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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 11, 1999
PEOPLE'S CHOICE TV CORP.
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(Exact name of registrant as specified in its charter)
Delaware 0-21920 06-1366643
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(State or other juris- (Commission File Number) (IRS Employer
diction of incorporation) Identification No.)
2 Corporate Drive
Shelton, Connecticut 06484
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(Address of principal executive offices) (Zip Code)
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(203) 925-7900
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(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name or former address, if changed from last report)
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Item 5. Other Events.
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(a) On April 12, 1999, People's Choice TV Corp. (the "Company") entered into an
Agreement and Plan of Merger, dated as of April 12, 1999 (the "Merger
Agreement"), with Sprint Corporation ("Sprint") and MM Acquisition Corp., a
wholly owned subsidiary of Sprint ("Merger Sub"). Pursuant to the terms and
subject to the conditions of the Merger Agreement, Merger Sub will merge with
and into the Company (the "Merger"), with the Company as the surviving
corporation. As a result of the Merger, each outstanding share of common stock,
par value $.01 per share (the "Common Stock") of the Company (other than shares
owned by Sprint, Merger Sub or held by the Company as treasury stock or shares
with respect to which the holders have perfected appraisal rights under Delaware
law) will be converted into the right to receive $8.00 per share in cash. The
foregoing description is qualified in its entirety by reference to the Merger
Agreement which is attached hereto as Exhibit 2.1 and is incorporated herein by
reference.
(b) On April 12, 1999, as a condition and inducement to Sprint entering into the
Merger Agreement, Matthew Oristano, the Company's Chairman and Chief Executive
Officer, and members of Mr. Oristano's family and family trusts and foundations
(collectively, the "Oristano Stockholders"), who beneficially own or have the
power to vote shares of the Common Stock representing 10.5% of the outstanding
Common Stock of the Company, entered into an agreement with Sprint (the
"Stockholder and Option Agreement") pursuant to which the Oristano Stockholders,
among other things, have granted an option in favor of Sprint with respect to
the Common Stock held by the Oristano Stockholders, subject to certain terms and
conditions. The foregoing description of the Stockholder and Option Agreement
contained herein is qualified in its entirety by reference to the Stockholder
and Option Agreement, which is attached hereto as Exhibit 10.1 and is
incorporated herein by reference.
(c) On April 11, 1999, the Board of Directors of the Company authorized and
declared a distribution of one right (a "Right") for each of its outstanding
shares of Common Stock. The distribution is payable as of April 22, 1999 (the
"Record Date") to holders of record of shares of Common Stock on that date. Each
Right entitles the registered holder thereof to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $.01 per share, of the Company ("Series A Preferred Stock") at a price of
$35.00 (the "Exercise Price"), subject to certain adjustments. The description
and terms of the Rights will be set forth in a Rights Agreement, as the same may
be amended from time to time (the "Rights Agreement"), between the Company and
Harris Trust Company of New York, as rights agent (the "Rights Agent").
Initially the Rights will not be exercisable, certificates will not be sent
to stockholders and the Rights will automatically trade with the shares of
Common Stock.
The Rights, unless earlier redeemed or exchanged by the Board of Directors,
become exercisable upon the close of business on the day (the "Distribution
Date") which is the earlier of (i) the tenth day following a public announcement
that a person or group of affiliated or associated persons (other than certain
exceptions set forth below, an "Acquiring Person") which has acquired beneficial
ownership or voting control of 15% or more of the outstanding shares of Common
Stock of the Company, (ii) the tenth business day (or such later date as may be
determined by the Board of Directors prior to such time as any person or group
of affiliated or associated persons becomes an Acquiring Person) after the date
of the commencement or public announcement of a person's or group's intention to
commence a tender or exchange offer the consummation of which would result in
the acquisition of beneficial ownership or voting control of 15% or more of the
Company's outstanding shares of Common Stock (even if no shares of Common Stock
are actually acquired pursuant to such offer) or (iii) the Expiration Date (as
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defined therein). Prior to a Distribution Date, the Rights will not be
exercisable, will not be represented by a separate certificate, and will not be
transferable apart from the shares of Common Stock, but will instead be
evidenced, with respect to any of the Common Stock certificates outstanding as
of the Record Date, by such Common Stock certificate itself. An Acquiring Person
does not include (i) the Company, (ii) any subsidiary of the Company, (iii) any
employee benefit plan of the Company or of any subsidiary of the Company, or any
trust or other entity holding shares of Common Stock for or pursuant to the
terms of any such plan, or (iv) any person or group of affiliated or associated
persons whose beneficial ownership or voting control of 15% or more of the
outstanding shares of Common Stock of the Company results solely from a
reduction in the number of outstanding shares of Common Stock of the Company
(provided that any such person or group that does not become an Acquiring Person
by reason of the exception provided by this clause (iv) shall become an
Acquiring Person upon acquisition of any additional outstanding shares of Common
Stock unless such acquisition of additional shares of Common Stock will not
result in such person or group becoming an Acquiring Person). In addition,
Sprint and Merger Sub shall not be deemed to be an "Acquiring Person" solely by
virtue of their acquisition of preferred stock of the Company pursuant to the
Securities Purchase and Option Agreement between Sprint and Wireless Holding
LLC, dated as of April 2, 1999, or the acquisition of Common Stock pursuant to
or otherwise permitted by the Merger Agreement or any other agreement
contemplated thereby.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), new certificates for shares of Common Stock issued after the
Record Date will contain a legend incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), the surrender for transfer of shares of Common Stock
outstanding as of the Record Date also will constitute the transfer of the
Rights attaching to such shares. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of shares of Common Stock as
of the close of business on the Distribution Date, and such separate Rights
Certificates alone will evidence the Rights from and after the Distribution
Date.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on April 22, 2009 (the "Final Expiration Date"),
unless earlier redeemed or exchanged by the Company as described below.
The number of one one-thousandths of a share of Series A Preferred Stock
issuable upon exercise of the Rights is subject to certain adjustments from
time to time in the event of a share distribution on, or a subdivision or
combination of, the Common Stock. The Exercise Price for the Rights is subject
to adjustment in certain events.
Unless the Rights are earlier redeemed or exchanged, in the event that a
person or group of affiliated or associated persons becomes an Acquiring
Person, the Rights Agreement provides that each holder of record of a Right,
other than the Acquiring Person (whose Rights will thereupon become null and
void), will thereafter have the right to receive, upon payment of the Exercise
Price, that number of shares of Common Stock having a market value at the time
of the transaction equal to two times the Exercise Price.
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In addition, unless the Rights are earlier redeemed or exchanged, in the
event that after the time that a person or group of affiliated or associated
persons becomes an Acquiring Person the Company were to be acquired in a merger
or other business combination (in which any shares are changed into or exchanged
for other securities or assets) or more than 50% of the assets or earning power
of the Company and its subsidiaries (taken as a whole) were to be sold or
transferred in one or a series of related transactions, the Rights Agreement
provides that proper provision will be made so that each holder of record of a
Right, other than the Acquiring Person (whose rights will thereupon become null
and void), will from and after such date have the right to receive, upon payment
of the Exercise Price, that number of shares of common stock of the acquiring
company having a market value at the time of such transaction equal to two times
the Exercise Price.
At any time on or prior to the earlier of (i) the close of business on the
tenth day after a public announcement that a person or group of affiliated or
associated persons has become an Acquiring Person (or such earlier or later date
as may be authorized by the Board of Directors), or (ii) the Expiration Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right ("Redemption Price"), payable at the election of the Company in cash,
shares of Common Stock or other consideration determined to be appropriate by
the Board of Directors. Following the effective time of the action of the Board
of Directors authorizing redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of the Rights will be to
receive the Redemption Price.
For as long as the Rights are then redeemable, the Company may, except with
respect to the Redemption Price or date of expiration of the Rights, amend the
Rights in any manner, including an amendment to extend the time period in which
the Rights may be redeemed. At any time when the Rights are not then redeemable,
the Company may amend the Rights in any manner that does not materially
adversely affect the interests of holders of the Rights as such.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive distributions.
The foregoing description is qualified in its entirety by reference to the
form of Rights Agreement, which includes as Exhibit B the form of Summary of
Rights to Purchase Shares of Series A Junior Participating Preferred Stock and
as Exhibit C the form of Rights Certificate, which is attached hereto as Exhibit
4.1 and is incorporated herein by reference.
A copy of the press release announcing the foregoing transactions is
attached hereto as Exhibit 99.1 and is incorporated herein by reference.
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Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial statements of business acquired: None
(b) Pro forma financial information: None
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of April 12, 1999
among People's Choice TV Corp., Sprint Corporation and MM
Acquisition Corp.
4.1 Form of Rights Agreement, dated as April 12, 1999 between
People's Choice TV Corp. and Harris Trust Company of
New York, as Rights Agent.
10.1 Stockholder and Option Agreement, dated as of April 12, 1999
among Sprint Corporation, Matthew Oristano and
other parties named therein.
99.1 Press Release issued by People's Choice TV Corp. on
April 12, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PEOPLE'S CHOICE TV CORP.
By: /s/ Matthew Oristano
--------------------
Chairman and Chief Executive Officer
Date: April 14, 1999
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EXHIBIT INDEX
Exhibit
Number Description
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2.1 Agreement and Plan of Merger, dated as of April 12, 1999 among
People's Choice TV Corp., Sprint Corporation and MM Acquisition
Corp.
4.1 Rights Agreement, dated as of April 12, 1999 between People's
Choice TV Corp. and Harris Trust Company of New York, as Rights
Agent.
10.1 Stockholder and Option Agreement, dated as of April 12, 1999
among Sprint Corporation, Matthew Oristano and other parties
named therein.
99.1 Press Release issued by People's Choice TV Corp.
April 12, 1999.
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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
AMONG
SPRINT CORPORATION,
MM ACQUISITION CORP.
AND
PEOPLE'S CHOICE TV CORP.
DATED AS OF APRIL 12, 1999
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 12,
1999, by and among Sprint Corporation, a Kansas corporation ("Parent"), MM
Acquisition Corp., a Delaware corporation ("Buyer") and wholly owned subsidiary
of Parent, and People's Choice TV Corp., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement desire to effect the acquisition of
the Company by Buyer;
WHEREAS, in furtherance of the foregoing, upon the terms and subject to the
conditions of this Agreement and in accordance with the Delaware General
Corporation Law of the State of Delaware (the "DGCL"), Buyer will merge with and
into the Company (the "Merger") in accordance with the provisions of the DGCL,
with the Company as the surviving corporation;
WHEREAS, as of the date hereof, Matthew Oristano, members of his family and
family trusts and foundations (collectively, the "Oristano Stockholders")
beneficially own or have the power to vote shares of the common stock, par value
$.01 per share, of the Company (including any and all rights to be attached
thereto to acquire shares of preferred stock of the Company pursuant to the
Rights Plan (as hereinafter defined), and any other rights associated therewith,
to be adopted by the Company pursuant to Section 5.21, the "Company Common
Stock"), representing approximately 10.5% of the outstanding Company Common
Stock;
WHEREAS, concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to Parent entering into this Agreement, the
Oristano Stockholders have entered into a stockholder's agreement, dated as of
the date hereof (the "Stockholder's Agreement"), pursuant to which, among other
things, the Oristano Stockholders have granted an option in favor of Parent with
respect to the shares of Company Common Stock held by the Oristano Stockholders,
subject to the terms and conditions contained therein;
WHEREAS, the Board of Directors of the Company has unanimously determined
that the Merger and this Agreement are fair to, and in the best interests of,
the Company and the holders of Company Common Stock;
WHEREAS, the Board of Directors of Parent and Buyer have each approved this
Agreement and the Merger, upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of the Company has unanimously approved
this Agreement and the Merger, and the transactions contemplated hereby, which
approval was based in part on the opinions of Chase Securities, Inc. and
Houlihan Lokey Howard & Zukin Capital (the "Independent Advisors"), independent
financial advisors to the Board of Directors of the Company, that, as of the
date of such opinions and based on the assumptions, qualifications and
limitations contained therein, the consideration to be received by the Company's
stockholders for
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their shares of Company Common Stock in the Merger is fair, from a financial
point of view, to these stockholders;
WHEREAS, the Board of Directors of the Company has unanimously resolved to
recommend acceptance of the Merger to the holders of the Company Common Stock
and has determined that the consideration to be paid for each share of Company
Common Stock in the Merger is fair to the holders of the Company Common Stock
and to recommend that the holders of the Company Common Stock approve the
Merger, this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the DGCL, at the Effective Time (as
hereinafter defined), Buyer shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Buyer shall cease and
the Company shall continue as the surviving corporation following the Merger
(the "Surviving Corporation"). The corporate existence of the Company, with all
its purposes, rights, privileges, franchises, powers and objects, shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the laws of the State of Delaware.
Section 1.2. Effective Time; Closing. As promptly as practicable (and in
any event within five (5) business days) after the satisfaction or waiver of the
conditions set forth in Article VI hereof, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger or certificate of
ownership and merger, if applicable (the "Certificate of Merger"), with the
Secretary of State of the State of Delaware and by making all other filings or
recordings required under the DGCL in connection with the Merger, in such form
as is required by, and executed in accordance with the relevant provisions of,
the DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or at
such other time as the parties hereto agree shall be specified in the
Certificate of Merger (the date and time the Merger becomes effective, the
"Effective Time"). On the date of such filing, a closing (the "Closing") shall
be held at 10:00 a.m., Eastern Standard Time, at the offices of the King &
Spalding, 1185 Avenue of the Americas, New York, New York 10036, or at such
other time and location as the parties hereto shall otherwise agree.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Buyer shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and Buyer
shall become
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the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
Section 1.4. Conversion of Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of Buyer, the Company or
the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares canceled pursuant to
Section 1.4(c) and Dissenting Shares (as defined in Section 1.5), if any) shall
be canceled and, subject to Section 1.5, shall by virtue of the Merger and
without any action on the part of the holder thereof be converted automatically
into the right to receive an amount in cash equal to $8.00 payable, without
interest, to the holder of such share of Company Common Stock, upon surrender of
the certificate that formerly evidenced such share of Company Common Stock in
the manner provided in Section 1.7 (the "Merger Consideration"); provided, if
prior to the consummation of the Merger, Parent or any of its affiliates
purchases, or enters into an option to purchase, shares of Company Common Stock
at a price per share in excess of the Merger Consideration, the Merger
Consideration shall be increased to the highest such price per share;
(b) Each share of Preferred Stock (as hereinafter defined) issued and
outstanding immediately prior to the Effective Time (other than shares canceled
pursuant to Section 1.4(c)) shall continue to be an issued and outstanding share
of Preferred Stock of the Surviving Corporation following the Effective Time;
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is owned by Parent or Buyer and
each share of Company Common Stock and Preferred Stock (collectively, "Company
Stock") that is owned by the Company as treasury stock shall be canceled and
retired and cease to exist and no payment or distribution shall be made with
respect thereto;
(d) At the Effective Time, all shares of the Company Common Stock
converted pursuant to Section 1.4(a) shall no longer be outstanding and shall
automatically be canceled and retired and cease to exist, and each holder of a
certificate ("Certificate") representing any such shares of Company Common Stock
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration in accordance with Section 1.4(a).
(e) Each share of common stock, par value $1.00 per share, of Buyer
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock, par value $1.00 per share, of the Surviving Corporation and
shall constitute the only outstanding shares of capital stock of the Surviving
Corporation.
Section 1.5. Dissenting Shares.
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(a) Notwithstanding anything in this Agreement to the contrary, shares
of Company Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by holders of Company Stock (the "Company
Stockholders") who have demanded
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and perfected their demands for appraisal of such shares of Company Stock in the
time and manner provided in Section 262 of the DGCL and, as of the Effective
Time, have neither effectively withdrawn nor lost their rights to such appraisal
and payment under the DGCL (the "Dissenting Shares") shall not be converted as
described in Section 1.4(a), but shall, by virtue of the Merger, be entitled to
only such rights as are granted by Section 262 of the DGCL; provided, however,
that if such holder shall have failed to perfect or shall have effectively
withdrawn or lost his, her or its right to appraisal and payment under the DGCL,
such holder's shares of Company Stock shall thereupon be deemed to have been
converted, at the Effective Time, as described in Section 1.4(a), into the right
to receive the Merger Consideration set forth in such provisions, without any
interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal pursuant to Section 262 of the DGCL received by the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent or
as otherwise required by applicable law, make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
Section 1.6. Stock Option Plans. The Company shall take all commercially
reasonable efforts necessary to ensure that, pursuant to the Company's 1993 Key
Employee Non-qualified Stock Option Plan, 1993 Founders Non-qualified Option
Plan and 1993 Stock Option Plan (collectively, the "Company Stock Option
Plans"), all outstanding options to acquire Company Common Stock (the "Company
Options") granted under the Company Stock Option Plans shall be exercisable in
full immediately prior to the consummation of the Merger and all Company Options
that are not exercised prior to the consummation of the Merger will terminate
and expire as of the consummation date of the Merger. In addition, the Company
shall, by written notice to each holder of Company Options, offer to pay such
holder upon the consummation of the Merger, in exchange for the cancellation of
such holder's Company Options (regardless of exercise price) upon the
consummation of the Merger, an amount in cash determined by multiplying (A) the
excess, if any, of the Merger Consideration over the applicable exercise price
per share of the Company Option by (B) the number of shares of Company Common
Stock such holder could have purchased had such holder exercised such Company
Option in full immediately prior to the consummation of the Merger (such amount,
the "Option Consideration"), and each such Company Option shall thereafter be
canceled.
Section 1.7. Surrender of Shares of Company Common Stock; Stock
Transfer Books.
--------------------------------------------------
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company to act as agent (the "Paying Agent") for the holders of shares of
Company Common Stock reasonably acceptable to the Company to receive the funds
necessary to make the payments to such holders pursuant to Section 1.4 upon
surrender of their Certificates. Parent will, on or prior to the Effective Time,
deposit with the Paying Agent the Merger Consideration to be paid in respect of
the shares of Company Common Stock (the "Fund"). The Fund shall be invested by
the Paying Agent as directed by Parent. Any net profit resulting from, or
interest or income produced by, such investments, shall be payable to the
Surviving Corporation. Parent shall
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replace any monies lost through any investment made pursuant to this Section
1.7(a). The Paying Agent shall make the payments provided in Section 1.4.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of shares of Company Common Stock entitled to receive the Merger
Consideration pursuant to Section 1.4 a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates pursuant to such letter of transmittal. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration for each share of Company Common Stock formerly evidenced
by such Certificate, and such Certificate shall then be canceled. Until so
surrendered, each such Certificate shall, at and after the Effective Time,
represent for all purposes, only the right to receive such Merger Consideration.
No interest shall accrue or be paid to any beneficial owner of shares of Company
Common Stock or any holder of any Certificate with respect to the Merger
Consideration payable upon the surrender of any Certificate. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered on the stock transfer books of
the Company, it shall be a condition of payment that the Certificate so
surrendered shall be endorsed in blank or to the Paying Agent or otherwise be in
proper form for transfer and that the person requesting such payment shall have
paid all transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such taxes either have been paid or are not
applicable. If any Certificate shall have been lost, stolen or destroyed, upon
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation or
Parent, the posting by such person of a bond, in such reasonable amount as the
Surviving Corporation or Parent may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration such holder is entitled to receive pursuant to Section 1.4.
(c) At any time following the sixth (6th) month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any portion of the Fund which had been made available to the
Paying Agent and not disbursed to holders of shares of Company Common Stock
(including, without limitation, all interest and other income received by the
Paying Agent in respect of all amounts held in the Fund or other funds made
available to it), and thereafter each such holder shall be entitled to look only
to the Surviving Corporation (subject to abandoned property, escheat and other
similar laws), and only as general creditors thereof, with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
such holder. If any Certificates representing shares of Company Common Stock
shall not have been surrendered immediately prior to such date on which the
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as hereinafter defined), any
such cash, shares, dividends or distributions payable in respect of such
Certificate shall, to the extent permitted by
5
<PAGE>
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
Notwithstanding the foregoing, none of the Surviving Corporation, Parent, Buyer
or the Paying Agent shall be liable to any holder of a share of Company Common
Stock for any Merger Consideration delivered in respect of such share of Company
Common Stock to a public official pursuant to any abandoned property, escheat or
other similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, except for Parent and Buyer, the holders of shares
of Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Company Common
Stock except as otherwise provided herein or by applicable law, and all cash
paid pursuant to this Article I upon the surrender or exchange of Certificates
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock theretofore represented by such
Certificate.
(e) Parent, Buyer, the Surviving Corporation and the Paying Agent, as
the case may be, shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock and Company Options such amounts that Parent,
Buyer, the Surviving Corporation or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), the rules and regulations promulgated
thereunder or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent, Buyer, the Surviving Corporation or the
Paying Agent, such amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common Stock and
Company Options in respect of which such deduction and withholding was made by
Parent, Buyer, the Surviving Corporation or the Paying Agent.
ARTICLE II.
THE SURVIVING CORPORATION
Section 2.1. Certificate of Incorporation. The Certificate of Incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until the same shall
thereafter be altered, amended or repealed in accordance with applicable law or
such Certificate of Incorporation.
Section 2.2. Bylaws. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until the same shall thereafter be altered, amended or repealed in accordance
with applicable law, the Certificate of Incorporation of the Surviving
Corporation or such Bylaws.
Section 2.3. Directors and Officers. From and after the Effective Time,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Buyer at the Effective Time shall
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be the directors of the Surviving Corporation, and (ii) the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the other parties hereto as
follows:
Section 3.1. Organization and Standing. Each of the Company and each
subsidiary of the Company (a "Subsidiary") (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has full corporate power and authority and all necessary
government approvals to own, lease and operate its properties and assets and to
conduct its business as presently conducted and (iii) is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing necessary
except where failure to be so qualified or licensed would not, individually or
in the aggregate, have a Company Material Adverse Effect (as hereinafter
defined). The Company has furnished or made available to Parent true and
complete copies of its certificate of incorporation (including any certificates
of designations attached thereto, the "Company Certificate of Incorporation")
and bylaws (the "Company Bylaws") and the certificate of incorporation and
bylaws (or equivalent organizational documents) of each Subsidiary, each as
amended to date. Such certificate of incorporation, bylaws or equivalent
organizational documents are in full force and effect, and neither the Company
nor any Subsidiary is in violation of any provision of its certificate of
incorporation, bylaws or equivalent organizational documents.
Section 3.2. Capitalization. The authorized capital stock of the Company
consists of 75,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, $.0l par value per share (the "Preferred Stock"). As of the
date hereof, (i) 12,923,817 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Company Common Stock are held in
the treasury of the Company, (iii) 2,392,975 Company Options are outstanding
pursuant to the Company Stock Option Plans (including certain additional
non-plan options), each such option entitling the holder thereof to purchase one
share of Company Common Stock, and 2,392,975 shares of Company Common Stock are
authorized and reserved for future issuance pursuant to the exercise of such
Company Options, (iv) 746,104 shares of Preferred Stock are issued and
outstanding designated as Convertible Cumulative Pay-in-Kind Preferred Stock
(the "Convertible Preferred Stock"), liquidation preference of $100 per share,
and (v) 629,321 shares of Company Common Stock are reserved for future issuance
pursuant to the exercise of outstanding Company Warrants. The Company will
authorize and reserve 75,000 shares of Series A Junior Participating Preferred
Stock for future issuance pursuant to the Rights Plan. The Company Disclosure
Letter delivered by the Company to the other parties hereto concurrently with
the execution of this Agreement (the "Company Disclosure Letter") sets forth a
true and complete list of the outstanding Company Options with the exercise
price. Except as set forth above or in the Company Disclosure Letter, there are
no options, warrants, convertible securities, subscriptions, stock appreciation
rights, phantom stock plans or stock equivalents or other rights, agreements,
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arrangements or commitments (contingent or otherwise) of any character issued or
authorized by the Company relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or options, warrants, convertible
securities, subscriptions or other equity interests in, the Company or any
Subsidiary. All shares of Company Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in the Company Disclosure Letter, there are
no outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Stock or any
capital stock of any Subsidiary or to pay any dividend or make any other
distribution in respect thereof or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any person.
Except as set forth in the Company Disclosure Letter, the Company owns
beneficially and of record all of the issued and outstanding capital stock of
each Subsidiary and does not own an equity interest in any other corporation,
partnership or entity, other than in the Subsidiaries. Each outstanding share of
capital stock of each Subsidiary is duly authorized, validly issued, fully paid
and nonassessable and each such share owned by the Company or another Subsidiary
is free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or such other
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever.
Section 3.3. Authority for Agreement.
-----------------------
(a) The Company has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and, subject to
obtaining necessary stockholder approval, to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by the Company of this Agreement, and the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate action (including, without
limitation, the unanimous approval of the Board of Directors of the Company) and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement (other than, with respect to the Merger, the
approval and adoption of this Agreement by the affirmative vote of a majority of
the voting power of the then outstanding shares of Company Common Stock and
Convertible Preferred Stock voting as a single class and the approval by
two-thirds of the holders of the outstanding shares of Convertible Preferred
Stock voting as a separate class and the filing and recordation of appropriate
merger documents as required by the DGCL). This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Buyer, constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms. The
affirmative vote of holders of the outstanding shares of Company Stock and
Convertible Preferred Stock voting as a single class entitled to vote at a duly
called and held meeting of stockholders and the affirmative vote of two-thirds
of the holders of the outstanding shares of the Convertible Preferred Stock are
the only votes of the Company Stockholders necessary to approve this Agreement,
the Merger and the other transactions contemplated by this Agreement.
(b) At a meeting duly called and held on April 11, 1999, the Board of
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Directors of the Company unanimously (i) determined that this Agreement and the
other transactions contemplated hereby, including the Merger, are fair to and in
the best interests of the Company and the holders of the Company Common Stock,
(ii) approved, authorized and adopted this Agreement, the Merger and the other
transactions contemplated hereby, and (iii) resolved to recommend approval and
adoption of this Agreement and the Merger by the holders of the Company Common
Stock.
(c) The Independent Advisors have delivered to the Board of Directors
of the Company their written opinions, dated as of the date of this Agreement,
that, as of such date and based on the assumptions, qualifications and
limitations contained therein, the consideration to be received by the holders
of Company Common Stock in the Merger is fair, from a financial point of view,
to such holders. Copies of such opinions are included in the Company Disclosure
Letter.
Section 3.4. No Conflict. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the Company Certificate of
Incorporation or Company Bylaws or equivalent organizational documents of any of
its Subsidiaries, (ii) subject to Section 3.5, conflict with or violate any
United States federal, state or local or any foreign statute, law, rule,
regulation, ordinance, code, order, judgment, decree or any other requirement or
rule of law (a "Law") applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, or (iii) except as set forth in the Company Disclosure Letter,
result in a breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, give to others any right of
termination, amendment, acceleration or cancellation of, result in triggering
any payment or other obligations, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any property or asset of any of them is bound or affected,
except in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, have a Company Material Adverse Effect.
"Company Material Adverse Effect" shall mean, with respect to the Company, any
change, event or effect shall have occurred or been threatened that, when taken
together with all other adverse changes, events or effects that have occurred or
been threatened, is or is reasonably likely to (i) be materially adverse to the
business, operations, properties, condition (financial or otherwise), assets,
liabilities (including, without limitation, contingent liabilities) of the
Company and its Subsidiaries taken as a whole or (ii) prevent or materially
delay the performance by the Company of any of its obligations under this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 3.5. Required Filings and Consents. The execution and delivery of
this Agreement by the Company do not, and the performance of this Agreement by
the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any United States federal, state or local or
any foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign
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(a "Governmental Entity"), except (i) for applicable requirements, if any, of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or "blue sky" laws ("Blue Sky Laws") and filing and recordation of
appropriate merger documents as required by the DGCL, (ii) for those required by
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) for those required by the Federal Communications Commission or any
successor entity (the "FCC") under the Communications Act of 1934, as amended,
and the rules, regulations and policies of the FCC promulgated thereunder
(collectively, the "Communications Act"), including those required in connection
with the transfer of control of the Company and the assignment of the FCC
Licenses held by the Alda Companies (as hereinafter defined) (the "FCC
Filings"), (iv) for filings contemplated by Section 3.15 hereof, and (v) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, could not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 3.6. Compliance. Subject to Section 3.7 and except as disclosed in
the Company Disclosure Letter, each of the Company and its Subsidiaries (i) has
been operated at all times in compliance with all Laws applicable to the Company
or any of its Subsidiaries or by which any property, business or asset of the
Company or any of its Subsidiaries is bound or affected and (ii) is not in
default or violation of any notes, bonds, mortgages, indentures, contracts,
agreements, leases, licenses, permits, franchises, or other instruments or
obligations to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any property or asset of the
Company or any of its Subsidiaries is bound or affected, except in either case
for any such failures to comply, conflicts, defaults or violations that could
not, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.7. Licenses and Permits. The Company Disclosure Letter sets forth
all of the FCC licenses, permits, applications, and authorizations for MDS (as
hereinafter defined), ITFS (as hereinafter defined), I Channels and other FCC
licensed facilities (collectively, the "FCC Licenses") either held by the
Company, or a Subsidiary or affiliate thereof, or that are subject to an
agreement pursuant to which the use of the transmission capacity associated
therewith is leased by the Company, a Subsidiary or an affiliate thereof (the
"Channel Leases"). The Company Disclosure Letter correctly sets forth the
identity of the holder and lessor and lessee (if applicable) of the transmission
capacity of such FCC Licenses and the termination date of such FCC Licenses.
Each FCC License was duly and validly issued and assigned to the holder thereof
by the FCC pursuant to procedures which comply with all requirements of
applicable Law, including the requirements of any international agreements
implemented by the FCC related to channel use or frequency coordination, and
there has been no occurrence of any event or the existence of any circumstances
which may lead to the forfeiture, revocation, suspension, impairment, adverse
modification or non-renewal of any FCC License. Each FCC License has been duly
authorized and is in full force and effect and the holders of the FCC Licenses
and the Company (and its Subsidiaries and affiliates, as applicable) are in
substantial and material compliance therewith and with the FCC rules and
policies and there is no known conflict with the valid rights of others which
could have a material adverse effect on the value and use of the FCC Licenses or
the transmission capacity associated therewith. No event has occurred which
permits, or after notice or lapse of time or both would permit, the forfeiture,
revocation, impairment, adverse modification or non-renewal of any FCC License,
or the imposition of a monetary fine or forfeiture. Except as set forth in the
Company Disclosure Letter, there are no agreements,
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arrangements or understandings relating to the assignment, transfer, conveyance
or pledge of any FCC License, in whole or in part, or any interest therein for
the markets of Chicago, Detroit, Houston, Indianapolis, Milwaukee, Phoenix,
Saint Louis, Salt Lake City and Tucson (the "Major Markets").
(b) The Company and each of the holders of the FCC Licenses has duly
filed in a timely manner all filings and reports relating to the FCC Licenses
and the Channel Leases required to be filed by the holders of the FCC Licenses,
or the Company, as the case may be, under the Communications Act, other
applicable Laws and FCC rules and are in compliance with other applicable Laws
and the Communications Act, including, without limitation, the rules and
regulations of the FCC relating to the operation and use of the FCC Licenses,
and, to the knowledge of the Company, each filing and report filed with respect
to the FCC Licenses is true, correct and complete in all respects and there have
been no changes in the ownership of the FCC Licenses since the filing of the
most recent ownership report.
(c) The Company Disclosure Letter correctly sets forth all of the
Channel Leases pursuant to which the Company may use the transmission capacity
of the FCC Licenses corresponding thereto. Each of the Channel Leases was duly
and validly entered into by the parties thereto pursuant to procedures which
comply with all requirements of applicable Law, including the requirements of
the FCC, and no event has occurred or circumstances exist which may lead to the
revocation, suspension, termination, breach, default, adverse modification or
non-renewal of any Channel Lease or material provision thereof, or cause any
Channel Lease, or any material provision thereof, not to comply with the
requirements of the FCC. The Company Disclosure Letter sets forth, on a market
by market basis, for the Major Markets, (i) the aggregate amount of transmission
capacity (including the number of 6 MHZ channels) available to the Company in
each of the Major Markets pursuant to the FCC Licenses and the Channel Leases
(the "Aggregate Capacity") and (ii) the amount of Aggregate Capacity, in
analogue mode, that is reserved for the holder of the FCC Licenses pursuant to
the Channel Leases for uses other the commercial uses associated with the
Company's business, without regard to the recapture requirements under the
Channel Leases. Buyer upon the closing of the transactions contemplated by this
Agreement, will have the sole right to use the transmission capacity of the FCC
License under each of the Channel Leases (other than the transmission capacity
expressly reserved by such Channel Lease for the holder of an FCC License). Each
Channel Lease is in full force and effect and the parties thereto are in
compliance with the terms thereof with no known conflicts with the valid rights
of others. No third party has any rights to assert any interests in any of the
Channel Leases or the rights and benefits granted to the Company pursuant
thereto (other than the rights of the federal government and the rights of the
holder of an FCC License which is the subject of a Channel Lease). No event has
occurred which permits, or after notice or lapse of time or both would permit
the revocation, suspension, termination, breach, default, adverse modification
or non-renewal of any Channel Lease by the lessor. There are no existing or
alleged material defaults by the lessors or the Company under any of the Channel
Leases, including any defaults relating to the payment obligations thereunder.
The consummation of the transactions contemplated by this Agreement will not
result in the breach or violation of any of the terms, conditions, or provisions
of any of the Channel Leases.
(d) Except as set forth in the company Disclosure Letter, neither the
Company,
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any Subsidiary or affiliate of the Company, nor any lessor under any Channel
Lease has agreed to accept any interference from any third party or to take any
action to protect any third party's reception from interference that would have
a Company Material Adverse effect on the current operations of the Company. The
Company Disclosure Letter sets forth all interference agreements with respect to
the FCC Licenses to which the Company or any of its Subsidiaries or affiliates
is a party or any of the parties to the Channel Leases.
(e) Except as set forth in the Company Disclosure Letter, (i) each
Colocation Application (as hereinafter defined) and Other Application (as
hereinafter defined) complies with the FCC rules (including the interference
protection requirements), has been accepted for filing by the FCC, and cut-off
from competing and conflicting applications; (ii) the deadline for filing timely
petitions to deny each Colocation Application and each Other Application has
lapsed; (iii) there are no threatened or pending petitions to deny, informal
objections, competing or conflicting applications, outstanding no-objection
letters, comments, petitions for reconsideration, petitions for review or waiver
requests relating to such Colocation Applications and Other Applications; and
(iv) a protected service area for the FCC License has been granted or requested.
For purposes hereof, (i) a "Colocation Application" shall mean any Major Market
application filed with, or granted by, the FCC to authorize the operation of the
facilities associated with each FCC License at a common transmitter site with
other ITFS and Multichannel Multipoint Distribution Service and Multipoint
Distribution Service stations (collectively, "MDS") pursuant to common technical
parameters of the FCC License and (ii) "Other Application" shall mean any other
Major Market applications, in addition to Colocation Applications, filed with or
granted by the FCC to authorize the provision of digital services and/or two-way
services on the facilities associated with each FCC License.
(f) There is no outstanding adverse judgment, injunction, decree or
order that has been issued by the FCC against the Company, or a Subsidiary or
affiliate thereof or the holder of an FCC License, or any action, proceeding or
investigation pending before or threatened by the FCC or a third party
specifically, including, but not limited to, any pending or threatened
proceeding that would have the effect of revoking or restricting or impairing
one or more of the FCC Licenses or the operations of the Company or a Subsidiary
or affiliate thereof.
(g) Except as set forth in the Company Disclosure Letter, all
regulatory fees and expenses due and payable associated with the FCC Licenses
have been paid to the FCC, including all fees and costs associated with the FCC
Licenses held by the Company to provide LMDS or MDS service in basic trading
areas, as defined by Rand McNally (the "BTA Authorizations"). The Company
Disclosure Letter discloses any discounts or bidding credits that the Company
received from the FCC in conjunction with the licensing of the BTA
Authorizations.
Section 3.8. SEC Filings, Financial Statements.
---------------------------------
(a) The Company has filed all forms, reports, statements and documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since January 1, 1997 (collectively, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, or the Exchange Act, and the rules and
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regulations promulgated thereunder, each as in effect on the date so filed. None
of the SEC Reports (including, but not limited to, any financial statements or
schedules included or incorporated by reference therein) contained when filed
any untrue statement of a material fact or omitted or omits to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the audited consolidated balance sheets of the Company as
of December 31, 1998 and December 31, 1997 and the related consolidated
statements of operations, shareholders' equity/(deficit) and cash flows for the
three fiscal years in the period ended December 31, 1998 included in its Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, in each case,
including any related notes thereto, as filed with the SEC (collectively, the
"Company Financial Statements"), has been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and
fairly presents in all material respects the consolidated financial position of
the Company and its Subsidiaries at the respective date thereof and the
consolidated results of its operations and changes in cash flows for the periods
indicated.
(c) Except as disclosed in the Company Disclosure Letter, there are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether or not accrued and whether or not contingent or absolute, that are
material to the Company and its Subsidiaries, taken as a whole, other than (i)
liabilities disclosed or provided for in the consolidated balance sheet of the
Company and its Subsidiaries at December 31, 1998, including the notes thereto,
(ii) liabilities disclosed in the SEC Reports, (iii) liabilities incurred on
behalf of the Company in connection with this Agreement and the contemplated
Merger, and (iv) liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1998, none of which are,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
(d) The Company has heretofore furnished or made available to Parent a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC as exhibits to the SEC
Reports pursuant to the Securities Act and the rules and regulations promulgated
thereunder or the Exchange Act and the rules and regulations promulgated
thereunder.
Section 3.9. Absence of Certain Changes or Events. Except as contemplated
by this Agreement or as disclosed in the Company Disclosure Letter or the SEC
Reports filed prior to the date hereof, since December 31, 1998, the Company and
its Subsidiaries have conducted their respective businesses only in the ordinary
course and consistent with prior practice and there has not been (i) any event
or occurrence of any condition that has had or would reasonably be expected to
have a Company Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or any other distribution with respect to any of the
capital stock of the Company or any Subsidiary, (iii) any material change in
accounting methods, principles or practices employed by the Company, or (iv) any
action of the type described in Sections 5.1(b)
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(other than Section 5.1(b)(v) and (vi)) or 5.1(c) which had such action been
taken after the date of this Agreement would be in violation of any such
Section.
Section 3.10. Taxes. Except as set forth in the Company Disclosure Letter,
the Company and each of its Subsidiaries have timely filed all material Tax
Returns required to be filed by any of them. All such Tax Returns are true,
correct and complete in all material respects. All Taxes of the Company and its
Subsidiaries which are (i) shown as due on such Tax Returns, (ii) otherwise due
and payable or (iii) claimed or asserted by any taxing authority to be due, have
been paid, except for those Taxes being contested in good faith and for which
adequate reserves have been established in the financial statements included in
the SEC Reports in accordance with GAAP. There are no liens for any Taxes upon
the assets of the Company or any of its Subsidiaries, other than statutory liens
for Taxes not yet due and payable and liens for real estate Taxes contested in
good faith. The Company does not know of any proposed or threatened Tax claims
or assessments which, if upheld, could individually or in the aggregate have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has made an election under Section 341(f) of the Code. Neither the Company nor
any of its Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. Except as set forth in the Company Disclosure Letter, the Company
and each Subsidiary has withheld and paid over to the relevant taxing authority
all Taxes required to have been withheld and paid in connection with payments to
employees, independent contractors, creditors, shareholders or other third
parties, except for such Taxes which individually or in the aggregate could not
have a Company Material Adverse Effect. The unpaid Taxes of the Company and its
Subsidiaries for the current taxable period (A) did not, as of the most recent
Company Financial Statement, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheet in the most
recent Company Financial Statement (rather than in any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time through the Closing
in accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns. For purposes of this Agreement, (a)
"Tax" (and, with correlative meaning, "Taxes") means any federal, state, local
or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty or addition thereto, whether disputed or
not, imposed by any Governmental Entity, and (b) "Tax Return" means any return,
report or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
Section 3.11. Title to Assets.
---------------
(a) Except as set forth in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 (the "10-K") or in the Company
Disclosure Letter, the Company and each of its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, all of their real and
personal properties and assets reflected in the 10-K or acquired after December
31, 1998 (other than assets disposed of since December 31, 1998 in the ordinary
course of business consistent with past practice), in each case free and clear
of all title defects,
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liens, encumbrances and restrictions, except for (i) liens, encumbrances or
restrictions which secure indebtedness which are properly reflected in the 10-K;
(ii) liens for Taxes accrued but not yet payable; (iii) liens arising as a
matter of law in the ordinary course of business with respect to obligations
incurred after December 31, 1998, provided that the obligations secured by such
liens are not delinquent; and (iv) such title defects, liens, encumbrances and
restrictions, if any, as individually or in the aggregate are not reasonably
likely to have a Company Material Adverse Effect. The Company Disclosure Letter
sets forth a true, correct and complete list of all real property (i) owned or
leased by the Company or a Subsidiary, (ii) as to which the Company or a
Subsidiary has a license, easement or right of way to use, (iii) as to which the
Company or a Subsidiary has the option to purchase, lease, license or acquire an
easement or right of way or (iv) in which the Company or a Subsidiary has any
other interest. Except as set forth in the Company Disclosure Letter, the
Company and each of its Subsidiaries either own, or have valid leasehold
interests in, all properties and assets used by them in the conduct of their
business, except where the absence of such ownership or leasehold interest could
not individually or in the aggregate have a Company Material Adverse Effect.
(b) Except as set forth in the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries has any legal obligation, absolute or
contingent, to any other person to sell or otherwise dispose of any of its
assets with an individual value of $25,000 or an aggregate value in excess of
$100,000.
Section 3.12. Change of Control Agreements. Except as set forth in Section
1.6 or the Company Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the Merger or the other transactions
contemplated by this Agreement, will (either alone or in conjunction with any
other event) result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any director, officer
or employee of the Company. Except as set forth in the Company Disclosure
Letter, without limiting the generality of the foregoing, no amount paid or
payable by the Company in connection with the Merger or the other transactions
contemplated by this Agreement, including accelerated vesting of options,
(either solely as a result thereof or as a result of such transactions in
conjunction with any other event) will be an "excess parachute payment" within
the meaning of Section 280G of the Code.
Section 3.13. Litigation. Except for such matters disclosed in the Company
Disclosure Letter which, if adversely determined, have not had, and would not
reasonably be expected to have, a Company Material Adverse Effect, there are no
claims, suits, actions, investigations, indictments or information, or
administrative, arbitration or other proceedings ("Litigation") pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries. Except for such matters which have not had, and could not
reasonably be expected to have, a Company Material Adverse Effect, there are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) against or relating to the Company or any of its
Subsidiaries.
Section 3.14. Contracts and Commitments. The Company Disclosure Letter sets
forth a true, correct and complete list of the following contracts to which the
Company or a Subsidiary is
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a party (including every amendment, modification or supplement to the
foregoing): (i) any contracts of employment, (ii) agreements or arrangements for
the purchase or sale of any assets (otherwise than in the ordinary course of
business), (iii) agreements, contracts or indentures relating to the borrowing
of money, (iv) agreements with unions, material independent contractor
agreements and material leased or temporary employee agreements, (v) leases of
any real property involving annual rent of $5,000 or more, and (vi) other than
respect to contracts identified in the Company Disclosure Letter pursuant to
Section 3.7, all other contracts, agreements or commitments involving payments
made by or to the Company or a Subsidiary of $100,000. Except for agreements,
arrangements or commitments disclosed in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries is a party to any agreement, arrangement
or commitment which is material to the business of the Company taken as a whole.
The Company has delivered or made available true, correct and complete copies of
all such agreements, arrangements and commitments to Parent. Neither the Company
nor any of its Subsidiaries is in default under any such agreement, arrangement
or commitment which has had, or could reasonably be expected to have, a Company
Material Adverse Effect.
Section 3.15. Information Supplied. The proxy statement to be mailed to the
Company Stockholders in connection with the meeting (the "Stockholder's
Meeting") to be called to consider the Merger (the "Proxy Statement") at the
date such document is first published, sent or delivered to Company Stockholders
or, unless promptly corrected, at any time during the pendency of the
Stockholder's Meeting, will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Proxy Statement will comply as to form
and substance in all material respects with the requirements of the Exchange Act
and the applicable rules and regulations of the SEC thereunder. Notwithstanding
the foregoing, no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied by Parent or Buyer for inclusion or incorporation by reference in the
foregoing document.
Section 3.16. Employee Benefit Plans. All employee benefit plans,
compensation arrangements and other benefit arrangements covering employees of
the Company or any of its Subsidiaries (the "Company Benefit Plans") and all
employee agreements providing for compensation, severance or other benefits to
any employee or former employee of the Company or any of its Subsidiaries are
set forth in the Company Disclosure Letter. True and complete copies of the
Company Benefit Plans have been made available to Parent. To the extent
applicable, the Company Benefit Plans comply with the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
Code, and any Company Benefit Plan intended to be qualified under Section 401(a)
of the Code has received a determination letter or is a model prototype plan and
continues to satisfy the requirements for such qualification. Neither the
Company nor any of its Subsidiaries nor any ERISA Affiliate of the Company
maintains, contributes to or has maintained or contributed in the past six (6)
years to any benefit plan which is covered by Title IV of ERISA or Section 412
of the Code. Neither any Company Benefit Plan, nor the Company nor any
Subsidiary has incurred any material liability or penalty under Section 4975 of
the Code or Section 502(i) of ERISA or engaged in any transaction that is
reasonably likely to result in any such liability or penalty. Except as set
forth in the Company
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Disclosure Letter, each Company Benefit Plan has been maintained and
administered in compliance with its terms and with ERISA and the Code to the
extent applicable thereto, except for such non-compliance which individually or
in the aggregate could not reasonably be expected to have a Company Material
Adverse Effect. There is no pending or anticipated Litigation against or
otherwise involving any of the Company Benefit Plans and no Litigation
(excluding claims for benefits incurred in the ordinary course of Company
Benefit Plan activities) has been brought against or with respect to any such
Company Benefit Plan, except for any of the foregoing which individually or in
the aggregate could not have a Company Material Adverse Effect. All
contributions required to be made as of the date hereof to the Company Benefit
Plans have been made or provided for. Except as described in the SEC Reports or
as required by Law, neither the Company nor any of its Subsidiaries maintains or
contributes to any plan or arrangement which provides or has any liability to
provide life insurance or medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment,
and neither the Company nor any of its Subsidiaries has ever represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided.
For purposes of this Agreement "ERISA Affiliate" means any business or
entity which is a member of the same "controlled group of corporations," an
"affiliated service group" or is under "common control" with an entity within
the meanings of Sections 414(b), (c) or (m) of the Code, is required to be
aggregated with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing Sections.
Section 3.17. Labor and Employment Matters. Except as set forth in the
Company Disclosure Letter:
(a) There are no agreements or arrangements on behalf of any officer,
director or employee providing for payment or other benefits to such person
contingent upon the execution of this Agreement, the Closing or a transaction
involving a change of control of the Company.
(b) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement or other contracts, arrangements,
agreements or understandings with a labor union or labor organization that was
certified by the National Labor Relations Board ("NLRB"). Except for such
matters which, individually or in the aggregate, could not have a Company
Material Adverse Effect, there is no existing, pending or threatened (i) unfair
labor practice charge or complaint, labor dispute, labor arbitration proceeding
or any other matter before the NLRB or any other comparable state agency against
or involving the Company or any of its Subsidiaries, (ii) activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its Subsidiaries, (iii) certification or decertification
question relating to collective bargaining units at the premises of the Company
or any of its Subsidiaries or (iv) lockout, strike, organized slowdown, work
stoppage or work interruption with respect to such employees.
(c) Neither the Company nor any of its Subsidiaries has taken any
action that
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would constitute a "Mass Layoff" or "Plant Closing" within the meaning of the
Worker Adjustment and Retraining Notification ("WARN") Act or would otherwise
trigger notice requirements or liability under any state or local plant closing
notice law. No agreement, arbitration or court decision or governmental order in
any way limits or restricts any of the Company, any of its Subsidiaries or
Parent from relocating or closing any of the operations of the Company or any of
its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has failed to pay
when due any wages, bonuses, commissions, benefits, taxes, penalties or
assessments or other monies, owed to, or arising out of the employment of or any
relationship or arrangement with, any officer, director, employee, sales
representative, contractor, consultant or other agent. There are no citations,
investigations, administrative proceedings or formal complaints of violations of
any federal or state wage and hour laws pending or threatened before the
Department of Labor or any federal, state or administrative agency or court
against or involving the Company or any of its Subsidiaries.
(e) The Company and each of its Subsidiaries are in compliance with
all immigration laws relating to employment and have properly completed and
maintained all applicable forms (including but not limited to I-9 forms) and, to
the knowledge of the Company, there are no citations, investigations,
administrative proceedings or formal complaints of violations of the immigration
laws pending or threatened before the Immigration and Naturalization Service or
any federal, state or administrative agency or court against or involving the
Company or any of its Subsidiaries.
(f) There are no investigations, administrative proceedings, charges
or formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, disability,
handicap or veteran status) pending or threatened before the Equal Employment
Opportunity Commission or any federal, state or local agency or court against or
involving the Company or any of its Subsidiaries. No discrimination and/or
retaliation claim is pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries under the 1866, 1877, 1964 or
1991 Civil Rights Acts, the Equal Pay Act, the Age Discrimination in Employment
Act, as amended, the Americans with Disabilities Act, the Family and Medical
Leave Act, the Fair Labor Standards Act, ERISA, or any other federal law
relating to employment or any comparable state or local fair employment
practices act regulating discrimination in the workplace, and no wrongful
discharge, libel, slander, invasion of privacy or other claim (including but not
limited to violations of the Fair Credit Reporting Act, as amended, and any
applicable whistleblower statutes) under any state or federal law is pending or
threatened against the Company or any of its Subsidiaries.
(g) If the Company or any of its Subsidiaries is a Federal, State or
local contractor obligated to develop and maintain an affirmative action plan,
no discrimination claim, show-cause notice, conciliation proceeding, sanctions
or debarment proceedings is pending or has been threatened against the Company
or any of it Subsidiaries with the Office of Federal Contract Compliance
Programs or any other Federal agency or any comparable state or local agency or
court and no desk audit or on-site review is in progress.
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(h) There are no citations, investigations, administrative proceedings
or formal complaints of violations of local, state or federal occupational
safety and health laws pending or threatened before the Occupational Safety and
Health Review Commission or any federal, state or local agency or court against
or involving the Company or any of its Subsidiaries.
(i) No workers' compensation or retaliation claim is pending against
the Company or any of its Subsidiaries in excess of $250,000 in the aggregate
and the Company maintains adequate insurance with respect to workers'
compensation claims pursuant to insurance policies that are currently in force,
or has accrued an adequate liability for such obligations, including, without
limitation, adequate accruals with respect to accrued but unreported claims and
retroactive insurance premiums.
Section 3.18. Environmental Compliance and Disclosure. Except as set forth
in the Company Disclosure Letter:
(a) The Company possesses, and is in compliance in all material
respects with, all permits, licenses and government authorizations and has filed
all notices that are required under local, state and federal Laws and
regulations relating to protection of the environment, pollution control,
product registration and hazardous materials ("Environmental Laws") applicable
to the Company, and the Company is in compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any Law, regulation, code, plan, order, decree, judgment, notice, permit or
demand letter issued, entered, promulgated or approved thereunder;
(b) The Company has not received notice of actual or threatened
liability under the Federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") or any similar state or local statute or ordinance
from any governmental agency or any third party and, to the knowledge of the
Company, there are no facts or circumstances which could form the basis for the
assertion of any claim against the Company under any Environmental Laws
including, without limitation, CERCLA or any similar local, state or foreign Law
with respect to any on-site or off-site location;
(c) The Company has neither entered into nor agreed to, nor does it
contemplate entering into any consent decree or order, and is not subject to any
judgment, decree or judicial or administrative order relating to compliance
with, or the cleanup of hazardous materials under, any applicable Environmental
Laws;
(d) The Company has not been subject to any administrative or judicial
proceeding pursuant to and, to the knowledge of the Company, has not been
alleged to be in violation of, applicable Environmental Laws or regulations
either now or any time during the past five years;
(e) The Company has not received notice that it is subject to any
claim, obligation, liability, loss, damage or expense of whatever kind or
nature, contingent or otherwise, incurred or imposed or based upon any provision
of any Environmental Law and arising out of any act or omission of the Company,
its employees, agents or representatives or, to the
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knowledge of the Company, arising out of the ownership, use, control or
operation by the Company of any plant, facility, site, area or property
(including, without limitation, any plant, facility, site, area or property
currently or previously owned or leased by the Company) from which any hazardous
materials were released into the environment (the term "release" meaning any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment, and the term
"environment" meaning any surface or ground water, drinking water supply, soil,
surface or subsurface strata or medium, or the ambient air);
(f) The Company has heretofore provided Parent with true, correct and
complete copies of all files of the Company relating to environmental matters
(or an opportunity to review such files). The Company has not paid any fines,
penalties or assessments within the last five years with respect to
environmental matters; and
(g) To the Company's knowledge, none of the assets owned by the
Company or any real property leased by the Company contain any friable asbestos,
regulated PCBs or underground storage tanks.
As used in this Section 3.18, the term "Hazardous Materials" means any
waste, pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by the Company is in any way governed by or subject to any applicable Law,
rule or regulation of any Governmental Entity.
Section 3.19. Intellectual Property.
---------------------
(a) The Company Disclosure Letter sets forth a true and complete list
of (i) all United States and foreign patents, trademark, service mark and
copyright registrations and applications therefor, and material trademarks,
trade names, service marks and copyrights owned by the Company and its
Subsidiaries (the "Intellectual Property Rights") and (ii) all United States and
foreign patents, trademarks, trade names, service marks and copyrights licensed
to the Company or any of its Subsidiaries (the "Licensed Rights"). The Company
represents and warrants that, except as set forth in the Company Disclosure
Letter, (i) the Intellectual Property Rights are free and clear of any liens,
claims or encumbrances, are not subject to any license (royalty bearing or
royalty free) and are not subject to any other arrangement requiring any payment
to any person or the obligation to grant rights to any person in exchange; (ii)
to the knowledge of the Company, the Licensed Rights are free and clear of any
liens, claims, encumbrances, royalties or other obligations; and (iii) the
Intellectual Property Rights and the Licensed Rights are all those material
rights necessary to the conduct of the business of each of the Company, its
Subsidiaries and the Company's affiliates as presently conducted. Except as set
forth in the Company Disclosure Letter, the validity of the Intellectual
Property Rights and title thereto, (i) have not been questioned in any prior
Litigation; (ii) are not being questioned in any pending Litigation; and (iii)
to the knowledge of the Company, are not the subject(s) of any threatened or
proposed Litigation. The business of each of the Company and its Subsidiaries,
as
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presently conducted, does not conflict with and, to the knowledge of the
Company, has not been alleged to conflict with any patents, trademarks, trade
names, service marks, copyrights or other intellectual property rights of
others. The consummation of the transactions contemplated hereby will not result
in the loss or impairment of any of the Intellectual Property Rights or the
Company's or its Subsidiaries' right to use any of the Licensed Rights. To the
knowledge of the Company, there are no third parties using any of the
Intellectual Property Rights material to the business of the Company or its
Subsidiaries as presently conducted.
(b) Except as identified in the Company Disclosure Letter, each of the
Company and its Subsidiaries owns, or possesses valid rights to, all computer
software programs that are material to the conduct of the business of the
Company and its Subsidiaries. To the Company's knowledge, there are no
infringement suits, actions or proceedings pending or threatened against the
Company or any Subsidiary with respect to any software owned or licensed by the
Company or any Subsidiary.
Section 3.20. Year 2000 Compliance. The Company has made available to
Parent the Company's plan to ensure that it will be Year 2000 Compliant (the
"Year 2000 Plan"). To the Company's knowledge, the Year 2000 Plan will enable
the Company to be Year 2000 Compliant in a timely manner except as to matters
which are not reasonably likely to result in a Company Material Adverse Effect
and the cost for the Company to become Year 2000 Compliant is estimated to be
$400,000.
"Year 2000 Compliant" means that (a) the products, services, or other
item(s) at issue accurately process, provide and/or receive date/time data
(including calculating, comparing, and sequencing), within, from, into, and
between centuries (including the twentieth and twenty-first centuries and the
years 1999 and 2000), including leap year calculations, and (b) neither the
performance nor the functionality nor the supply of the products, services, and
other item at issue will be affected by dates/times prior to, on, after, or
spanning January 1, 2000. The design of the products, services, and other item
at issue to ensure compliance with the foregoing warranties and representations
includes proper date/time data century recognition and recognition of 1999 and
2000, calculations that accommodate same century and multicentury formulae and
date/time values before, on, after, and spanning January 1, 2000, and date/time
data interface values that reflect the century, 1999, and 2000. In particular,
but without limitation, (i) no value for current date/time will cause any error,
interruption, or decreased performance in or for such product, service, and
other item, (ii) all manipulations of date and time related data (including
calculating, comparing, sequencing, processing, and outputting) will produce
correct results for all valid dates and times, including when used in
combination with other products, services, or items, (iii) all date/time
elements in interfaces and data storage will specify the century to eliminate
date ambiguity without human intervention, including leap year calculations,
(iv) where any date/time element is represented without a century, the correct
century will be unambiguous for all manipulations involving that element, (v)
authorization codes, passwords, and zaps (purge functions) will function
normally and in the same manner during prior to, on, and after January 1, 2000,
including the manner in which they function with respect to expiration dates and
CPU serial numbers, and (vi) the Company's and its Subsidiaries' supply of the
product, service, and other item will not be interrupted, delayed, decreased, or
otherwise affected by the advent of the year 2000.
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Section 3.21. Brokers. Except pursuant to the Independent Advisor
Engagement Letters (as hereinafter defined), no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company Disclosure Letter includes a complete and correct copy
of all agreements between the Company and the Independent Advisors pursuant to
which such firms would be entitled to any payment relating to this Agreement,
the Merger or the other transactions contemplated by this Agreement.
Section 3.22. [Intentionally Omitted.]
Section 3.23. Insurance Policies. The Company has delivered to Parent prior
to the date hereof a complete and accurate list of all insurance policies in
force naming the Company, any of its Subsidiaries or employees thereof as an
insured or beneficiary or as a loss payable payee or for which the Company or
any Subsidiary has paid or is obligated to pay all or part of the premiums.
Neither the Company nor any Subsidiary has received notice of any pending or
threatened cancellation or premium increase (retroactive or otherwise) with
respect thereto, and each of the Company and the Subsidiaries is in compliance
in all material respects with all conditions contained therein. There are no
material pending claims against such insurance policies by the Company or any
Subsidiary as to which insurers are defending under reservation of rights or
have denied liability, and there exists no material claim under such insurance
policies that has not been properly filed by the Company or any Subsidiary.
Except for the self-insurance retentions or deductibles set forth in the
policies contained in the aforementioned list, the policies are adequate in
scope and amount to cover all prudent and reasonably foreseeable risks which may
arise in the conduct of the business of the Company and the Subsidiaries that
would reasonably be expected to have a Company Material Adverse Effect.
Section 3.24. Notes and Accounts Receivable.
-----------------------------
(a) Except as disclosed in the Company Disclosure Letter, there are no
notes receivable of the Company or any Subsidiary owing by any director,
officer, stockholder or employee of the Company or any Subsidiary.
(b) Except as disclosed in the Company Disclosure Letter, all accounts
receivable of the Company and any Subsidiary are current or covered by adequate
reserves for uncollectability, and there are no material disputes regarding the
collectibility of any such accounts receivable that would reasonably be expected
to have a Company Material Adverse Effect.
Section 3.25. Transactions with Affiliates. Except as set forth in the
Company Disclosure Letter (other than compensation and benefits received in the
ordinary course of business as an employee or director of the Company or its
Subsidiaries), no director, officer or other "affiliate" or "associate" (as such
terms are defined in Rule 12b-2 under the Exchange Act) of the Company or any
Subsidiary or any entity in which, to the knowledge of the Company, any such
director, officer or other affiliate or associate, owns any beneficial interest
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter
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market and less than 1% of the stock of which is beneficially owned by any such
persons) has any interest in: (i) any contract, arrangement or understanding
with, or relating to the business or operations of Company or any Subsidiary;
(ii) any loan, arrangement, understanding, agreement or contract for or relating
to indebtedness of the Company or any Subsidiary; or (iii) any property (real,
personal or mixed), tangible, or intangible, used or currently intended to be
used in, the business or operations of the Company or any Subsidiary.
Section 3.26. No Existing Discussions. As of the date hereof, the Company
is not engaged, directly or indirectly, in any negotiations or discussions with
any other party with respect to an Acquisition Proposal (as hereinafter
defined).
Section 3.27. Disclosure. No representation, warranty or covenant made by
the Company in this Agreement or in the Company Disclosure Letter contains an
untrue statement of a material fact or omits to state a material fact required
to be stated herein or therein or necessary to make the statements contained
herein or therein not misleading. Any matter expressly disclosed in the Company
Disclosure Letter shall be deemed to be disclosed as to such matter so long as
such disclosure being made states clearly the matter being disclosed and the
context for which it is being disclosed.
Section 3.28. Company Warrants. Upon the consummation of the Merger, each
of the Company's outstanding warrants to acquire shares of Company Common Stock
shall, pursuant to their terms, become exercisable, upon payment of the
applicable exercise price thereof, into the right to receive an amount in cash
determined by multiplying (A) the Merger Consideration by (B) the number of
shares of Company Common Stock such holder could have purchased had such holder
exercised such warrant in full immediately prior to the consummation of the
Merger.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYER
Each of Parent and Buyer represents and warrants to the Company as follows:
Section 4.1. Organization and Standing. Such person (a) is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) has full corporate power and authority to
own, lease and operate it properties and assets and to conduct its business as
presently conducted and (c) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a material adverse effect on Parent or Buyer.
Section 4.2. Authority for Agreement. Such person has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by such person of this Agreement, and the consummation by
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each such person of the Merger and the other transactions contemplated by this
Agreement, have been duly authorized by all necessary corporate action and no
other corporate proceedings on the part of such person are necessary to
authorize this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement (other than, with respect to the Merger, the
filing and recordation of appropriate merger documents as required by the DGCL).
This Agreement has been duly executed and delivered by such person and, assuming
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of such person enforceable against such
person in accordance with its terms.
Section 4.3. No Conflict. The execution and delivery of this Agreement by
such person do not, and the performance of this Agreement by such person and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the certificate of
incorporation or bylaws of such person, (ii) conflict with or violate any Law
applicable to such person or by which any property or asset of such person is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of such person pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which such person is a party or by which such person
or any property or asset of either of them is bound or affected, except in the
case of clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
prevent or materially delay the performance by such person of its respective
obligations under this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 4.4. Required Filings and Consents. The execution and delivery of
this Agreement by such person do not, and the performance of this Agreement by
such person will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Exchange Act, Blue Sky Laws and filing
and recordation of appropriate merger documents as required by the DGCL, (ii)
for those required by the HSR Act, (iii) for the FCC Filings, (iv) for filings
contemplated by Section 3.15 and (v) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, prevent or materially delay the
performance by such person of any of its respective obligations under this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 4.5. Information Supplied. None of the information supplied or to
be supplied by such person for inclusion or incorporation by reference in the
Proxy Statement will, at the date such document is first published, sent or
delivered to Company Stockholders or, unless promptly corrected, at any time
during the pendency of the Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, no representation or warranty is made by such person with respect
to statements made or incorporated by reference therein based
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on information upplied by the Company for inclusion or incorporation by
reference in the foregoing document.
Section 4.6. Brokers. No broker, finder or investment banker (other than
Warburg Dillon Read LLC) is entitled to any brokerage, finder's or other fee or
commission payable by such person in connection with this Agreement, the Merger
or the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of such person.
Section 4.7. No Prior Activities. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement, the Merger and the transactions contemplated
hereby and the purchase of the shares of Convertible Preferred Stock, Buyer has
not incurred any obligations or liabilities, and has not engaged in any business
or activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
ARTICLE V.
COVENANTS
Section 5.1. Conduct of the Business Pending the Merger.
------------------------------------------
(a) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, unless Parent shall otherwise agree in
writing, (i) the business of the Company and its Subsidiaries shall be conducted
only in, and the Company and its Subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent with prior
practice, (ii) the Company and its Subsidiaries shall use all commercially
reasonable efforts to maintain and protect the FCC Licenses and Channel Leases,
to preserve substantially intact their business organizations, to keep available
the services of their current officers and employees and to preserve the current
relationships of the Company and its Subsidiaries with customers, suppliers and
other persons with which the Company or its Subsidiaries has significant
business relations, and (iii) the Company will comply in all material respects
with all applicable Laws and regulations wherever its business is conducted,
including, without limitation, the timely filing of all reports, forms or other
documents with the FCC and with the SEC required pursuant to the Securities Act
or the Exchange Act.
(b) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, the Company shall not, nor shall the Company
permit any of its Subsidiaries to, (i) declare or pay any dividends on or make
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, except for dividends (x) by a wholly owned Subsidiary of the
Company to the Company or another wholly owned Subsidiary of the Company, (y)
with respect to the Convertible Preferred Stock and (z) with respect to the
preferred stock of Speedchoice of Detroit, Inc.; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; (iii) repurchase or otherwise acquire any
shares of its capital stock; (iv) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into any such shares of its capital stock, or any
rights, warrants or options to acquire any such shares or convertible securities
or
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any stock appreciation rights, phantom stock plans or stock equivalents, other
than the issuance of shares of Company Common Stock upon (x) the exercise of
Company Options outstanding as of the date of this Agreement, (y) exercise of
warrants and (z) conversion of Convertible Preferred Stock; (v) willfully take
any action that would make the Company's representations and warranties set
forth in Article III not true and correct in all material respects; or (vi) take
any action that would, or could reasonably be expected to, result in any of the
conditions set forth in Article VI not being satisfied.
(c) The Company covenants and agrees that between the date of this
Agreement and the Effective Time, the Company shall not, nor shall the Company
permit any of its Subsidiaries to, (i) amend its certificate of incorporation
(including any certificate of designations attached thereto) or bylaws or other
equivalent organizational documents; (ii) incur any indebtedness for borrowed
money or guaranty any such indebtedness of another person, other than (A)
borrowings under existing lines of credit (or under any refinancing of such
existing lines) or (B) indebtedness owing to, or guaranties of indebtedness
owing to, the Company (iii) make any loans or advances to any other person other
than loans or advances between any Subsidiaries of the Company or between the
Company and any of its Subsidiaries (other than loans or advances less than
$50,000 made in the ordinary course of business consistent with past practice);
(iv) merge or consolidate with any other entity in any transaction, or sell any
business or assets in a single transaction or series of transactions in which
the aggregate consideration is $100,000 or greater; (v) change its accounting
policies except as required by GAAP; (vi) make any change in employment terms
for any of its directors or officers; (vii) alter, amend or create any
obligations with respect to compensation, severance, benefits, change of control
payments or any other payments to employees, directors or affiliates of the
Company or its Subsidiaries, other than with respect to alterations or
amendments made with respect to non-officers and non-directors in the ordinary
course of business consistent with past practice or as expressly contemplated by
this Agreement or consented to in writing by Parent; (viii) make any change to
the Company Benefit Plans; (ix) enter into any leasing or licensing agreements,
take-or-pay arrangements or other affiliations, alignments or agreements with
respect to the FCC Licenses, provided, the Company may renegotiate any Channel
Leases in the ordinary course of business; or (x) commit or agree to take any of
the actions described in this Section 5.1.
(d) The Company Disclosure Letter sets forth the projected operating
expenses and capital expenditures for Company and its Subsidiaries on a
consolidated basis from the date of this Agreement through December 31, 1999 as
agreed to by the Company and Parent (the "Projections"). The Company agrees that
it shall not incur material operating expenses or capital expenditures, in the
aggregate, in excess of those identified in the Projections.
Section 5.2. Access to Information; Confidentiality.
--------------------------------------
(a) From the date hereof to the Effective Time, the Company shall, and
shall cause the officers, directors, employees, auditors, attorneys, financial
advisors, lenders and other agents (collectively, the "Representatives") of the
Company to, afford the Representatives of Parent and Buyer reasonable access at
all reasonable times to the officers, employees, agents, properties, offices and
other facilities, books and records of the Company and its Subsidiaries, and
shall furnish Parent and Buyer with all financial, operating and other data and
information as
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Parent or Buyer, through its Representatives, may reasonably request. Parent
will remain subject to the terms of a confidentiality agreement with the Company
dated March 20, 1998 (the "Confidentiality Agreement").
(b) No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 5.3. Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence, or nonoccurrence, of any event which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure by such party (or Buyer, in the case of Parent)
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.3 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice. If any event or
matter arises after the date of this Agreement which, if existing or occurring
at the date of this Agreement, would have been required to be set forth or
described in the Company Disclosure Letter or which is necessary to correct any
information in the Company Disclosure Letter which has been rendered inaccurate
thereby, then the Company shall promptly supplement, or amend, and deliver to
Parent the Company Disclosure Letter which it has delivered pursuant to this
Agreement.
Section 5.4. Further Assurances.
------------------
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under Law to consummate and make effective the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, using all commercially reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of each Governmental Entity and parties to contracts with the Company and
its Subsidiaries as are necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement and to fulfill the conditions
set forth in Article VI. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers of each party to this Agreement and the Surviving
Corporation shall use all commercially reasonable efforts to take all such
action.
(b) In connection with, and without limiting the foregoing, the
Company shall (i) take all actions necessary to ensure that no state
antitakeover statute or similar statute or regulation is or becomes operative
with respect to this Agreement, the Merger or any other transactions
contemplated by this Agreement and (ii) if any state antitakeover statute or
similar statute or regulation is or becomes operative with respect to this
Agreement, the Merger or any other transaction contemplated by this Agreement,
take all actions necessary to ensure that this Agreement, the Merger and any
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
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transactions contemplated by this Agreement.
(c) The parties hereto shall use their best efforts to secure promptly
all necessary approvals from the FCC that are required to consummate this
Agreement. Without limitation to the foregoing, promptly after the date of this
Agreement, the parties shall file with the FCC applications seeking
authorization for the transfer of control of the Company to Buyer at the Closing
and the assignment of any FCC Licenses held by the Alda Companies to an entity
designated by Buyer at the Closing. The parties shall use their best efforts to
prosecute such applications with diligence and shall diligently oppose any
objections to such applications to the end that each application, as soon as
practicable, shall be granted by the FCC and such grants shall no longer be
subject to any further administrative or judicial review.
Section 5.5. Board Recommendations.
---------------------
(a) In connection with the Merger and Stockholders' Meeting, the Board
of Directors of the Company shall (i) subject to Section 5.5(b), recommend to
the holders of the Company Common Stock to vote in favor of the Merger and use
all commercially reasonable efforts to obtain the necessary approvals by the
Company Stockholders of this Agreement and (ii) otherwise comply with all legal
requirements applicable to such meeting.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall, except as expressly permitted by this Section 5.5(b) (i)
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to Parent, the approval or recommendation of such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any transaction
involving an Acquisition Proposal (as hereinafter defined) from a third party
(an "Alternative Transaction"), or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Alternative
Transaction. Notwithstanding the foregoing, if prior to the approval of this
Agreement by the Company Stockholders, the Board of Directors of the Company
determines in good faith, after it has received a Superior Proposal (as
hereinafter defined) in compliance with Section 5.9 and after receipt of written
advice from outside counsel that it is required to do so by its fiduciary duties
to Company Stockholders under applicable Law, the Board of Directors of the
Company may (subject to this and the following sentences) inform Company
Stockholders that it no longer believes that the Merger is advisable and no
longer recommends approval (a "Subsequent Determination") and enter into an
Acquisition Agreement with respect to a Superior Proposal, but only at a time
that is after the third business day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company has received a
Superior Proposal. Such written notice shall specify the material terms and
conditions of such Superior Proposal (and include a copy thereof with all
accompanying documentation, if in writing), identify the person making such
Superior Proposal and state that the Board of Directors of the Company intend to
make a Subsequent Determination. During such three business day period, the
Company shall provide an opportunity for Parent to propose such adjustments to
the terms and conditions of this Agreement as would enable the Company to
proceed with its recommendation to its stockholders without a Subsequent
Determination; provided, however, that any such proposed adjustment shall be at
the discretion of the parties hereto at the time. For
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purposes of this Agreement, a "Superior Proposal" means any proposal (on its
most recently amended or modified terms, if amended or modified) made by a third
party to enter into an Alternative Transaction which the Board of Directors of
the Company determines in its good faith judgment (based on, among other things,
the written advice of an independent financial advisor) to be more favorable to
the Company Stockholders than the Merger, taking into account all relevant
factors (including whether, in the good faith judgment of the Board of Directors
of the Company, after obtaining the advice of such independent financial
advisor, the third party is reasonably able to finance the transaction, and any
proposed changes to this Agreement that may be proposed by Parent in response to
such Alternative Transaction). Notwithstanding any other provision of this
Agreement, the Company shall submit this Agreement (whether or not terminated)
to the Company Stockholders whether or not the Board of Directors of the Company
makes a Subsequent Determination. Nothing contained in this Section 5.5 or any
other provision hereof shall prohibit the Company or the Board of Directors of
the Company from (A) taking and disclosing to the Company Stockholders pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act a position with
respect to a tender or exchange offer by a third party, which is consistent with
its obligations hereunder or (B) making such disclosure to the Company
Stockholders as, in the good faith judgment of the Board of Directors of the
Company, after receiving advice from outside counsel is consistent with its
obligations hereunder and is required by applicable law; provided, that the
Company may not, except as provided by this Section 5.5(b), withdraw, qualify or
modify, in a manner adverse to Parent, the approval or recommendation of such
Board of Directors of the Merger or this Agreement.
Section 5.6. Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
Litigation against the Company and its directors relating to the transactions
contemplated by this Agreement or the Merger; provided, however, that no such
settlement shall be agreed to without Parent's consent which consent will not be
unreasonably withheld.
Section 5.7. Indemnification.
---------------
(a) It is understood and agreed that all rights to indemnification by
the Company now existing in favor of each present and former director, officer,
employee and agent of the Company or its Subsidiaries (the "Indemnified
Parties") as provided in the Company Certificate of Incorporation or the Company
Bylaws, in each case as in effect on the date of this Agreement, or pursuant to
any other agreements in effect on the date hereof, copies of which have been
provided to Parent, shall survive the Merger and Parent shall (i) cause the
Surviving Corporation to continue in full force and effect for a period of at
least six (6) years from the Effective Time and (ii) perform, or cause the
Surviving Corporation to perform, in a timely manner, the Surviving
Corporation's obligation with respect thereto. Parent and Buyer agree that any
claims for indemnification hereunder as to which they have received written
notice prior to the sixth anniversary of the Effective Time shall survive,
whether or not such claims shall have been finally adjudicated or settled.
(b) Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, maintain in effect for six (6) years from the Effective Time,
if available, the current directors' and officers' liability insurance policies
("D&O Insurance") covered by such
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policies (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
not materially less favorable) with respect to matters occurring prior to the
Effective Time; provided, however, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 5.7(b) more than an
amount per year equal to one hundred fifty percent (150%) of current annual
premiums paid by the Company for such insurance. In the event that, but for the
proviso to the immediately preceding sentence, the Surviving Corporation would
be required to expend more than one hundred fifty percent (150%) of current
annual premiums, the Surviving Corporation shall obtain the maximum amount of
such insurance obtainable by payment of annual premiums equal to one hundred
fifty percent (150%) of current annual premiums. If the Surviving Corporation
elects to reduce the amount of insurance coverage pursuant to the preceding
sentence, it will furnish to the officers and directors currently covered by
such D&O Insurance reasonable notice of such reduction in coverage and shall, to
the extent additional coverage is available, afford such persons the opportunity
to pay such additional premiums as may be necessary to maintain the existing
level of D&O Insurance coverage.
(c) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 5.7.
(d) The provisions of this Section 5.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 5.8. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with a national
securities exchange or trading system to which Parent or the Company is a party.
The parties agree that the initial press release to be issued with respect to
the transactions contemplated by this Agreement is set forth in Exhibit 5.8 to
this Agreement.
Section 5.9. Acquisition Proposals. The Company shall not, nor shall it
authorize or permit any of its Subsidiaries or Representatives to, directly or
indirectly, (a) solicit, initiate or encourage the submission of any Acquisition
Proposal or (b) participate in or encourage any discussion or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of, any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that the foregoing shall not prohibit
the Board of Directors of the Company from furnishing information to, or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited Acquisition Proposal prior to the approval of this Agreement by
the Company Stockholders if, and to the extent that, (A) the Board of Directors
of the Company, based upon the written advice of independent outside legal
counsel, determines in good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary obligations
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to the Company Stockholders under applicable Delaware law, (B) prior to taking
such action, the Company receives from such person or entity an executed
agreement in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity and (C) the Board of
Directors of the Company concludes in good faith, based upon written advice from
its independent financial advisor, that the Acquisition Proposal is a Superior
Proposal. The Company shall provide immediate oral and written notice to Parent
of (a) the receipt of any such Acquisition Proposal or any inquiry which could
reasonably be expected to lead to any Acquisition Proposal, (b) the material
terms and conditions of such Acquisition Proposal or inquiry, (c) the identity
of such person or entity making any such Acquisition Proposal or inquiry and (d)
the Company's intention to furnish information to, or enter into discussions or
negotiations with, such person or entity. The Company shall continue to keep
Parent informed of the status and details of any such Acquisition Proposal or
inquiry. For purposes of this Agreement, "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange, tender
offer or similar transaction involving the Company, or any purchase or other
acquisition of all or any significant portion of the assets of the Company or
any equity interest in the Company.
Section 5.10. Company Stockholders' Meeting.
-----------------------------
(a) The Company shall cause the Stockholders' Meeting to be duly
called and held as soon as practicable for the purpose of voting on the approval
and adoption of this Agreement and the Merger. The Company shall take all action
necessary in accordance with applicable Law and the Company Certificate of
Incorporation and Company Bylaws to duly call, give notice of, and convene the
Stockholders' Meeting.
(b) The Company shall, at the direction of Parent, solicit from
holders of shares of Company Stock entitled to vote at the Stockholders' Meeting
proxies in favor of such approval and shall take all other action necessary or,
in the reasonable judgment of Parent, helpful to secure the vote or consent of
such holders required by the DGCL or this Agreement to effect the Merger.
Section 5.11. Proxy Statement.
---------------
(a) Parent and the Company will as promptly as practicable following
the execution of this Agreement jointly prepare, and the Company shall file, the
Proxy Statement with the SEC and will use all commercially reasonable efforts to
respond to the comments of the SEC and to cause the Proxy Statement to be mailed
to the Company Stockholders at the earliest practical time. The Company shall
furnish all information concerning it and the holders of its capital stock as
Parent may reasonably request in connection with such actions. Each party to
this Agreement will notify the other parties and the Board of Directors of the
Company promptly of the receipt of the comments of the SEC, if any, and of any
request by the SEC for amendments or supplements to the Proxy Statement or for
additional information with respect thereto, and will supply the other parties
with copies of all correspondence between such party or its Representatives, on
the one hand, and the SEC or members of its staff, on the other hand, with
respect to the Proxy Statement or the Merger. If (A) at any time prior to the
Stockholders' Meeting, any event should occur relating to the Company or any of
its Subsidiaries which should
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be set forth in an amendment of, or a supplement to, the Proxy Statement, the
Company will promptly inform Parent and (B) if at any time prior to the
Stockholders' Meeting, any event should occur relating to Parent or Buyer or any
of their respective associates or affiliates, or relating to the plans of any
such persons for the Company after the Effective Time that should be set forth
in an amendment of, or a supplement to, the Proxy Statement, Parent will
promptly inform the Company, and in the case of (A) or (B) the Company and
Parent, will, upon learning of such event, promptly prepare, and the Company
shall file and, if required, mail such amendment or supplement to the Company
Stockholders; provided, prior to such filing or mailing, the Company and Parent
shall consult with each other with respect to such amendment or supplement and
shall incorporate the other's comments thereon. Parent shall vote, or cause to
be voted, in favor of the Merger and this Agreement all shares of Company Stock
directly or indirectly beneficially owned by it.
(b) The Company hereby consents to the inclusion in the Proxy
Statement of the recommendation of the Board of Directors of the Company
described in Section 3.3, subject to any modification, amendment or withdrawal
thereof, and represents that the Independent Advisors have, subject to the terms
of their engagement letters with the Company and the Board of Directors of the
Company (the "Independent Advisor Engagement Letters"), consented to the
inclusion of references to their opinions in the Proxy Statement. The Company
and its counsel shall permit Parent and its counsel to participate in all
communications with the SEC and its staff, including any meetings and telephone
conferences, relating to the Proxy Statement, the Merger or this Agreement.
Section 5.12. Stockholder Lists. The Company shall promptly upon the
request by Parent, or shall cause its transfer agent to promptly, furnish Parent
and Buyer with mailing labels containing the names and addresses of all record
holders of shares of Company Stock and with security position listings of shares
of Company Stock held in stock depositories, each as of the most recent
practicable date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of shares of Company Stock. The Company shall furnish Parent
and Buyer with such additional information, including, without limitation,
updated listings and computer files of the Company Stockholders, mailing labels
and security position listings, and such other assistance as Parent, Buyer or
their agents may reasonably request.
Section 5.13. [Intentionally Omitted.]
Section 5.14. [Intentionally Omitted.]
Section 5.15. FCC Application. The Company and Parent shall coordinate
efforts and cooperate with each other, to the extent permitted by the FCC rules,
in the preparation and filing of Colocation Applications and Other Applications
with the FCC. Without limitation to the foregoing, upon the request of Parent,
the Company shall use all commercially reasonable efforts to prepare and file
and/or to cause the lessor of a Channel Lease to prepare and file, at the
Company's expense, a Colocation Application or Other Application to be filed
with the FCC, as soon as practicable, and to the extent applicable, in no event
after: (i) the end of the initial one week filing window in which the FCC will
accept Other Applications for the provision of Two-
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Way Services pursuant to the newly adopted FCC rules governing the provision of
Two-Way Services; or (ii) the end of a filing window for ITFS major modification
applications established pursuant to Section 74.911(c) of the FCC rules.
Section 5.16. Undertakings of Parent. Parent shall perform, or cause to be
performed, when due all obligations of Buyer under this Agreement.
Section 5.17. Transfer of FCC Licenses. The Company shall cause, prior to
the consummation of the Merger, the FCC Licenses and Channel Leases owned by
Alda Wireless Holdings, Inc., Alda Tucson, Inc. and Alda Gold, Inc.
(collectively, the "Alda Companies") to be transferred to the Company in a
manner reasonably satisfactory to Parent. In connection with such transfer, the
Company shall cause each of the Alda Companies to release the Company from any
liabilities to the Alda Companies associated with such FCC Licenses and Channel
Leases and acknowledge that the Company has no further obligations to the Alda
Companies with respect to such FCC Licenses and Channel Leases.
Section 5.18. Director Resignations. The Company shall cause to be
delivered to Parent resignations of all the directors of the Company's
Subsidiaries to be effective upon the consummation of the Merger. The Company
shall cause such directors, prior to resignation, to appoint new directors
nominated by Parent to fill such vacancies.
Section 5.19. Company Options. As promptly as practicable following the
date hereof, the Company shall use all commercially reasonable efforts to cause
all of the holders of Company Options to agree to the termination and expiration
of their Company Options immediately prior to the consummation of the Merger in
exchange for the Option Consideration described in Section 1.6.
Section 5.20. [Intentionally Omitted.]
Section 5.21. Rights Plan. The Board of Directors of Company shall as
promptly as practicable, and in any event prior to 5:00 p.m., New York time, on
April 12, 1999, adopt a Rights Agreement between the Company and Harris Trust
Company of New York (the "Rights Plan") and shall approve the appropriate
resolutions so that (i) neither Parent nor Buyer will become an "Acquiring
Person" (as defined in the Rights Plan) as a result of the transactions
contemplated by this Agreement or the Merger, (ii) no "Stock Acquisition Date"
or "Distribution Date" (as such terms are defined in the Rights Plan) will occur
as a result of this Agreement or the Merger or the consummation of the
transactions contemplated by this Agreement or the Merger, and (iii) all
outstanding rights to purchase Series A Junior Participating Preferred Stock
issued and outstanding under the Rights Plan will expire at the Effective Time.
Section 5.22. Year 2000 Plan. The Company shall use all commercially
reasonable efforts to ensure that the Year 2000 Plan shall be completed in a
timely manner. The Company shall (i) allow Parent to monitor the Company's Year
2000 Compliance issues and Year 2000 Plan, (ii) provide prompt notice to Parent
if the Company does not achieve, or reasonably expects it shall not achieve,
milestones and objectives identified in the Year 2000 Plan and (iii) cooperate
in good faith with Parent's efforts to ensure that the Company is Year 2000
Compliant.
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Section 5.23. Purchase of Company Stock. The Company shall in no way
prohibit Parent or any of its affiliates from purchasing shares of Company Stock
or entering into option, lock-up, voting or proxy agreements or any other
similar agreements with respect to Company Stock (including, but not limited to,
amending the Rights Plan to cause such acquisition or agreement to trigger a
Stock Acquisition Date or Distribution Date or cause Parent or any or its
affiliates to become an Acquiring Person) at any time prior to the consummation
of the Merger.
Section 5.24. Appointment of Directors. Unless or until permitted by FCC
rules and regulations, Parent shall not appoint any directors to the Board of
Directors of the Company pursuant to rights relating to shares of Company Stock
owned directly or indirectly by Parent.
ARTICLE VI.
CONDITIONS
Section 6.1. Conditions to the Obligation of Each Party. The respective
obligations of Parent, Buyer and the Company to effect the Merger are subject to
the satisfaction of the following conditions, unless waived in writing by all
parties:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the Company Stockholders, as required by the DGCL, the
Company Certificate of Incorporation and the Company Bylaws;
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition (including, any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued or
deemed applicable to, or any consent or approval withheld with respect to, the
Merger, by any Governmental Entity) preventing the consummation of the Merger
shall be in effect; provided, however, that the parties invoking this condition
shall use all commercially reasonable efforts to have any such order or
injunction vacated; and
(c) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Merger shall have been
obtained or made (including any necessary approval by the FCC and the expiration
or termination of any applicable waiting period under the HSR Act).
Section 6.2. Conditions to Obligations of Parent and Buyer to Effect the
Merger. The obligations of Parent and Buyer to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) (i) the representations and warranties of the Company in this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of the Agreement and as of the Effective Time; (ii) the
representations and warranties of the Company in the Agreement that are not
qualified by materiality shall be true and correct in all material respects as
of the date of this Agreement and as of the Effective Time; (iii) the Company
shall have performed in all material respects all obligations required to be
performed by it under this
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Agreement; (iv) the Alda Companies shall have transferred to the Company the FCC
Licenses and Channel Leases pursuant to Section 5.17; (v) the directors of the
Company's Subsidiaries shall have resigned and appointed nominees to fill their
vacancies as provided in Section 5.18; and (vi) an officer of the Company shall
have delivered to Parent and Buyer a certificate to the effect that each of the
foregoing conditions is satisfied in all respects; provided, however, for
purposes of this condition, as used in the representations and warranties of the
Company contained in Article III of this Agreement, a Company Material Adverse
Effect shall not include adverse developments in the Company's or its
Subsidiaries' revenue or results of operations so long as the operating expenses
and capital expenditures, in the aggregate, are not in excess of those
identified in the Projections;
(b) The Company and its Subsidiaries shall have procured all necessary
third party consents in connection with the consummation of the Merger and the
transactions contemplated hereby;
(c) There shall not be instituted, pending or threatened any action,
investigation or proceeding by any Governmental Entity, or there shall not be
instituted, pending or threatened any action or proceeding by any other person,
domestic or foreign, before any Governmental Entity, which is reasonably likely
to be determined adversely to Buyer, (A) challenging or seeking to make illegal,
to delay materially or otherwise, directly or indirectly, to restrain or
prohibit the consummation of the Merger, seeking to obtain material damages or
imposing any material adverse conditions in connection therewith or otherwise,
directly or indirectly, relating to the transactions contemplated by the Merger,
(B) seeking to restrain, prohibit or delay the exercise of full rights of
ownership or operation by Buyer or its affiliates of all or any portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or of
Buyer or any of its affiliates, or to compel Buyer or any of its affiliates to
dispose of or hold separate all or any material portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, or of Buyer or any
of its affiliates, (C) seeking to impose or confirm material limitations on the
ability of Buyer or any of its affiliates effectively to exercise full rights of
ownership of the shares of Company Common Stock, including, without limitation,
the right to vote the shares of Company Common Stock acquired or owned by Buyer
or any of its affiliates on all matters properly presented to the Company
Stockholders, (D) seeking to require divestiture by Buyer or any of its
affiliates of the shares of Company Common Stock, or (E) that otherwise would
reasonably be expected to have a Company Material Adverse Effect; or
(d) There shall not have occurred any change, condition, event or
development that has resulted in, or would reasonably be expected to result in,
a Company Material Adverse Effect; provided, that for purposes of this
condition, a Company Material Adverse Effect shall not include adverse
developments in the Company's or its Subsidiaries' revenue or results of
operations so long as the operating expenses and capital expenditures, in the
aggregate, are not in excess of those identified in the Projections.
Section 6.3. Conditions to Obligations of the Company to Effect the Merger.
The obligations of the Company to effect the Merger are further subject to
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
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(a) The representations and warranties of Parent and Buyer in this
Agreement that are qualified by materiality shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time;
(b) The representations and warranties of Parent and Buyer in this
Agreement that are not qualified by materiality shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective Time;
(c) Parent and Buyer shall have performed in all material respects all
obligations required to be performed by them under this Agreement; and
(d) Parent and Buyer shall have delivered to the Company a certificate
to the effect that each of the conditions specified in Sections 6.3(a), (b) and
(c) is satisfied in all respects.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of matters presented in connection with the Merger by the Company
Stockholders:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) By any of Parent, Buyer or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree,
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; provided however, that the party terminating
this Agreement pursuant to this Section 7.1(b) shall use all commercially
reasonable efforts to have such order, decree, ruling or action vacated;
(c) By any of Parent, Buyer or the Company if the Merger shall not
have been consummated on or before December 31, 1999; provided, however, that
the right to terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the primary cause of, or resulted in, the failure to
consummate the Merger on or before such date;
(d) By Parent or Buyer if the Board of Directors of the Company (i)
shall have withdrawn or shall have modified in a manner adverse to Parent or
Buyer its approval or recommendation of the Merger or this Agreement, (ii)
causes the Company to enter into an agreement with respect to an Acquisition
Proposal, (iii) shall have endorsed, approved or recommended any Acquisition
Proposal or (iv) shall have resolved to do any of the foregoing;
(e) By any of the Company, Parent or Buyer, if this Agreement and the
Merger shall fail to be approved and adopted by the Company Stockholders at the
Stockholders' Meeting;
36
<PAGE>
(f) By Parent or Buyer, if (i) any of the conditions set forth in
Section 6.2 shall have become incapable of fulfillment and shall not have been
waived by Parent and Buyer or (ii) the Company shall breach in any material
respect any of its representations, warranties, covenants or other obligations
hereunder and, within ten (10) days after written notice of such breach to the
Company from Parent, such breach shall not have been cured in all material
respects or waived by Parent or Buyer and the Company shall not have provided
reasonable assurance to Parent and Buyer that such breach will be cured in all
material respects on or before the Effective Time;
(g) By the Company, if (i) any of the conditions set forth in Section
6.3 shall have become incapable of fulfillment and shall not have been waived by
the Company or (ii) Parent or Buyer shall breach in any material respect any of
their respective representations, warranties or obligations hereunder and,
within ten (10) days after written notice of such breach to Parent from the
Company, such breach shall not have been cured in all material respects or
waived by the Company and Parent or Buyer, as the case may be, shall not have
provided reasonable assurance to the Company that such breach will be cured in
all material respects on or before the Effective Time; or
(h) By the Company if, in compliance with its obligations under
Sections 5.5 and 5.9, (i) the Board of Directors of the Company shall have
withdrawn or shall have modified in a manner adverse to Parent or Buyer its
approval or recommendation of the Merger or this Agreement and (ii) the Company
shall have entered into an agreement with respect to a Superior Proposal.
Section 7.2. Effect of Termination.
---------------------
(a) In the event of the termination of this Agreement pursuant to
Section 7.1 hereof, this Agreement shall forthwith be terminated and have no
further effect except as specifically provided herein and, except as provided in
this Section 7.2 and in Section 8.12, there shall be no liability on the part of
any party hereto, provided that nothing herein shall relieve any party from
liability for any willful breach hereof.
(b) If (i) Parent or Buyer exercises its right to terminate this
Agreement under Section 7.1(d), the Company shall pay to Parent $14 million (the
"Termination Fee"), payable in same-day funds, as liquidated damages and not as
a penalty to reimburse Parent for its time, expense and lost opportunity costs
of pursuing the Merger, upon consummation of the transaction relating to such
Acquisition Proposal.
(c) If within one year after termination of this Agreement, the
Company shall enter into any agreement relating to, or consummate, an
Acquisition Proposal with a person other than Parent or Buyer, then immediately
prior to, and as a condition of, consummation of such transaction the Company
shall pay to Parent upon demand $14 million, payable in same-day funds, as
liquidated damages and not as a penalty, to reimburse Parent for its time,
expense and lost opportunity costs of pursuing the Merger; provided that no such
amount shall be payable if the Termination Fee shall have become payable or have
been paid in accordance with Section 7.2(b) of this Agreement or if this
Agreement shall have been terminated by the Company in accordance with clause
(ii) of Section 7.1(g); provided, no such amount shall be payable if the fair
37
<PAGE>
market value of the per share consideration to be received by the holders of
Company Stock pursuant to such Acquistion Proposal is less than 90% of the
Merger Consideration on a pre tax basis determined as of the effective date of
such transaction.
(d) Notwithstanding anything to the contrary set forth in this
Agreement, if the Company fails promptly to pay to Parent any amounts due under
this Section 7.2, the Company shall pay the costs and expenses (including
reasonable legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee or obligation at the publicly
announced prime rate of Citibank, N.A. in effect from time to time from the date
such fee or obligation was required to be paid.
Section 7.3. Amendments. This Agreement may not be amended except by action
of the board of directors of each of the parties hereto (and, in the case of the
Company, with the approval of the Board of Directors of the Company) set forth
in an instrument in writing signed on behalf of each of the parties hereto;
provided, however, that after approval of the Merger by the Company Stockholders
(if required), no amendment may be made without the further approval of the
Company Stockholders if the effect of such amendment would be to reduce the
Merger Consideration or change the form thereof.
Section 7.4. Waiver. At any time prior to the Effective Time, whether
before or after the Stockholders' Meeting, any party hereto, by action taken by
its board of directors, may (i) extend the time for the performance of any of
the covenants, obligations or other acts of any other party hereto or (ii) waive
any inaccuracy of any representations or warranties or compliance with any of
the agreements, covenants or conditions of any other party or with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by its duly authorized
officer. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
The waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
ARTICLE VIII.
GENERAL PROVISIONS
Section 8.1. No Third Party Beneficiaries. Other than the provisions of
Sections 5.6 and 5.7 hereof, nothing in this Agreement shall confer any rights
or remedies upon any person other than the parties hereto.
Section 8.2. Entire Agreement. This Agreement constitutes the entire
Agreement among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof.
38
<PAGE>
Section 8.3. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other parties; provided, however, that Buyer may freely assign its rights to
another wholly owned subsidiary of Parent without such prior written approval
but no such assignment shall relieve Buyer of any of its obligations hereunder.
Section 8.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 8.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law thereof.
Section 8.7. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
Section 8.8. Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 8.9. Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.10. Non-Survival of Representations and Warranties and
Agreements. The
39
<PAGE>
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
7.1, as the case may be, except that (i) the agreements set forth in Articles I
and VIII and Sections 5.4, 5.6 and 5.7 shall survive the Effective Time
indefinitely and (ii) the agreements set forth in Sections 5.6, 5.7, 5.23 and
7.2 and in Article VIII shall survive the termination of this Agreement
indefinitely.
Section 8.11. Certain Definitions. For purposes of this Agreement, the
terms "associate" and "affiliate" shall have the same meaning as set forth in
Rule l2b-2 promulgated under the Exchange Act, and the term "person" shall mean
any individual, corporation, partnership (general or limited), limited liability
company, limited liability partnership, trust, joint venture, joint-stock
company, syndicate, association, entity, unincorporated organization or
government or any political subdivision, agency or instrumentality thereof.
Section 8.12. Fees and Expenses. Each party hereto shall pay its own costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
Section 8.13. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses, or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 8.13:
If to Parent or Buyer:
Sprint Corporation
2330 Shawmee Mission Parkway
Westwood, Kansas 66205
Telecopier: (913) 624-8426
Attention: President
with a copy to:
Sprint Corporation
2330 Shawmee Mission Parkway
Westwood, Kansas 66205
Telecopier: (913) 624-8426
Attention: J. Richard Devlin
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Telecopier: (404) 572-5100
Attention: Bruce N. Hawthorne, Esq.
40
<PAGE>
If to the Company:
People's Choice TV Corp.
2 Corporate Drive
Shelton, Connecticut 06484
Telecopier: (203) 925-6250
Attention: Matthew Oristano
Donald Olander
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Telecopier: (212) 728-8111
Attention: Mario M. Cuomo
Daniel D. Rubino
Section 8.14. Control. Buyer has not exercised and shall not exercise any
control of the Company or the FCC Licenses held by the Company or the Alda
Companies prior to the Closing and the grant of the necessary approvals by the
FCC.
IN WITNESS WHEREOF, the Company, Parent and Buyer and have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PEOPLE'S CHOICE TV CORP.
By: /s/ Matthew Oristano
------------------------------------
Chairman and Chief Executive Officer
SPRINT CORPORATION
By: /s/ Theodore H. Schell
------------------------------------
Senior Vice President
MM ACQUISITION CORP.
By: /s/ Theodore H. Schell
------------------------------------
Senior Vice President
41
<PAGE>
================================================================================
Rights Agreement
People's Choice TV Corp.
and
Harris Trust Company of New York,
Rights Agent
Dated as of April 12, 1999
===============================================================================
<PAGE>
Table of Contents
-----------------
Page
----
Section 1. Certain Definitions.............................................1
Section 2. Appointment of Rights Agent.....................................6
Section 3. Issue of Rights Certificates....................................6
Section 4. Form of Rights Certificates.....................................8
Section 5. Countersignature and Registration...............................9
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates....................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..10
Section 8. Cancellation and Destruction of Rights Certificates............13
Section 9. Reservation and Availability of Capital Stock..................13
Section 10. Preferred Stock Record Date....................................15
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights............................................15
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....25
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power..................................................25
Section 14. Fractional Rights and Fractional Shares........................28
Section 15. Rights of Action...............................................29
Section 16. Agreement of Rights Holders....................................30
Section 17. Rights Certificate Holder Not Deemed a Stockholder.............30
Section 18. Concerning the Rights Agent....................................31
Section 19. Merger or Consolidation or Change of Name of Rights Agent......31
Section 20. Duties of Rights Agent.........................................32
Section 21. Change of Rights Agent.........................................34
(i)
<PAGE>
Section 22. Issuance of New Rights Certificates............................36
Section 23. Redemption and Termination.....................................36
Section 24. Notice of Certain Events.......................................36
Section 25. Notices........................................................37
Section 26. Supplements and Amendments.....................................38
Section 27. Successors.....................................................39
Section 28. Determinations and Actions by the Board of Directors, etc......39
Section 29. Benefits of this Agreement.....................................39
Section 30. Severability...................................................40
Section 31. Governing Law..................................................40
Section 32. Counterparts...................................................40
Section 33. Descriptive Headings...........................................40
Exhibit A - Form of Certificate of Designation,
Preferences and Rights
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights
(ii)
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of April 12, 1999 between People's Choice TV
Corp., a Delaware corporation (the "Company"), and Harris Trust Company of New
York, a national banking association, as Rights Agent (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on April 11, 1999 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock of the Company
outstanding at the close of business on April 22, 1999 (the "Record Date"), and
has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date, each
Right initially representing the right to purchase one unit (a "Unit") with each
such unit consisting initially of one one-thousandth of a share of Series A
Junior Participating Preferred Stock of the Company having the rights, powers
and preferences set forth in the form of Certificate of Designation, Preferences
and Rights attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth ("Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
-------------------
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 15%
or more of the shares of Common Stock then outstanding, but shall not include
(i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit
plan of the Company or of any Subsidiary of the Company, or (iv) any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan (each of (i) through (iv), an "Exempted Person").
Notwithstanding the foregoing, (i) no Person shall become an "Acquiring Person"
as a result of an acquisition of Common Stock by the Company which, by reducing
the number of such shares then outstanding, increases the proportionate number
of shares beneficially owned by such Person to 15% or more of the outstanding
Common Stock, except that if such Person, after such share purchases by the
Company, becomes the Beneficial Owner of any additional shares of Common Stock,
<PAGE>
such Person shall be deemed to be an "Acquiring Person;" and (ii) if the Board
of Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person" has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of Common Stock so
that such Person would no longer be an Acquiring Person then such Person shall
not be deemed to be an "Acquiring Person." Notwithstanding the foregoing, Sprint
Corporation and MM Acquisition Corp. shall not be deemed to be an "Acquiring
Person" solely by virtue of their acquisition of preferred stock of the Company
pursuant to the Securities Purchase and Option Agreement between Sprint
Corporation and Wireless Holding LLC dated as of April 2, 1999 and the
announcement or occurrence of the acquisition of Common Stock pursuant to or
permitted under the Agreement and Plan of Merger among the Company, Sprint
Corporation and its wholly owned subsidiary dated as of April 12, 1999 (the
"Merger Agreement") or any agreement contemplated thereby or the consummation of
the transactions contemplated thereby. The term "outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then issued and outstanding which such Person
would be deemed to beneficially own hereunder.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) of this Agreement.
(d) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(e) "Associate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(f) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
-2-
<PAGE>
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof ("Original Rights") or
pursuant to Section 11(i) hereof in connection with an adjustment made
with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (f)) or disposing of any voting securities of the
Company;
provided, however, that nothing in this paragraph (f) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(g) "Business Day" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in the State of New York or the state in which the
principal office of the Rights Agent is located are authorized or obligated by
law or executive order to close.
-3-
<PAGE>
(h) "Close of business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(i) "Common Stock" shall mean the common stock, par value $.01 per share, of
the Company, except that "Common Stock" when used with reference to any Person
other than the Company shall mean the capital stock of such Person with the
greatest voting power, or the equity securities or other equity interest having
power to control or direct the management, of such Person.
(j) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(k) "Company" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(l) "Current Market Price" shall have the meaning set forth in Section
11(d)(i).
(m) "Current Value" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(n) "Distribution Date" shall have the meaning set forth in Section 3(a) of
this Agreement.
(o) "Equivalent preferred stock" shall have the meaning set forth in Section
11(b) of this Agreement.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(q) "Excluded Person" shall have the meaning set forth in Section 1(f) of
this Agreement.
(r) "Exempted Person" shall have meaning set forth in Section 1(a) of this
Agreement.
(s) "Expiration Date" shall have the meaning set forth in Section 7(a) of
this Agreement.
(t) "Final Expiration Date" shall have the meaning set forth in Section 7(a)
of this Agreement.
(u) "Original Rights" shall have the meaning set forth in Section 1(f)(i) of
this Agreement.
(v) "Person" shall mean any individual, firm, corporation, partnership or
other entity.
(w) "Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, par value $.01 per share, of the Company, and, to the extent
that there are not a sufficient number of shares of Series A Junior
-4-
<PAGE>
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of Preferred Stock, par value $.01 per share, of the
Company designated for such purpose containing terms substantially similar to
the terms of the Series A Junior Participating Preferred Stock.
(x) "Principal Party" shall have the meaning set forth in Section 13(b) of
this Agreement.
(y) "Purchase Price" shall have the meaning set forth in Section 4(a) of
this Agreement.
(z) "Record Date" shall have the meaning set forth in the "Whereas" clause
of this Agreement.
(aa) "Redemption Price" shall have the meaning set forth in Section 23 of
this Agreement.
(bb) "Rights" shall have the meaning set forth in the "Whereas" clause of
this Agreement.
(cc) "Rights Agent" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(dd) "Rights Certificates" shall have the meaning set forth in Section 3(a)
of this Agreement.
(ee) "Rights Dividend Declaration Date" shall have the meaning set forth in
the "Whereas" clause of this Agreement.
(ff) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) of this Agreement.
(gg) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) of this Agreement.
(hh) "Section 13 Event" shall mean any event described in clause (x), (y) or
(z) of Section 13(a) of this Agreement.
(ii) "Spread" shall have the meaning set forth in Section 11(a)(iii) of this
Agreement.
(jj) "Stock Acquisition Date" shall mean the earlier of the date of (i) the
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such or (ii) the public disclosure of facts by the Company or an Acquiring
Person indicating that an Acquiring Person has become an Acquiring Person.
(kk) "Subsidiary" shall mean, with reference to any Person, any corporation
of which an amount of voting securities sufficient to elect at least a majority
-5-
<PAGE>
of the directors of such corporation is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(ll) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(mm) "Summary of Rights" shall have the meaning set forth in Section 3(b) of
this Agreement.
(nn) "Trading Day" shall have the meaning set forth in Section 11(d)(i) of
this Agreement.
(oo) "Transaction" shall mean any merger, consolidation or sale of assets or
earning power described in Section 13(a) hereof or any acquisition of Common
Stock of the Company which, without regard to any required approval of the
Company, would result in a Person becoming an Acquiring Person.
(pp) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
(qq) "Unit" shall have the meaning set forth in the "Whereas" clause of this
Agreement.
Section 2. Appointment of Rights Agent.
---------------------------
The Company hereby appoints the Rights Agent to act as agent for the Company
in accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the earlier of (i) the close of business on the tenth day after
the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the close of business on the Record Date),
(ii) the close of business on the tenth Business Day (or such later date as the
Board shall determine) after the date that a tender or exchange offer by any
Person is first published or sent or given within the meaning of Rule 14d-2(a)
of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would become an Acquiring Person or (iii) the
Expiration Date (the earlier of (i), (ii) and (iii) being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced by the certificates
for the Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). The Board of Directors of
the Company may defer the date set forth in clause (ii) of the preceding
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sentence to a specified later date or to an unspecified later date, each to be
determined, by action of a majority of the Board of Directors of the Company. As
soon as practicable after the Distribution Date, the Rights Agent will, at the
Company's expense, send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable, the Company will send a copy of a Summary of
Rights, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of the
Common Stock as of the close of business on the Record Date, at the address of
such holder shown on the records of the Company.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be deemed
to be certificates for Rights and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between People's
Choice TV Corp. (the "Company") and Harris Trust Company of New York
(the "Rights Agent") dated as of April 12, 1999 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge, promptly after receipt
of a written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
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thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, registered holders of
Common Stock shall also be the registered holders of the associated Rights, and
the transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever distributed, shall be dated as of the Record
Date and on their face shall entitle the holders thereof to purchase such number
of one one-thousandths of a share of Preferred Stock as shall be set forth
therein at the price set forth therein (such exercise price per one
one-thousandth of a share, the "Purchase Price"), but the amount and the type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Affiliate or Associate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Board of Directors has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
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exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by an authorized signatory of the
Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by an authorized
signatory of the Rights Agent and issued and delivered by the Company with the
same force and effect as though the person who signed such Rights Certificates
had not ceased to be such officer of the Company; and any Rights Certificates
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date of the execution
of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its office or offices designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates.
--------------------------------------------------------------------
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(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and at
or prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-thousandths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment by the holder of a Rights Certificate of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate, if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
----------------------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
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exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such purpose, along
with a signature guarantee and such other and further documentation as the
Rights Agent may reasonably request, together with payment of the aggregate
Purchase Price with respect to the total number of one one-thousandths of a
share (or other securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or prior to the earlier
of (i) the close of business on April 22, 2009 (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof,
or (iii) the time of filing of a Certificate of Merger or, if applicable, a
Certificate of Ownership and Merger with the Secretary of State of Delaware
pursuant to the Merger Agreement (the earlier of (i), (ii) or (iii) being herein
referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $35, and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
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registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
check or bank draft payable to the order of the Company. In the event that the
Company is obligated to issue other securities (including Common Stock) of the
Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which a majority of the Board
of Directors has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action, and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
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<PAGE>
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
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(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, or (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement, and shall give simultaneous written notice to the Rights Agent
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued, and fully paid and
non-assessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of the Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
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that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date.
---------------------------
Each person in whose name any certificate for a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such fractional
shares of Preferred Stock (or Common Stock and/or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Stock (or Common Stock and/or other securities, as the case
may be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights.
------------------------------------------------
The Purchase Price, the number and kind of shares covered by each Right and
the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
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shares of Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller
number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open, he
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person, alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing the 15%
threshold to be crossed is a transaction set forth in Section 13(a)
hereof, or is an acquisition of shares of Common Stock pursuant to a
tender offer or an exchange offer for all outstanding shares of Common
Stock at a price and on terms determined by at least a majority of the
Board of Directors, after receiving advice from one or more investment
banking firms, to be (a) at a price which is fair to stockholders
(taking into account all factors which such members of the Board deem
relevant including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders, then, promptly following
the occurrence of any event described in Section 11(a)(ii) hereof,
proper provision shall be promptly made so that each holder of a Right
(except as provided below and in Section 7(e) hereof) shall thereafter
have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of one one-thousandths of a share of Preferred Stock, such
number of shares of Common Stock of the Company as shall equal the
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result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares being referred to as the
"Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which are
authorized by the Company's Restated Certificate of Incorporation but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this Section 11(a), the Company, acting by resolution of a majority
of the Board of Directors shall (A) determine the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current
Value"), and (B) with respect to each Right (subject to Section 7(e)
hereof), make adequate provision to substitute for the Adjustment
Shares, upon the exercise of a Right and payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred stock,
such as the Preferred Stock, which the Board has deemed to have
essentially the same value or economic rights as shares of Common Stock
(such shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets,
or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined by the
Board based upon the advice of a nationally recognized investment
banking firm selected by the Board; provided, however, that if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y)
the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the
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Current Value over (ii) the Purchase Price. If the Board determines in
good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended
to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, is herein called
the "Substitution Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (2) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek such shareholder
approval for such authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the value of
each Adjustment Share shall be the Current Market Price (as determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock on
the Section 11(a)(ii) Trigger Date and the per share or per unit value
of any Common Stock Equivalent shall be deemed to equal the Current
Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the Current Market Price per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
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which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation), of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d)(i) hereof) per share of Preferred Stock on such record date, less
the fair market value (as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price per share of Preferred Stock. Such adjustments shall
be made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common
Stock for the thirty (30) consecutive Trading Days immediately prior to
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such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the Current Market Price per share of Common Stock
on any date shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following such date; provided, however, that
in the event that the Current Market Price per share of the Common
Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities
convertible into shares of such Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common
Stock, and the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification
shall not have occurred prior to the commencement of the requisite
thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be
properly adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange
or, if the shares of Common Stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if on any such date the shares of Common Stock
are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board. If on any such date
no market maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by the Board
shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, Current
Market Price per share shall mean the fair value per share as
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determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be determined in the
manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section
11(d), the Current Market Price per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 1000 (as such number may
be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded,
Current Market Price per share of the Preferred Stock shall mean the
fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of a Unit shall be equal to
the Current Market Price of one share of Preferred Stock divided by
1000.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest hundred-thousandth of a share of Common
Stock or other share or one-ten-millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
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10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment
made to the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of one one-thousandths of a share of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one-ten-millionth)
obtained by (i) multiplying (x) the number of one one-thousandths of a share
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
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substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable such number of one one-thousandths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in
the Purchase Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the number of one
one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that in their good faith judgment the Board of Directors of the Company shall
determine to be advisable in order that any (i) consolidation or subdivision of
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the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price thereof, (iii) issuance wholly for
cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the event
that the Company shall at any time after the Rights Dividend Declaration Date
and prior to the Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, the number of Rights associated
with each share of Common Stock then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, shall be proportionately adjusted
so that the number of Rights thereafter associated with each share of Common
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Stock following any such event shall equal the result obtained by multiplying
the number of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares.
-----------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment, the adjusted Purchase Price and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent, and
with each transfer agent for the Preferred Stock and the Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.
-----------------------------------------
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell, mortgage or otherwise transfer (or one
or more of its Subsidiaries shall sell, mortgage or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case (except as may
be contemplated by Section 13(d) hereof), proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
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then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradable shares of Common Stock of the Principal Party, not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
---------------
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
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<PAGE>
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, sale or
transfer unless the Principal Party shall have a sufficient number of authorized
shares of its Common Stock which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in paragraph (a) of this Section 13, the
Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired shares of Common Stock pursuant to a tender offer or exchange offer
for all outstanding shares of Common Stock which complies with the provisions of
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Section 11(a)(ii) hereof regarding the determination of a majority of the Board
of Directors, (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to such
tender offer or exchange offer, and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
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distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-thousandth of a share of Preferred Stock shall be one one-thousandth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not be
required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the Current
Market Value of one (1) share of Common Stock. For purposes of this Section
14(c), the Current Market Value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
----------------
All rights of action in respect of this Agreement, excepting the rights of
action given to the Rights Agent, are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement
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and shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
---------------------------
Every holder of a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligations; provided, however, the Company must use its best efforts to have
any such order, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
--------------------------------------------------
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the number of one
one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
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represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent such compensation as shall
be agreed to in writing between the Company and the Rights Agent for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including, without limitation, the costs and expenses of defending
against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed and executed, and where necessary,
verified or acknowledged, by the proper Person or Persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name
of Rights Agent.
-----------------------------------------
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
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Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes the duties and obligations expressly imposed by
this Agreement, and no implied duties or obligations shall be read into this
Agreement against the Rights Agent, upon the following terms and conditions, by
all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its selection (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
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delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or execution
of any Rights Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights becoming
void pursuant to Section 7(e) hereof); nor shall it be responsible for any
adjustment required under the provisions of Section 11 or Section 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
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by it in good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days' notice in writing
mailed to the Company. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock and Preferred Stock, by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
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to make such appointment within a period of thirty (30) days after giving notice
of such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then the Company shall become the Rights Agent
until a successor Rights Agent has been appointed, and any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of New York), in good
standing, having a principal office in the State of New York which is authorized
under such laws to exercise corporate trust or shareholder services powers and
is subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least [$100,000,000]. After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred Stock, and mail a notice
thereof in writing to the registered holders of the Rights Certificates. Failure
to give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
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Section 22. Issuance of New Rights Certificates.
-----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, subject to Section 4 hereof, issue
new Rights Certificates evidencing Rights in such form as may be approved by its
Board of Directors to reflect any adjustment or change in the Purchase Price and
the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement.
Section 23. Redemption and Termination.
--------------------------
(a) The Company may, by a resolution adopted by majority of the Board of
Directors, at its option, at any time prior to the earlier of (i) the close of
business on the tenth day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.
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Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate and to the Rights Agent, to the extent feasible
and in accordance with Section 25 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
shares of Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Preferred Stock whichever shall be the earlier.
(b) In the event that a Section 11(a)(ii) Event shall occur, then (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph to Preferred Stock shall be
deemed thereafter to refer to Common Stock and/or, if appropriate, other
securities.
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Section 25. Notices.
-------
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
People's Choice TV Corp.
2 Corporate Drive
Shelton, Connecticut 06484
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Harris Trust Company of New York
88 Pine Street
New York, New York
Attention: Compliance Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 26. Supplements and Amendments.
--------------------------
Prior to the Distribution Date and subject to the penultimate sentence of
this Section 26, the Company may by resolution of a majority of the Board of
Directors and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company may by resolution of a majority of the Board of Directors and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which, in the case of this clause (iv), shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
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<PAGE>
provided, however, that this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.
Section 27. Successors.
----------
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors, etc.
---------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board to any liability to the holders of the Rights.
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Section 29. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of the Common Stock).
Section 30. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the close of business on the tenth day following the date
of such determination by the Board of Directors.
Section 31. Governing Law.
-------------
This Agreement, each Right and each Rights Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Delaware
and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts made and to be performed entirely
within such State.
Section 32. Counterparts.
------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 33. Descriptive Headings.
--------------------
Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
PEOPLE'S CHOICE TV CORP.
By:__________________________
Name:
Title:
HARRIS TRUST COMPANY OF NEW YORK,
as Rights Agent
By:__________________________
Name:
Title:
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Exhibit A
---------
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
PEOPLE'S CHOICE TV CORP.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, ____________________, [office] of People's Choice TV Corp., a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation, as amended, of this Corporation, the Board of
Directors on April 11, 1999, adopted the following resolution creating a series
of 75,000 shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, as amended, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 75,000.
Section 2. Dividends and Distributions.
(A) Subject to the superior rights of the holders of any shares of any
series of Preferred Stock ranking superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Junior Participating Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of January, April, July and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
<PAGE>
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Junior Participating Preferred Stock, in an amount per
share (rounded to the nearest cent), subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate per share amount of all
cash dividends, and 1000 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends on the Series A Junior Participating Preferred Stock
shall be noncumulative and no sums in later years shall be paid to the holders
of the Series A Junior Participating Preferred Stock with respect to any prior
years or years when dividends were not paid. Dividends paid on the shares of
Series A Junior Participating Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than thirty (30) days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
A-2
<PAGE>
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to [1000] votes on all matters submitted to a vote of the stockholders
of the Corporation. In the event the Corporation shall at any time (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the number of votes per share
to which holders of shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 5. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation the holders of the Series A Junior Participating Preferred Stock,
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 1000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock. Following the payment of the foregoing, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed.
(B) In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock (by reclassification or otherwise), or (iii) combine
A-3
<PAGE>
the outstanding Common Stock into a smaller number of shares, then in each such
case the aggregate amount to which holders of shares of the Series A Junior
Participating Preferred Stock, were entitled immediately prior to such event
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 6. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock (by reclassification or otherwise), or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 8. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock which
may be hereafter issued and on a parity with the Common Stock as to the payment
of dividends and the distribution of assets, unless the terms of any such series
of the Corporation's Preferred Stock shall provide otherwise.
Section 9. Amendment. The Certificate of Incorporation as amended, of
the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Junior Participating Preferred Stock voting
separately as a class.
A-4
<PAGE>
Section 10. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true under the penalties of perjury
this ____ day of April, 1999.
___________________________
A-5
<PAGE>
Exhibit B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- ______Rights
NOT EXERCISABLE AFTER APRIL 22, 2009 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*
RIGHTS CERTIFICATE
PEOPLE'S CHOICE TV CORP.
This certifies that_________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of April 12, 1999 (the "Rights Agreement"),
between People's Choice TV Corp., a Delaware corporation (the "Company"), and
Harris Trust Company of New York, a national banking association (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and at any time prior to 5:00
P.M. (New York City time) on April 22, 2009 at the office or offices of the
Rights Agent designated for such purpose, or its successors as Rights Agent, one
one-thousandth of a fully paid, nonassessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $35 per one one-thousandth of a share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
_____________________
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
Election to Purchase and related Certification duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of one
one-thousandths of a share of Preferred Stock which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of April 22, 1999, based on the
Preferred Stock as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number and kind of shares of Preferred
Stock or other securities, which may be purchased upon the exercise of the
Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Affiliate or
Associate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
B-2
<PAGE>
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right. No fractional shares of Preferred Stock will be issued
upon the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-3
<PAGE>
WITNESS the facsimile signature of the proper officer of the Company
and its corporate seal.
Dated as of ___________ __, ____
PEOPLE'S CHOICE TV CORP.
By:________________________
Name:
Title:
Countersigned:
HARRIS TRUST COMPANY OF NEW YORK,
as Rights Agent
By________________________________
Authorized Representative
B-4
<PAGE>
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _____________________________________________________________
________________________________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to transfer the
within Rights Certificate on the books of the within-named Company, with full
power of substitution.
Dated:__________________, ____
_________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
B-5
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
Certification
-------------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: ___________________, ___
_________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
NOTICE
The signature to the foregoing Assignment and Certification must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Certificate) and such Assignment
will not be honored.
B-6
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: People's Choice TV Corp.:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:________________, ____
_________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
B-7
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
Certification
-------------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _________________, ___
_________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company,
broker, dealer, or other eligible institution which is a member in good standing
of a medallion guaranty program approved by the Securities Transfer Association,
Inc.
NOTICE
------
The signature to the foregoing Election to Purchase and Certification
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Certificate) and such Election to
Purchase will not be honored.
B-8
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On April 11, 1999, the Board of Directors of People's Choice TV Corp. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of common stock, par value $.01 per share (the "Common Stock"), of the
Company. The dividend is payable to stockholders of record at the close of
business on April 22, 1999 (the "Record Date") and with respect to the Common
Stock issued thereafter until the Distribution Date (defined below) and, in
certain circumstances, with respect to the Common Stock issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Company a unit
consisting initially of one one-thousandth of a share (a "Unit") of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of the Company, at a Purchase Price of $35 per Unit, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement"), dated as of April 12,
1999, between the Company and Harris Trust Company of New York, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates evidencing
the Rights ("Rights Certificates") will be distributed. The Rights will separate
from the Common Stock and a Distribution Date will occur upon the earlier of (i)
ten (10) days (or such later date as the Board of Directors shall determine)
following public disclosure that a person or group of affiliated or associated
persons has become an "Acquiring Person" (as defined below), or (ii) ten (10)
business days (or such later date as the Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an "Acquiring Person". Except as set forth below, an
"Acquiring Person" is a person or group of affiliated or associated persons who
has acquired beneficial ownership of 15% or more of the outstanding shares of
Common Stock. The term "Acquiring Person" excludes (i) the Company, (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the Company or any
subsidiary of the Company, and (iv) any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan. In
addition, each of Sprint Corporation and MM Acquisition Corp. shall not be
deemed to be an "Acquiring Person" solely by virtue of their acquisition of
preferred stock of the company pursuant to the Securities Purchase and Option
Agreement between Sprint Corporation and Wireless Holding LLC, dated as of April
2, 1999 or the acquisition of Common Stock pursuant to the Agreement and Plan of
Merger dated as of April 12, 1999 among Sprint Corporation, MM Acquisition Corp.
and the Company, or any other agreement contemplated thereby.
Until the occurrence of the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Rights
<PAGE>
Agreement by reference, and (iii) the surrender for transfer of any certificates
for Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. Pursuant to
the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.
As soon as practicable after the occurrence of the Distribution Date,
Rights Certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights. Except in certain
circumstances specified in the Rights Agreement or as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the Distribution
Date and until the Rights no longer are redeemable. The Rights will expire at
the close of business on April 22, 2009, unless extended or earlier redeemed by
the Company as described below.
In the event that, at any time following the Distribution Date, a person
becomes the beneficial owner of more than 15% of the then outstanding shares of
Common Stock (except pursuant to an offer for all outstanding shares of Common
Stock at a price and on terms determined to be fair to, and in the best
interests of, the stockholders by at least a majority of the Board of
Directors), becomes an Acquiring Person, each holder of a Right will thereafter
have the right to receive, upon exercise of the Right, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. Notwithstanding any
of the foregoing, following the occurrence of the event set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void and nontransferable and any holder of any such right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such right. For example, at an exercise price of $35 per Right,
each Right not owned by an Acquiring Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its holder
to purchase $70 worth of Common Stock (or other consideration, as noted above)
for $35. Assuming that the Common Stock had a per share value of $5 at such
time, the holder of each valid Right would be entitled to purchase sixteen (16)
shares of Common Stock for $35.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock
C-2
<PAGE>
Acquisition Date"), (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation
(other than a merger which follows an offer described in the preceding
paragraph), or (ii) 50% or more of the Company's assets or earning power is
sold, mortgaged or transferred, each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. There is an exception for a
merger that is approved by a majority of the Board of Directors at a price which
is fair to, and otherwise in the best interests of, the stockholders and in
which all stockholders of the Company receive equal consideration. The events
set forth in this paragraph and in the preceding paragraph are referred to as
the "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock. Shares of Preferred Stock purchasable upon
exercise of the Rights will not be redeemable. Each share of Preferred Stock
will be entitled to a quarterly dividend payment of 1000 times the dividend
declared per share of Common Stock. In the event of liquidation, each share of
Preferred Stock will be entitled to an aggregate payment of 1000 times the
aggregate payment made per share of Common Stock. Each share of Preferred Stock
will have 1000 votes, voting together with the shares of Common Stock. These
rights are protected by customary antidilution provisions.
C-3
<PAGE>
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price (the
"Redemption Price") of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors) by resolution of a
majority of the Board of Directors. The redemption of the Rights may be made
effective at such time on such basis with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon such action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by
resolution adopted by a majority of the Board of Directors prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by resolution adopted by a majority of the Board of
Directors in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person or its affiliates or associates), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
April 14, 1999. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
C-4
<PAGE>
STOCKHOLDER AND OPTION AGREEMENT
--------------------------------
THIS STOCKHOLDER AND OPTION AGREEMENT (this "Agreement") dated as of
April 12, 1999, is entered into between Sprint Corporation, a Kansas corporation
("Parent"), and Matthew Oristano, an individual resident of the State of
Connecticut, on his own behalf and as attorney-in-fact for the stockholders
identified on Schedule I hereto (collectively, "Stockholder"), with respect to
the shares of common stock, par value $.01 per share (the "Company Common
Stock"), of People's Choice TV Corp., a Delaware corporation (the "Company"),
owned by Stockholder.
W I T N E S S E T H:
-------------------
WHEREAS, as of the date hereof, the Stockholder beneficially owns and
has the power to vote 1,694,823 shares of Company Common Stock as identified on
Schedule I hereto (including any and all rights attached thereto to acquire
shares of stock of the Company if the Company adopts a stockholders' rights
plan, and any other rights associated therewith, the "Option Shares"); and
WHEREAS, Parent desires to enter into this Agreement in connection with
its efforts to consummate an acquisition of the Company and Parent requires that
Stockholder enter into this Agreement as a condition to its willingness to enter
into an acquisition agreement with the Company.
NOW, THEREFORE, in contemplation of the foregoing and in consideration
of the mutual agreements, covenants, representations and warranties contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Certain Covenants.
1.1. Lock-Up. Stockholder hereby covenants and agrees during
the term of this Agreement that (a) except as consented to in writing by Parent
in its sole discretion, Stockholder will not sell, transfer, assign, pledge,
hypothecate, tender or otherwise dispose of or limit its right to vote in any
manner any of the Option Shares, or agree to do any of the foregoing, and (b)
Stockholder will not take any action which would have the effect of preventing
or disabling Stockholder from performing its obligations under this Agreement.
1.2. Irrevocable Proxy. Stockholder has revoked or terminated
any proxies, voting agreements or similar arrangements previously given or
entered into with respect to the Option Shares and hereby irrevocably appoints
Parent, during the term of this Agreement, as proxy for Stockholder to vote (or
refrain from voting) in any manner as Parent, in its sole discretion, may see
fit, all of the Option Shares for Stockholder and in Stockholder's name, place
and stead, at any annual, special or other meeting or action of the stockholders
of the Company, as applicable, or at any adjournment thereof or pursuant to any
consent of the stockholders of the Company, in lieu of a meeting or otherwise,
with respect to any issue
<PAGE>
brought before the stockholders of the Company, other than with respect to the
election of directors of the Company, for which the stockholders of the Company
are entitled to vote.
1.3. Public Announcement. Stockholder shall consult with
Parent before issuing any press releases or otherwise making any public
statements with respect to the transactions contemplated herein and shall not
issue any such press release or make any such public statement without the
approval of Parent, except as may be required by law.
1.4. Stop Transfer Instruction. Promptly following the date
hereof, Stockholder and Parent shall deliver joint written instructions to the
Company and to the Company's transfer agent stating that the Option Shares may
not be sold, transferred, pledged, assigned, hypothecated, tendered or otherwise
disposed of in any manner without the prior written consent of Parent or except
in accordance with the terms and conditions of this Agreement.
1.5. HSR Filing. Promptly following the date hereof, Parent
will make all filings with and give all notices to governmental or regulatory
authorities required of Parent pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), in connection with
consummating the transactions contemplated by this Agreement. Parent will use
all commercially reasonable efforts to obtain early termination of all
applicable waiting periods under the HSR Act.
2. Grant of Option.
2.1. Option. Upon the terms and subject to the conditions of
this Agreement, Stockholder hereby grants to Parent or Parent's designee an
irrevocable option (the "Option") to purchase the Option Shares. Upon exercise
of the Option and purchase of the Option Shares, Parent shall not assume any
liabilities or obligations (if any) of Stockholder related to or in connection
with such Option Shares and arising prior to the Option Closing Date (as defined
hereinafter).
2.2. Option Price. The purchase price payable by Parent or
its designee at the Option Closing (as hereinafter defined) for the Option
Shares shall be an amount equal to $8.00 per Option Share (the "Option Price");
provided, however, if prior to the Option Closing, Parent shall purchase any
shares of the Company Common Stock for an amount per share in excess of the
Option Price (the "Excess Amount"), then the amount per Option Share to be paid
by Parent shall equal the sum of the Option Price plus the Excess Amount. If
following the Option Closing, Parent shall purchase any shares of the Company
Common Stock for an amount per share in excess of the sum of the Option Price
plus, if applicable, the Excess Amount plus any other amount previously remitted
pursuant to this Section 2.2 (the "Subsequent Excess Amount"), then Parent shall
forthwith remit to Stockholder an amount equal to the Subsequent Excess Amount
for each Option Share purchased at the Option Closing.
2.3. Exercise.
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<PAGE>
(a) Parent or its designee shall be entitled to exercise
the Option by giving written notice to Stockholder. Such notice shall specify a
date (not earlier than one business day or later than three business days from
the date such notice is delivered to Stockholder) and place for closing of the
exercise of the Option (the "Option Closing"). Upon delivery of notice
exercising the Option, the Option shall be deemed to have been exercised by
Parent or its designee irrespective of the actual date of the Option Closing
(the actual date of the Option Closing is referred to hereinafter as the "Option
Closing Date"). At the Option Closing, Parent or its designee will deliver to
Stockholder the Option Price (as adjusted pursuant to Section 2.2, if necessary)
with respect to the Option Shares, by wire transfer of immediately available
funds to an account designated in writing by Stockholder prior to the Option
Closing Date.
(b) Upon payment of the Option Price as provided in
Section 2.3 hereof, the Stockholder shall deliver to Parent or its designee at
the Option Closing, (i) the certificates representing the Option Shares duly
endorsed in blank for transfer, or accompanied by duly executed stock powers in
blank, in each case with signatures guaranteed by a national bank or trust
company or a member firm of the New York Stock Exchange, Inc. and (ii) all such
other agreements, endorsements, assignments and other instruments as are
necessary or desirable, in Parent's sole and absolute discretion, to vest in
Parent or its designee good and marketable title to such Option Shares or to
evidence of record the sale and assignment of such Option Shares to Parent or
its designee.
2.4. Option Expiration/Put Right. Except as provided below, the
Option shall terminate and expire ten days after the transactions contemplated
by this Agreement receive approval required by the HSR Act ("HSR Approval") if
the Option has not been exercised by Parent or its designee on or before such
date (the "Expiration Date"). If the Option has not been exercised by Parent on
or before the Expiration Date, Stockholder shall have the right at such time,
and for a period of 30 days thereafter, to deliver a written notice to Parent
(the "Stockholder Notice") requiring that Parent or its designee purchase the
Option Shares at the Option Price, as adjusted (if necessary) in accordance with
Section 2.2 hereof (the "Put Right"). Upon the exercise by Stockholder of the
Put Right, the parties hereto shall consummate the purchase and sale of the
Option Shares in accordance with Section 2.3 hereof.
3. Representations and Warranties of Stockholder. Stockholder
hereby represents and warrants to Parent, as of the date hereof and as of the
Closing Date, as follows:
3.1. Ownership. Stockholder has good and marketable title to,
and is the sole legal and beneficial owner of the Option Shares, in each case
free and clear of all liabilities, claims, liens, options, proxies, charges,
participations and encumbrances of any kind or character whatsoever. At the
Option Closing, Stockholder will transfer and convey to Parent or its designee
good and marketable title to the Option Shares, free and clear of all
liabilities, claims, liens, options, proxies, charges, participations and
encumbrances of any kind or character whatsoever created by or arising through
Stockholder.
-3-
<PAGE>
3.2. Authorization. Stockholder has all requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and has sole voting power and sole power of
disposition, with respect to all of the Option Shares owned by Stockholder with
no restrictions on its voting rights or rights of disposition pertaining
thereto. Stockholder has duly executed and delivered this Agreement and this
Agreement is a legal, valid and binding agreement of Stockholder, enforceable
against Stockholder in accordance with its terms.
3.3. Stockholder Has Adequate Information. Stockholder is a
sophisticated seller with respect to the Option Shares and has adequate
information concerning the business and financial condition of the Company to
make an informed decision regarding the sale of the Option Shares and has
independently and without reliance upon Parent and based on such information as
Stockholder has deemed appropriate, made its own analysis and decision to enter
into this Agreement. Stockholder acknowledges that Parent has not made and does
not make any representation or warranty, whether express or implied, of any kind
or character except as expressly set forth in this Agreement. Stockholder
acknowledges that the sale of the Option Shares by Stockholder to Parent is
irrevocable, and that Stockholder shall have no recourse to the Option Shares or
Parent, except with respect to breaches of representations, warranties,
covenants and agreements expressly set forth in this Agreement.
3.4. Parent's Excluded Information. Stockholder acknowledges
and confirms that (a) Parent may possess or hereafter come into possession of
certain non-public information concerning the Option Shares and the Company
which is not known to Stockholder and which may be material to Stockholder's
decision to sell the Option Shares ("Parent's Excluded Information"), (b)
Stockholder has requested not to receive Parent's Excluded Information and has
determined to sell the Option Shares notwithstanding its lack of knowledge of
Parent's Excluded Information, and (c) Parent shall have no liability or
obligation to Stockholder in connection with, and Stockholder hereby waives and
releases Parent from, any claims which Stockholder or its successors and assigns
may have against Parent (whether pursuant to applicable Option Shares, laws or
otherwise) with respect to the non-disclosure of Parent's Excluded Information;
provided, however, nothing contained in this Section 3.4 shall limit
Stockholder's right to rely upon the express representations and warranties made
by Parent in this Agreement, or Stockholder's remedies in respect of breaches of
any such representations and warranties.
4. Survival of Representations and Warranties. The respective
representations and warranties of Stockholder and Parent contained herein shall
not be deemed waived or otherwise affected by any investigation made by the
other party hereto, and each representation and warranty contained herein shall
survive the closing of the transactions contemplated hereby until the expiration
of the applicable statute of limitations, including extensions thereof.
5. Specific Performance. Stockholder acknowledges that Parent
will be irreparably harmed and that there will be no adequate remedy at law for
a violation of any of the covenants or agreements of Stockholder which are
contained in this Agreement. It is accordingly agreed that, in addition to any
other remedies which may be available to Parent upon the breach by
-4-
<PAGE>
Stockholder of such covenants and agreements, Parent shall have the right to
obtain injunctive relief to restrain any breach or threatened breach of such
covenants or agreements or otherwise to obtain specific performance of any of
such covenants or agreements.
6. Miscellaneous.
6.1. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective representatives and permitted successors and assigns.
6.2. Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements and
understandings between the parties with respect to its subject matter. This
Agreement may be amended only by a written instrument duly executed by the
parties hereto.
6.3. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Time is of the essence with respect to all
provisions of this Agreement.
6.4. Assignment. This Agreement may not be transferred or
assigned by Stockholder but may be assigned by Parent to any of its affiliates
or to any successor to its business and will be binding upon and inure to the
benefit of any such affiliate or successor.
6.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original, but each of which
together shall constitute one and the same Agreement.
6.6. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by delivery, telegram or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any national courier service, provided that any notice
delivered as herein provided shall also be delivered by telecopy at the time of
such delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice, provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Parent:
Sprint Corporation
Shawnee Mission Parkway
Westwood, Kansas 66205
Attention: Corporate Secretary
Telecopy: (913) 624-2256
-5-
<PAGE>
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Bruce N. Hawthorne, Esq.
Telecopy: (404) 572-5146
(b) If to
Stockholder:
Matthew Oristano
Old Quarry Road
Woodbridge, CT 06525
Telecopy: (203) 393-3852
with a copy to:
Cummings & Lockwood
Stamford Plaza
Box 120
Stamford, CT 06904
Attention: John Flaherty
Telecopy: (203) 351-4140
6.7. Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of New
York, without regard to its principles of conflicts of laws.
6.8. Enforceability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
6.9. Further Assurances. From time to time at or after the
Option Closing, at Parent's request and without further consideration,
Stockholder shall execute and deliver to Parent such documents and take such
action as Parent may reasonably request in order to consummate more effectively
the transactions contemplated hereby and to vest in Parent good, valid and
marketable title to the Option Shares, including, but not limited to, using its
best efforts to cause the appropriate transfer agent or registrar to transfer of
record the Option Shares.
-6-
<PAGE>
IN WITNESS WHEREOF, Parent and Stockholder have caused this Agreement to
be duly executed as of the day and year first above written.
SPRINT CORPORATION
By: /s/ Theodore H. Schell
----------------------
Senior Vice President
MATTHEW ORISTANO
/s/ Matthew Oristano
--------------------
In his individual capacity and as
attorney-in-fact for the
stockholders identified on
Schedule I hereto
-7-
<PAGE>
<TABLE>
SCHEDULE I
----------
<CAPTION>
Name of Stockholder Shares of Company Common Stock
- ------------------- ------------------------------
<S> <C>
Alda Multichannels Limited 936,327
Matthew Oristano 10,000
Jean Oristano 45,000
Matthew Oristano, as custodian for 110,000
Rachel Oristano
Mark Oristano 79,357
Michael Oristano 105,809
Trust FBO Stacey Oristano 13,226
Trust FBO Kelley Oristano 13,226
Victor Oristano 5,000
Joan and Victor Oristano Gifting Trust # 1 179,522
Joan and Victor Oristano Gifting Trust # 2 72,743
Joan Oristano Generation Skipping Trust 6,613
exempt marital trust
The Oristano Foundation 108,000
Alda LP 10,000
TOTAL: 1,694,823
</TABLE>
<PAGE>
PEOPLE'S CHOICE TV CORP.
TO BE ACQUIRED BY SPRINT CORPORATION
Shelton, Connecticut -- People's Choice TV Corp. (OTC: PCTV)
announced today that it has agreed to be acquired by Sprint Corporation.
Pursuant to a definitive Agreement and Plan of Merger executed today, each
common shareholder of PCTV will receive $8.00 per share in cash. Consummation of
the transaction is subject to the receipt of shareholder and government
regulatory approval. It is anticipated that the merger transaction will close
within 120 days.
PCTV also announced today the adoption of a Stockholder Rights
Plan in which preferred stock purchase rights will be distributed as a dividend
at the rate of one Right for each share of the Company's Common Stock held as of
the close of business on April 22, 1999.
Each Right will entitle stockholders, in certain circumstances,
to buy one one-thousandth of a newly issued share of Series A Junior
Participating Preferred Stock of the Company at an exercise price of $35. The
Rights generally will be exercisable and transferable apart from the Common
Stock only if a person or group acquires beneficial ownership of 15% or more of
the Common Stock or commences a tender or exchange offer upon consummation of
which such person or group would beneficially own 15% or more of the Common
Stock.
If any person becomes the beneficial owner of 15% or more of the
Company's Common Stock other than pursuant to an offer for all shares which is
fair to and otherwise in the best interests of the Company and its stockholders,
then each Right not owned by such 15% or more shareholder or certain related
parties will entitle its holder to purchase, at the Right's then-current
exercise price, shares of Common Stock (or, in certain circumstances as
determined by the Board, cash, other property, or other securities) having a
value of twice the Right's exercise price. In addition, if, after any person has
become a 15% or more stockholder, the Company is involved in a merger or other
business combination transaction with another person in which its Common Stock
is changed or converted, or sells 50% or more of its assets or earning power to
another person, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, shares of common stock of such other person having
a value of twice the Right's exercise price.
The Company will generally be entitled to redeem the Rights at
$.01 per Right at any time until the tenth day following public disclosure that
a person or group has become the beneficial owner of 15% or more of the
Company's Common Stock.
The Rights Plan contains provisions which permit certain
transactions by Sprint in accordance with the Agreement and Plan of Merger.
<PAGE>
Matthew Oristano, Chairman of the Board and Chief Executive
Officer of PCTV, stated that he is extremely pleased with the terms of the
Sprint transaction which provide for full and fair value for all shareholders of
PCTV.
Chase Securities, Inc. acted as financial advisor to PCTV and
provided a fairness opinion to the Board of Directors of the Company in
connection with the transaction. A fairness opinion was also provided by
Houlihan Lokey Howard & Zukin.
All statements contained herein that are not historical fact are
based on current expectations. These statements are forward looking in nature
and involve a number of risks and uncertainties. Actual results may differ
materially. All such statements should be considered with regard to the risk
factors described in the Company's reports filed with the Securities and
Exchange Commission. The Company wishes to caution readers not to place undue
reliance on any such forward looking statements, which statements speak only as
of the date made.
People's Choice TV Corp. is a wireless communications company
with wireless transmission capacity in nine major cities located in the
southwest and midwest. The Company provides wireless cable television service in
Chicago, Houston, Phoenix, Detroit, St. Louis and Tucson and provides wireless
high-speed data communications service marketed under the name of
SpeedChoice(TM) in the Detroit and Phoenix markets.
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