer, providing for a possible
Transaction Proposal, or (iv) make or authorize any statement, recommendation or
solicitation in support of any possible Transaction Proposal by any Person,
other than by Buyer. Notwithstanding the above, the Shareholder may take any
actions in the Shareholder's role as a director or officer of the Company
permitted under the Merger Agreement.
Section 5.2 Termination. This Agreement shall terminate upon the
earlier to occur of (i) the closing of the transactions contemplated by the
Merger Agreement and (ii) the termination of the Merger Agreement in accordance
with its terms; provided, however, that nothing in this Agreement shall relieve
any party from liability for the breach of any of its representations and
warranties or the breach of any of its covenants and agreements set forth in
this Agreement which shall survive any such termination.
<PAGE>
6
Section 5.3 Additional Shares. If, after the date hereof, a Shareholder
acquires the right to vote any additional shares of Company Common Stock (any
such shares shall be referred to herein as "Additional Shares"), including,
without limitation, upon exercise or conversion of any Derivative Security or
through any stock dividend or stock split, the provisions of this Agreement
applicable to the Shares shall be applicable to such Additional Shares as if
such Additional Shares had been outstanding Shares as of the date hereof. The
provisions of the immediately preceding sentence shall be effective with respect
to Additional Shares without action by any Person immediately upon the
acquisition by a Shareholder of record or Beneficial Ownership of such
Additional Shares.
Section 5.4 Registration Statement. Prior to the closing of the
transactions contemplated by the Merger Agreement, the Buyer shall enter into a
registration rights agreement with the Shareholders and, as contemplated
thereby, agrees to file promptly after the Registration Statement (as defined in
the Merger Agreement) is declared effective and use its reasonable best efforts
to have declared effective by the SEC not later than six months after the
Effective Time a registration statement covering the shares of common stock of
the Buyer ("Buyer Common Stock") to be received by the Shareholders in the
Merger in exchange for their Shares and use its reasonable best efforts to
maintain the effectiveness of such registration statement until the earlier of
(x) the date all such shares are disposed of and (y) two years from the date of
its effectiveness.
Section 5.5 Tag-Along Rights.
(a) In the event at any time prior to the date News America
Incorporated and its affiliates no longer Beneficially Own in excess of 5% of
the outstanding shares of Buyer Common Stock, Metromedia proposes to sell,
transfer or assign any shares of Buyer Common Stock to a non-affiliated third
party (other than a sale pursuant to an effective registration under the
Securities Act or Rule 144 promulgated under the Securities Act), Metromedia
shall have the obligation, and each of News America Incorporated, News PLD LLC
and any affiliate thereof that owns Buyer Common Stock (collectively, "News")
shall have the right (the "Tag- along Right"), to require the proposed
transferee to purchase from News a number of shares of Buyer Common Stock up to
or equal to the product (rounded up to the nearest integer) of (i) the quotient
determined by dividing the number of shares of the Buyer Common Stock held by
News by the number of shares of Buyer Common Stock owned by Metromedia, and (ii)
the number of shares of the Buyer Common Stock proposed to be transferred in the
contemplated sale, and at the same price per share and upon the same terms and
conditions offered to Metromedia. Metromedia shall give notice to News of each
proposed transfer giving rise to the Tag-along Right, at least 10 days prior to
the proposed consummation of such transfer, setting forth the maximum number of
shares of Buyer Common Stock proposed to be transferred, the name and address of
the transferee, the proposed amount of consideration and the other terms and
conditions of the transactions, and the
<PAGE>
7
maximum number of shares News may require the transferee to purchase from such
Investor under the Tag-along Right (in accordance with the first sentence of
this Section 5.5).
(b) The Tag-along Right provided by this Section 5.5 must be
exercised by News within 5 days following the receipt of the notice required by
the preceding paragraph (a), by delivery prior to the end of such 5-day period
of a written notice to Metromedia indicating News' desire to exercise its rights
under this Section 5.5 and specifying the number of shares it desires to sell.
(c) The closing of the purchase of the shares of Buyer Common
Stock owned by News by the transferee shall be held (i) at the principal office
of the Buyer on the same day as the closing of the sale from Metromedia to the
transferee; or (ii) at such other time and place as the parties to the
applicable transaction may agree. At such closing, Metromedia and News shall
deliver certificates representing the shares of Buyer Common Stock being sold,
duly authenticated by another officer of the corporation, for transfer and
accompanied by all requisite transfer taxes, if any, and such shares of Buyer
Common Stock shall be free and clear of any Liens other than those arising
hereunder. News shall further represent and warrant that it beneficially owns
such shares, that it or its designee is the record holder of such shares and
that the delivery of such shares shall convey good and marketable title to such
shares. At such closing the transferee shall deliver payment in full in
immediately available funds for the Buyer Common Stock purchased by such
transferee.
Section 5.6 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 5.7 Entire Agreement. This Agreement constitutes the entire
agreement between Buyer and the Shareholders with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, between Buyer and the Shareholders with respect to the subject matter
hereof.
Section 5.8 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 5.9 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being
<PAGE>
8
enforced, the parties hereby shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in a mutually
acceptable manner in order that the terms of this Agreement remain as originally
contemplated.
Section 5.10 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made and shall be effective upon receipt, if delivered personally, upon
receipt of a transmission confirmation if sent by facsimile (with a confirming
copy sent by overnight courier) and on the next business day if sent by Federal
Express, United Parcel Service, Express Mail or other reputable overnight
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by notice):
If to a Stockholder, to:
Arthur M. Siskind, Esq.
Senior Executive Vice President and
Group General Counsel
The News Corporation Limited
1211 Avenue of the Americas
New York, NY 10036
Telephone: (212) 852-7000
Fax: (212) 768-2029
If to Metromedia International Group, Inc., to:
Arnold L. Wadler, Esq.
One Meadowlands Plaza
East Rutherford, NJ 07073-2137
with a copy to:
Douglas A. Cifu, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Telephone: (212) 373-3000
Fax: (212) 757-3990
Section 5.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such state.
<PAGE>
9
Section 5.12 Obligations of Stockholders. The obligations of the
Stockholders hereunder shall be "several" and not "joint" or "joint and
several." Without limiting the generality of the foregoing, under no
circumstances will any Stockholder have any liability or obligation with respect
to any misrepresentation or breach of covenant of any other Stockholder.
Section 5.13 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which, when
taken together, shall constitute one and the same instrument.
<PAGE>
10
IN WITNESS WHEREOF, each of the Shareholders and Buyer have caused this
Agreement to be duly executed on the date hereof.
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Chief Financial Officer,
Executive Vice President,
Treasurer and Director
NEWS AMERICA INCORPORATED
By: /s/ Lawrence A. Jacobs
----------------------
Name: Lawrence A. Jacobs
Title: Senior Vice President and Deputy
General Counsel
NEWS PLD LLC
By: /s/ Lawrence A. Jacobs
----------------------
Name: Lawrence A. Jacobs
Title:
For Purposes of Section 5.5 only:
METROMEDIA COMPANY
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Senior Vice President
<PAGE>
11
SCHEDULE 1
NAME OF SHAREHOLDER NUMBER OF SHARES
- ------------------- ----------------
News America Incorporated 18,436,149
(includes 3,804,369 shares issuable upon
the conversion of notes held by News
America Incorporated and 250,000 shares
issuable upon the exercise of warrants held
by News PLD LLC)
News PLD LLC 14,631,780
(includes 250,000 shares issuable
upon the exercise of warrants held
by News PLD LLC)
Metromedia International Group
One Meadowlands Plaza
East Rutherford, N.J. 07073
May 18, 1999
News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Reference is made to (i) the Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), by and among PLD Telekom, Inc., a
Delaware corporation (the "Company"), Metromedia International Group, Inc., a
Delaware corporation (the "Buyer") and Moscow Communications, Inc., a Delaware
corporation and wholly owned subsidiary of the Buyer ("Merger Sub"), pursuant to
which, at the Effective Time (as defined in the Merger Agreement), Merger Sub
will merge with and into the Company (the "Merger"), and following such Merger,
the Company will become a wholly-owned subsidiary of the Buyer and (ii) the
Revolving Credit Agreement, dated as of September 30, 1998, as amended (the
"News Credit Agreement"), between the Company and News America Incorporated
("News") pursuant to which News made short-term financing available to the
Company. Capitalized terms used but not defined herein shall have the meanings
set forth in the Merger Agreement.
On the date hereof, there are (a) $6.45 million aggregate principal
amount of loans outstanding under the News Credit Agreement (the "Loans") and
(b) guarantees of $3.1 million aggregate principal amount of other indebtedness
of the Company outstanding under the News Credit Agreement (the "Guarantees").
In connection with and as a condition precedent to the obligations of
the Buyer and the Merger Sub to effect the Merger and consummate the other
transactions contemplated by the Merger Agreement, the Buyer and News are
entering into this letter agreement (the "News Letter Agreement") which provides
as follows:
1. News agrees that it will not exercise any of its rights under the
News Credit Agreement or any note or guarantee issued thereunder from the date
<PAGE>
2
hereof until the earlier to occur of (x) the Closing Date (as defined in the
Merger Agreement) or (y) the date the Merger Agreement is terminated or expires
in accordance with its terms (the period ending on the earlier of such dates
being referred to as the "Pre-Closing Period").
2. News agrees that during the Pre-Closing Period it will not exercise
its rights under Section 8 of the News Credit Agreement or any note issued under
the News Credit Agreement to convert any amounts owed News under the News Credit
Agreement into shares of Company Common Stock.
3. News hereby agrees that during the Pre-Closing Period it will not
exercise its rights upon the occurrence of any default (including, without
limitation, the failure to make any payment of principal, interest or any other
Obligation (as defined in the News Credit Agreement) during the Pre-Closing
Period) under the News Credit Agreement or any Event of Default (as defined in
the News Credit Agreement) occurring as a result of the execution by the Company
of the Merger Agreement or the transactions contemplated thereby; provided,
however, that notwithstanding the foregoing agreement not to exercise remedies
during the Pre- Closing Period, any amounts otherwise coming due under the News
Credit Agreement or any promissory note, guarantee or other instrument issued
thereunder during the Pre-Closing Period, whether at maturity in accordance with
the terms thereof or otherwise, shall be immediately due and payable, without
any action required on the part of News or the Company, and shall in all
respects be deemed to be a currently payable obligation which shall be paid by
the Company and may be asserted by News as a claim in any proceeding to the
fullest extent permitted by law, (a) upon the termination or expiration of the
Merger Agreement and (b) if the Company shall be adjudged bankrupt or insolvent,
or shall commence any voluntary case (or become the subject of any involuntary
case that remains undismissed for a period of 30 days) under the United States
Bankruptcy Code.
4. Substantially simultaneously with the completion of the Merger, in
consideration for the cancellation of the Loans and all other Obligations
outstanding under the News Credit Agreement, the Buyer shall, or shall cause the
Company to, (i) pay to News, by wire transfer of immediately available funds to
an account designated in advance by News, the principal amount of the Loans
outstanding on such date together with interest accrued on the Loans at a rate
of 10% per annum (in lieu of the rate of 20% per annum that is specified in
Section 2.6 of the News Credit Agreement) from the date each such Loan was
advanced by News to the Company under the News Credit Agreement to and including
the date of such payment and (ii) cause the Guarantees and all obligations of
News thereunder to be canceled with no liability to News. Upon receipt of such
payments, News shall return to the Company all promissory notes issued by the
Company in favor of News marked "paid in full."
5. News acknowledges and consents to the Company entering into and
performing under each of the Bridge Loan Agreement and Pledge Agreement
<PAGE>
3
dated as of the date hereof substantially in the form of Exhibit A hereto
pursuant to which Buyer has agreed to make loans available to the Company during
the Pre- Closing Period and pledged certain collateral to the Buyer to secure
such loans and further agrees that the proceeds of such Loans may be used for
any purposes permitted by such Bridge Loan Agreement. Further, in consideration
of the agreements made by News herein, Buyer agrees that in the event that any
demand is made on News under any of the Guarantees during the Pre-Closing
Period, Buyer will indemnify News for any payments made thereunder within two
business days of receiving notice that such payments were made by News.
6. This agreement shall remain in effect so long as the Merger
Agreement is effective and shall terminate in the event that the Merger
Agreement is terminated or expires, in which case the parties will have no
further liability or obligations to each other. The obligations of the Buyer
under Section 4 of this letter agreement are expressly conditioned upon the
completion of the transactions contemplated by the Merger Agreement, including
the Merger.
7. This letter agreement shall be governed in all respects by the laws
of the State of New York without reference to the choice of laws principles
thereof.
8. This letter agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one and the same instrument.
9. No amendment, modification, termination or waiver or any provision
of this letter agreement shall be effective unless it shall be in writing and
signed by each of the parties to this agreement.
<PAGE>
4
If the foregoing sets forth your understanding with regard to the
matter specified herein, please so indicate by signing a copy of this letter and
returning an original to us at the address set forth above.
Sincerely,
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Chief Financial Officer,
Executive Vice President,
Treasurer and Director
ACCEPTED AND AGREED
as of the date first written above:
NEWS AMERICA INCORPORATED
By: /s/ Lawrence A. Jacobs
----------------------
Name: Lawrence A. Jacobs
Title: Senior Vice President and Deputy General Counsel
Metromedia International Group, Inc. PLD Telekom Inc.
One Meadowlands Plaza 505 Park Avenue
East Rutherford, NJ 07073-2137 New York, NY 10022
May 18, 1999
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
The Travelers Indemnity Company
One Tower Square
Hartford, CT 06183-2030
Reference is made to (i) the Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), by and among PLD Telekom, Inc., a
Delaware corporation (the "Company"), Metromedia International Group, Inc., a
Delaware corporation (the "Parent") and Moscow Communications, Inc., a Delaware
corporation and wholly owned subsidiary of the Parent ("Merger Sub"), pursuant
to which, at the Effective Time (as defined in the Merger Agreement), Merger Sub
will merge with and into the Company (the "Merger"), and following such Merger,
the Company will become a wholly-owned subsidiary of the Parent and (ii) the
Revolving Credit Note and Warrant Agreement, dated as of November 26, 1997, as
amended (the "Travelers Credit Agreement") between The Travelers Insurance
Company, The Travelers Indemnity Company (collectively, "Travelers") and the
Company, pursuant to which Travelers made a revolving line of credit available
to the Company. Capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement.
In connection with and as a condition precedent to the obligations of
the Parent and the Merger Sub to effect the Merger and consummate the other
transactions contemplated by the Merger Agreement, the Parent and Travelers are
entering into this letter agreement (the "Travelers Note Modification
Agreement") which provides as follows:
1. Notwithstanding anything to the contrary set forth in the Travelers
Credit Agreement, Travelers shall defer payment by the Company of the
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2
mandatory repayments of the outstanding Revolving Credit Loans (and waive any
related Events of Default as provided in Section 3 below) until the earlier to
occur of (x) the Closing Date and (y) the date the Merger Agreement is
terminated or expires (such date referred to as the "Termination Date"). On the
Closing Date, the Company and Travelers will amend and restate the Travelers
Credit Agreement (the "Restated Credit Agreement") to provide that all amounts
payable under the Travelers Credit Agreement shall be payable in the manner set
forth in Section 4 below.
2. Travelers agrees that it shall not exercise any warrants that it
owns or may acquire to purchase shares of the Company's common stock, par value
$.01 per share (the "Company Common Stock") between the date hereof and the
Closing Date.
3. Travelers hereby waives the occurrence of any default or any Event
of Default (as defined in the Travelers Credit Agreement) under Section 11 of
the Travelers Credit Agreement, provided that, notwithstanding such waiver,
through the Closing Date subject to the provisions of Section 2 above, Travelers
shall continue to be entitled to all rights it may have under Section 9.27 of
the Travelers Credit Agreement and/or Section 2A of the Warrant Agreement (the
"Warrant Agreement"), dated as of November 26, 1997, between the Company and the
Bank of New York, resulting from the failure of the Company to make the payment
in full of the principal and any accrued but unpaid interest on the Series A
Notes as and when due on December 31, 1998, or as extended thereafter, or the
payment in full of the principal and any accrued but unpaid interest on the
Series B Notes as and when due on September 30, 1998, or as extended thereafter,
(including, in each case, all payments of principal previously deferred);
provided, further that notwithstanding the foregoing agreement not to exercise
any remedies as a result of any default or Event of Default prior to the
Termination Date, any amounts otherwise coming due under the Travelers Credit
Agreement or any promissory note, guarantee or other instrument issued
thereunder prior to the Termination Date, whether at maturity in accordance to
the terms thereof or otherwise, shall be immediately due and payable, without
any action required on the part of Travelers or the Company, and shall in all
respects be deemed to be a currently payable obligation which shall be paid by
the Company and may be asserted by Travelers as a claim in any proceeding to the
fullest extent permitted by law, if the Company shall be adjudged bankrupt or
insolvent, or shall commence any voluntary case (or become the subject of any
involuntary case that remains undismissed for a period of 30 days) under the
United States Bankruptcy Code. Travelers agrees that the Restated Credit
Agreement will provide that in consideration for the payments and issuance of
the warrants specified in Section 4 below, Travelers will on the Closing Date
forever waive any rights and relinquishes any claim it might now have or have
had in the past with regard to (i) the reset of the exercises prices of the
Initial Warrants or the Additional Warrants to $.01, (ii) the issuance of
Default Warrants (each as defined in the Warrant Agreement) with an exercise
price of $.01 or (iii) the issuance of any additional Default Warrants.
<PAGE>
3
4. (a) The Restated Credit Agreement will provide that on the Closing
Date, in consideration for the undertakings of the Company in Section 4(b)
hereunder, any and all warrants to purchase the Company's common stock, par
value $.01 per share, held by Travelers (including the Initial Warrants, the
Additional Warrants and any Default Warrants) shall be canceled and shall
thereafter, no longer be exercisable.
(b) The Restated Credit Agreement will further provide that in
consideration for the cancellation of the warrants held by Travelers
contemplated by Section 4(a) above, the Company shall:
(i) pay to Travelers on the Closing Date the sum of $8,500,000
by wire transfer to an account designated in advance by Travelers,
which amount will be applied first, to the repayment of the entire
outstanding Series B Revolving Credit Loans (as defined in the
Travelers Credit Agreement), and second, after all Series B Revolving
Credit Loans have been paid in full, to the repayment of outstanding
Series A Revolving Credit Loans;
(ii) issue to Travelers on the Closing Date 100,000 shares of
Company Common Stock which will be immediately converted pursuant to
Section 2.1 of the Merger Agreement into shares of the Parent's common
stock, par value $1.00 per share (the "Parent Common Stock"); provided,
however, that Travelers will agree not to sell, assign, pledge or
otherwise transfer such shares of Parent Common Stock prior to June 30,
2000;
(iii) issue to Travelers on the Closing Date warrants to
purchase 700,000 shares of Parent Common Stock (the "Warrants"). The
Warrants will be exercisable during the period beginning on the date of
the third anniversary of the Closing Date and ending on the date of the
tenth anniversary of the Closing Date at an exercise price (the
"Exercise Price") calculated as follows:
(A) the Exercise Price for the Warrants will be equal
to 125% of the average of the daily closing price of the
Parent Common Stock as reported on the American Stock Exchange
Composite Transactions Tape (as reported by The Wall Street
Journal (national edition)) (or if the Parent Common Stock is
no longer listed on the American Stock Exchange, such exchange
upon which the Parent Common Stock is principally traded) for
each trading day in December 2000; and
(B) notwithstanding Section 4(b)(iii)(A), if the
Exercise Price calculated pursuant to such section is at least
$15.00 then the Exercise Price will be $15.00 or if the
Exercise
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4
Price is less than $10.00 then the Exercise Price will be
$10.00; and
(C) notwithstanding anything in this Section
4(b)(iii)(A) or (B) if the new Series A Notes are not repaid
in full on or prior to the Maturity Date (as defined below),
then the Exercise Price will be $.01;
(iv) amend and restate the existing Series A Notes which
evidence the Series A Revolving Credit Loans which remain outstanding
after giving effect to the repayment contemplated by the foregoing
clause (ii) such that (x) the interest rate on the Series A Revolving
Credit Loans evidenced thereby shall be changed to 10.5% and (y) the
Series A maturity date shall be changed to the date (the "Maturity
Date") which is the earlier of (I) August 30, 2000 or (II) one year
from the Closing Date, and issue to Travelers new Series A Notes
reflecting such amendment and restatement in substitution for such
existing Series A Notes;
(v) pay interest on the new Series A Notes at the rate of
10.5% per annum, payable monthly in arrears; and
(vi) secure the Note with the following collateral:
(1) the existing guarantee from Wireless
Technology Corporations Limited;
(2) the existing guarantee from Baltic
Communications Limited;
(3) a guarantee from PLD Holdings Limited in
form and substance satisfactory to the parties;
(4) a guarantee from Metromedia
International Group Inc. in form and substance
satisfactory to the parties;
(5) the existing pledge of 28 ordinary
shares of Technocom Limited; and
(6) the existing lien on the receivables of
the Company.
5. The new Series A Notes will not be secured by any guarantee from
News America Incorporated ("News") and at the Closing Date the existing
guarantee of News of certain amounts payable under the Travelers Credit
Agreement will be terminated and canceled by Travelers and returned to News
marked "canceled."
6. Travelers hereby consents pursuant to the Travelers Credit Agreement
(a) to the execution and delivery of the Merger Agreement and
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5
consummation of the Merger and (b) to the execution by the Company of (i) the
Bridge Loan Agreement and Pledge Agreement, each dated as of the date hereof
between Parent and Company, and (ii) the pledge of the collateral by the Company
to the Parent contemplated by the Pledge Agreement to secure the Company's
obligations under the Bridge Loan Agreement.
7. Except for those amendments expressly contemplated by this Travelers
Note Modification Agreement and to permit the issuance of the new Parent Senior
Notes to the holders of the Company's existing senior notes and convertible
notes as contemplated by the Agreement to Exchange and Consent dated as of the
date hereof, the Restated Credit Agreement shall continue, ratify and confirm,
the terms, covenants and conditions contained in the Travelers Credit Agreement
as in effect on the date hereof and the Travelers Credit Agreement, as so
amended and restated by the Restated Credit Agreement, shall remain in full
force and effect.
8. This Travelers Note Modification Agreement shall terminate on the
Termination Date, in which event the parties hereto will have no further
liability to each other.
9. This letter agreement shall be governed in all respects by the laws
of the State of New York without reference to the choice of laws principles
thereof.
10. This letter agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
11. No amendment, modification, termination or waiver or any provision
of this letter agreement shall be effective unless it shall be in writing and
signed by each of the parties to this agreement.
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6
If the foregoing sets forth your understanding with regard to the
matter specified herein, please so indicate by signing a copy of this letter and
returning an original to us at the address set forth above.
Sincerely,
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Chief Financial Officer,
Executive Vice President,
Treasurer and Director
PLD TELEKOM INC.
By: /s/ James R.S. Hatt
-------------------
Name: James R.S. Hatt
Title: Chairman, President and Chief
Executive Officer
ACCEPTED AND AGREED
as of the date first written above:
THE TRAVELERS INSURANCE COMPANY
By: /s/ Craig Farnsworth
--------------------
Name: Craig Farnsworth
Title: 2nd Vice President
THE TRAVELERS INDEMNITY COMPANY
By: /s/ Craig Farnsworth
--------------------
Name: Craig Farnsworth
Title: 2nd Vice President
AGREEMENT TO EXCHANGE AND CONSENT
AGREEMENT TO EXCHANGE AND CONSENT (the "Agreement"), dated as of May
18, 1999 by and among Metromedia International Group, Inc., a Delaware
corporation (the "Company"), PLD Telekom Inc., a Delaware corporation ("PLD"),
and each of the Noteholders listed on Schedule I hereto (the "Noteholders").
WITNESSETH
WHEREAS, PLD and the Company are concurrently herewith entering into an
Agreement and Plan of Merger (the "Merger Agreement"), dated the date hereof,
which provides for, among other things, the merger of a wholly owned subsidiary
of the Company with and into PLD with PLD as the surviving corporation (the
"Merger").
WHEREAS, in connection with the Merger and as a condition to the
consummation thereof, the Company proposes (i) to exchange (A) $1,000 accreted
amount of its 10.5% Senior Discount Notes due 2007 (the "New Notes") having
terms substantially as set forth in the Summary of Principal Terms attached as
Exhibit A hereto (the "Summary of Terms"), for each $1,000 principal amount of
PLD's outstanding 14.5% Senior Discount Notes due 2004 (the "Senior Notes"),
plus an additional accreted amount of New Notes equal to the amount of all
accrued but unpaid interest on such Senior Notes to the date of exchange, and
(B) $900 accreted amount of New Notes for each $1,000 principal amount of PLD's
outstanding 9% Convertible Subordinated Notes due 2006 (the "Convertible Notes"
and, together with the Senior Notes, the "Old Notes"), plus an additional
accreted amount of New Notes equal to the amount of all accrued but unpaid
interest on such Convertible Notes to the date of exchange, and (ii) to seek the
consent of each of the holders of the Old Notes to (x) certain amendments to the
Indentures (as defined below) pursuant to which the Old Notes were issued and
(y) waivers of certain defaults under the Indentures (clauses (x) and (y) being
collectively referred to as the "Amendments") pursuant to a Second Supplemental
Indenture, Amendment, Consent and Waiver to each of the Indentures, which will
have substantially the terms and provisions specified in the term sheets
attached hereto as Exhibit B (the "Second Supplemental Indentures") (clauses (i)
and (ii) being collectively referred to as the "Exchange Offers");
WHEREAS, it is a condition to the consummation of the Exchange Offers
and the Merger that the holders of at least 95% of each of the Senior Notes and
the Convertible Notes validly tender and not withdraw their Old Notes and
consent to the Amendments, in each case, pursuant to the Exchange Offers;
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2
WHEREAS, as a condition and inducement to its willingness to enter into
the Merger Agreement, the Company has requested that the Noteholders agree, and
each of the Noteholders has agreed to enter into this Agreement; and
WHEREAS, each of the Noteholders has agreed to direct its respective
nominee to exchange its Old Notes and consent to the Amendments pursuant to the
Exchange Offers.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and conditions hereinafter contained, the parties agree as
follows:
1. Agreement to Exchange.
(a) At the Closing (as defined in the Merger Agreement) and
subject only to (i) the simultaneous consummation of the Merger and of the
transactions contemplated by the Note and Warrant Modification Agreement, the
Elite Option Modification Agreement, the Plicom Option Modification Agreement
and the News Letter Agreement (each, as defined in the Merger Agreement)
(collectively, the "Transactions"), each on the economic terms contemplated by
the forms of such agreements attached as exhibits to the Merger Agreement and
(ii) the declaration by the Securities and Exchange Commission (the "SEC") of
the effectiveness of the Exchange Offer Registration Statement (as defined
below) or, alternatively, of the Shelf Registration Statement (as defined below)
if the Company determined under Section 8.1 that the Registered Exchange Offer
(as defined below) is not available or may not be consummated, each Noteholder
hereby agrees to, and to direct its nominee to, exchange all of such
Noteholder's Old Notes listed on Schedule I hereto, together with any other Old
Notes the beneficial ownership (as defined below) of which is acquired by such
Noteholder during the period from and including the date hereof through and
including the date on which this Agreement is terminated pursuant to Section
10.9 hereof (collectively, the "Subject Debentures"), for New Notes with the
terms and provisions specified in the Summary of Terms. For purposes of this
Agreement, "beneficial ownership" or "beneficially owned" shall have the meaning
ascribed to those terms by Section 13 under the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"). The New Notes will be issued pursuant to an indenture between the Company
and a Trustee reasonably satisfactory to the Noteholders and will set forth the
Summary of Terms and such other terms and conditions as are reasonably agreed to
by the Company and the Noteholders.
(b) Delivery of the New Notes to each Noteholder under this
Agreement shall be made on the Closing Date (as defined in the Merger
Agreement).
2. Consent. At the Closing and subject only to the simultaneous
consummation of the Merger and of the Transactions, each substantially as
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3
contemplated by the forms of agreements for such Transactions attached as
exhibits to the Merger Agreement, each Noteholder hereby agrees to consent, and
agrees to cause its nominee as record holder of all Subject Debenture
beneficially owned by it to consent, to the Amendments and to direct each of the
Trustee for the Senior Notes and the Trustee for the Convertible Notes, as the
case may be, to execute and deliver on behalf of the holders of Old Notes each
of the Second Supplemental Indentures pursuant (i) to Section 9.2 of the
Indenture for the Senior Notes, dated as of May 31, 1996, among PLD as issuer,
the Subsidiary Guarantors named therein and The Bank of New York as trustee, as
amended (the "Senior Notes Indenture"), and (ii) Section 9.2 of the Indenture
for the Convertible Notes, dated as of May 31, 1996, among PLD as issuer, the
Subsidiary Guarantors named therein and The Bank of New York as trustee, as
amended (the "Convertible Notes Indenture" and, together with the Senior Notes
Indenture, the "Indentures"), which agreement to consent shall be effective with
respect to all Subject Debentures during the period from and including the date
hereof through and including the date on which this Agreement is terminated
pursuant to Section 10.9 hereof, after which such consent shall expire and no
longer be effective. In addition, each of the Noteholders hereby consents to the
execution by PLD of the Bridge Loan Agreement dated as of the date hereof (the
"Bridge Loan Agreement") between the Company and PLD providing for certain loans
to be made to PLD and to the grant of the security interest to the Company by
PLD contemplated by the Security Agreement dated the date hereof made by PLD in
favor of the Company to secure the advances made under the Bridge Loan
Agreement.
3. Waiver. Pursuant to the Indentures, each Noteholder hereby waives and
agrees to cause its nominee as record holder of all Subject Debentures
beneficially owned by it to waive its right to (i) receive the payment of
interest in cash on the Subject Debentures (including Additional Amounts, if
any, and Special Interest, if any (each as defined in the Indentures)) or demand
the payment of such interest from amounts deposited in the Company Senior Note
Escrow Account (as defined in the Senior Notes Indenture) or the Company
Convertible Note Escrow Account (as defined in the Convertible Notes Indenture)
and (ii) declare or instruct the respective Trustee for each of the Senior Notes
and the Convertible Notes, as the case may be, to declare the occurrence of an
Event of Default (as defined under each of the Indentures), to demand or take
any other action to cause the acceleration of the entire principal amount
represented by the Subject Debentures or take any other action as a result of
such non-payment, in each of (i) and (ii) above, from the date hereof until the
earlier of (x) the termination of this Agreement or (y) the consummation of the
Exchange Offers. The parties hereby agree that this waiver constitutes a waiver
of the time of payment of the interest under the Subject Debentures only and
does not constitute a foreclosure on the right of each Noteholder to receive the
payment when due of interest and principal and other amounts owed to it under
the Subject Debentures at maturity or otherwise.
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4
4. Representations and Warranties of the Noteholder. Each Noteholder
hereby represents and warrants to the Company that:
4.1 Authority. The Noteholder has all necessary power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Noteholder and the consummation by such
Noteholder of the transactions contemplated hereby have been duly and validly
authorized by its board of directors or other governing body, and no other
proceedings on its part are necessary to authorize this Agreement or to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by the Noteholder and, assuming the due authorization, execution
and delivery by the other parties hereto, constitutes its legal, valid and
binding obligation, enforceable against such Noteholder in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally or by general principles governing the availability of equitable
remedies.
4.2 No Conflict.
(a) The execution and delivery of this Agreement by
the Noteholder do not, and the performance of this Agreement by such Noteholder
shall not, (i) conflict with or violate its organizational documents, (ii)
conflict with or violate any agreement, arrangement, law, rule, regulation,
order, judgment or decree to which it is a party or by which it is (or the
Subject Debentures held of record or beneficially owned by it are) bound or
affected or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Subject
Debentures held of record or beneficially owned by such Noteholder pursuant to
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which it is a party or by
which it (or the Subject Debentures held of record or beneficially owned by it)
is bound or affected, except, in the case of clauses (ii) and (iii) of this
Section 4.2, for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or delay the performance by the Noteholder
of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by
the Noteholder do not, and the performance of this Agreement by such Noteholder
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental entity except for applicable
requirements, if any, of the Exchange Act and except where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay the performance by the Noteholder of
its obligations under this Agreement.
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5
4.3 Title to the Old Notes. As of the date hereof, the
Noteholder is the record or beneficial owner of the Old Notes listed on Schedule
I hereto. The Old Notes listed on Schedule I hereto are all the securities of
the Company either held of record or beneficially owned by the Noteholder. The
Noteholder has not appointed or granted any proxy, which appointment or grant is
still effective, with respect to the Old Notes held of record or beneficially
owned by such Noteholder. The Old Notes listed on Schedule I hereto are owned
and all other Subject Debentures will be owned by the Noteholder free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreement, limitations on the Noteholders voting rights, charges and
other encumbrances of any nature whatsoever (collectively, "Liens"), other than
Liens arising as a result of this Agreement.
4.4 Investment Purpose; QIB Status. The Noteholder is agreeing
to exchange its Subject Debentures and shall receive New Notes under this
Agreement and pursuant to the Exchange Offers for its own account solely for the
purpose of investment and not with a view to, or for offer or sale in connection
with, any distribution of the New Notes in violation of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"). The Noteholder has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the New Notes and is able to bear the economic risk of such
investment. The Noteholder acknowledges that none of the New Notes has been
registered under the Securities Act and that such securities may be sold or
disposed of in the absence of such registration only pursuant to an exemption
from such registration. The Noteholder is a qualified institutional buyer as
defined in Rule 144A under the Securities Act.
5. Representations and Warranties of PLD and the Company. Each of PLD
and the Company hereby represents and warrants to each of the Noteholders that:
5.1 Authority. Each of PLD and the Company has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of PLD and the Company and
the consummation by each of PLD and the Company of the transactions contemplated
hereby have been duly and validly authorized by the board of directors or other
governing body of each of PLD and the Company and no other proceedings on its
part are necessary to authorize this Agreement or to consummate such
transactions. This Agreement has been duly and validly executed and delivered by
each of PLD and the Company and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes its legal, valid and binding
obligation, enforceable against each of PLD and the Company in accordance with
its terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally or by general principles governing the availability of equitable
remedies.
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6
5.2 No Conflict.
(a) The execution and delivery of this Agreement by
each of PLD and the Company do not, and the performance of this Agreement by
each of PLD and the Company shall not, (i) conflict with or violate its
organizational documents, (ii) conflict with or violate any agreement,
arrangement, law, rule, regulation, order, judgment or decree to which it is a
party or by which it is bound or affected, except, in the case of clause (ii) of
this Section 5.2, for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay the performance by each of
PLD and the Company of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by
each of PLD and the Company do not, and the performance of this Agreement by
each of PLD and the Company shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
entity except for applicable requirements, if any, of the Exchange Act and
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
the performance by each of PLD and the Company of its obligations under this
Agreement.
(c) The execution and delivery of this Agreement by
PLD does not, and the performance of this Agreement by PLD shall not result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which it is a party or by which its assets or properties are bound
or affected, except for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay the performance by PLD of its
obligations under this Agreement.
6. Transfer of Title. Each Noteholder hereby covenants and agrees that
it will not, prior to the termination of this Agreement, either directly or
indirectly, offer or otherwise agree to sell, assign, pledge, hypothecate,
transfer, exchange, or dispose of any Subject Debentures, owned either directly
or indirectly by it or with respect to which each such Noteholder has the power
of disposition, whether now or hereafter acquired, without the prior written
consent of the Company, unless the person or entity to whom Subject Debentures
have been sold, assigned, pledged, hypothecated, transferred, exchanged or
disposed agrees to be bound by this Agreement as if a party hereto. Each
Noteholder hereby agrees and consents to the entry of stop transfer instructions
by the Company or the Trustee, as the case may be, against the transfer of any
Subject Debentures inconsistent with the terms of this Section 6.
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7
7. Legend. (a) Each Noteholder agrees to the placement on certificates
representing the New Notes to be received by such Noteholder under this
Agreement, of a legend substantially as set forth below, unless the Company
determines otherwise in accordance with an opinion of counsel:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR NON-U.S. JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS OF SUCH OTHER STATE
OR NON-U.S. JURISDICTIONS. THE HOLDER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS."
(b) In addition to any other legend on certificates
representing the Old Notes, each Noteholder agrees to the placement on
certificates representing the Old Notes of a legend substantially as set forth
below:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN AGREEMENT TO EXCHANGE AND CONSENT, DATED AS OF MAY 18,
1999, AMONG METROMEDIA INTERNATIONAL GROUP, INC. (THE "COMPANY") AND
CERTAIN NOTEHOLDERS LISTED ON SCHEDULE I THERETO COPIES OF WHICH ARE ON
FILE AT THE OFFICES OF THE SECRETARY OF THE COMPANY."
8. Registered Exchange Offer.
8.1 Registration Statement. The Company agrees that on or
prior to the Closing Date (as defined in the Merger Agreement) the Company's
Registration Statement on Form S-4 (or another appropriate form under the
Securities Act) (the "Exchange Offer Registration Statement") with respect to
the proposed offer to the Noteholders (the "Registered Exchange Offer") to issue
and deliver to such Noteholders, in exchange for New Notes received in the
Exchange Offers, a like aggregate principal amount of debt securities of the
Company (such debt securities referred to as the "Exchange Notes") that are
identical in all respects to the New Notes, except for transfer restrictions
relating to the Securities Act, will be declared
<PAGE>
8
effective by the SEC; provided, however, in the event that the Company
determines that the Registered Exchange Offer is not available or may not be
consummated because it would violate applicable law or applicable
interpretations of the Staff of the SEC, the Company will use its best efforts
to cause to be filed as soon as practicable after such determination a shelf
registration statement (the "Shelf Registration Statement") providing for the
sale by the Noteholders of all of the New Notes and to have such Shelf
Registration Statement declared effective by the SEC; provided further, however,
that no Noteholder shall be entitled to have the New Notes held by it covered by
such Shelf Registration Statement unless such Noteholder furnishes to the
Company in writing the information specified in Items 507 and 508 of
Registration S-K. In the event the Company makes the determination specified in
the preceding sentence, the Company agrees that it shall enter into a
registration rights agreement with the Noteholders, which agreement shall be
reasonably satisfactory in form and substance to such Noteholders and shall
contain representations, covenants and indemnities that shall be no less
favorable to the Noteholders than those currently contained in the Company's
Registration Rights Agreement, dated as of May 18, 1999, with News America
Incorporated and News PLD LLC. The Company further agrees that if the Exchange
Offer Registration Statement is declared effective, it will keep the Exchange
Offer Registration Statement effective for not less than 30 days (or longer if
required by applicable law) after the date on which notice of the Registered
Exchange Offer is mailed to the Noteholders, it being the objective of the
Registered Exchange Offer that each Noteholder electing to exchange New Notes
for Exchange Notes (assuming, among other things, that such Noteholder (i) is
not an affiliate of the Company, (ii) acquires the Exchange Notes during the
ordinary course of such Noteholder's business and (iii) has no arrangements or
understandings with any person to participate in and does not participate in,
and does not intend to participate in, the distribution of the Exchange Notes)
be permitted to trade such Exchange Notes from and after their receipt without
any limitation or restrictions under the Securities Act. The Exchange Notes will
be issued pursuant to an indenture between the Company and a trustee that is
reasonably satisfactory to the holders of Notes, which indenture will be
identical to (or will be the same indenture as) the indenture for the New Notes,
except for the transfer restrictions under the Securities Act relating to the
New Notes.
8.2 Registered Exchange Offer. In connection with the
Registered Exchange Offer, the Company will:
(a) mail to each Noteholder a copy of the prospectus
forming part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not
less than 30 days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Noteholders;
<PAGE>
9
(c) utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of Manhattan, The City
of New York;
(d) permit Noteholders to withdraw tendered New Notes
at any time prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws
that are applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(a) accept for exchange all New Notes tendered and
not validly withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to or deposit with the Trustee for the
New Notes for cancellation all New Notes so accepted for exchange; and
(c) cause the Trustee for the New Notes, promptly to
authenticate and deliver to each Noteholder, Exchange Notes with an equal
principal amount to the New Notes of such Noteholder so accepted for exchange.
8.3 Effectiveness. If the Company is required to file a Shelf
Registration Statement in accordance with Section 8.1, the Company shall use its
reasonable best efforts to keep the Shelf Registration Statement effective and
to amend and supplement the prospectus contained therein in order to permit such
prospectus to be used by all persons subject to the prospectus delivery
requirements of the Securities Act for the period of time specified in Rule
144(k) or such shorter period of time as all New Notes covered thereby shall
have been sold thereunder.
8.4 Indenture. The indenture for the New Notes or the
indenture for the Exchange Notes, as the case may be, shall provide that the New
Notes and the Exchange Notes shall vote and consent together on all matters as
one class and that none of the New Notes or the Exchange Notes will have the
right to vote or consent as a separate class on any matter.
8.5 Additional Representations. Each Noteholder participating
in the Registered Exchange Offer shall be required to represent to the Company
that at the time of the consummation of the Registered Exchange Offer (i) any
Exchange Notes received by such Noteholder will be acquired in the ordinary
course of such Noteholder's business, (ii) such Noteholder will have no
arrangements or understanding with any person to participate in and is not
participating in, and does not intend to participate in, the distribution of the
New Notes or the Exchange Notes
<PAGE>
10
within the meaning of the Securities Act and (iii) such Noteholder is not an
affiliate (as defined in Rule 405 under the Securities Act) of the Company.
8.6 Certain Information. The Company may require each
Noteholder to furnish to the Company such information regarding the distribution
of such securities and other matters as may be required to be included in the
Exchange Offer Registration Statement or Shelf Registration Statement and each
such Noteholder shall be obligated to provide any such information for inclusion
in the Exchange Offer Registration Statement or Shelf Registration Statement as
the Company shall reasonably request.
8.7 Notification. The Company shall, as expeditiously as
possible, notify each Noteholder of the happening of any event as a result of
which the prospectus included in the Exchange Offer Registration Statement or
Shelf Registration Statement contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and prepare and file with the SEC a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Exchange Notes or New Notes, as applicable, such prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Each
Noteholder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in this Section 8.7, it shall
forthwith discontinue disposition of Exchange Notes or New Notes, as applicable,
pursuant to the Exchange Offer Registration Statement or Shelf Registration
Statement, as applicable, covering such notes until its receipt of the copies of
the supplemented or amended prospectus and, if so directed by the Company, each
such Noteholder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in its possession, of the
prospectus covering such notes current at the time of receipt of such notice. If
the Company shall give any such notice, the Company shall extend the period
during which such Exchange Offer Registration Statement or Shelf Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice pursuant to this Section 8.7 to and including the date when each
Noteholder shall have received the copies of the supplemented or amended
prospectus.
9. Indemnification; Contribution.
9.1 Indemnification by the Company. The Company agrees to
indemnify to the fullest extent permitted by law, each Noteholder, its officers,
directors and agents and each person, if any, who controls each such Noteholder
(within the meaning of the Securities Act), against any and all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of
<PAGE>
11
a material fact contained in the Exchange Offer Registration Statement or Shelf
Registration Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the circumstances
under which they were made) not misleading, except to the extent, and only to
the extent, the same are caused by or contained in any information with respect
to a Noteholder furnished in writing to the Company by such Noteholder expressly
for use therein or by a Noteholder's failure to deliver a copy of the prospectus
or any amendments or supplements thereto after the Company has furnished such
Noteholder with a sufficient number of copies of the same or by the delivery of
prospectuses by a Noteholder after the Company notified such Noteholder in
writing to discontinue delivery of prospectuses.
9.2 Indemnification by the Noteholder. Each Noteholder shall
furnish to the Company in writing such information and affidavits with respect
to each such Noteholder as the Company reasonably requests for use in connection
with the Exchange Offer Registration Statement, Shelf Registration Statement or
prospectus included therein and agrees to indemnify, severally and not jointly,
to the fullest extent permitted by law, the Company, its officers, directors and
agents and each person, if any, who controls the Company (within the meaning of
the Securities Act) against any and all losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to be
stated in the Exchange Offer Registration Statement, Shelf Registration
Statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission is caused by or contained in or improperly omitted
from, as the case may be, any information or affidavit with respect to such
Noteholder so furnished in writing by it or by the delivery of prospectuses by a
Noteholder after the Company notified such Noteholder in writing to discontinue
delivery of prospectuses.
9.3 Contribution. If the indemnification provided for in
Section 9 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, to the extent such
indemnification is unavailable, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses. The relative fault of
such indemnifying party and indemnified parties shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged
<PAGE>
12
untrue statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 9.3 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person.
If indemnification is available under this Section 9.3, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 9.1 and 9.2 hereof without regard to the relative fault of
said indemnifying parties or indemnified party.
10. Miscellaneous.
10.1 Permission to Disclose. Each Noteholder hereby agrees and
consents to the disclosure by the Company of this Agreement in connection with
the Exchange Offers or as otherwise required by law (except that such
Noteholders name will not be disclosed in any press release, filing or other
notice or report unless required by law or the SEC).
10.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
10.3 Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Noteholders with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the Company and the Noteholders with respect to the
subject matter hereof.
10.4 Amendment. This Agreement may not be amended and no other
actions may be taken under this Agreement except by an instrument in writing
signed by the Company and each of the holders of the Subject Debentures covered
by this Agreement.
<PAGE>
13
10.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereby shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
10.6 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made and shall be effective upon receipt, if delivered personally, upon
receipt of a transmission confirmation if sent by facsimile (with a confirming
copy sent by overnight courier) and on the next business day if sent by Federal
Express, United Parcel Service, Express Mail or other reputable overnight
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by notice):
If to the Noteholders, to the addresses specified on Schedule I.
With a copy to:
Douglas Bartner, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 848-8000
Fax: (212) 848-7179
If to the Company, to:
Arnold L. Wadler, Esq.
Metromedia International Group, Inc.
One Meadowlands Plaza
East Rutherford, N.J. 07076
Facsimile: (201) 531-2803
<PAGE>
14
with a copy to:
Douglas A. Cifu, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Telephone: (212) 373-3000
Fax: (212) 757-3990
If to PLD, to:
PLD Telekom Inc.
505 Park Avenue, 21st floor
New York, NY 10022
Facsimile: (212) 527-3995
Attention: General Counsel
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
10.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which, when
taken together, shall constitute one and the same instrument.
10.9 Termination. This Agreement shall terminate on the first
to occur of (x) written agreement to terminate of the Company and a majority in
principal amount of the Noteholders (determined as a single class), (y)
termination of the Merger Agreement in accordance with its terms or (z) October
31, 1999, unless in any such case it is extended by the Company and each of the
Noteholders. Upon termination, this Agreement shall be of no further force and
effect among the parties except for the provisions of Section 10.10 which shall
survive the termination of this Agreement.
10.10 Fees and Expenses. Except as otherwise provided in this
Agreement, each party shall bear its own expenses, including the fees and
expenses of accountants, financial or other advisors or representatives engaged
by it, incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that the Company shall pay the
reasonable fees and disbursements of one firm of attorneys for all of the
Noteholders.
10.11 Survival of Representations, Warranties, Consents and
Covenants. The consent, representations and warranties contained in or made
pursuant to this Agreement shall survive the Closing without limitation and the
covenants and agreements contained in or made pursuant to this Agreement which
by
<PAGE>
15
their terms are to survive after the Closing shall survive for the period
specified herein, provided, that if a claim or notice is given with respect to
any representation, warranty, covenant or agreement prior to any such expiration
date, the claim with respect to such representation, warranty, covenant or
agreement shall continue indefinitely until such claim is finally resolved.
10.12 Successors and Assigns. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and their
respective successors or assigns.
<PAGE>
16
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its respective officers thereunto duly authorized all
as of the date first above written.
METROMEDIA INTERNATIONAL GROUP, INC.
By: /s/ Silvia Kessel
-----------------
Name: Silvia Kessel
Title: Chief Financial Officer,
Executive Vice President,
Treasurer and Director
PLD TELEKOM INC.
By: /s/ James R.S. Hatt
-------------------
Name: James R.S. Hatt
Title: Chairman, President and Chief
Executive Officer
MERRILL LYNCH GLOBAL ALLOCATION
FUND, INC.
By: /s/ Lisa Ann O'Donnell
----------------------
Name: Lisa Ann O'Donnell
Title: VP MLAM, Authorized Signatory
MERRILL LYNCH EQUITY/CONVERTIBLE
SERIES-GLOBAL ALLOCATION PORTFOLIO
By: MERRILL LYNCH ASSET MANAGEMENT,
L.P., AS INVESTMENT ADVISER
By: /s/ Lisa Ann O'Donnell
----------------------
Name: Lisa Ann O'Donnell
Title: VP MLAM, Authorized Signatory
<PAGE>
17
OPPENHEIMER FUNDS, INC. AS INVESTMENT
SUB-ADVISER FOR ATLAS STRATEGIC INCOME
FUND
By: /s/ David P. Negri
------------------
Name: David P. Negri
Title: Senior Vice President
OPPENHEIMER CHAMPION INCOME FUND
By: /s/ David P. Negri
------------------
Name: David P. Negri
Title: Vice President
OPPENHEIMER HIGH INCOME FUND
By: /s/ David P. Negri
------------------
Name: David P. Negri
Title: Vice President
OPPENHEIMER STRATEGIC INCOME FUND
By: /s/ David P. Negri
------------------
Name: David P. Negri
Title: Vice President
OPPENHEIMER VARIABLE ACCOUNT FUNDS
FOR THE ACCOUNT OF OPPENHEIMER
STRATEGIC BOND FUND
By: /s/ David P. Negri
------------------
Name: David P. Negri
Title: Vice President
<PAGE>
18
OPPENHEIMER HIGH YIELD FUND
By: /s/ David P. Negri
------------------
Name: David P. Negri
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND
By: /s/ Jeffrey Aurigemma
---------------------
Name: Jeffrey Aurigemma
Title: Vice President
NORTHSTAR HIGH TOTAL RETURN FUND II
By: /s/ Jeffrey Aurigemma
---------------------
Name: Jeffrey Aurigemma
Title: Vice President
HIGH YIELD PORTFOLIO
By: /s/
Name:
Title:
TOTAL RETURN PORTFOLIO
By: /s/
Name:
Title:
<PAGE>
19
IDS LIFE SPECIAL INCOME FUND
By: /s/
Name:
Title:
IDS LIFE INCOME ADVANTAGE FUND
By: /s/
Name:
Title:
GENERAL RETIREMENT SYSTEM OF THE
CITY OF DETROIT
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
BEA INCOME FUND, INC. HIGH YIELD
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
BEA STRATEGIC GLOBAL INCOME FUND,
HIGHYIELD
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
<PAGE>
20
OMAHA PUBLIC SCHOOL EMPLOYEE
RETIREMENT SYSTEM
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
WARBURG PINCUS HIGH YIELD FUND
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
RJR NABISCO DOMESTIC HIGH YIELD
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
SEI INSTITUTIONAL MANAGED TRUST
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
VAIL
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
<PAGE>
21
THE COMMON FUND
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
NORTHWESTERN UNIVERSITY
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
PERKIN ELMER CORP EMPLOYEE
PENSION & SAVINGS PLAN
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
TEXACO INC.
By: /s/ Richard J. Lindquist
------------------------
Name: Richard J. Lindquist
Title: Managing Director
PHOENIX EMERGING MARKET FUND
By: /s/ Daniel Senecal
------------------
Name: Daniel Senecal
Title: Director
<PAGE>
22
PHOENIX MULTI-SECTOR FIXED INCOME FUND
By: /s/ Daniel Senecal
------------------
Name: Daniel Senecal
Title: Director
PHOENIX EDGE MULTI-SECTOR FIXED INCOME
FUND
By: /s/ Daniel Senecal
------------------
Name: Daniel Senecal
Title: Director
<PAGE>
23
SCHEDULE I
1. Merrill Lynch Global Allocation Fund, Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
Beneficial ownership of Senior Notes:
Principal amount: $74,500,000
Beneficial ownership of Convertible Notes:
Principal amount: $18,700,000
2. Merrill Lynch Equity/Convertible Series: Global Allocation Portfolio
800 Scudders Mill Road
Plainsboro, NJ 08536
Beneficial ownership of Senior Notes:
Principal amount: $1,900,000
Beneficial ownership of Convertible Notes:
Principal amount: $500,000
3. Oppenheimer Champion Income Fund
World Trade Center - 31st Floor
New York, NY 10048
Beneficial ownership of Senior Notes:
Principal amount: $3,500,000
Beneficial ownership of Convertible Notes:
Principal amount: $200,000
4. Oppenheimer Strategic Income Fund
World Trade Center - 31st Floor
New York, NY 10048
Beneficial ownership of Senior Notes:
Principal amount: $16,650,000
Beneficial ownership of Convertible Notes:
Principal amount: $1,500,000
5. Oppenheimer High Yield Fund
World Trade Center - 31st Floor
New York, NY 10048
Beneficial ownership of Senior Notes:
Principal amount: $--
Beneficial ownership of Convertible Notes:
Principal amount: $630,000
<PAGE>
24
6. Oppenheimer High Income Fund
World Trade Center - 31st Floor
New York, NY 10048
Beneficial ownership of Senior Notes:
Principal amount: $--
Beneficial ownership of Convertible Notes:
Principal amount: $170,000
7. Atlas Strategic Income Fund
World Trade Center - 31st Floor
New York, NY 10048
Beneficial ownership of Senior Notes:
Principal amount: $50,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
8. Oppenheimer Strategic Bond Fund
World Trade Center - 31st Floor
New York, NY 10048
Beneficial ownership of Senior Notes:
Principal amount: $300,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
9. Northstar High Total Return Fund
300 First Stamford Place
Stamford, CT 06902
Beneficial ownership of Senior Notes:
Principal amount: $7,000,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
10. Northstar High Total Return Fund II
300 First Stamford Place
Stamford, CT 06902
Beneficial ownership of Senior Notes:
Principal amount: $--
Beneficial ownership of Convertible Notes:
Principal amount: $2,000,000
<PAGE>
25
11. High Yield Portfolio
IDS Tower 10, T30-216
Minneapolis, MN 55440
Beneficial ownership of Senior Notes:
Principal amount: $4,000,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
12. Total Return Portfolio
IDS Tower 10, T30-216
Minneapolis, MN 55440
Beneficial ownership of Senior Notes:
Principal amount: $3,000,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
13. IDS Life Special Income Fund
IDS Tower 10, T30-216
Minneapolis, MN 55440
Beneficial ownership of Senior Notes:
Principal amount: $5,000,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
14. IDS Life Income Advantage Fund
IDS Tower 10, T30-216
Minneapolis, MN 55440
Beneficial ownership of Senior Notes:
Principal amount: $100,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
15. General Ret System of the City of Detroit
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $490,000
Beneficial ownership of Convertible Notes:
Principal amount: $70,000
<PAGE>
26
16. BEA Income Fund, Inc.
High Yield
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $1,610,000
Beneficial ownership of Convertible Notes:
Principal amount: $230,000
17. BEA Strategic Global Income Fund High Yield
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $560,000
Beneficial ownership of Convertible Notes:
Principal amount: $80,000
18. Omaha Public School Employee Ret. System
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $210,000
Beneficial ownership of Convertible Notes:
Principal amount: $30,000
19. Warburg Pincus High Yield Fund
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $1,010,000
Beneficial ownership of Convertible Notes:
Principal amount: $230,000
20. RJR Nabisco Domestic High Yield
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $350,000
Beneficial ownership of Convertible Notes:
Principal amount: $50,000
<PAGE>
27
21. SEI Institutional Managed Trust
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $830,000
Beneficial ownership of Convertible Notes:
Principal amount: $90,000
22. VAIL
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $1,140,000
Beneficial ownership of Convertible Notes:
Principal amount: $220,000
23. The Common Fund
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $30,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
24. Northwestern University
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $150,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
25. Perkin Elmer Corp. Emp. Pen & Savings Plan
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $150,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
<PAGE>
28
26. Texaco Inc.
151 E. 53rd Street - 57th Street
New York, NY 10022
Beneficial ownership of Senior Notes:
Principal amount: $200,000
Beneficial ownership of Convertible Notes:
Principal amount: $--
27. Phoenix Emerging Market Fund
56 Prospect Street - 2nd Floor
Hartford, CT 06115
Beneficial ownership of Senior Notes:
Principal amount: $--
Beneficial ownership of Convertible Notes:
Principal amount: $600,000
28. Phoenix Multi-Sector Fixed Income Fund
56 Prospect Street - 2nd Floor
Hartford, CT 06115
Beneficial ownership of Senior Notes:
Principal amount: $--
Beneficial ownership of Convertible Notes:
Principal amount: $600,000
29. Phoenix Edge Multi-Sector Fixed Income Fund
56 Prospect Street - 2nd Floor
Hartford, CT 06115
Beneficial ownership of Senior Notes:
Principal amount: $--
Beneficial ownership of Convertible Notes:
Principal amount: $600,000
<PAGE>
29
EXHIBIT A
Term Sheet for New Notes will be attached as Exhibit A.
<PAGE>
30
EXHIBIT B
The following is a summary of the material provisions of the proposed
amendments and waivers to the Senior Notes Indenture and the Convertible Notes
Indenture. Additional technical or conforming changes will be made to the
Indentures.
I. PROPOSED AMENDMENTS TO THE SENIOR NOTES INDENTURE.
1. Elimination in their entirety of the following Sections from the
Senior Notes Indenture:
o Section 4.4: Corporate existence covenant.
o Section 4.5: Maintenance of property covenant.
o Section 4.9: Limitation on indebtedness covenant.
o Section 4.10: Limitation on issuances of guarantees by
restricted subsidiaries covenant.
o Section 4.11: Limitation on liens covenant.
o Section 4.12: Limitation on sale and leaseback
transactions covenant.
o Section 4.13: Restricted payments covenant.
o Section 4.14: Limitations on dividends and other payment
restrictions affecting restricted subsidiaries covenant.
o Section 4.15: Limitation on issuance and sale of preferred
stock of restricted subsidiaries covenant.
o Section 4.16: Transactions with affiliates covenant.
o Section 4.17: Restricted and unrestricted subsidiaries
covenant.
o Section 4.18: Limitations on line of business covenant.
o Section 4.19: Limitation on sales of telecommunications
assets agreements or qualified investments covenant.
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31
o Section 4.20: Reports covenant.
o Section 4.21: Compliance certificate; notice of default or
event of default covenant.
o Sections 4.24 and 4.26: Certain subsidiaries covenants.
o Article V: Consolidation, merger, conveyance, lease or
transfer covenant.
2. Amendments to Article XI of the Senior Notes Indenture to
authorize the release of all of the collateral including all cash
held in escrow from the security interest, liens, pledge and
escrow agreements of the Senior Notes Indenture.
3. Waiver of all past defaults arising from the failure to pay
interest on the notes or otherwise.
II. PROPOSED AMENDMENTS TO THE CONVERTIBLE NOTES INDENTURE
1. Elimination in their entirety of the following Sections from the
Convertible Notes Indenture:
o Section 4.4: Corporate existence covenant.
o Section 4.5: Maintenance of property covenant.
o Section 4.9: Limitation on issuances of guarantees by
restricted subsidiaries covenant.
o Section 4.10: Restricted and unrestricted subsidiaries
covenant
o Section 4.11: Reports covenant.
o Section 4.12: Compliance certificate; notice of default or
event of default covenant.
o Sections 4.16 and 4.18: Certain subsidiaries covenants.
o Article V: Consolidation, merger, conveyance, lease or
transfer covenant.
2. Amendments to Article XI of the Convertible Notes Indenture to
authorize the release of all of the collateral including all cash
held in
<PAGE>
32
escrow from the security interest, liens, pledge and escrow
agreements of the Convertible Notes Indenture.
3. Waiver of all past defaults arising from the failure to pay
interest on the notes or otherwise.
<PAGE>
SUMMARY OF PRINCIPAL TERMS
ISSUER Metromedia International Group, Inc. (the
"Company")
EXCHANGE OFFER The Company will offer to exchange (i) $1,000
accreted value ($1,291.55 face value) of 10.5%
Senior Discount Notes, due 2007 (the "Notes") for
each $1,000 principal amount of the existing 14.5%
Senior Discount Notes due 2004 (the "PLD Senior
Notes") of PLD Telekom Inc. ("PLD"); and $900
Accreted Value of the Notes for each $1,000
principal amount of the existing PLD's 9%
Convertible Subordinated Notes due 2006 (the "PLD
Convertible Notes"; and together with the PLD
Senior Notes, the "PLD Notes"). The exchange
offers described in the preceding sentence will be
consummated simultaneously with the consummation
of the merger of a wholly owned subsidiary of the
Company with and into PLD pursuant to a Merger
Agreement dated as of the date hereof among the
Company, PLD and Moscow Communications, Inc.
Accrued interest on the PLD Notes through the date
of consummation of the exchange offers will be
paid through the issuance of additional Notes with
an accreted value equal to 100% of the outstanding
amount of such accrued, but unpaid, interest.
MATURITY 8 years.
YIELD & INTEREST The Notes will be issued at a discount and will
accrete, but will not pay interest in cash, at a
rate of 10 1/2% per annum, compounded
semi-annually, to a principal amount of $1,291.55
per Note at the end of 2 1/2 years. Cash interest
will not accrue on the Notes for 5 semi-annual
periods (2 1/2 years). Thereafter, cash interest
on the Notes will be payable semi-annually at 10
1/2% per annum.
OPTIONAL REDEMPTION The Notes will not be redeemable prior to 2 1/2
years following the Issue Date. The Notes will be
redeemable at any time thereafter, at the option
of the Company, in whole or in part, at a
redemption price equal to the principal amount of
the Notes, plus accrued and unpaid interest, if
any, to but excluding the date of redemption.
RANKING The Notes will be senior unsecured obligations of
the
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Company. The Notes will rank pari passu in right
of payment with all senior indebtedness of the
Company and will rank senior in right of all
payments to all subordinated indebtedness of the
Company. The Notes will not be guaranteed by any
of the Company's Subsidiaries.
CHANGE OF CONTROL Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase the Notes at an offer price in cash
equal to 101% of the accreted value of the Notes,
plus accrued and unpaid interest, if any, to the
date of purchase.
CHANGE OF CONTROL means the occurrence of any of
the following: (i) the sale, lease, exchange or
other transfer by the Company of all or
substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to
any person other than a Wholly Owned Restricted
Subsidiary of the Company; (ii) a merger or
consolidation in which the shareholders of the
Company immediately prior to the merger or
consolidation do not hold a majority of the voting
power of the Company immediately after the merger
or consolidation, (iii) any person other than a
Permitted Holder becomes the beneficial owner of
>50% of the total voting power of all classes of
the voting stock of the Company; or (iv) the first
day on which a majority of the members of the
Board of Directors of the Company are not
continuing directors; or (v) the Company is
liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a
transaction which complies with the provisions set
forth in "Limitations on Merger, Consolidation or
Sale of Assets"; PROVIDED, however, that the sale
or disposition of (x) all or substantially all of
the assets or voting stock of Snapper, Inc.
("Snapper") or (y) all or any portion of the PLD
Assets (as defined below) will not be deemed to be
a Change of Control. The sale of any of the PLD
Assets shall be governed by the provisions set
forth in "Limitation on Asset Sales".
PERMITTED HOLDER means Metromedia Company, its
Related Parties, and any Person controlling,
controlled by, or under common control of,
Metromedia Company.
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PLD ASSETS will mean all of the assets (including
shares of capital stock of any Subsidiary) owned
by PLD Telekom Inc. ("PLD") or any direct or
indirect Subsidiary of PLD on the Issue Date,
accounts receivable generated by such assets, and
the Additional PLD Assets.
SUBSIDIARY means, with respect to any Person, any
corporation, association or other business entity
of which more than 50% of the total voting power
of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to
vote in the election of directors, managers,
trustees or similar governing body thereof is at
the time owned or controlled, directly or
indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a
combination thereof).
LIMITATIONS ON INDEBTEDNESS The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or
indirectly, create, incur or assume any additional
Indebtedness or to issue Disqualified Capital
Stock and the Company will not permit any of its
Restricted Subsidiaries to issue any shares of
Preferred Stock, unless the Consolidated Leverage
Ratio at the end of the Company's most recently
completed quarter is less than or equal to 5.5 to
1.0 prior to June 30, 2002, or less than 5.0 to
1.0 on or after June 30, 2002, determined on a pro
forma basis (including the application of the
proceeds therefrom), as if the additional
Indebtedness or Preferred Stock had been incurred
or issued at the beginning of the Reference
Period.
Except with respect to the PLD Companies, the
foregoing limitations will not prohibit:
(a) Existing Indebtedness of the Company or any of
its Restricted Subsidiaries;
(b) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness consisting
of Capital Lease Obligations, Purchase Money
Obligations, or other obligations incurred for the
purpose of financing all or any part of the
purchase price, development, acquisition,
construction or improvement of real or personal
property, tangible or intangible, used or to be
used in a Related Business (including capital
stock of a
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<PAGE>
Person engaged in a Related Business) or a credit
facility or debt securities entered into for the
purpose of providing such financing, PROVIDED that
such Indebtedness (inclusive of the interest
portion thereof and reasonable costs of financing)
does not exceed the lesser of Fair Market Value or
the purchase price and related costs of design,
development, acquisition, construction or
improvement of such assets or property at the time
of such incurrence;
(c) the incurrence by the Company of Indebtedness
in an aggregate principal amount not to exceed two
(2) times the sum of the Net Cash Proceeds
received by the Company after the date of the
Indenture in connection with any Public Equity
Offerings or sale of Capital Stock (other than
Disqualified Capital Stock) to any Strategic
Investor to the extent that such Net Cash Proceeds
have not been used to make Restricted Payments
pursuant to paragraphs (c)(ii) and (c)(2) of the
"Limitations on Restricted Payments" covenant,
provided that such Indebtedness does not mature
prior to six (6) months following the Stated
Maturity of the Notes;
(d) the incurrence by the Company or any
Subsidiary of any Indebtedness entered into in the
ordinary course of business (i) pursuant to
interest rate agreements entered into to protect
the Company or any Subsidiary against fluctuations
in interest rates in respect of Indebtedness of
the Company or any Subsidiary so long as the
notional principal amount of such interest rate
agreements does not exceed the aggregate principal
amount of such Indebtedness then outstanding or
(ii) under any currency hedging arrangements
entered into to protect the Company or any
Subsidiary against fluctuations in the value of
any currency and not for speculative purposes;
(e) ordinary course performance bonds, letters of
credit and appeal and surety bonds entered into
not in connection with borrowed money;
4
<PAGE>
(f) inter-company indebtedness owed to the Company
or any Restricted Subsidiary or any guarantee by
the Company or any Restricted Subsidiary of any
Indebtedness permitted to be incurred hereunder;
(g) the incurrence by the Company or any of its
Restricted Subsidiaries of additional
Indebtedness, so long as the aggregate principal
amount of such Indebtedness does not exceed $200
million at any one time outstanding; and
(h) Permitted Refinancing Indebtedness of any of
the Indebtedness permitted by clauses (a-g) above.
"INDEBTEDNESS" will mean at any time (without
duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of
such Person, and whether or not contingent, (i)
any obligation of such Person for money borrowed,
(ii) any obligation of such Person evidenced by
bonds, debentures, notes, guarantees or other
similar instruments, including, without
limitation, any such obligations incurred in
connection with acquisition of property, assets or
businesses, excluding trade accounts payable made
in the ordinary course of business, (iii) any
reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances
or similar facilities issued for the account of
such Person, (iv) any obligation of such Person
issued or assumed as the deferred purchase price
of property or services (but excluding trade
accounts payable or accrued liabilities arising in
the ordinary course of business, which in either
case are not more than 60 days overdue or which
are being contested in good faith), (v) any
Capital Lease Obligation of such Person, (vi) the
maximum fixed redemption or repurchase price of
Disqualified Capital Stock of such Person and, to
the extent held by other Persons, the maximum
fixed redemption or repurchase price of
Disqualified Capital Stock of such Person's
Restricted Subsidiaries at the time of
determination, (vii) the notional amount of any
interest hedging obligations or exchange rate
obligations of such Person at the time of
determination, (viii) any Attributable
Indebtedness with respect to any Sale and
Leaseback Transaction to which such Person is a
party and (ix) any obligation of the type referred
to in clauses (i) through (viii) of this
definition of
5
<PAGE>
another Person and all dividends and distributions
of another Person the payment of which, in either
case, such Person has guaranteed or is responsible
or liable, directly or indirectly, as obligor,
guarantor or otherwise. For purposes of the
preceding sentence, the maximum fixed repurchase
price of any Disqualified Capital Stock that does
not have a fixed repurchase price shall be
calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified
Capital Stock were repurchased on any date on
which Indebtedness shall be required to be
determined pursuant hereto; PROVIDED that if such
Disqualified Capital Stock is not then permitted
to be repurchased, the repurchase price shall be
the book value of such Disqualified Capital Stock.
The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date
of all unconditional obligations as described
above and the maximum liability of any guarantees
at such date; PROVIDED that for purposes of
calculating the amount of the Notes outstanding at
any date, such amount shall be the accreted value
thereof as of such date unless cash interest has
commenced to accrue pursuant to the terms of the
Notes, in which case the amount of the Notes
outstanding will be determined pursuant to the
terms of the Notes.
"ATTRIBUTABLE INDEBTEDNESS" will mean, with
respect to any Sale and Leaseback Transaction of
any Person, as at the time of determination, the
greater of (i) the capitalized amount in respect
of such transaction that would appear on the
balance sheet of such Person in accordance with
GAAP and (ii) the present value (discounted at a
rate consistent with accounting guidelines, as
determined in good faith by such Person) of the
payments during the remaining term of the lease
(including any period for which such lease has
been extended or may, at the option of the lessor,
be extended) or until the earliest date on which
the lessee may terminate such lease without
penalty or upon payment of a penalty (in which
case the rental payments shall include such
penalty).
"SALE AND LEASEBACK TRANSACTION" means, with
respect to any Person, any direct or indirect
arrangement pursuant to which property is sold or
transferred by such Person or a Restricted
Subsidiary of such Person and is thereafter
6
<PAGE>
leased back from the purchaser or transferee
thereof by such Person or one of its Restricted
Subsidiaries.
LIMITATION ON PLD Notwithstanding the foregoing, neither PLD nor any
INDEBTEDNESS of its direct or indirect Subsidiaries (including,
without limitation, PeterStar Company Limited,
Baltic Communications Limited, Technocom Limited,
ALTEL and CPY Yellow Pages Limited) (collectively,
the "PLD Companies") will directly or indirectly,
create, incur, assume or suffer to exist any
additional Indebtedness or any guarantees of any
Indebtedness.
The foregoing limitations will not prohibit:
(a) Existing Indebtedness of the PLD Companies;
(b) the incurrence by the PLD Companies of
Indebtedness consisting of Capital Lease
Obligations, Purchase Money Obligations, or other
obligations incurred for the purpose of financing
all or any part of the purchase price,
development, acquisition, construction or
improvement of real or personal property, tangible
or intangible, used or to be used in a Related
Business (other than any business specified in
clause (v) of the definition of Related Business)
or a credit facility or debt securities entered
into for the purpose of providing such financing,
PROVIDED that such Indebtedness (inclusive of the
interest portion thereof and reasonable costs of
financing) does not exceed the lesser of Fair
Market Value or the purchase price and related
costs of design, development, acquisition,
construction or improvement of such assets or
property at the time of such incurrence;
(c) the incurrence by the PLD Companies of any
Indebtedness entered into in the ordinary course
of business (i) pursuant to interest rate
agreements entered into to protect the PLD
Companies against fluctuations in interest rates
in respect to Indebtedness of any of the PLD
Companies so long as the notional principal amount
of such interest rate agreements does not exceed
the
7
<PAGE>
aggregate principal amount of such Indebtedness
then outstanding or (ii) under any currency
hedging arrangements entered into to protect the
PLD Companies against fluctuations in the value of
any currency and not for speculative purposes;
(d) ordinary course performance bonds, letters of
credit and appeal and surety bonds entered into
not in connection with borrowed money;
(e) Indebtedness between any of the PLD Companies
or any guarantee by any PLD Company of any
Indebtedness permitted to be incurred by any other
PLD Company hereunder;
(f) the incurrence by the PLD Companies of
additional Indebtedness, so long as the aggregate
principal amount of such Indebtedness does not
exceed $25.0 million at any one time outstanding;
and
(g) Permitted Refinancing Indebtedness of any of
the Indebtedness permitted by clauses (a-f) above.
RESTRICTED SUBSIDIARIES will mean (x) Metromedia
International Telecommunications, Inc., Snapper
and all other direct or indirect wholly-owned
subsidiaries of the Company that are incorporated
in any state in the United States, (y) Paging One
Services, GmbH (Austria), Romsat Cable TV & Radio,
SA (Romania) and Radio Balalon Juventus Kft.
(Hungary), to the extent each of the foregoing
constitutes Subsidiaries, and (z) each of the PLD
Companies, to the extent each of them constitutes
Subsidiaries.
DISQUALIFIED CAPITAL STOCK means, with respect to
any person, any Capital Stock which, by its terms
(or by the terms of any security into which it is
convertible or for which it is exchangeable), or
upon the happening of any event or the passage of
time, matures or becomes mandatorily redeemable,
pursuant to a sinking fund obligation or
otherwise, or becomes exchangeable for
Indebtedness at the option of the holder thereof,
or becomes redeemable at the option of the holder
thereof, in whole or in part, on or prior to the
Stated Maturity of
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<PAGE>
the Notes; PROVIDED such Capital Stock shall only
constitute Disqualified Capital Stock to the
extent it so matures or becomes so redeemable or
exchangeable on or prior to the Stated Maturity of
the Notes; PROVIDED, FURTHER, that any Capital
Stock that would not constitute Disqualified
Capital Stock but for provisions thereof giving
holders thereof the right to require such person
to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of
the Notes shall not constitute Disqualified
Capital Stock if the "asset sale" or "change of
control" provisions applicable to such Capital
Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in
"Limitation on Asset Sales" and "Change of
Control" described herein and such Capital Stock
specifically provides that such person will not
repurchase or redeem any such stock pursuant to
such provision prior to the Company's repurchase
of such Notes as are required to be repurchased
pursuant to the "Limitation on Asset Sales" and
"Change of Control" provisions described herein.
CONSOLIDATED LEVERAGE RATIO will mean the ratio of
(a) the total consolidated Indebtedness of the
Company and its consolidated Subsidiaries as of
the date of calculation (the "Determination Date")
to (b) two times the Consolidated Operating Cash
Flow of the Company and its consolidated
Subsidiaries for the most recent two fiscal
quarters for which financial information is
available (the "Reference Period") immediately
preceding such Determination Date, calculated in
accordance with GAAP and on a pro forma basis to
(i) include the results of any Person that is a
consolidated Subsidiary on such Determination Date
(or would become a consolidated Subsidiary in
connection with the transaction that requires the
determination of such Consolidated Operating Cash
Flow), (ii) exclude any Person that is not a
consolidated Subsidiary on such Determination Date
(or would cease to be a consolidated Subsidiary in
connection with the transaction that requires the
determination of such Consolidated Operating Cash
Flow ) and (iii) include or exclude, as the case
may be, the results of any operating business
acquired or disposed of by the Company or a
consolidated Subsidiary in such Reference Period.
9
<PAGE>
CONSOLIDATED OPERATING CASH FLOW will mean, with
respect to any period, Consolidated Net Income for
such period increased (without duplication), to
the extent deducted in calculating such
Consolidated Net Income by,
(a) Consolidated Income Tax Expense for such
period,
(b) Consolidated Interest Expense for such period,
and
(c) depreciation, amortization, minority interest
and any other non-cash items for such period
(other than any non-cash item which requires the
accrual of, or reserve for, cash charges for any
future period) of the Company and any consolidated
Subsidiary.
RELATED BUSINESS will mean, when used in reference
to any Person, that such Person is engaged
primarily in the business of, or providing
services related to the business of, (i) the
transmission of voice, video or data, including,
but not limited to, local and long-distance
wireline and wireless telephone services and
internet services, (ii) multi-channel television
services including wireline and wireless cable
television service, (iii) broadcast radio, (iv)
paging, (v) lawn and garden products and related
services and (vi) in the case of each of (i)
through (v) above, the construction of any
facilities related thereto or any businesses
reasonably related thereto, which determination
shall be made in good faith by the Board of
Directors.
PUBLIC EQUITY OFFERING will mean an underwritten
sale of Capital Stock (excluding Disqualified
Capital Stock) of the Company with gross proceeds
to the Company of at least $25 million.
STRATEGIC INVESTOR will mean any Person that is
(or a controlled Affiliate of any Person that is)
engaged principally in a Related Business.
AFFILIATE of any specified Person means any other
Person directly or indirectly controlling,
controlled by or under direct or indirect common
control with such specified Person. For purposes
of this definition, "control" (including, with
correlative meanings, the terms "controlling,"
"controlled by" and "under common
10
<PAGE>
control with"), as used with respect to any
Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the
direction of the management or policies of such
Person, whether through the ownership of voting
securities, by agreement or otherwise, provided
that the ability to vote 10% or more of the voting
securities of such Person shall constitute
control.
PERMITTED REFINANCING INDEBTEDNESS will mean any
amendments, supplements, modifications, deferrals,
renewals, extensions, substitutions, refundings,
defeasance, refinancings or replacements
(collectively, a "refinancing") of any
Indebtedness, including successive refinancings so
long as (i) the borrower under such refinancing is
the Company or, if not the Company, the same as
the borrower (or its successor) of the
Indebtedness being refinanced, (ii) the aggregate
principal amount (or accreted value) of the new
Indebtedness does not exceed the sum of (a) the
aggregate principal amount (or accreted value)
being refinanced, (b) the accrued interest
represented thereby, (c) the amount of expenses of
the Company or such borrower incurred in
connection with such refinancing, and (d) the
lesser of (x) the stated amount of any premium or
other payment required to be paid in connection
with such refinancing pursuant to the terms of the
Indebtedness being refinanced and (y) the amount
of premium actually paid at such time to refinance
the Indebtedness and (iii) in the case of any
refinancing of Subordinated Indebtedness, such new
Indebtedness is made subordinated to the Notes at
least to the same extent as the Indebtedness being
refinanced and such refinancing does not reduce
the Average Life to Stated Maturity or the Stated
Maturity of such Subordinated Indebtedness.
EXISTING INDEBTEDNESS of a Person means
Indebtedness of such Person in existence on the
Issue Date, until such amounts are repaid.
CAPITAL LEASE OBLIGATION means any obligation of a
Person and its subsidiaries on a consolidated
basis under any capital lease of real or personal
property which, in accordance with GAAP, has been
recorded as a capital lease obligation.
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<PAGE>
PURCHASE MONEY OBLIGATION of any Person means any
Indebtedness secured by a Lien on assets related
to the business of such Person and any additions,
replacements, modifications and accessions
thereto, which are purchased by such Person at any
time after the Notes are issued; PROVIDED that (i)
the security agreement or conditional sales or
other title retention contract pursuant to which
the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be
entered into within 180 days after the purchase or
substantial completion of the construction of such
assets and shall at all times be confined solely
to the assets so purchased or acquired, any
additions, replacements, modifications and
accessions thereto and any proceeds and products
therefrom, (ii) at no time shall the aggregate
principal amount of the outstanding Indebtedness
secured thereby be increased except in connection
with the purchase of additions and accessions
thereto and except in respect of commitment or
facility fees or other similar fees and other
similar obligations in respect of the incurrence
of such Indebtedness, and (iii) (A) the aggregate
outstanding principal amount of Indebtedness
secured thereby (determined on a per asset basis
in the case of any additions and accessions) shall
not at the time such Purchase Money Security
Agreement is entered into exceed 90% of the
purchase price to such Person of the assets
subject thereto or (B) the Indebtedness secured
thereby shall be with recourse solely to the
assets so purchased or acquired, any additions,
replacements, modifications and accessions thereto
and any proceeds and products therefrom.
FAIR MARKET VALUE means, with respect to any asset
or property, the sale value that would be
reasonably expected to be obtained in an arm's
length transaction between an informed and willing
seller under no compulsion to sell and an informed
and willing buyer under no compulsion to buy. Fair
Market Value shall be determined by the Board of
Directors of the Company acting in good faith and
shall be evidenced by a resolution of the Board of
Directors.
LIMITATIONS ON RESTRICTED The Company will not, and will not permit any
PAYMENTS Restricted Subsidiary to, (i) declare or pay any
dividends on, or make any distribution on account
of the Company's or
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any of its Restricted Subsidiaries' Capital Stock
(other than dividends or distributions solely in
Qualified Capital Stock or options, warrants or
other rights to acquire Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or
retire for value any of the Company's Capital
Stock; (iii) make any principal payment on, or
purchase, redeem, defease, retire or otherwise
acquire for value, prior to any scheduled
principal payment or maturity, any Subordinated
Indebtedness; or (iv) make any Investment in any
Person unless, and after giving effect thereto:
(a) no Default of Event of Default shall have
occurred; and
(b) after such Restricted Payment, the Company
could incur at least $1.00 of additional
indebtedness under the test given in "Limitation
on Indebtedness;"
(c) on a pro forma basis, the aggregate amount of
all Restricted Payments shall not exceed (in each
case without duplication) the sum of:
(i) the Cumulative Consolidated Operating
Cash Flow LESS a minority equity interest in
such Consolidated Operating Cash Flow in the
event a minority interest has not already
been deducted from Consolidated Operating
Cash Flow, LESS 150% of the Cumulative
Consolidated Interest Expense; PLUS
(ii) the Net Cash Proceeds received upon the
sale of Qualified Capital Stock or any
options, warrants or rights to purchase such
Qualified Capital Stock from the Company to
the extent not utilized to incur
Indebtedness under paragraph (c) of
"Limitations on Indebtedness" above; PLUS
(iii) the Net Cash Proceeds upon the
exercise of any options, warrants or rights
to purchase Qualified Capital Stock of the
Company; PLUS
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<PAGE>
(iv) Net Cash Proceeds received from the
conversion or exchange of debt securities or
Redeemable Capital Stock into Qualified
Capital Stock of the Company plus, to the
extent such debt securities or Redeemable
Capital Stock were issued after the issue
date the Net Cash Proceeds from their
original issuance; PLUS
(v) In the case of the disposition or
repayment of any Investment constituting a
Restricted Payment, an amount equal to the
lesser of (x) the cash return of capital
resulting from sale proceeds, dividends,
distributions, interest payments, return of
capital or principal, management fees or
other transfers of assets to the Company or
any Restricted Subsidiary or (y) the initial
amount of such Investment; LESS
(vi) amounts paid or payments made pursuant
to any of clauses (2), (3), (5) and (6)
below.
So long as no Default of Event of Default has
occurred and is continuing or would be caused
thereby, the foregoing provisions will not
prohibit:
(1) The payment of any dividend within 60 days
after the date of declaration, if at said date of
declaration such dividend would have complied with
(c) above;
(2) the repurchase, redemption, or other
acquisition or retirement for value of any shares
of any class of Qualified Capital Stock of the
Company in exchange for, or out of the Net Cash
Proceeds of a substantially concurrent sale of
Qualified Capital Stock of the Company;
(3) the repurchase, redemption, defeasance,
retirement, refinancing, acquisition for value or
payment of principal of any Subordinated
Indebtedness in exchange for, or out of the Net
Cash Proceeds of a substantially
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concurrent sale of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend or other
distribution by a Restricted Subsidiary to holders
of its Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other
acquisition or retirement for value of any
Qualified Capital Stock of the Company or any of
its Restricted Subsidiaries held by a member of
the Company's or such Restricted Subsidiary's
management, provided that the aggregate amount of
such repurchases in any calendar year shall not
exceed $1 million in any twelve-month period, plus
the aggregate cash proceeds provided to the
Company during such period from any reissuance of
Qualified Capital Stock to management;
(6) Investments in any Person engaged, or to be
engaged, principally in a Related Business on the
date of such investments; and
(7) Investments by Restricted Subsidiaries which
are lessees or buyers of Telecommunications Assets
under Telecommunications Assets Agreements in
transactions in which the monetary consideration
for such Telecommunications Assets is paid
immediately or is payable over time, PROVIDED that
such Investments shall be made as a sublease or
installment sale of the Telecommunications Assets
subject to the Telecommunications Asset Agreement
to which such Restricted Subsidiary is party as
lessee or buyer.
(8) Permitted Payments.
PERMITTED PAYMENTS will include:
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(a) Payments made under any tax sharing agreement
between or among the Company and its Restricted
Subsidiaries;
(b) The payment of dividends on the Company's
Convertible Preferred Stock in an aggregate amount
not to exceed $15.1 million in any calendar year;
and
(c) payments to Metromedia Company and any of its
Affiliates for reasonable legal, tax, accounting,
financial advisory and other management services
in the ordinary course of business, subject to
approval by disinterested members of the board of
directors of the Company.
QUALIFIED CAPITAL STOCK means any and all Capital
Stock of a Person other than Disqualified Capital
Stock.
CAPITAL STOCK means (i) with respect to any Person
that is a corporation, any and all shares,
interests, participations or other equivalents
(however designated and whether or not voting) of
corporate stock, including each class of common
stock and preferred stock of such Person and (ii)
with respect to any Person that is not a
corporation, any and all partnership, membership
or other equity interest of such Person.
STATED MATURITY means, when used with respect to
any Indebtedness or any installment of interest
thereon, the dates specified in such Indebtedness
as the fixed date on which the principal of such
Indebtedness or such installment of interest, as
the case my be, is due and payable.
CONSOLIDATED INTEREST EXPENSE will mean, without
duplication, for any period, the sum of (a) the
interest expense of such person and its
subsidiaries for such period, on a consolidated
basis in accordance with GAAP, including without
limitation, (i) amortization of debt discount,
(ii) the net costs associated with Interest Rate
Agreements and Currency Hedging Agreements, (iii)
the interest portion of any deferred payment
obligation, and (iv) accrued interest, plus (b)
the interest component
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of capital lease obligations paid, accrued and/or
scheduled to be paid or accrued by such Person and
its consolidated Subsidiaries, plus (c) the
aggregate amount for such period of cash dividends
paid on any Redeemable Capital Stock or Preferred
Stock of the Company and its consolidated
Subsidiaries, in each case on a consolidated basis
in accordance with GAAP.
CUMULATIVE CONSOLIDATED OPERATING CASH FLOW and
CUMULATIVE CONSOLIDATED INTEREST EXPENSE will
mean, on any date of determination, the cumulative
Consolidated Operating Cash Flow and Consolidated
Interest Expense, as the case may be, realized
during the period commencing on the issue date of
the Notes and ending on the last day of the most
recent fiscal quarter immediately preceding the
date of determination for which consolidated
financial information is available.
TELECOMMUNICATIONS ASSETS means, with respect to
any Person, assets (including, without limitation,
rights of way, trademarks and licenses and
licenses to use copyrighted material), that are
utilized by such Person, directly or indirectly,
in a Telecommunications Business.
Telecommunications Assets shall also include
stock, joint venture or partnership interest in
another Person, provided that substantially all of
the assets of such other Person consist of
Telecommunications Assets. The determination of
what constitutes Telecommunications Assets shall
be made by the Board of Directors of the Company.
TELECOMMUNICATIONS ASSET AGREEMENT means a lease
or installment sale agreement where title is
transferred to the buyer pursuant to which a
Leasing Company leases or sells, in a transaction
in which the monetary consideration therefor is
paid immediately or is payable over time,
Telecommunications Assets that consist of
equipment and rights acquired in connection with
the lease or sale thereof (including, without
limitation, software licenses) to a Restricted
Subsidiary or Qualified Joint Venture in the
Russian Federation and Kazakhstan, which lease or
installment sale agreement will be Collateral,
provided that if the lessor or seller does not
retain title to such Telecommunications Assets
until payment of the full amount of the lease
payments or purchase price due from
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the lessee or purchaser, such Telecommunications
Assets are subject to all necessary pledges,
assignments, mortgages, trusts, liens or other
security interests which are valid and perfected
so as to create a first priority interest under
Russian or Kazakh law, as applicable.
TELECOMMUNICATIONS BUSINESS means the business of
(i) transmitting, or providing services relating
to the transmission of, voice, video or data
through owned or leased transmission facilities,
(ii) creating, developing or marketing
communications related network equipment, software
and other devices for use in (i) above or (iii)
evaluating, participating or pursuing any other
activity or opportunity that is related to those
specified in (i) or (ii) above and includes,
without limitation, any business which the PLD and
its direct and indirect Subsidiaries are currently
engaged.
LEASING COMPANY means a special purpose Cypriot
corporation which is a wholly-owned Subsidiary
organized for the limited purpose of acquiring
Telecommunications Assets and leasing such
Telecommunications Assets to direct or indirect
Subsidiaries of PLD pursuant to Telecommunications
Asset Leases and/or making investments in a
Telecommunications Company primarily engaged or
proposing to engage in the Telecommunications
Business in the Russian Federation or Kazakhstan.
QUALIFIED JOINT VENTURE means a Joint Venture in
which PLD owns directly or indirectly Voting Stock
thereof and any future Joint Venture in which PLD
owns 20% or more of the Voting Stock thereof.
JOINT VENTURE means a Telecommunications Company
of which less than 50 percent of the Voting Stock
is held by PLD, provided that the
Telecommunications Business of such Person is
principally conducted in the Russian Federation
and/or Kazakhstan.
TELECOMMUNICATIONS COMPANY means any Person
substantially all of the assets of which consist
of Telecommunications Assets.
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VOTING STOCK means, with respect to any Person,
securities of any class or classes of Capital
Stock in such Person entitling the holders thereof
(whether at all times or at the times that such
class of Capital Stock has voting power by reason
of the happening of any contingency) to vote in
the election of members of the board of directors
or comparable body of such Person.
TRANSACTIONS WITH AFFILIATES The Company will not permit, and will not permit
any of its Restricted Subsidiaries to, engage in
an Affiliate Transaction unless (a) such Affiliate
Transaction is on terms that are not materially
less favorable, in the aggregate, to the Company
or such Restricted Subsidiary, as applicable, than
those that would have been obtained in a
comparable transaction by the Company or such
Restricted Subsidiary, as applicable, on an arms
length basis with a Person that is not an
Affiliate; and (b) the Company delivers to the
Trustee:
(i) for transactions >$5 million, a
resolution of the Board of Directors
certifying that the transaction complies
with (a) above and has been approved by a
majority of the disinterested members of the
Board of Directors; and
(ii) for transactions >$10 million, an
opinion as to the fairness of the
transaction issued by an investment banking
firm.
PROVIDED, however that this covenant does not
apply to:
(i) compensation or employee benefit
arrangements in the ordinary course of
business;
(ii) any transaction solely between or among
the Company and/or any Restricted
Subsidiary;
(iii) transactions with any Persons engaged
in a Related Business that is an Affiliate
solely because the Company has a direct or
indirect equity interest in such Person;
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(iv) payment of reasonable and customary fees to
directors who are not employees of the Company;
(v) sales of equity interests of the Company
(other than Disqualified Capital Stock) to
Affiliates of the Company;
(vi) any transaction permitted under the covenant
"Limitation on Restricted Payments;"
(vii) advances to employees in the ordinary course
of business in an aggregate amount not to exceed
$2.0 million;
(viii) any transaction with an officer or director
in the ordinary course of business not involving
more than $100,000 in any one case and in an
aggregate amount not to exceed $2.0 million; and
(ix) Affiliate Transactions (and replacements
thereof) in effect or approved by the Board of
Directors at the time of the Issue Date.
CREATION OF ADDITIONAL The Company agrees that (i) from May 18, 1999
PLD ASSETS through the second anniversary of the Issue Date,
at least $15.0 million of additional PLD Assets
that would be classified as "property and
equipment" on PLD's consolidated balance sheet
will be acquired by one of the PLD Companies (such
assets referred to as the "Additional PLD Assets")
and (ii) to the extent it acquires Pivotel Assets
or properties prior to such date, without using
Purchase Money Obligations, it shall cause such
assets to become Additional PLD Assets.
PIVOTEL ASSETS means the Pivotel
telecommunications switches and nodes located in
New York and London, transatlantic cables,
European cables, upgraded switches in St.
Petersburg and Moscow and related
telecommunications equipment.
LIMITATION ON LIENS The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly,
create, incur, assume or suffer to exist or affirm
any Lien of any kind upon any
20
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property or assets of the Company or any
Restricted Subsidiary unless the Notes are
directly secured equally and ratably with the
obligation or liability secured by such Lien
except for any Permitted Liens.
PERMITTED LIENS will include:
(a) Any Lien existing on the date of the
Indenture;
(b) Any Lien arising in connection with court
judgements, taxes, workmen's compensation, zoning
restrictions, easements and rights of way that do
not materially impair operation of the business,
performance bids, contracts, leases, statutory
obligations, surety and appeal bonds, letters of
credit and other obligations incurred in the
ordinary course of business;
(c) any lien securing obligations in connection
with Indebtedness permitted under that Section of
the Indenture described in clauses (b), (d), (e),
(g) and (h) (to the extent the Indebtedness to
which the Permitted Refinancing Indebtedness
relates was secured) of the first paragraph of
"Limitations on Indebtedness" above; and
(d) any PLD Company Permitted Liens.
LIMITATIONS ON LIENS OF PLD In addition to the foregoing, none of the PLD
ASSETS Companies will directly or indirectly create,
incur, assume or suffer to incur or affirm any
Lien of any kind upon any PLD Asset, unless the
Notes are directly secured equally and ratably
with the obligation or liability secured by such
Lien except for any PLD Company Permitted Liens.
PLD COMPANY PERMITTED LIENS will include:
(a) any Lien existing on the date of the
Indenture;
(b) any Lien arising in connection with court
judgments, taxes, workmen's compensation, zoning
restrictions, easements and rights of way that do
not materially impair operation of the business,
performance bids, contracts, leases, statutory
allegations, surety and
21
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appeal bonds, letters of credit and other
obligations incurred in the ordinary course of
business; and
(c) any Lien securing obligations in connection
with Indebtedness permitted under that section of
the Indenture described in clauses (b), (c), (d),
(f) and (g) (to the extent the Indebtedness to
which the Permitted Refinancing Indebtedness
relates was secured) of "Limitations on PLD
Indebtedness" above.
LIMITATION ON ASSET The Company and its Restricted Subsidiaries will
SALES not engage in an Asset Sale unless: (a) the
Company receives consideration equal to the Fair
Market Value of the assets sold, and (b) at least
80% of the consideration received is cash paid at
closing of such transaction, marketable securities
or comparable consideration, provided that the
amount of any liabilities of the Company or any
Restricted Subsidiary as shown on the Company's or
such Restricted Subsidiary's most recent balance
sheet or in the notes thereto that are assumed by
the transferee of any such assets shall be deemed
to be cash for the purpose of this paragraph. To
the extent that the Company or any of its
Restricted Subsidiaries receives securities or
other noncash property or assets as proceeds of an
Asset Sale, such securities or other noncash
proceeds will not be treated as Net Proceeds of an
Asset Sale unless and until the Company receives
cash or Cash Equivalents from a sale, repayment,
exchange or other return of capital on, such
securities or other noncash property and then only
to the extent of the cash received.
In the event of an Asset Sale involving PLD Assets
(other than Telecommunications Assets subject to a
Telecommunications Asset Agreement), the Company
will, after applying the net proceeds therefrom to
repay and permanently reduce other Existing
Indebtedness that by its terms requires such
repayment from such Asset Sale, be required to use
50% of the net proceeds of such Asset Sale to make
an offer to purchase Notes at 100% of their
accreted value, provided, however, that the
Company will not be required to make an offer to
purchase the Notes under this provision in an
amount less than $10 million; provided, further,
that to the extent that 50% of the net proceeds of
an Asset Sale of PLD Assets
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<PAGE>
do not exceed $10 million, such amount shall
constitute Excess Proceeds and once such Excess
Proceeds exceed $10 million, the Company will be
required to use such Excess Proceeds to make an
offer to purchase the Notes at 100% of their
accreted value.
The Company or a Restricted Subsidiary will be
permitted to apply the net proceeds from an Asset
Sale or the remaining proceeds from an Asset Sale
of PLD Assets following the offer to purchase
described above to (a) repay the Notes, any
Existing Indebtedness (or any Permitted
Refinancing Indebtedness thereof) or any PARI
PASSU Indebtedness if required by the terms
thereof or (b) reinvest in Assets of a Related
Business, provided that (i) in the case of PLD
Assets, the net proceeds remaining after the offer
to purchase described above, if any, must be
applied within 365 days of such Asset Sale and
(ii) in the case of an Asset Sale of any assets
other than PLD Assets, the net proceeds must be
applied within 2 years of such Asset Sale. To the
extent that the net proceeds from an Asset Sale
are not so applied within such periods, the
remaining net proceeds will constitute Excess
Proceeds. Once Excess Proceeds exceed $10 million,
the Company will be required to use such Excess
Proceeds to make an offer to purchase the Notes at
100% of their accreted value.
ASSET SALE will mean any sale, issuance,
conveyance, transfer, lease or other disposition,
directly or indirectly, in one or a series of
transactions, of (i) any Capital Stock of any
Subsidiary, (ii) all or substantially all of the
properties and assets of any division or line of
business of the Company or its Subsidiaries, or
(iii) any other properties and assets of the
Company or any Subsidiary other than in the
ordinary course of business, provided, however,
that the term "Asset Sale" shall not include any
sale or transfer of properties and assets (A) that
is by the Company to any Restricted Subsidiary or
by any Restricted Subsidiary to the Company or any
other Restricted Subsidiary, (B) that is of
obsolete equipment in the ordinary course of
business, (C) the Fair Market Value of which in
the aggregate does not exceed $10 million in any
transaction or series of related transactions, (D)
that is permitted under the "Limitations on
Restricted Payments" covenant above, (E) which
constitutes the
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<PAGE>
granting of any Permitted Lien or (F) that is
transferred in exchange for Related Assets.
LIMITATION ON SALE AND The Company will not, and will not permit any
LEASEBACK TRANSACTIONS Restricted Subsidiary to, directly or indirectly,
enter into any Sale-Leaseback Transaction with
respect to any property or assets unless:
(a) The consideration received at the time of the
Sale-Leaseback Transaction is at least equal to
the Fair Market Value of the property or asset;
(b) the sale or transfer of such property or
assets to be leased is treated as an Asset Sale
and complies with the "Limitation on Sale of
Assets" covenant;
(c) the Company or such Restricted Subsidiary
would be entitled under the "Limitation on
Indebtedness" covenant to incur any Indebtedness.
The foregoing restriction does not apply to any
Sale-Leaseback Transaction if:
(i) the lease is for a period, including renewal
rights, not in excess of three years;
(ii) the transaction is solely between the Company
and any Restricted Subsidiary or any Restricted
Subsidiary and any other Restricted Subsidiary;
and
(iii) the transaction is consummated within 180
days of the acquisition by the Company or its
Subsidiary of the property or entered into within
180 days after the purchase or substantial
completion of the construction of such property or
assets or 270 days in the event that the only
condition delaying such consummation is the
receipt of applicable regulatory approvals.
DIVIDEND AND OTHER PAYMENT The Company will not, and will not permit any of
RESTRICTIONS AFFECTING its Restricted Subsidiaries to, create or cause or
SUBSIDIARIES suffer to exist or become effective any
encumbrance or restriction on the ability of any
Subsidiary to (a) pay dividends or make any other
distribution to the Company or any of its
Restricted Subsidiaries (i) on its capital stock
or (ii) with
24
<PAGE>
respect to any other interests or participation
in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any of its
Restricted Subsidiaries (c) sell, lease or
transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions
under:
(i) Existing Indebtedness;
(ii) Applicable law;
(iii) agreements in effect at the time of the
acquisition of any Person by the Company or any of
its Restricted Subsidiaries, which agreements are
not entered into in connection with, as a result
of, or in anticipation of, such acquisition;
(iv) encumbrances or restrictions imposed pursuant
to contracts in connection with Permitted Liens;
(v) any encumbrances or restrictions imposed
pursuant to contracts for the sale of assets;
(vi) any encumbrance or restriction existing under
any agreement that extends, renews, refinances or
replaces the agreements containing the
encumbrances or restrictions in the foregoing
clauses, provided that such provisions are no less
favorable to the Company.
LIMITATIONS ON MERGER, The Company may not consolidate or merge with or
CONSOLIDATION OR SALE OF into or sell, assign, transfer, lease, convey or
ASSETS otherwise dispose of all or substantially all of
its assets unless:
(a) the Company is the surviving corporation, or
the entity surviving such consolidation or merger
is a corporation existing under the laws of the
United States or a state thereof;
(b) the surviving entity expressly assumes all the
obligations of the Company pursuant to a
supplemental indenture;
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<PAGE>
(c) except for a transaction with a Wholly Owned
Subsidiary, the entity formed by such transaction
could incur at least $1.00 of additional
Indebtedness under the covenant "Limitation on
Indebtedness" described above;
(d) the Company shall have delivered to the
Trustee, an Officers' Certificate and an opinion
of counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture
comply with the Indenture; and
(e) before and after giving effect to such
transaction, no Default or Event of Default shall
have occurred and be continuing.
