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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 27, 1997
INTERNATIONAL POST LIMITED
(Exact name of registrant as specified in its charter)
DELAWARE 000-23388 13-3735647
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
545 FIFTH AVENUE, NEW YORK, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 986-6300
NOT APPLICABLE
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On June 27, 1997, the Registrant entered into an Agreement and Plan of
Merger with Video Services Corporation and Louis H. Siracusano, Arnold P.
Ferolito and Donald H. Buck (the stockholders of Video Services Corporation)
regarding the merger of the Registrant and Video Services Corporation. The
Agreement and Plan of Merger is attached hereto as Exhibit 10.57 and
incorporated by reference herein. The press release announcing the execution of
the Agreement and Plan of Merger is attached hereto as Exhibit 99.1 and
incorporated by reference herein.
On June 27, 1997, the Registrant entered into a Voting Agreement with
Video Services Corporation, Terrence A. Elkes, The Equitable Life Assurance
Society of the United States, Equitable Deal Flow Fund, L.P., Louis H.
Siracusano, Arnold P. Ferolito and Donald H. Buck which contains the agreement
of the parties thereto to vote all of his/its shares of the Registrant's common
stock for the approval of the Agreement and Plan of Merger and the transactions
contemplated therein and in favor of the Registrant's 1997 Long Term Incentive
Plan. The Voting Agreement is attached hereto as Exhibit 10.58 and incorporated
by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.57 Agreement and Plan of Merger, dated as of June 27, 1997, by and
among International Post Limited, Video Services Corporation and
Louis H. Siracusano, Arnold P. Ferolito and Donald H. Buck.
10.58 Voting Agreement, dated as of June 27, 1997, by and among
International Post Limited, Video Services Corporation, Terrence A.
Elkes, The Equitable Life Assurance Society of the United States,
Equitable Deal Flow Fund, L.P., Louis H. Siracusano, Arnold P.
Ferolito and Donald H. Buck.
99.1 Press Release announcing the execution of the Agreement and Plan of
Merger.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INTERNATIONAL POST LIMITED
By: /s/ Martin Irwin
--------------------------------
Name: Martin Irwin
Title: President and Chief Executive
Officer
Date: July 7, 1997
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INDEX TO EXHIBITS
Exhibit No.
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10.57 Agreement and Plan of Merger, dated as of June 27, 1997, by and
among International Post Limited, Video Services Corporation and
Louis H. Siracusano, Arnold P. Ferolito and Donald H. Buck.
10.58 Voting Agreement, dated as of June 27, 1997, by and among
International Post Limited, Video Services Corporation, Terrence A.
Elkes, The Equitable Life Assurance Society of the United States,
Equitable Deal Flow Fund, L.P., Louis H. Siracusano, Arnold P.
Ferolito and Donald H. Buck.
99.1 Press Release announcing the execution of the Agreement and Plan of
Merger.
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==============================
AGREEMENT AND PLAN OF MERGER
AMONG
INTERNATIONAL POST LIMITED,
VIDEO SERVICES CORPORATION
AND
LOUIS H. SIRACUSANO, ARNOLD P. FEROLITO AND DONALD H. BUCK
==============================
JUNE __, 1997
==============================
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER............................................................ 1
Section 1.1. Filing of Certificate of Merger; Effective Time of
the Merger................................................. 1
Section 1.2. Closing...................................................... 1
Section 1.3. Effects of the Merger........................................ 2
ARTICLE II
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS......................... 2
Section 2.1. Effect on Capital Stock...................................... 2
(a) Conversion Number for Video Common Stock................... 2
(b) Cancellation of Treasury Stock and Other Video
Common Stock............................................. 3
(c) Cancellation of IPL Common Stock........................... 3
(d) Fractional Shares. ........................................ 3
Section 2.2. Exchange of Certificates..................................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IPL................................. 4
Section 3.1. Organization, Standing and Power............................. 4
Section 3.2. Capital Structure............................................ 4
Section 3.3. Authority Relative to this Agreement......................... 5
Section 3.4. SEC Documents; Financial Statements.......................... 7
Section 3.5. Information Supplied......................................... 7
Section 3.6. Absence of Certain Changes or Events......................... 8
Section 3.7. Litigation................................................... 8
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Section 3.8. Taxes........................................................ 9
Section 3.9. Benefit Plans................................................ 12
Section 3.10. Labor Relations............................................. 14
Section 3.11. Authorizations and Compliance with Laws..................... 14
Section 3.12. Insurance................................................... 14
Section 3.13. Title to Real Properties.................................... 15
Section 3.14. Environmental Laws.......................................... 16
Section 3.15. Contracts................................................... 17
Section 3.16. Intellectual Property....................................... 17
Section 3.17. Related Party Transactions.................................. 18
Section 3.18. Opinion of Financial Adviser................................ 18
Section 3.19. No Undisclosed Material Liabilities......................... 18
Section 3.20. Vote Required............................................... 18
Section 3.21. Certain Agreements.......................................... 18
Section 3.22. Brokers or Finders.......................................... 19
Section 3.23. NASDAQ Listing.............................................. 19
Section 3.24. Subsidiaries................................................ 19
Section 3.25. Title to and Condition of Certain Personal Property......... 19
Section 3.26. Status of Agreements and Business Relationships............. 19
Section 3.27. Customers and Suppliers..................................... 19
Section 3.28. Absence of Certain Commercial Practices..................... 19
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Section 3.29. Books and Records........................................... 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIDEO............................... 20
Section 4.1. Organization, Standing and Power............................. 20
Section 4.2. Capital Structure............................................ 21
Section 4.3. Authority Relative to this Agreement......................... 21
Section 4.4. Financial Statements......................................... 22
Section 4.5. Information Supplied......................................... 23
Section 4.6. Absence of Certain Changes or Events......................... 23
Section 4.7. Litigation................................................... 24
Section 4.8. Taxes........................................................ 24
Section 4.9. Benefit Plans................................................ 27
Section 4.10. Labor Relations............................................. 29
Section 4.11. Authorizations and Compliance with Laws..................... 29
Section 4.12. Insurance................................................... 29
Section 4.13. Title to Real Properties.................................... 30
Section 4.14. Environmental Laws.......................................... 31
Section 4.15. Contracts.................................................... 33
Section 4.16. Intellectual Property....................................... 33
Section 4.17. Related Party Transactions.................................. 33
Section 4.18. No Undisclosed Material Liabilities......................... 33
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Section 4.19. Certain Agreements.......................................... 34
Section 4.20. Brokers or Finders.......................................... 34
Section 4.21. Subsidiaries................................................ 34
Section 4.22. Title to and Condition of Certain Personal Property......... 34
Section 4.23. Status of Agreements and Business Relationships............. 34
Section 4.24. Customers and Suppliers..................................... 35
Section 4.25. Absence of Certain Commercial Practices..................... 35
Section 4.26. Books and Records........................................... 35
Section 4.27. Spin-Off Transaction and Contribution Transaction........... 35
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS........................ 36
Section 5.1. Ownership of Video Common Stock.............................. 36
Section 5.2. Authority Relative to this Agreement......................... 37
Section 5.3. Information Supplied......................................... 37
Section 5.4. Restricted Securities........................................ 37
ARTICLE VI
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER........................................ 38
Section 6.1. Ordinary Course.............................................. 38
Section 6.2. Governing Documents.......................................... 38
Section 6.3. Issuance of Securities....................................... 38
Section 6.4. Dividends; Changes in Stock.................................. 39
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Section 6.5. Acquisition Proposals........................................ 39
Section 6.6. No Acquisitions.............................................. 39
Section 6.7. No Dispositions.............................................. 39
Section 6.8. Indebtedness; Leases......................................... 40
Section 6.9. Advice of Changes; Filings................................... 40
Section 6.10. Employee Arrangements....................................... 40
Section 6.11. No Dissolution, Etc......................................... 41
Section 6.12. No Action................................................... 41
ARTICLE VII
ADDITIONAL AGREEMENTS................................................. 41
Section 7.1. Preparation of the Registration Statement and
Proxy Statement............................................ 41
Section 7.2. Letters of Accountants....................................... 42
Section 7.3. Access to Information........................................ 42
Section 7.4. Meeting of IPL Stockholders.................................. 42
Section 7.5. Legal Conditions to Merger................................... 42
Section 7.6. NASDAQ....................................................... 42
Section 7.7. Management Options........................................... 43
Section 7.8. Fees and Expenses............................................ 43
Section 7.9. Indemnification.............................................. 43
Section 7.10. Additional Agreements; Commercially Reasonable Efforts...... 44
Section 7.11. Reserved Shares of IPL Common Stock......................... 45
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Section 7.12. Tax Treatment............................................... 45
Section 7.13. Spin-Off Transaction/Insurance.............................. 45
Section 7.14. Contribution Agreement...................................... 45
Section 7.15. Video Subsidiaries.......................................... 46
Section 7.16. (a) Stock Resale Agreement................................. 46
(b) Registration Rights Agreement.......................... 46
Section 7.17. Fairness Opinion............................................ 46
Section 7.18. Committee Review............................................ 47
Section 7.19. Replacement of Shares....................................... 47
Section 7.20. Voting Agreement............................................ 47
Section 7.21. Non-Compete................................................. 47
Section 7.22. Tag-Along Rights Agreement.................................. 47
ARTICLE VIII
CONDITIONS OF MERGER.................................................. 47
Section 8.1. General Conditions to Obligation of IPL and Video............ 47
(a) Stockholder Approval....................................... 48
(b) NASDAQ Listing............................................. 48
(c) Employment Agreements...................................... 48
(d) Other Approvals............................................ 48
(e) Registration Statement. ................................... 48
(f) No Injunction or Restraints................................ 48
(g) Accountants' Letters....................................... 48
(h) Financings................................................. 48
(i) No Pending Proceedings..................................... 49
(j) Fairness Opinion........................................... 49
(k) Losses Escrow Agreement.................................... 49
(l) Qualification To Do Business............................... 49
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Section 8.2. Additional Conditions to Obligation of IPL................... 49
(a) Representations and Warranties............................. 49
(b) Agreements and Covenants................................... 49
(c) No Material Adverse Change................................. 49
(d) Compliance Certificate..................................... 49
(e) Stock Resale Agreement..................................... 49
(f) Contribution Agreement..................................... 50
(g) Videotape and Video Dub.................................... 50
(h) Environmental Reports...................................... 50
(i) Authority.................................................. 50
(j) Opinion of Counsel......................................... 50
(k) Approvals and Filings...................................... 50
(l) FIRPTA Certificates........................................ 50
(m) Estoppel Certificates...................................... 50
(n) Certificates of Occupancy.................................. 50
(o) Surveys.................................................... 51
Section 8.3. Additional Conditions to Obligation of Video................. 51
(a) Representations and Warranties............................. 51
(b) Agreements and Covenants................................... 51
(c) No Material Adverse Change................................. 51
(d) Compliance Certificate..................................... 51
(e) Environmental Reports...................................... 51
(f) Authority.................................................. 51
(g) Opinion of Counsel......................................... 52
(h) Approvals and Filings...................................... 52
(i) FIRPTA Certificates........................................ 52
(j) Registration Rights Agreement.............................. 52
(k) Estoppel Certificates...................................... 52
(l) Certificates of Occupancy.................................. 52
(m) Approval................................................... 52
(n) Security Interest.......................................... 52
(o) Surveys.................................................... 52
(p) Option Plan................................................ 52
(q) Waivers.................................................... 53
(r) Agreements................................................. 53
(s) Resignation................................................ 53
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER..................................... 53
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Section 9.1. Termination.................................................. 53
Section 9.2. Fees and Expenses............................................ 54
Section 9.3. Effect of Termination........................................ 55
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; SHAREHOLDERS' REPRESENTATIONS........................ 55
Section 10.1. Survival of Representations and Warranties.................. 55
Section 10.2. Indemnification............................................. 55
(a) Agreement to Indemnify..................................... 55
(b) Threshold.................................................. 57
(c) Limitation on Indemnity.................................... 57
(d) Indemnification Procedure.................................. 58
(e) Contribution............................................... 59
(f) Adjustment to Conversion Number............................ 59
(g) Leases..................................................... 59
(h) Tax Indemnification........................................ 59
ARTICLE XI
GENERAL PROVISIONS.................................................... 60
Section 11.1. Notices..................................................... 60
Section 11.2. Interpretation; Certain Definitions......................... 61
Section 11.3. Counterparts................................................ 61
Section 11.4. Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership....................................... 62
Section 11.5. Governing Law............................................... 62
Section 11.6. Severability................................................ 62
Section 11.7. Publicity................................................... 62
Section 11.8. Assignment.................................................. 62
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Section 11.9. Remedies Cumulative......................................... 63
Section 11.10. Representations of Video and IPL........................... 63
Section 11.11. Remedies Exclusive......................................... 63
Section 11.12. Waiver..................................................... 63
Section 11.13. Amendment.................................................. 63
Section 11.14. Extension; Waiver.......................................... 64
ARTICLE XII
GLOSSARY.............................................................. 64
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SCHEDULES
IPL DISCLOSURE SCHEDULE
VIDEO DISCLOSURE SCHEDULE
SCHEDULE 6.8 - STONEHURST LEASE
SCHEDULE 7.7 - MANAGEMENT OPTIONS
SCHEDULE 7.13 - SPIN-OFF TRANSACTION
SCHEDULE 10.2(a)(iv) - TAX RESERVES
EXHIBITS
EXHIBIT 1.1(a) - DELAWARE CERTIFICATE
EXHIBIT 1.1(b) - NEW JERSEY CERTIFICATE
EXHIBIT 1.3(b) - DIRECTORS OF SURVIVING CORPORATION
EXHIBIT 3.18 - FAIRNESS OPINION
EXHIBIT 7.13 - SECTION 355 AGREEMENT
EXHIBIT 7.14 - CONTRIBUTION AGREEMENT
EXHIBIT 7.16(a) - STOCK RESALE AGREEMENT
EXHIBIT 7.16(b) - REGISTRATION RIGHTS AGREEMENT
EXHIBIT 7.19 - OPTION LETTER AGREEMENT
EXHIBIT 7.20 - VOTING AGREEMENT
EXHIBIT 7.22 - TAG-ALONG RIGHTS AGREEMENT
EXHIBIT 8.1(c)(a) - SIRACUSANO EMPLOYMENT AGREEMENT
EXHIBIT 8.1(c)(b) - BUCK EMPLOYMENT AGREEMENT
EXHIBIT 8.1(k) - LOSSES ESCROW AGREEMENT
EXHIBIT 8.2(j) - OPINION OF COUNSEL TO VIDEO
EXHIBIT 8.2(m) - FORM OF ESTOPPEL CERTIFICATE
EXHIBIT 8.3(g) - OPINION OF COUNSEL TO IPL
EXHIBIT 8.3(q) - FORM OF OPTION WAIVER
EXHIBIT 8.3(r)(i) - FEROLITO CONSULTING AGREEMENT
EXHIBIT 8.3(r)(ii) - IRWIN SEVERANCE AGREEMENT
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June __, 1997 (the
"Agreement"), among INTERNATIONAL POST LIMITED, a Delaware corporation ("IPL"),
VIDEO SERVICES CORPORATION, a New Jersey corporation ("Video"), and Louis H.
Siracusano, Arnold P. Ferolito, and Donald H. Buck, (each, a "Stockholder" and
collectively, the "Stockholders"). Unless otherwise defined herein, each
capitalized term used herein shall have the meaning attributed to it in the
glossary set forth in Article XII hereof.
WHEREAS, the Boards of Directors of IPL and Video have each determined
that it is in the best interests of their respective stockholders for Video to
merge with and into IPL (the "Merger") upon the terms and subject to the
conditions set forth herein, and have approved the Merger and this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Code; and
WHEREAS, IPL, Video and the Stockholders desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, IPL, Video and (with respect to Articles V, VI, X and XI hereof) the
Stockholders hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. Filing of Certificate of Merger; Effective Time of the
Merger. Subject to the provisions of this Agreement: (i) a certificate of
merger in the form attached as Exhibit 1.1 (a) (the "Delaware Certificate")
shall be duly prepared, executed and acknowledged by IPL and thereafter
delivered to the Secretary of State of the State of Delaware for filing as
provided in the Delaware General Corporation Law (the "DGCL") simultaneously
with the Closing; and (ii) a certificate of merger in the form attached hereto
as Exhibit 1.1(b) (the "New Jersey Certificate") shall be duly prepared and
shall be executed by each of IPL and Video and thereafter delivered for filing
as provided in the New Jersey Business Corporation Act ("NJBCA") simultaneously
with the Closing. The Merger shall become effective upon the later of the
filing of the New Jersey Certificate with the Secretary of State of the State
of New Jersey or the filing of the Delaware Certificate with the Secretary of
State of the State of Delaware (the "Effective Time").
Section 1.2. Closing. The closing of the Merger (the "Closing") will
take place at the offices of Gordon Altman Butowsky Weitzen Shalov & Wein, 114
West 47th Street, New York, New York
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10036, as soon as practicable following the satisfaction of the conditions set
forth in Article VIII, or at such other place, time or date as may be agreed
upon by IPL and Video (the date of such Closing being referred to herein as
the "Closing Date").
Section 1.3. Effects of the Merger.
(a) At the Effective Time and by virtue of the Merger: (i) the
separate existence of Video shall cease and Video shall be merged with and into
IPL and IPL shall be the Surviving Corporation (IPL and Video are sometimes
referred to herein as the "Constituent Corporations" and IPL is sometimes
referred to herein as the "Surviving Corporation"); (ii) all of the outstanding
capital stock of Video shall be converted as provided in Section 2.1; (iii) the
Certificate of Incorporation of IPL as in effect immediately prior to the
Effective Time shall be amended to increase the number of authorized shares of
IPL Common Stock, from 15,000,000 shares to 25,000,000 shares and to change the
corporate name of IPL to "Video Services Corporation" and, as so amended, the
Certificate of Incorporation of IPL as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation; and (iv) the By-Laws of IPL as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation.
(b) The directors and officers of the Surviving Corporation
immediately after the Effective Time shall be: (i) four (4) individuals
selected by the Stockholders (being the individuals identified on Part (a) of
Exhibit 1.3(b), or if they are unable to serve, such other persons as are
selected by the Stockholders and are reasonably acceptable to IPL); and (ii)
three (3) individuals selected by IPL (being the individuals identified on Part
(b) of Exhibit 1.3(b), or if they are unable to serve, such other persons as
are selected by IPL and are reasonably acceptable to Video) who shall hold
office until their respective successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-Laws.
(c) At and after the Effective Time, the corporate existence of IPL,
with all its rights, privileges, powers and franchises of a public as well as
of a private nature, shall continue unaffected and unimpaired by the Merger.
The Merger shall have the effects specified in Section 259 of the DGCL.
ARTICLE II
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
Section 2.1. Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any shares
of capital stock of IPL or Video:
(a) Conversion Number for Video Common Stock. Each share of Video
Common Stock which shall be issued and outstanding immediately prior to the
Effective Time (other than any shares
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of Video Common Stock to be canceled pursuant to Section 2.l(b)) shall be
converted into the right, to receive a number (the "Conversion Number") of
fully paid and nonassessable shares of IPL Common Stock, such that the
aggregate number of such shares of IPL Common Stock into which all such shares
of Video Common Stock shall be converted shall equal 7,223,445. As of the
Effective Time, all such shares of Video Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease
to exist, and each holder of a certificate representing such shares of Video
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the shares of IPL Common Stock to be issued in consideration
therefor upon surrender of such certificate in accordance with Section 2.2,
without interest. If, between the date hereof and the Effective Time, the
outstanding shares of IPL Common Stock shall be changed into a different
number of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or similar event,
or a stock dividend thereon shall be distributed as of a date prior to the
Effective Time, or declared with a record date prior to the Effective Time and
a distribution date or comparable effective date after the Effective Time, the
Conversion Number set forth above shall be appropriately adjusted to reflect
such change.
(b) Cancellation of Treasury Stock and Other Video Common Stock. All
shares of Video Common Stock that are owned by Video or its Subsidiaries as
treasury stock shall be cancelled and retired and shall cease to exist, and no
securities of IPL or other consideration shall be delivered in exchange
therefor.
(c) Cancellation of IPL Common Stock. Notwithstanding any provision of
this Agreement to the contrary, each share of IPL Common Stock owned by Video
or any Subsidiary of Video immediately prior to the Effective Time shall by
virtue of the Merger become an asset of IPL and shall then immediately be
cancelled and retired and shall cease to exist, and no securities, in addition
to those contained in clause (a) above, of IPL or other consideration shall be
delivered in exchange therefor. The certificates evidencing such shares of IPL
Common Stock shall be delivered to IPL at the Closing.
(d) Fractional Shares. No fractional shares of IPL Common Stock shall
be issued in the Merger and no certificate therefor will be issued. In lieu of
such fractional shares, any holder of Video Common Stock who would otherwise be
entitled to a fraction of a share of IPL Common Stock shall, upon surrender of
his certificate or certificates representing Video Common Stock, be paid an
amount in cash (without interest) determined by multiplying such fraction by
the Market Value at the Effective Time.
Section 2.2. Exchange of Certificates. Each Stockholder shall deliver
to IPL at the Closing certificates representing all shares of Video Common
Stock owned by such Stockholder, and, in exchange therefor, IPL shall deliver
to each Stockholder certificates representing that number of shares of IPL
Common Stock which such Stockholder has the right to receive pursuant to
Section 2.1(a) and the certificates for shares of Video Common Stock so
surrendered shall forthwith be cancelled. Until such shares of Video Common
Stock are so delivered, certificates representing such shares of Video Common
Stock shall be deemed at any time after the Effective Time to represent only
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the right to receive upon such delivery one or more certificates representing
shares of IPL Common Stock as contemplated by this Section 2.2. and the
holders thereof shall have no rights whatsoever as stockholders of IPL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IPL
Except as set forth on IPL's disclosure schedule previously delivered
to Video (the "IPL Disclosure Schedule"), IPL hereby represents and warrants to
Video as follows; provided however, that the parties acknowledge that IPL
occupies, through leases of real property, the IPL Leased Property that is
leased by IPL or its Subsidiaries (as tenant) from Video or its Affiliates (as
landlord) and that notwithstanding the terms of the representations and
warranties set forth in this Article III, no breach of any such representation
or warranty shall be deemed to exist, to the extent such breach resulted from
any act or omission of the Stockholders or their Affiliates, or Video or any of
its Subsidiaries or Affiliates (in their capacity as landlord) in, or with
respect to such IPL Leased Property (provided that this exception shall not
apply to any such breach if the same results from any action or inaction of IPL
or its Subsidiaries or Affiliates acting as tenant in respect of such IPL
Leased Property):
Section 3.1. Organization, Standing and Power. Each of IPL and its
Subsidiaries: (i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; (ii) has all
requisite corporate power and corporate authority to own, lease and operate its
properties and to carry on its business as now being conducted; and (iii) is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be in good
standing, qualified or licensed does not, individually or in the aggregate,
have a Material Adverse Effect. Correct and complete copies of the Certificate
of Incorporation and By-Laws of IPL and its Subsidiaries, each as amended to
the date hereof, are attached to the IPL Disclosure Schedule. All Subsidiaries
of IPL and their respective jurisdictions of incorporation or organization are
identified on the IPL Disclosure Schedule.
Section 3.2. Capital Structure.
(a) As of the date hereof, the authorized capital stock of IPL
consists of 15,000,000 shares of IPL Common Stock and 3,000,000 shares of IPL
Preferred Stock.
(b) As of the date hereof, 6,226,958 shares of IPL Common Stock are
issued and outstanding and -0- shares of IPL Preferred Stock are issued and
outstanding.
(c) As of the date hereof: (i) 841,818 shares of IPL Common Stock are
reserved for issuance upon the exercise of options to purchase shares of IPL
Common Stock; (ii) no shares of IPL
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Common Stock are held by IPL in its treasury or by its Subsidiaries; and (iii)
no bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on all matters on which
stockholders may vote ("Voting Debt") are issued or outstanding, other than
$6,350,000 principal amount of IPL's 4% convertible subordinated notes due May
4, 2003, which notes do not currently have and will not, solely by virtue of
the Merger, or by virtue of the financial condition of the Surviving
Corporation immediately thereafter, obtain any right to vote, but are
convertible into IPL Common Stock at the rate of $14.00 per share (the "IPL
Convertible Notes").
(d) All outstanding shares of IPL Common Stock are, and all shares of
IPL Common Stock which may be issued upon exercise of any outstanding options
to purchase IPL Common Stock or upon conversion of the IPL Convertible Notes
when issued in accordance with the respective terms thereof will be, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth on the IPL Disclosure Schedule, all outstanding shares of
capital stock of the Subsidiaries of IPL are owned by IPL or a direct or
indirect wholly-owned Subsidiary of IPL, free and clear of all Liens and
options of any nature. The IPL Disclosure Schedule sets forth all outstanding
options granted by IPL to purchase shares of IPL Common Stock, the number of
shares of IPL Common Stock for which such options are exercisable, which of
such options are currently exercisable, the option exercise price and the
identity of the optionee. Except as set forth in this Section 3.2 and on the
IPL Disclosure Schedule, there are outstanding: (i) no shares of capital stock,
Voting Debt or other voting securities of IPL; (ii) no securities of IPL or any
of its Subsidiaries convertible into or exchangeable for shares of capital
stock, Voting Debt or other voting securities of IPL or any of its
Subsidiaries; and (iii) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which IPL or any of its
Subsidiaries is a party or by which it is bound obligating IPL or any of its
Subsidiaries to issue, deliver, sell, purchase, redeem or acquire, or cause to
be issued, delivered, sold, purchased, redeemed or acquired, additional shares
of capital stock or any Voting Debt or other voting securities of IPL or any of
its Subsidiaries or obligating IPL or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.
Except as set forth in this Agreement, there are not as of the date hereof and
there will not be at the Effective Time, any stockholder agreements, voting
trusts or other agreements or understandings to which IPL is a party or by
which it is bound relating to the voting of any shares of the capital stock of
IPL or its Subsidiaries.
(e) The shares of IPL Common Stock to be issued pursuant to the
Merger, will be duly authorized, validly issued, fully paid and nonassessable
and will not be subject to preemptive rights created by: (i) statute; (ii)
IPL's Certificate of Incorporation or By-Laws; or (iii) any agreement to which
IPL is a party or by which it is bound.
Section 3.3. Authority Relative to this Agreement.
(a) IPL has all necessary corporate power and corporate authority to
execute and deliver this Agreement and, subject, with respect to the
consummation of the Merger and the issuance of IPL Common Stock pursuant to the
Merger, to approval of this Agreement and the transactions
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contemplated herein (including the amendment to IPL's Certificate of
Incorporation increasing the number of authorized shares of IPL Common Stock
and changing IPL's corporate name, the appointment of the directors identified
in Exhibit 1.3(b), in each such case as contemplated by Section 1.3 and the
New Option Plan) by the affirmative vote of the holders of a majority of the
outstanding shares of IPL Common Stock entitled to vote thereon (the "IPL
Vote"), to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of IPL subject, with respect to the consummation of the
Merger and the issuance of IPL Common Stock pursuant to the Merger, to
approval of this Agreement and the transactions contemplated herein (including
the amendment to IPL's Certificate of Incorporation increasing the number of
authorized shares of IPL Common Stock and changing IPL's corporate name, the
appointment of the directors identified in Exhibit 1.3(b), in each such case
as contemplated by Section 1.3 and the New Option Plan) by the IPL Vote. This
Agreement has been duly executed and delivered by IPL and subject, with
respect to the consummation of the Merger and the issuance of IPL Common Stock
pursuant to the Merger, to approval of this Agreement and the transactions
contemplated herein (including the amendment to IPL's Certificate of
Incorporation increasing the number of authorized shares of IPL Common Stock
and changing IPL's corporate name, the appointment of the directors identified
in Exhibit 1.3(b), in each such case as contemplated by Section 1.3 and the
New Option Plan) by the IPL Vote, and, assuming this Agreement constitutes the
valid and binding agreement of Video and the Stockholders, constitutes the
valid and binding obligation of IPL, enforceable against IPL in accordance
with its terms, except as may be limited by bankruptcy, reorganization,
moratorium, fraudulent conveyance and insolvency Laws and by other Laws
affecting the rights of creditors generally and except as may be limited by
the availability of equitable remedies.
(b) The execution and delivery of this Agreement by IPL does not, and
the consummation of the transactions contemplated hereby by IPL will not: (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or By-Laws of IPL or any of its Subsidiaries; or
(ii) assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.3(c) are duly and timely obtained or
made and the approval of this Agreement and the transactions contemplated
herein (including the amendment to IPL's Certificate of Incorporation
increasing the number of authorized shares of IPL Common Stock and changing
IPL's corporate name, the appointment of the directors identified in Exhibit
1.3(b), in each such case as contemplated by Section 1.3 and the New Option
Plan) by the IPL Vote has been obtained, result in any violation or breach of,
or constitute (with or without notice or lapse of time, or both) a default (or
give rise to any right of termination, cancellation or acceleration or Lien, or
other charge or encumbrance) (any of the foregoing, a "Violation"), under any
of the terms, conditions or provisions of any loan or credit agreement, note,
mortgage, indenture, lease, IPL Benefit Plan or other agreement, obligation,
instrument, IPL Permit, concession, franchise, license, Judgment or Law
applicable to IPL or any of its Subsidiaries or its or their respective
properties or assets, except for such Violations that, individually or in the
aggregate, do not have a Material Adverse Effect.
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(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any court, administrative agency,
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity"), or any other Person is required by or with
respect to IPL or any of its Subsidiaries to validly execute and deliver this
Agreement on behalf of IPL or to effect the Merger, except for: (i) the filing
with the SEC of (A) a proxy statement in definitive form relating to the
meeting of IPL's stockholders to be held in connection with the Merger (the
"Proxy Statement"); (B) a registration statement on Form S-3 under the
Securities Act, for the resale of IPL Common Stock issued in the Merger (the
"Registration Statement") and the effectiveness of the Registration Statement
and (C) such reports under Section 13(a) of the Exchange Act and such other
compliance with the Securities Act, the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this Agreement
and the transactions contemplated hereby, and the obtaining from the SEC of
such orders as may be so required; (ii) the filing of the Delaware Certificate
with the Secretary of State of the State of Delaware and the New Jersey
Certificate with the Secretary of State of the State of New Jersey; (iii) such
filings and approvals as may be required by applicable state securities, "blue
sky" or takeover Laws; (iv) filings with, and approval of, The NASDAQ Stock
Market; (v) the IPL Vote and (vi) as otherwise disclosed on the IPL Disclosure
Schedule.
Section 3.4. SEC Documents; Financial Statements.
(a) The IPL Disclosure Schedule sets forth a true and complete list of
each report, schedule, registration statement and definitive proxy statement
required to be filed by IPL with the SEC since January 1, 1994 (the "IPL SEC
Documents"). As of their respective dates: (i) the IPL SEC Documents complied
as to form in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such IPL SEC Documents; and (ii) none of the IPL
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The financial statements of IPL included in the IPL SEC Documents
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto), and fairly present, in accordance with applicable requirements of
GAAP (subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) the consolidated financial position of IPL and its
Subsidiaries as at their respective dates and the consolidated results of
operations and the consolidated cash flows of IPL and its Subsidiaries for the
periods then ended.
Section 3.5. Information Supplied. None of the information supplied or
to be supplied by IPL for inclusion or incorporation by reference in: (i) the
Registration Statement will; (A) at the time the Registration Statement is
filed with the SEC; (B) at the time it becomes effective under the Securities
Act; and (C) at the Effective Time, contain any untrue statement of a material
fact or omit
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to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; or (ii) the Proxy Statement will, at
the date such information is mailed to IPL's stockholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Proxy
Statement, insofar as it relates to IPL or its Subsidiaries or other
information supplied by IPL for inclusion therein, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder, and the Registration Statement, insofar as it
relates to IPL or its Subsidiaries or other information supplied by IPL for
inclusion therein, will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
Section 3.6. Absence of Certain Changes or Events. Except as set forth
in the IPL 10-Q, from July 31, 1996 to the date hereof, IPL and its
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, except for
transactions contemplated by this Agreement, there has not been: (i) any change
in the business, results of operations, properties (including intangible
properties), financial condition, assets or liabilities of IPL or any of its
Subsidiaries having a Material Adverse Effect; (ii) any material change in
accounting methods, principles or practices by IPL or its Subsidiaries; (iii)
any material revaluation (and, as of the date hereof, there is no contemplated
revaluation) by IPL or any of its Subsidiaries of any of its or their
respective assets, including, without limitation, writing-down the value of
inventory or writing-off notes or accounts receivable other than in the
ordinary course of business; (iv) any declaration, setting aside or payment of
any dividends or distributions in respect of the shares of its capital stock;
(v) any issuance, sale or transfer by IPL, or any commitment to issue, sell or
transfer by IPL, any shares of its capital stock, or any redemption, purchase
or other acquisition of any of its securities (other than the issuance of
shares to the Stockholders contemplated pursuant to this Agreement); or (vi)
any increase in, or establishment of, any bonus, insurance, severance, welfare,
thrift, deferred compensation, pension, retirement, profit sharing, stock
option, stock purchase or other employee benefit plan of IPL or any of its
Subsidiaries, or, except in the ordinary course of business consistent with
past practice, any other increase in the compensation payable or to become
payable to officers or employees of IPL or any of its Subsidiaries, except
pursuant to the provisions of any such plan in effect as of July 31, 1996.
Section 3.7. Litigation. There are no actions, suits or proceedings
pending against IPL or any of its Subsidiaries or its or their respective
assets (whether or not covered by insurance) including, without limitation, for
condemnation or foreclosure of real property. To the knowledge of IPL, no
investigation, action, suit or proceeding before the FCC is threatened against
IPL or any of its Subsidiaries or with respect to its or their respective
assets (whether or not covered by insurance) including, without limitation, for
condemnation or foreclosure of real property and to the knowledge of IPL, there
exists no basis for the commencement of any action, proceeding or investigation
against IPL or any of its Subsidiaries, in each case which may have a Material
Adverse Effect. There is no outstanding Judgment against IPL or any of its
Subsidiaries or by which IPL or any of its Subsidiaries or its or their
respective assets are bound.
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Section 3.8. Taxes.
(a) IPL is the common parent of an Affiliated Group of corporations
which includes current IPL Subsidiaries and all other direct and indirect
Subsidiaries of IPL which are eligible to be included in a consolidated return
with IPL, and with respect to which IPL files consolidated United States
federal income Tax Returns. All Tax Returns that were or will be required to be
filed by, or with respect to, the IPL Entities on or before the Closing Date
have been or will be filed on a timely basis in accordance with the Laws,
regulations and administrative requirements of the appropriate Taxing
Authority. All such Tax Returns that have been filed were, when filed, and
continue to be, true, correct and complete.
(b) All deficiencies proposed (plus any interest, penalties and
additions to Tax that were or are proposed to be assessed thereon, if any) with
respect to the IPL Entities have been fully paid or, as described on the IPL
Disclosure Schedule, are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established on the
financial statements of the IPL Entities (whether or not required to be
disclosed under GAAP). There are no outstanding waivers or extensions of any
statute of limitations relating to either the filing of any Tax Return or the
payment of any Tax for which the IPL Entities may be liable, and no Taxing
Authority has either formally or informally requested such a waiver or
extension. The IPL Disclosure Schedule sets forth the Tax Returns of the IPL
Entities which have been examined by and settled with the relevant Taxing
Authority or which are otherwise closed by the applicable statute of
limitations.
(c) All Taxes due and payable on or before the Closing Date that are
either: (i) required to be shown on any Tax Return filed by, or with respect
to, the IPL Entities; or (ii) which were not required to be shown on any Tax
Return but which were or will be required to be paid by or with respect to the
IPL Entities, have been or will be timely paid on or before the Closing Date.
All Taxes that the IPL Entities were or will be required by Law to withhold or
collect have been (in the case of those Taxes that were already required to be
withheld or collected) or will be duly withheld or collected and, to the extent
required, have been (in the case of those Taxes that were already required to
be paid) or will be paid to the appropriate Taxing Authority. There are no Tax
Liens and will be no Tax Liens on the Closing Date, with respect to Taxes upon
any of the properties or assets, real or personal, tangible or intangible, of
the IPL Entities, except for Taxes not yet due and payable. Any liability of
the IPL Entities for Taxes not yet due and payable and for Taxes being
contested by the IPL Entities in good faith has adequately been provided for by
the IPL Entities on its financial statements (whether or not required to be
disclosed under GAAP).
(d) None of the IPL Entities has ever been included in a consolidated,
combined or unitary income Tax Return, except for such Tax Returns as are
listed on the IPL Disclosure Schedule.
(e) No consent to the application of Section 341(f)(2) of the Code has
been filed with respect to any property or assets held or acquired by the IPL
Entities.
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(f) No property owned by the IPL Entities is property that the IPL
Entities, or the Surviving Corporation, is or will be required to treat as
being owned by another person pursuant to the provisions of Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and in effect immediately
before the enactment of the Tax Reform Act of 1986, or is "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code.
(g) None of the IPL Entities is subject to an adjustment under Section
481 of the Code or has been required by, or has requested or received the
permission of, any Taxing Authority to change its method of accounting.
(h) None of the IPL Entities has in effect any tax elections for
federal income tax purposes under Sections 108, 168, 338, 441, 471, 1017, 1033
or 4977 of the Code or under any other Section of the Code.
(i) There is no contract, agreement, plan or arrangement with the IPL
Entities covering any Person that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by either the
IPL Entities or the Surviving Corporation by reason of Sections 162(m) or 280G
of the Code or as excessive or unreasonable compensation.
(j) None of the IPL Entities is a party (other than as an investor) to
any industrial development bond.
(k) None of the IPL Entities has engaged in any exchange under which
the gain realized on such exchange was not recognized due to Section 1031 of
the Code.
(l) No claim has ever been made by any Taxing Authority in any
jurisdiction in which no Tax Return is or has ever been filed by the IPL
Entities that the IPL Entities are, were or may be subject to taxation by such
jurisdiction.
(m) All United States federal income Tax Returns filed by, or on
behalf of, the IPL Entities disclose all positions that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
(n) None of the IPL Entities is or has been a party to any Tax Sharing
Agreement with any Person other than IPL or a member of the IPL Affiliated
Group.
(o) The IPL Disclosure Schedule sets forth, as of August 1, 1996, for
United States federal, state, local and foreign income Tax purposes, the
liabilities of the IPL Entities, and the adjusted basis of the assets of the
IPL Entities (other than the securities of IPL Entities) and any accumulated
depreciation thereon as of August 1, 1996; all of which has been determined by
the IPL Entities in good faith based on the best data available to them. The
net operating losses, alternative minimum tax net operating losses, capital
losses and credits, including any carryovers thereof, of the
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IPL Entities for United States federal income Tax purposes, and, where
applicable, for state, local and foreign income Tax purposes, are set forth on
the IPL Disclosure Schedule.
(p) Except as may result from this Agreement or the Merger, none of
the IPL Entities has a net operating loss carryover, capital loss carryover,
alternative minimum tax net operating loss carryover, or credit carryover which
(without regard to the transactions contemplated by this Agreement): (i) in the
case of a net operating loss carryover or alternative minimum tax net operating
loss carryover, is subject to restriction under Section 382 of the Code (or any
similar provision under state, local or foreign Law); (ii) in the case of a net
capital loss carryover and credit carryover, is subject to restriction under
Section 383 of the Code (or any similar provision under state, local or foreign
Law); or (iii) in the case of either a net operating loss carryover,
alternative minimum tax net operating loss carryover, capital loss carryover or
credit carryover, arose in a separate return limitation year.
(q) IPL has provided Video with copies of: (i) all Tax Returns of the
IPL Entities and all pro forma income Tax Returns of the IPL Entities for all
periods (including periods for which any IPL Entity is or may have been a
member of another consolidated, combined or unitary group) with respect to
which the statute of limitations on assessment has not expired; (ii) any
notices, protests or closing agreements relating to issues arising, or
potentially arising, in any audit, litigation or similar proceeding with
respect to the liability for Taxes of the IPL Entities; (iii) any elections or
disclosure of any controversial position filed by or on behalf of the IPL
Entities with any Taxing Authority (whether or not filed with any Tax Return);
(iv) any letter rulings, determination letters or similar documents issued by
any Taxing Authority with respect to the IPL Entities; and (v) any Tax Sharing
Agreement to which an IPL Entity is or has been a party.
(r) The IPL Entities have retained all books and records with respect
to Tax matters pertinent to the IPL Entities relating to those taxable periods
set forth on the IPL Disclosure Schedule and have abided by all record
retention agreements entered into with any Taxing Authority.
(s) None of the IPL Entities has any liability (whether contingent or
otherwise) for Taxes of any Person other than itself or its Subsidiaries,
including, without limitation, pursuant to the following: (i) under Treasury
Regulations Section 1.1502-6 (or any successor provision thereto or any similar
provision under state, local or foreign Law); (ii) as a successor or
transferee; or (iii) by contract.
(t) The IPL Entities have no gains or losses that have been deferred
under the United States federal consolidated return regulations, and no losses
that have been deferred under Section 267 of the Code. The IPL Entities have
not entered into any transaction in which income is being taken into account
under the installment method within the meaning of Section 453 of the Code (or
under a similar method for state, local or foreign Tax purposes).
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Section 3.9. Benefit Plans.
(a) The IPL Disclosure Schedule contains a true and complete list of
each: (i) pension, retirement, savings, profit sharing, stock bonus, deferred
compensation, bonus incentive compensation, stock option, restricted stock,
stock purchase, stock appreciation right, salary continuation, severance or
termination pay, medical, dental, life or other insurance, disability, fringe
benefit, vacation pay, sick pay, holiday, unemployment, employee loan,
educational assistance or other employee benefit plan or program, agreement or
arrangement and (ii) employment, consulting or severance agreement, in each
case, whether written or oral, covering current or former employees, directors
or agents of IPL or its Subsidiaries and maintained, sponsored or contributed
to by IPL or any of its Subsidiaries, or with respect to which IPL or any of
its Subsidiaries may otherwise have any liability or obligation (including, but
not limited to, any "employee benefit plans" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (all the
foregoing being herein called "IPL Benefit Plans"). With respect to the IPL
Benefit Plans, individually and in the aggregate, IPL has made available to
Video a true and correct copy of: (i) the three (3) most recent annual reports
(Form 5500) filed with the IRS, if any; (ii) such IPL Benefit Plan; (iii) any
summary plan description relating to such IPL Benefit Plan; (iv) each trust
agreement and group annuity contract, if any, relating to such IPL Benefit
Plan; (v) the most recent actuarial report or valuation; and (vi) the latest
IRS determination letter and any other IRS ruling relating to an IPL Benefit
Plan.
(b) Each IPL Benefit Plan complies, in form and operation, in all
material respects, with all applicable Laws and each IPL Benefit Plan has been
administered substantially in accordance with its terms. With respect to the
IPL Benefit Plans, individually and in the aggregate, no event has occurred and
there exists no condition or set of circumstances in connection with which IPL
or any of its Subsidiaries could be subject to any liability which has a
Material Adverse Effect under ERISA, the Code, or any other applicable statute,
order or governmental rule or regulation.
(c) Each of the IPL Benefit Plans and related trusts that is intended
to be qualified under Section 401(a) and Section 501(a) of the Code has been
determined by the IRS to qualify under the Code and, to the knowledge of IPL,
nothing has occurred since such determination to cause any of such IPL Benefit
Plans not to qualify under Section 401(a) and Section 501(a) of the Code.
(d) With respect to the IPL Benefit Plans, individually and in the
aggregate, all required returns, reports and descriptions have been
appropriately filed and distributed, except where the failure to be so filed
and distributed would not have a Material Adverse Effect.
(e) With respect to the IPL Benefit Plans, individually and in the
aggregate: (i) there has been no prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code or any liability for Taxes or
breach of fiduciary duty, which, individually, or in the aggregate has a
Material Adverse Effect; and (ii) there is no action, suit, grievance,
arbitration or other claim with respect to the administration or investment of
assets of the IPL Benefit Plans (other than routine claims for benefits made in
the ordinary course of plan administration) pending, or to the knowledge
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of IPL, threatened, and IPL has no knowledge of any facts which are reasonably
likely to give rise to any such action, suit, grievance, arbitration or other
claim, which, individually, or in the aggregate has a Material Adverse Effect.
(f) None of IPL, its Subsidiaries, nor their IPL ERISA Affiliates
currently maintains, sponsors or contributes to (or is required to contribute
to), or at any time in the past five years has maintained, sponsored or
contributed to (or was required to contribute to) any "defined benefit plan"
as defined in Section 3(35) of ERISA, any "multiemployer plan" as defined in
Section 3(37) of ERISA, or any other plan subject to Title IV of ERISA or
Section 412 of the Code. None of IPL, its Subsidiaries, or any entity which is
under common control, determined under Section 414(b), (c), (m) or (o) of the
Code, with IPL or its Subsidiaries (each, an "IPL ERISA Affiliate") has
incurred liability under Title IV of ERISA or Section 412 of the Code which
would have a Material Adverse Effect, and no event has occurred and no
condition exists, which could subject IPL, its Subsidiaries or any IPL ERISA
Affiliate, directly or indirectly (through an indemnification agreement or
otherwise), to any such liability which would have a Material Adverse Effect.
(g) With respect to the IPL Benefit Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions are
due and have not been made or for which contributions have not been properly
accrued as required by GAAP, and there are no unfunded benefit obligations
which have not been: (i) accounted for by reserves (if required by GAAP); or
(ii) if required (and to the extent required, if any), properly disclosed in
accordance with GAAP or the rules and regulations of the SEC in the
consolidated financial statements of IPL included in the IPL 10-K, which
obligations have a Material Adverse Effect.
(h) No IPL Benefit Plan provides life, health or other welfare
benefits to retirees or other terminated employees of IPL or its Subsidiaries,
other than continuation coverage mandated by Section 4980B of the Code or any
state Law requiring similar continuation coverage.
(i) The audited consolidated balance sheet of IPL as of July 31, 1996
contained in the IPL 10-K, and the unaudited consolidated balance sheet of IPL
as of April 30, 1997 contained in the IPL 10-Q reflect reserves which are
adequate to cover any reasonably expected liabilities for unresolved or
outstanding workers compensation claims or claims under IPL's self-funded
employee welfare plans.
(j) No IPL Benefit Plan is a "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code or a "welfare
benefit fund" within the meaning of Section 419 of the Code.
(k) None of the IPL Benefit Plans, and to the knowledge of IPL, no
fiduciary thereof, is currently the subject of an order, investigation or
examination by the IRS, the Department of Labor, or any other domestic or
foreign governmental agency.
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Section 3.10. Labor Relations. None of the employees of IPL or any of
its Subsidiaries is represented by any labor union. To the knowledge of IPL,
there is no activity involving any employees of IPL or any of its Subsidiaries
seeking to certify a collective bargaining unit or engaging in any other
organizational activity.
Section 3.11. Authorizations and Compliance with Laws. IPL and each of
its Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for IPL and each of
its Subsidiaries to own, lease and operate their properties or to carry on
their businesses as they are now being conducted, except where the failure to
have any of the IPL Permits would not, individually or in the aggregate, have a
Material Adverse Effect (collectively, the "IPL Permits"). The IPL Disclosure
Schedule sets forth an accurate, correct and complete list of the IPL Permits,
which IPL Permits are in full force and effect. IPL and each of its
Subsidiaries: (i) are, and have been, in compliance with all Laws, regulations,
rules and orders, and reporting, licensing, certification, registration and
qualification requirements applicable to their businesses or employees
conducting their businesses, including, without limitation, any federal, state
or local Laws, statutes, regulations or ordinances, and any judicial or
administrative orders or Judgments thereunder and the common law, pertaining to
all health, industrial hygiene Laws, the Communications Act of 1934, as
amended, and the rules and regulations adopted thereunder by the FCC, the
breach or Violation of which, individually or in the aggregate, has a Material
Adverse Effect; (ii) has received no written notification or written
communication from any Governmental Entity (A) asserting that IPL or any of its
Subsidiaries is not in compliance with any of the foregoing, which
noncompliance has a Material Adverse Effect, or (B) threatening to revoke any
IPL Permit, which revocation has a Material Adverse Effect. No renewal of any
IPL Permit would constitute a "major environmental action" under the rules of
the FCC.
Section 3.12. Insurance. The IPL Disclosure Schedule sets forth an
accurate, correct and complete list and summary description (including the name
of the insurer, coverage, premium and expiration date) of all binders or
policies of fire, liability, product liability, workers compensation,
vehicular, unemployment and other insurance, self insurance programs and
fidelity bonds maintained by IPL or its Subsidiaries or in which IPL or its
Subsidiaries is a named insured (collectively, the "IPL Insurance"). All such
IPL Insurance has been issued under valid and enforceable policies or binders
for the benefit of IPL or any of its Subsidiaries, and all such policies or
binders are in full force and effect and none of the premiums therefor are past
due, except to the extent that the failure of such policies to be in full force
and effect or the failure to have paid such premiums when due would not have a
Material Adverse Effect. There are no pending or asserted claims against IPL or
its Subsidiaries as to which any insurer has denied coverage, and there are no
claims under any IPL Insurance policy or binder that have been disallowed by
the insurer or which the insurer has asserted were improperly filed. No notice
of cancellation or nonrenewal with respect to, or increase of premium on, any
IPL Insurance has been received by IPL or any of its Subsidiaries since July
31, 1996. Neither IPL nor any of its Subsidiaries is in default with respect to
any provisions or requirements of any such policy or binder nor has any of them
failed to give notice or present any claim thereunder in due and timely
fashion, except for defaults or failures which, individually or in the
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aggregate, do not have a Material Adverse Effect. Neither IPL nor any of its
Subsidiaries has received any notice of cancellation or termination in respect
of any of the IPL Insurance.
Section 3.13. Title to Real Properties.
(a) The IPL Disclosure Schedule sets forth a true, accurate, correct
and complete list of: (i) all real property owned, leased or subleased by IPL
and its Subsidiaries; (ii) all leases, sub-leases, leases underlying such
sub-leases and assignment agreements with respect to such property ("IPL
Leases"); and (iii) IPL and its Subsidiaries' fee title policies relating
thereto (collectively, the "IPL Real Property"). True, correct and complete
copies of all such IPL Leases and fee title policies have been delivered to
Video. The IPL Real Property owned by IPL and its Subsidiaries is sometimes
hereinafter referred to as the "IPL Real Estate". The IPL Real Property leased
or subleased by IPL and its Subsidiaries is sometimes hereinafter referred to
as the "IPL Leased Property."
(b) IPL and its Subsidiaries are the sole and exclusive legal and
equitable owners of all right, title and interest in, and have good,
marketable, indefeasible and insurable title to, all of the IPL Real Estate set
forth on the IPL Disclosure Schedule as being owned by IPL and its Subsidiaries
(or a valid leasehold or subleasehold estate with respect to IPL Leased
Property) free and clear of all Liens, except for such title defects or Liens
as would not have a Material Adverse Effect. IPL and its Subsidiaries have been
in peaceable possession of the premises covered by each of the IPL Leased
Property leases or subleases since the commencement of the original term of
such lease or sublease, except as otherwise provided on the IPL Disclosure
Schedule.
(c) Each of the IPL Leases is in full force and effect. Neither IPL
nor any of its Subsidiaries is in breach, Violation or default under any IPL
Lease, except for such breaches, Violations or defaults as do not,
individually, or in the aggregate, have a Material Adverse Effect. All service
contracts covering any portion of the IPL Real Estate and the IPL Leased
Property are in full force and effect and are listed on the IPL Disclosure
Schedule and true, correct and complete copies thereof have been delivered to
Video.
(d) There are no assessments affecting the IPL Real Estate and, to the
knowledge of IPL, no assessments are contemplated. There are no Tax abatements
or exemptions affecting IPL Real Property. All public utilities required for
the operation of the IPL Real Property either enter the IPL Real Property
through adjoining public streets, or if they pass through adjoining private
land do so in accordance with valid public easements or valid private
easements.
(e) With respect to the IPL Real Property and any structures and
improvements, whether now existing or under construction relating to said IPL
Real Property, all existing IPL Permits are in full force and effect, and there
is no action or proceeding pending or, to the knowledge of IPL, threatened
which would have the effect of restricting, terminating, penalizing or limiting
any of such IPL Permits except, in any such case, as would not have a Material
Adverse Effect.
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(f) A valid certificate of occupancy exists for each building located
on the IPL Real Estate and for each leasehold premises of the IPL Leased
Property.
Section 3.14. Environmental Laws.
(a) IPL and its Subsidiaries are in compliance with all Environmental
Laws, and have obtained all necessary licenses and permits required to be
issued pursuant to any Environmental Law except where the failure to so comply
or to obtain such licenses or permits, individually or in the aggregate, does
not have a Material Adverse Effect. Neither IPL nor any of its Subsidiaries has
received written notice or written communication from any governmental agency
with respect to any Hazardous Materials relative to its operations, property or
acts.
(b) No Judgment has been issued and to IPL's knowledge: (i) no
Environmental Claim has been filed; (ii) no penalty has been assessed; and
(iii) no investigation or review has occurred or is pending or threatened by
any Governmental Entity with respect to any alleged failure by any of IPL or
any of its Subsidiaries: (A) to have any license and permit required under
applicable Environmental Laws in connection with the business, as currently
conducted, of IPL and its Subsidiaries; or (B) to comply with any Environmental
Laws except for such Judgments, Environmental Claims, investigations, or
reviews which would not have a Material Adverse Effect.
(c) None of IPL or any of its Subsidiaries owns, operates or leases a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, as amended, or under any other comparable state
or local Law; and, without limiting the foregoing: (i) no polychlorinated
biphenyl is or has been present; and to the knowledge of IPL no asbestos or
asbestos containing material has been present (ii) there are no underground
storage tanks or surface impoundments for hazardous materials, active or
abandoned; and (iii) no Hazardous Material has been released in a quantity
reportable under, or in violation of, any Environmental Law in the cases of
clauses (i) through (iii), at, on or under any site or facility now or
previously owned, operated or leased by any of IPL and its Subsidiaries;
provided, however, the representation in this subsection (c) as to sites or
facilities previously owned, operated or leased, is made only with respect to
the time of such ownership, operation or lease by IPL or its Subsidiaries.
(d) None of IPL or any of its Subsidiaries has transported or arranged
for the transportation of any Hazardous Material to any location that is: (i)
listed on the NPL or any similar state or local list; (ii) listed for possible
inclusion on the NPL; or (iii) the subject of enforcement actions by any
Governmental Entity that may lead to Environmental Claims against any of IPL
and its Subsidiaries.
(e) No Hazardous Material generated by any of IPL or its Subsidiaries
has been recycled, treated, stored, disposed of or released by any of IPL or
its Subsidiaries at any location in violation of any applicable Environmental
Law except, in any case, as would not have a Material Adverse Effect.
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(f) No site or facility currently, or to the best of IPL's knowledge,
previously owned, operated or leased by any of IPL or its Subsidiaries is
listed or proposed for listing on the NPL or any similar list of sites
requiring investigation or clean-up.
(g) None of IPL or any of its Subsidiaries is required by Law to place
any notice or restriction relating to the presence of Hazardous Materials at
any site or facility owned by it in any deed to the IPL Real Property on which
such site or facility is located.
(h) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by, or that are in the possession of, any of IPL or
its Subsidiaries in relating to any site or facility now or previously owned,
operated or leased by any of IPL or its Subsidiaries have been delivered to
Video.
Section 3.15. Contracts. The IPL Disclosure Schedule lists all
contracts, agreements, commitments or understandings, including, without
limitation, the IPL Leases to which IPL or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets are or may be
bound or subject which: (i) provide for payments (whether fixed or contingent)
by IPL or any of its Subsidiaries in excess of $25,000 during any calendar
year; (ii) limit the freedom of IPL or any of its Subsidiaries to compete in
any line of business or with any Person in any area, or to own, operate, sell,
transfer, pledge or otherwise dispose of or encumber any assets; or (iii)
provide for payments measured by the financial condition, profits, income or
operations of IPL or any of its Subsidiaries (collectively, together with the
IPL Leases, the "IPL Contracts"). Neither IPL nor any of its Subsidiaries is in
breach, violation or default under any IPL Contract, and no event exists which,
with notice or lapse of time or both will constitute such a breach, violation
or default, except as does not have a Material Adverse Effect, and, as of the
date hereof, no condition exists which will constitute a material breach,
violation or default thereunder by IPL or any of its Subsidiaries or give rise
to any right of termination, cancellation, prepayment or acceleration, and IPL
is not aware of any material default by other Persons party to any IPL Contract
nor of any event or condition, which in any of the foregoing cases,
individually or in the aggregate, has a Material Adverse Effect (whether or not
waived).
Section 3.16. Intellectual Property. IPL and its Subsidiaries own,
possess or have the right to use all franchises, patents, trademarks, service
marks, trade names, licenses and authorizations (collectively, "Intellectual
Property Rights") which are necessary to the conduct of their respective
businesses, except where the failure to own, possess or have the right to use
such Intellectual Property Rights does not have a Material Adverse Effect. To
the knowledge of IPL, neither IPL nor any of its Subsidiaries is infringing any
Intellectual Property Rights of any Person or otherwise violating the rights of
any Person which could subject IPL or any of its Subsidiaries to liabilities
which, individually or in the aggregate, have a Material Adverse Effect or
which would prevent IPL or any of its Subsidiaries from conducting their
respective businesses substantially in the manner in which they are now being
conducted and, as of the date hereof, no claim has been made or, to the
knowledge of IPL, threatened against IPL or any of its Subsidiaries alleging
any such violation.
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Section 3.17. Related Party Transactions. The IPL Disclosure Schedule
sets forth all transactions entered into since January 1, 1994 between IPL or
any of its Subsidiaries on the one hand, and: (i) an officer or director of IPL
or any of its Subsidiaries; (ii) a record or beneficial owner of five percent
(5%) or more of the voting securities of IPL; or (iii) an Affiliate of any such
officer, director or beneficial owner, on the other hand, other than payment of
compensation for services rendered to IPL or its Subsidiaries or reimbursement
by IPL or its Subsidiaries of expenses in the ordinary course of business.
Section 3.18. Opinion of Financial Adviser. IPL has received the
opinion of Montgomery Securities, its financial adviser, substantially in the
form attached hereto as Exhibit 3.18, dated April 15, 1997, to the effect that
the consideration to be paid by the Company in the Merger is fair, from a
financial point of view, to IPL (the "IPL Fairness Opinion"). Such opinion has
not been withdrawn, revoked or in any material respect modified.
Section 3.19. No Undisclosed Material Liabilities. As of the date
hereof, neither IPL nor any of its Subsidiaries had any liabilities or other
obligations of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in the
aggregate, are material to IPL and its Subsidiaries, taken as a whole, and, to
the knowledge of IPL, no basis exists for the assertion against IPL or any of
its Subsidiaries of any such liabilities or obligations, other than: (i)
liabilities provided for in the audited consolidated balance sheet of IPL as of
July 31, 1996 (or disclosed in the notes thereto) included in the IPL 10-K;
(ii) liabilities provided for in the unaudited consolidated balance sheet of
IPL as of April 30, 1997 (or disclosed in the notes thereto) included in the
IPL 10-Q; (iii) liabilities or obligations incurred in the ordinary course of
business consistent with past practice since April 30, 1997, which in the
aggregate are not material to IPL and its Subsidiaries, taken as a whole; and
(iv) liabilities under this Agreement.
Section 3.20. Vote Required. The only vote of the holders of any class
or series of IPL capital stock necessary to approve and adopt the Merger is the
affirmative vote of a majority of outstanding shares of IPL Common Stock.
Section 3.21. Certain Agreements. Neither IPL nor any of its
Subsidiaries is a party to any: (i) agreement with any director, officer or
other employee of IPL or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence
of a transaction involving IPL of the nature contemplated by this Agreement; or
(ii) agreement or plan (including IPL Benefit Plans), any of the benefits of or
rights under which will be increased, or the vesting or payment of the benefits
of or rights under which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. No holder of any option to purchase shares of
IPL Common Stock or shares of IPL Common Stock granted in connection with the
performance of services for IPL is or will be entitled to receive cash from IPL
in lieu of or in exchange for such option or shares solely as a result of the
transactions contemplated by this Agreement, other than the receipt of cash in
lieu of fractional shares.
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Section 3.22. Brokers or Finders. IPL represents, as to itself, its
Subsidiaries and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or Person retained by any such entity is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement.
Section 3.23. NASDAQ Listing. Since July 31, 1996, IPL has not
received any notice from The NASDAQ Stock Market or the NASD that it intends to
delist the IPL Common Stock or that IPL is not in compliance with the rules and
regulations thereof.
Section 3.24. Subsidiaries. Other than as disclosed on the IPL
Disclosure Schedule, IPL does not own or control, or have any ownership
interest in or any obligation to acquire an ownership interest in, either
directly or indirectly, any other Person.
Section 3.25. Title to and Condition of Certain Personal Property. The
IPL Disclosure Schedule contains a list of all machinery, equipment, fixtures
and other tangible personal property (including capital leases) owned by IPL or
any of its Subsidiaries (collectively, the "IPL Personal Property") (other than
items having a book value of less than $25,000 individually). IPL and its
Subsidiaries have (or at Closing will have) good title to all IPL Personal
Property, including the IPL Personal Property listed on the IPL Disclosure
Schedule, free and clear of all Liens.
Section 3.26. Status of Agreements and Business Relationships. All IPL
Contracts, IPL Benefit Plans, IPL Leases and all policies and licenses
disclosed or required to be disclosed on the IPL Disclosure Schedule are valid
and in full force and effect, except, where such invalidity or failure to be in
full force and effect would not have a Material Adverse Effect.
Section 3.27. Customers and Suppliers. The IPL Disclosure Schedule
sets forth a list of: (i) the ten (10) largest customers of each of IPL and its
Subsidiaries in terms of sales during the fiscal year ended July 31, 1996; and
(ii) the ten (10) largest suppliers of each of IPL and its Subsidiaries in
terms of purchases during the fiscal year ended July 31, 1996. Except as set
forth on the IPL Disclosure Schedule, there has not been any material adverse
change in the business relationships of IPL and its Subsidiaries with any
customer or supplier identified on the IPL Disclosure Schedule. Except for the
customers and suppliers listed on the IPL Disclosure Schedule, IPL and its
Subsidiaries have no customer who accounted for more than five percent (5%) of
its sales during the fiscal year ended July 31, 1996, or any supplier from whom
it purchased more than five percent (5%) of the goods or services that it
purchased during the fiscal year ended July 31, 1996. Except as set forth on
the IPL Disclosure Schedule, no Affiliate of IPL or other related party is a
supplier to or a customer of IPL or its Subsidiaries.
Section 3.28. Absence of Certain Commercial Practices. Neither IPL nor
any of its Subsidiaries, nor, to the knowledge of IPL, any director, officer,
agent, employee or other Person acting on behalf of IPL or any of its
Subsidiaries, has: (i) given or agreed to give any gift or similar benefit of
more than nominal value to any customer, supplier, or governmental employee or
official or any other Person who is or may be in a position to help or hinder
IPL or any of its Subsidiaries or
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assist IPL or any of its Subsidiaries in connection with any proposed
transaction, which gift or similar benefit, if not given in the past, might
have materially and adversely affected the business or prospects of IPL or any
of its Subsidiaries, or which, if not continued in the future, might
materially and adversely affect the business or prospects of IPL or any of its
Subsidiaries; or (ii) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others
or established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act. Neither IPL nor any of its Subsidiaries, nor,
to the knowledge of IPL, any director, officer, agent, employee or other
Person acting on behalf of IPL or any of its Subsidiaries, has accepted or
received any unlawful contributions, payments, gifts or expenditures.
Section 3.29. Books and Records. The books of account, minute books,
stock record books and other records of IPL and its Subsidiaries, all of which
have been made or will be made available to Video, are complete and correct in
all material respects and have been maintained in accordance with sound
business practices in all material respects. At the Closing, all of those books
and records will be in the possession of IPL and its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VIDEO
Except as set forth on Video's Disclosure Schedule previously
delivered to IPL (the "Video Disclosure Schedule"), Video hereby represents and
warrants to IPL as follows; provided however, that the parties acknowledge that
the representations and warranties set forth herein shall give effect to the
Spin-Off Transaction and the Contribution Transaction. In that regard, the
parties acknowledge that the representations and warranties of Video set forth
herein are true and that the Video Disclosure Schedule has been prepared in a
manner which indicates the status of Video and its Subsidiaries both as of the
date hereof and after the Spin-Off Transaction and the Contribution
Transaction. The parties further acknowledge that IPL leases certain of the IPL
Leased Property leased from Video and its Affiliates and that notwithstanding
the terms of the representations and warranties set forth in this Article IV,
no breach of any such representation or warranty shall be deemed to exist, to
the extent such breach resulted from any act or omission of IPL or any of its
Subsidiaries in, or with respect to, such IPL Leased Property (provided that
this exception shall not apply to any such breach if the same results from any
action or inaction of Video or its Subsidiaries or Affiliates acting as
landlord in respect of such IPL Leased Property).
Section 4.1. Organization, Standing and Power. Each of Video and its
Subsidiaries: (i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; (ii) has all
requisite corporate power and corporate authority to own, lease and operate its
properties and to carry on its business as now being conducted; and (iii) is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification or
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licensing necessary, other than in such jurisdictions where the failure to be
in good standing, qualified or licensed does not, individually or in the
aggregate, have a Material Adverse Effect. Correct and complete copies of the
Certificate of Incorporation and By-Laws of Video and its Subsidiaries, each
as amended to the date hereof, are attached to the Video Disclosure Schedule.
All Subsidiaries of Video and their respective jurisdictions of incorporation
or organization are identified on the Video Disclosure Schedule.
Section 4.2. Capital Structure.
(a) As of the date hereof, the authorized capital stock of Video
consists of 7,500,000 shares of Video Common Stock and no shares of preferred
stock.
(b) As of the date hereof, 2,678,162 shares of Video Common Stock are
issued and outstanding.
(c) As of the date hereof, no shares of Video Common Stock are held by
Video in its treasury or by its Subsidiaries and no Voting Debt is issued or
outstanding.
(d) All outstanding shares of Video Common Stock are validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except as
set forth on the Video Disclosure Schedule, all outstanding shares of capital
stock of the Subsidiaries of Video are owned by Video or a direct or indirect
wholly-owned Subsidiary of Video, free and clear of all Liens and options of
any nature. Except as set forth in this Section 4.2 and the Video Disclosure
Schedule, there are outstanding: (i) no shares of capital stock, Voting Debt or
other voting securities of Video; (ii) no securities of Video or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock,
Voting Debt or other voting securities of Video or any of its Subsidiaries; and
(iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which Video or any of its Subsidiaries is a party
or by which it is bound obligating Video or any of its Subsidiaries to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered,
sold, purchased, redeemed or acquired, additional shares of capital stock or
any Voting Debt or other voting securities of Video or any of its Subsidiaries
or obligating Video or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement. Except as set
forth in this Agreement, there are not as of the date hereof and there will not
be at the Effective Time, any stockholder agreements, voting trusts or other
agreements or understandings to which Video is a party or by which it is bound
relating to the voting of any shares of the capital stock of Video or its
Subsidiaries.
Section 4.3. Authority Relative to this Agreement.
(a) Video has all necessary corporate power and corporate authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Simultaneously with the execution and delivery of this
Agreement, each of the Stockholders has executed a unanimous written consent
pursuant to which such Stockholder has approved this Agreement and the
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transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Video. This
Agreement has been duly executed and delivered by Video and, assuming this
Agreement constitutes the valid and binding agreement of IPL, constitutes the
valid and binding obligation of Video, enforceable against Video in accordance
with its terms, except as may be limited by bankruptcy, reorganization,
moratorium, fraudulent conveyance and insolvency Laws and by other Laws
affecting the rights of creditors generally and except as may be limited by
the availability of equitable remedies.
(b) The execution and delivery of this Agreement by Video does not,
and the consummation of the transactions contemplated hereby by Video will not:
(i) conflict with, or result in any Violation or breach of any provision of the
Certificate of Incorporation or By-Laws of Video or any of its Subsidiaries; or
(ii) assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 4.3(c) are duly and timely obtained or
made and the approval of this Agreement by the Stockholders has been obtained,
result in any Violation of any of the terms, conditions or provisions of any
loan or credit agreement, note, mortgage, indenture, lease, Video Benefit Plan
or other agreement, obligation, instrument, Video Permit, concession,
franchise, license, Judgment or Law applicable to Video or any of its
Subsidiaries or its or their respective properties or assets, except for such
Violations that, individually or in the aggregate, do not have a Material
Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity or any other
Person is required by or with respect to Video or any of its Subsidiaries to
validly execute and deliver this Agreement on behalf of Video or to effect the
Merger, except for: (i) the filing with the SEC of such reports under Section
13(a) of the Exchange Act and such other compliance with the Securities Act,
the Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby, and
the obtaining from the SEC of such orders as may be so required; (ii) the
filing of the Delaware Certificate with the Secretary of State of the State of
Delaware and the New Jersey Certificate with the Secretary of State of the
State of New Jersey; (iii) such filings and approvals as may be required by
applicable state securities, "blue sky" or takeover Laws and (iv) as otherwise
disclosed on the Video Disclosure Schedule.
Section 4.4. Financial Statements. Video has delivered to IPL correct
and complete copies of: (i) the consolidated balance sheets of Video and its
Subsidiaries as of June 30, 1994, 1995 and 1996, and the related consolidated
statements of income, cash flows and stockholders' equity for the periods then
ended and the notes thereto, and the report thereon by Ernst & Young LLP
("E&Y") and (ii) the unaudited consolidated balance sheet of Video and its
Subsidiaries as of March 31, 1997 (the "Unaudited Statement") and the related
consolidated statements of operations, cash flows and stockholders' equity for
the periods then ended (the "Video Financial Statements"). The Video Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements,
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to normal, recurring audit adjustments and the absence of footnotes) the
consolidated financial position of Video and its Subsidiaries as at their
respective dates and the consolidated results of operations and the
consolidated cash flows of Video for the periods then ended. Video has
delivered to IPL a special purpose pro forma balance sheet of Video (the
"Special Purpose Balance Sheet") (absent footnotes), prepared in a manner
consistent with the Video Financial Statements setting forth the financial
position of the Company as of March 31, 1997 as if the Spin-Off Transaction
and the Contribution Transaction occurred immediately prior to such dates.
Section 4.5. Information Supplied. None of the information supplied or
to be supplied by Video for inclusion in: (i) the Registration Statement will:
(A) at the time the Registration Statement is filed with the SEC; (B) at the
time the Registration Statement becomes effective under the Securities Act; and
(C) at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and (ii) the Proxy Statement will,
at the date mailed to IPL's stockholders and at the times of any meetings of
stockholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Proxy
Statement, insofar as it relates to Video or its Subsidiaries or other
information supplied by Video for inclusion therein, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and the Registration Statement, insofar as it relates
to Video or its Subsidiaries or other information supplied by Video for
inclusion therein, will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
Section 4.6. Absence of Certain Changes or Events. Except as set forth
in the Unaudited Statements or in the Special Purpose Balance Sheet, from June
30, 1996 to the date hereof, Video and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, except for transactions contemplated in this
Agreement, there has not been: (i) any change in the business, results of
operations, properties (including intangible properties), financial condition,
assets or liabilities of Video or any of its Subsidiaries having a Material
Adverse Effect; (ii) any material change in accounting methods, principles or
practices by Video or its Subsidiaries; (iii) any material revaluation (and as
of the date hereof, there is no contemplated revaluation) by Video or any of
its Subsidiaries of any of its or their respective assets, including, without
limitation, writing-down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business; (iv) any
declaration, setting aside or payment of any dividends or distributions in
respect of the shares of its capital stock; (v) any issuance, sale or transfer
by Video, or any commitment to issue, sell or transfer by Video, any shares of
its capital stock, or any redemption, purchase or other acquisition of any of
its securities; or (vi) any increase in, or establishment of, any bonus,
insurance, severance, welfare, thrift, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or other employee
benefit plan of Video or any of its Subsidiaries, or, except in the ordinary
course of business consistent with past practice, any other increase in the
compensation payable or to become payable
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to officers or employees of Video or any of its Subsidiaries, except pursuant
to the provisions of any such plan in effect as of June 30, 1996.
Section 4.7. Litigation. There are no actions, suits or proceedings
pending against Video or any of its Subsidiaries or any of its or their assets
(whether or not covered by insurance) including, without limitation, for
condemnation or foreclosure of real property. To the knowledge of Video, no
investigation, action, suit or proceeding before the FCC is threatened against
Video or any of its Subsidiaries or with respect to its or their respective
assets (whether or not covered by insurance) including, without limitation,
for condemnation or foreclosure of real property and to the knowledge of
Video, there exists no basis for the commencement of any action, proceeding or
investigation against Video or any of its Subsidiaries, in each case which may
have a Material Adverse Effect. There is no outstanding Judgment against Video
or any of its Subsidiaries or by which Video or any of its Subsidiaries or its
or their respective assets are bound.
Section 4.8. Taxes.
(a) Video is the common parent of an Affiliated Group of corporations
which includes Atlantic Satellite Communications, Inc., A.F. Associates, Inc.,
Video Rentals, Inc. and Waterfront Communications Corporation, and all other
direct and indirect subsidiaries of Video which are eligible to be included in
a consolidated return with Video, and with respect to which Video files
consolidated United States federal income Tax Returns. All Tax Returns that
were or will be required to be filed by, or with respect to, the Video Entities
on or before the Closing Date have been or will be filed on a timely basis in
accordance with the Laws, regulations and administrative requirements of the
appropriate Taxing Authority. All such Tax Returns that have been filed were,
when filed, and continue to be, true, correct and complete.
(b) All deficiencies proposed (plus any interest, penalties and
additions to Tax that were or are proposed to be assessed thereon, if any) with
respect to the Video Entities have been fully paid or, as described on the
Video Disclosure Schedule, are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established on the
financial statements of the Video Entities (whether or not required to be
disclosed under GAAP). There are no outstanding waivers or extensions of any
statute of limitations relating to either the filing of any Tax Return or the
payment of any Tax for which the Video Entities may be liable, and no Taxing
Authority has either formally or informally requested such a waiver or
extension. The Video Disclosure Schedule sets forth the Tax Returns of the
Video Entities which have been examined by and settled with the relevant Taxing
Authority or which are otherwise closed by the applicable statute of
limitations.
(c) All Taxes due and payable on or before the Closing Date that are
either (i) required to be shown on any Tax Return filed by, or with respect to,
the Video Entities or (ii) which were not required to be shown on any Tax
Return but which were or will be required to be paid by or with respect to the
Video Entities, have been or will be timely paid on or before the Closing Date.
All Taxes that the Video Entities were or will be required by Law to withhold
or collect have been (in the case of those Taxes that were already required to
be withheld or collected) or will be duly
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withheld or collected and, to the extent required, have been (in the case of
those Taxes that were already required to be paid) or will be paid to the
appropriate Taxing Authority. There are no Tax Liens and will be no Tax Liens
on the Closing Date, with respect to Taxes upon any of the properties or
assets, real or personal, tangible or intangible, of the Video Entities except
for Taxes not yet due and payable. Any liability of the Video Entities for
Taxes not yet due and payable and for Taxes being contested by the Video
Entities in good faith has adequately been provided for by the Video Entities
on its financial statements (whether or not required to be disclosed under
GAAP).
(d) None of the Video Entities has ever been included in a
consolidated, combined or unitary income Tax Return, except for such Tax
Returns as are listed on the Video Disclosure Schedule.
(e) No consent to the application of Section 341 (f)(2) of the Code
has been filed with respect to any property or assets held or acquired by the
Video Entities.
(f) No property owned by the Video Entities is property that the Video
Entities or the Surviving Corporation is or will be required to treat as being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code.
(g) None of the Video Entities is subject to an adjustment under
Section 481 of the Code or has been required by, or has requested or received
the permission of, any Taxing Authority to change its method of accounting.
(h) None of the Stockholders is a foreign person within the meaning of
Section 1445 of the Code.
(i) None of the Video Entities has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(j) None of the Video Entities has in effect any tax elections for
federal income Tax purposes under Sections 108, 168, 338, 441, 471, 1017, 1033
or 4977 of the Code or under any other Section of the Code..
(k) There is no contract, agreement, plan or arrangement with the
Video Entities covering any Person that, individually or collectively, could
give rise to the payment of any amount that would not be deductible by either
the Video Entities or the Surviving Corporation by reason of Sections 162(m) or
280G of the Code or as excessive or unreasonable compensation.
(l) None of the Video Entities is a party (other than as an investor)
to any industrial development bond.
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(m) None of the Video Entities has engaged in any exchange under which
the gain realized on such exchange was not recognized due to Section 1031 of
the Code.
(n) No claim has ever been made by any Taxing Authority in any
jurisdiction in which no Tax Return is or has ever been filed by the Video
Entities that the Video Entities are, were or may be subject to taxation by
that jurisdiction.
(o) All United States federal income Tax Returns filed by, or on
behalf of, the Video Entities disclose all positions that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
(p) None of the Video Entities is or has been a party to any Tax
Sharing Agreement with any Person other than Video or a member of the Video
Affiliated Group.
(q) The Video Disclosure Schedule sets forth, as of June 30, 1996, for
United States federal, state, local and foreign income Tax purposes, the
liabilities of the Video Entities and the adjusted basis of the assets of the
Video Entities (other than the securities of the Video Entities) and any
accumulated depreciation thereon as of June 30, 1996, all of which has been
determined by the Video Entities in good faith based on the best data available
to them. The net operating losses, alternative minimum tax net operating
losses, capital losses and credits, including any carryovers thereof, of the
Video Entities, for United States federal income Tax purposes, and, where
applicable, for state, local and foreign income Tax purposes, are set forth on
the Video Disclosure Schedule.
(r) Except as may result from this Agreement or the Merger, none of
the Video Entities have a net operating loss carryover, capital loss carryover,
alternative minimum tax net operating loss carryover, or credit carryover
which: (i) in the case of a net operating loss carryover or alternative minimum
tax net operating loss carryover, is subject to restriction under Section 382
of the Code (or any similar provision under state, local or foreign Law), (ii)
in the case of a net capital loss carryover and credit carryover, is subject to
restriction under Section 383 of the Code (or any similar provision under
state, local or foreign Law), or (iii) in the case of a net operating loss
carryover, alternative minimum tax net operating loss carryover, capital loss
carryover or credit carryover, arose in a separate return limitation year.
(s) Video has provided IPL with copies of: (i) all Tax Returns of the
Video Entities and pro forma income Tax Returns of the Video Entities for all
periods (including periods for which any Video Entity is or may have been a
member of another consolidated, combined or unitary group) with respect to
which the statute of limitations on assessment has not expired; (ii) any
notices, protests or closing agreements relating to issues arising, or
potentially arising, in any audit, litigation or similar proceeding with
respect to the liability for Taxes of the Video Entities; (iii) any elections
or disclosure of any controversial position filed by or on behalf of the Video
Entities with any Taxing Authority (whether or not filed with any Tax Return);
(iv) any letter rulings, determination letters or similar
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documents issued by any Taxing Authority with respect to the Video Entities;
and (v) any Tax Sharing Agreement to which any Video Entity is or has been a
party.
(t) The Video Entities have retained all books and records with
respect to Tax matters pertinent to the Video Entities relating to those
taxable years or periods as set forth on the Video Disclosure Schedule, and
have abided by all record retention agreements entered into with any Taxing
Authority.
(u) None of the Video Entities has any liability (whether contingent
or otherwise) for Taxes of any Person other than itself or its Subsidiaries,
including, without limitation, pursuant to the following: (i) under Treasury
Regulations Section 1.1502-6 (or any successor provision thereto or any similar
provision under state, local or foreign Law); (ii) as a successor or
transferee; or (iii) by contract.
(v) The Video Entities have no gains or losses that have been deferred
under the United States federal consolidated return regulations, and no losses
that have been deferred under Section 267 of the Code. The Video Entities have
not entered into any transaction in which income is being taken into account
under the installment method within the meaning of Section 453 of the Code (or
under a similar method for state, local or foreign Tax purposes).
Section 4.9. Benefit Plans.
(a) The Video Disclosure Schedule contains a true and complete list of
each: (i) pension, retirement, savings, profit sharing, stock bonus, deferred
compensation, bonus, incentive compensation, stock option, restricted stock,
stock purchase, stock appreciation right, salary continuation, severance or
termination pay, medical, dental, life or other insurance, disability, fringe
benefit, vacation pay, sick pay, holiday, unemployment, employee loan,
educational assistance or other employee benefit plan or program, agreement or
arrangement; and (ii) employment, consulting or severance arrangement, in each
case, whether written or oral, covering current or former employees, directors
or agents of Video or its Subsidiaries and maintained, sponsored or contributed
to by Video or any of its Subsidiaries, or with respect to which Video or any
of its Subsidiaries may otherwise have any liability or obligation (including,
but not limited to, any "employee benefit plans" as defined in Section 3(3) of
ERISA (all the foregoing being herein called "Video Benefit Plans")). With
respect to the Video Benefit Plans, individually and in the aggregate, Video
has made available to IPL a true and correct copy of: (i) the three (3) most
recent annual reports (Form 5500) filed with the IRS, if any; (ii) such Video
Benefit Plan; (iii) any summary plan description relating to such Video Benefit
Plan; (iv) each trust agreement and group annuity contract, if any, relating to
such Video Benefit Plan; (v) the most recent actuarial report or valuation; and
(vi) the latest IRS determination letter and any other IRS ruling relating to a
Video Benefit Plan.
(b) Each Video Benefit Plan complies, in form and operation, in all
material respects, with all applicable Laws and each Video Benefit Plan has
been administered substantially in accordance with its terms. With respect to
the Video Benefit Plans, individually and in the aggregate, no event
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has occurred and there exists no condition or set of circumstances in
connection with which Video or any of its Subsidiaries could be subject to any
liability which has a Material Adverse Effect under ERISA, the Code or any
other applicable statute, order or governmental rule or regulation.
(c) Each of the Video Benefit Plans and related trusts that is
intended to be qualified under Section 401(a) and Section 501(a) of the Code
has been determined by the IRS to qualify under the Code and, to the knowledge
of Video, nothing has occurred since such determination to cause any of such
Video Benefit Plans not to qualify under Section 401(a) and Section 501(a) of
the Code.
(d) With respect to the Video Benefit Plans, individually and in the
aggregate, all required returns, reports and descriptions have been
appropriately filed and distributed, except where the failure to be so filed
and distributed would not have a Material Adverse Effect.
(e) With respect to the Video Benefit Plans, individually and in the
aggregate: (i) there has been no prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code, or any liability for Taxes or
breach of fiduciary duty, which, individually, or in the aggregate, has a
Material Adverse Effect; and (ii) there is no action, suit, grievance,
arbitration or other claim (other than routine claims for benefits made in the
ordinary course of plan administration) pending, or to the knowledge of Video,
threatened, and Video has no knowledge of any facts which are reasonably likely
to give rise to any such action, suit, grievance, arbitration or other claim,
which individually, or in the aggregate, has a Material Adverse Effect.
(f) None of Video, any of its Subsidiaries nor their Video ERISA
Affiliates currently maintains, sponsors or contributes to (or is required to
contribute to), or at any time in the past five years has maintained, sponsored
or contributed to (or was required to contribute to) any "defined benefit plan"
as defined in Section 3(35) of ERISA, any "multiemployer plan" as defined in
Section 3(37) of ERISA, or any other plan subject to Title IV of ERISA or
Section 412 of the Code. None of Video, its Subsidiaries, or any entity which
is under common control, determined under Section 414(b), (c), (m) or (o) of
the Code, with Video or its Subsidiaries (each, a "Video ERISA Affiliate") has
incurred liability under Title IV of ERISA or Section 412 of the Code which
would have a Material Adverse Effect, and no event has occurred and no
condition exists, which could subject Video, its Subsidiaries or any Video
ERISA Affiliate, directly or indirectly (through an indemnification agreement
or otherwise), to any such liability which would have a Material Adverse
Effect.
(g) With respect to the Video Benefit Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions are
due and have not been made or for which contributions have not been properly
accrued as required by GAAP, and there are no unfunded benefit obligations
which have not been: (i) accounted for by reserves (if required by GAAP); or
(ii) if required (and to the extent required, if any), properly disclosed in
accordance with GAAP or in the Video Financial Statements, which obligations
have a Material Adverse Effect.
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(h) No Video Benefit Plan provides life, health or other welfare
benefits to retirees or other terminated employees of Video or its
Subsidiaries, other than continuation coverage mandated by Section 4980B of the
Code or any state Law requiring similar continuation coverage.
(i) The audited consolidated balance sheets of Video as of June 30,
1996 and the unaudited consolidated balance sheet of Video as of March 31, 1997
contained in the Video Financial Statements reflects reserves which are
adequate to cover any reasonably expected liabilities for unresolved or
outstanding workers compensation claims or claims under Video's self-funded
employee welfare plans.
(j) No Video Benefit Plan is a "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code or a "welfare
benefit fund" within the meaning of Section 419 of the Code.
(k) None of the Video Benefit Plans and to the knowledge of Video, no
fiduciary thereof is currently the subject of an order, investigation or
examination by the IRS, the Department of Labor, or any other domestic or
foreign governmental agency.
Section 4.10. Labor Relations. None of the employees of Video or any
of its Subsidiaries is represented by any labor union. To the knowledge of
Video, there is no activity involving any employees of Video or any of its
Subsidiaries seeking to certify a collective bargaining unit or engaging in
any other organizational activity.
Section 4.11. Authorizations and Compliance with Laws. Video and each
of its Subsidiaries are in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for
Video and each of its Subsidiaries to own, lease and operate their properties
or to carry on their businesses as they are now being conducted, except where
the failure to have any of the Video Permits would not, individually or in the
aggregate, have a Material Adverse Effect (collectively, the "Video Permits").
The Video Disclosure Schedule sets forth an accurate, correct and complete
list of the Video Permits, which Video Permits are in full force and effect.
Video and each of its Subsidiaries: (i) are, and have been, in compliance with
all Laws, regulations, rules and orders, and reporting, licensing,
certification, registration and qualification requirements applicable to their
businesses or employees conducting their businesses, including, without
limitation, any federal, state or local Laws, statutes, regulations or
ordinances, and any judicial or administrative orders or Judgments thereunder
and the common law, pertaining to all health, industrial hygiene Laws, the
Communications Act of 1934, as amended and the rules and regulations adopted
thereunder by the FCC, the breach or Violation of which, individually or in
the aggregate, has a Material Adverse Effect; (ii) has received no written
notification or written communication from any Governmental Entity (A)
asserting that Video or any of its Subsidiaries is not in compliance with any
of the foregoing, which noncompliance has a Material Adverse Effect, or (B)
threatening to revoke any Video Permit, which revocation has a Material
Adverse Effect. No renewal of any Video Permit would constitute a major
environmental action under the rules of the FCC.
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Section 4.12. Insurance. The Video Disclosure Schedule sets forth an
accurate, correct and complete list and summary description (including the name
of the insurer, coverage, premium and expiration date) of all binders or
policies of fire, liability, product liability, workers compensation,
vehicular, unemployment and other insurance, self insurance programs and
fidelity bonds maintained by Video or its Subsidiaries or in which Video or its
Subsidiaries is a named insured (collectively, the "Video Insurance"). All such
Video Insurance has been issued under valid and enforceable policies or binders
for the benefit of Video or any of its Subsidiaries, and all such policies or
binders are in full force and effect and none of the premiums therefor are past
due, except to the extent that the failure of such policies to be in full force
and effect or the failure to have paid such premiums when due, would not have a
Material Adverse Effect. There are no pending or asserted claims against Video
or its Subsidiaries as to which any insurer has denied coverage, and there are
no claims under any Video Insurance policy or binder that have been disallowed
by the insurer or which the insurer has asserted were improperly filed. No
notice of cancellation or nonrenewal with respect to, or increase of premium
on, any Video Insurance has been received by Video or any of its Subsidiaries
since June 30, 1996. Neither Video nor any of its Subsidiaries is in default
with respect to any provisions or requirements of any such policy or binder nor
has any of them failed to give notice or present any claim thereunder in due
and timely fashion, except for defaults or failures which, individually or in
the aggregate, do not have a Material Adverse Effect. Neither Video nor any of
its Subsidiaries has received any notice of cancellation or termination in
respect of any of the Video Insurance.
Section 4.13. Title to Real Properties.
(a) The Video Disclosure Schedule sets forth a true, accurate, correct
and complete list of: (i) all real property owned, leased or subleased by Video
and its Subsidiaries; (ii) all leases, sub-leases, leases underlying such
sub-leases and assignment agreements with respect to such property (the "Video
Leases"); and (iii) Video and its Subsidiaries' fee title policies relating
thereto (collectively, the "Video Real Property"). True, correct and complete
copies of all such Video Leases and title policies have been delivered to IPL.
The Video Real Property owned by Video and its Subsidiaries is sometimes
hereinafter referred to as the "Video Real Estate". The Video Real Property
leased or subleased by Video and its Subsidiaries is sometimes hereinafter
referred to as the "Video Leased Property."
(b) Video and its Subsidiaries are the sole and exclusive legal and
equitable owners of all right, title and interest in, and have good,
marketable, indefeasible and insurable title to, all of the Video Real Estate
set forth on the Video Disclosure Schedule as being owned by Video and its
Subsidiaries (or a valid leasehold or subleasehold estate with respect to Video
Leased Property) free and clear of all Liens, except for such title defects or
Liens as would not have a Material Adverse Effect and those mortgages permitted
pursuant to Section 4.13 (g) below. Video and its Subsidiaries have been in
peaceable possession of the premises covered by each of the Video Leased
Property leases or subleases since the commencement of the original term of
such lease or sublease.
(c) Each of the Video Leases is in full force and effect. Neither
Video nor any of its Subsidiaries is in breach,
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Violation or default under any Video Lease, except for such breaches,
Violations or defaults as do not, individually or in the aggregate, have a
Material Adverse Effect. All services contracts covering any portion of the
Video Real Estate and the Video Leased Property are in full force and effect
and are listed on the Video Disclosure Schedule and true, correct and complete
copies thereof have been delivered to IPL.
(d) There are no assessments affecting the Video Real Estate and, to
the knowledge of Video, no assessments are contemplated. There are no Tax
abatements or exemptions affecting Video Real Property. All public utilities
required for the operation of the Video Real Property either enter the Video
Real Property through adjoining public streets, or if they pass through
adjoining private land do so in accordance with valid public easements or valid
private easements.
(e) With respect to the Video Real Property and any structures and
improvements, whether now existing or under construction relating to said Video
Real Property, all existing Video Permits are in full force and effect, and
there is no action or proceeding pending or, to the knowledge of Video,
threatened which would have the effect of restricting, terminating, penalizing
or limiting any of such Video Permits except, in any such case, as would not
have a Material Adverse Effect.
(f) A valid certificate of occupancy exists for each building located
on the Video Real Estate and for each leasehold premises of the Video Leased
Property.
(g) As to the Contributed Real Property, prior to the Effective Time
(and without giving effect to the Refinancing): there shall be no mortgage
indebtedness exceeding in the aggregate $5,000,000; such mortgage(s) shall have
been made to institutional lenders on customary terms and conditions for
similar type properties, located in similar locations; there shall be no
defaults by Video and its Subsidiaries under such mortgage(s) and Video and its
Subsidiaries shall have performed all of their obligations thereunder; the
mortgagee(s) shall not have waived any obligations of Video and its
Subsidiaries under such mortgage(s); and there shall be no pending or
threatened actions or proceedings by such mortgagee(s) which could affect the
Video Real Property. Video has delivered to IPL a true, accurate, correct and
complete copy of all such mortgages.
(h) All of the preceding representations and warranties shall be true
and correct in respect of the Contributed Real Property prior to and as of the
Effective Time.
Section 4.14. Environmental Laws.
(a) Video and its Subsidiaries are in compliance with all
Environmental Laws, and have obtained all necessary licenses and permits
required to be issued pursuant to any Environmental Law except where the
failure to so comply or to obtain such licenses or permits, individually or in
the aggregate, does not have a Material Adverse Effect. Neither Video nor any
of its Subsidiaries has received written notice or written communication from
any governmental agency with respect to any Hazardous Materials relative to its
operations, property or acts.
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(b) No Judgment has been issued and to Video's knowledge: (i) no
Environmental Claim has been filed; (ii) no penalty has been assessed; and
(iii) no investigation or review has occurred or is pending or threatened by
any Governmental Entity with respect to any alleged failure by any of Video or
any of its Subsidiaries: (A) to have any license and permit required under
applicable Environmental Laws in connection with the business, as currently
conducted, of Video and its Subsidiaries; or (B) to comply with any
Environmental Laws, except for such Judgments, Environmental Claims,
investigations or reviews, which would not have a Material Adverse Effect.
(c) None of Video or any of its Subsidiaries owns, operates or leases
a treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, as amended, or under any other comparable state
or local Law; and, without limiting the foregoing: (i) no polychlorinated
biphenyl is or has been present and to the knowledge of Video no asbestos or
asbestos containing material is or has been present; (ii) there are no
underground storage tanks or surface impoundments for hazardous materials,
active or abandoned; and (iii) no Hazardous Material has been released in a
quantity reportable under, or in violation of, any Environmental Law in the
cases of clauses (i) through (iii), at, on or under any site or facility now or
previously owned, operated or leased by any of Video and its Subsidiaries;
provided, however, the representation in this subsection (c) as to sites or
facilities previously owned, operated or leased, is made only with respect to
the time of such ownership, operation or lease by Video, any of its
Subsidiaries or any of the Stockholders.
(d) None of Video or any of its Subsidiaries has transported or
arranged for the transportation of any Hazardous Material to any location that
is: (i) listed on the NPL or any similar state or local list; (ii) listed for
possible inclusion on the NPL; or (iii) the subject of enforcement actions by
any Governmental Entity that may lead to Environmental Claims against any of
Video and its Subsidiaries.
(e) No Hazardous Material generated by any of Video or its
Subsidiaries has been recycled, treated, stored, disposed of or released by any
of Video or its Subsidiaries at any location in violation of any applicable
Environmental Law except, in any case, as would not have a Material Adverse
Effect.
(f) No site or facility currently, or to the best of Video's knowledge
previously owned, operated or leased by any of Video or its Subsidiaries is
listed or proposed for listing on the NPL or any similar list of sites
requiring investigation or clean-up.
(g) None of Video or any of its Subsidiaries is required by Law to
place any notice or restriction relating to the presence of Hazardous Materials
at any site or facility owned by it in any deed to the Video Real Property on
which such site or facility is located.
(h) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by, or that are in the possession of, any of Video
or its Subsidiaries in relating to any site
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or facility now or previously owned, operated or leased by any of Video or its
Subsidiaries have been delivered to IPL.
(i) All of the preceding representations and warranties shall be true
and correct in respect of the Contributed Real Property prior to and as of the
Effective Time.
Section 4.15. Contracts. The Video Disclosure Schedule lists all
contracts, agreements, commitments or understandings, including, without
limitation, the Video Leases, to which Video or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets are or may
be bound or subject which: (i) provide for payments (whether fixed or
contingent) by Video or any of its Subsidiaries in excess of $25,000 during any
calendar year; (ii) limit the freedom of Video or any of its Subsidiaries to
compete in any line of business or with any Person in any area, or to own,
operate, sell, transfer, pledge or otherwise dispose of or encumber any assets;
or (iii) provide for payments measured by the financial condition, profits,
income or operations of Video or any of its Subsidiaries (collectively,
together with the Video Leases, the "Video Contracts"). Neither Video nor any
of its Subsidiaries is in breach, violation or default under any Video
Contract, and no event exists which, with notice or lapse of time or both will
constitute such a breach, violation or default, except as does not have a
Material Adverse Effect, and, as of the date hereof, no condition exists which
will constitute a material breach, violation or default thereunder by Video or
any of its Subsidiaries or give rise to any right of termination, cancellation,
prepayment or acceleration, and Video is not aware of any material default by
other Persons to any Video Contract nor of any event or condition, which in any
of the foregoing cases, individually or in the aggregate, has a Material
Adverse Effect (whether or not waived).
Section 4.16. Intellectual Property. Video and its Subsidiaries own,
possess or have the right to use all Intellectual Property Rights which are
necessary to the conduct of their respective businesses, except where the
failure to own, possess or have the right to use such Intellectual Property
Rights does not have a Material Adverse Effect. To the knowledge of Video,
neither Video nor any of its Subsidiaries is infringing any Intellectual
Property Rights of any Person or otherwise violating the rights of any Person
which could subject Video or any of its Subsidiaries to liabilities which,
individually or in the aggregate, have a Material Adverse Effect or which would
prevent Video or any of its Subsidiaries from conducting their respective
businesses substantially in the manner in which they are now being conducted
and, as of the date hereof, no claim has been made or, to the knowledge of
Video, threatened against Video or any of its Subsidiaries alleging any such
violation.
Section 4.17. Related Party Transactions. The Video Disclosure
Schedule sets forth all transactions entered into since January 1, 1994 between
Video or any of its Subsidiaries on the one hand, and: (i) an officer or
director of Video or any of its Subsidiaries; (ii) a record or beneficial owner
of five percent (5%) or more of the voting securities of Video; or (iii) an
Affiliate of any such officer, director or beneficial owner, on the other hand,
other than payment of compensation for services rendered to Video or its
Subsidiaries or reimbursement by Video or its Subsidiaries of expenses in the
ordinary course of business to Video or its Subsidiaries.
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Section 4.18. No Undisclosed Material Liabilities. As of the date
hereof, neither Video nor any of its Subsidiaries had any liabilities or other
obligations of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in the
aggregate, are material to Video and its Subsidiaries, taken as a whole, and,
to the knowledge of Video, no basis exists for the assertion against Video or
any of its Subsidiaries of any such liabilities or obligations other than: (i)
liabilities provided for in the audited consolidated balance sheet of Video as
of June 30, 1996 (or disclosed in the notes thereto) included in the Video
Financial Statements; (ii) liabilities provided for in the unaudited
consolidated balance sheet of Video as of March 31, 1997; (iii) liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since March 31, 1997, or which in the aggregate are not material to
Video and its Subsidiaries, taken as a whole; (iv) liabilities under this
Agreement; and (v) liabilities provided for in the Special Purpose Balance
Sheet..
Section 4.19. Certain Agreements. Neither Video nor any of its
Subsidiaries is a party to any: (i) agreement with any director, officer or
other employee of Video or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence
of a transaction involving Video of the nature contemplated by this Agreement;
or (ii) agreement or plan (including Video Benefit Plans), any of the benefits
of or rights under which will be increased, or the vesting or payment of the
benefits of or rights under which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
Section 4.20. Brokers or Finders. Video represents, as to itself, its
Subsidiaries and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or Person retained by any such entity is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except Alex. Brown & Sons Incorporated, all of whose fees and
expenses will be paid by Video (or, in the event the Merger is completed, by
the Surviving Corporation) in accordance with Video's agreement with such firm.
Section 4.21. Subsidiaries. Other than as disclosed on the Video
Disclosure Schedule, Video does not own or control, or have any ownership
interest in or any obligation to acquire an ownership interest in, either
directly or indirectly, any other Person.
Section 4.22. Title to and Condition of Certain Personal Property. The
Video Disclosure Schedule contains a list of all machinery, equipment, fixtures
and other tangible personal property (including capital leases) owned by Video
or any of its Subsidiaries (collectively, the "Video Personal Property") (other
than items having a book value of less than $25,000 individually). Video and
its Subsidiaries have (or at Closing will have) good title to all Video
Personal Property, including the Video Personal Property listed on the Video
Disclosure Schedule, free and clear of all Liens.
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Section 4.23. Status of Agreements and Business Relationships. All
Video Contracts, Video Leases, Video Benefit Plans, and all policies and
licenses disclosed or required to be disclosed on the Video Disclosure Schedule
are valid and in full force and effect, except, in any case, as would not have
a Material Adverse Effect.
Section 4.24. Customers and Suppliers. The Video Disclosure Schedule
sets forth a list of: (i) the ten (10) largest customers of each of Video and
its Subsidiaries in terms of sales during the fiscal year ended June 30, 1996;
and (ii) the ten (10) largest suppliers of each of Video and its Subsidiaries
in terms of purchases during the fiscal year ended June 30, 1996. Except as set
forth on the Video Disclosure Schedule, there has not been any material adverse
change in the business relationships of Video and its Subsidiaries with any
such customer or supplier identified on the Video Disclosure Schedule. Except
for the customers and suppliers listed on the Video Disclosure Schedule, Video
and its Subsidiaries have no customer who accounted for more than five percent
(5%) of its sales during the fiscal year ended June 30, 1996, or any supplier
from whom it purchased more than five percent (5%) of the goods or services
that it purchased during the fiscal year ended June 30, 1996. Except as set
forth on the Video Disclosure Schedule, no Affiliate of Video or other related
party is a supplier to or a customer of Video or its Subsidiaries.
Section 4.25. Absence of Certain Commercial Practices. Neither Video
nor any of its Subsidiaries, nor, to the knowledge of Video, any director,
officer, agent, employee or other Person acting on behalf of Video or any of
its Subsidiaries, has: (i) given or agreed to give any gift or similar benefit
of more than nominal value to any customer, supplier, or governmental employee
or official or any other Person who is or may be in a position to help or
hinder Video or any of its Subsidiaries or assist Video or any of its
Subsidiaries in connection with any proposed transaction, which gift or similar
benefit, if not given in the past, might have materially and adversely affected
the business or prospects of Video or any of its Subsidiaries, or which, if not
continued in the future, might materially and adversely affect the business or
prospects of Video or any of its Subsidiaries; or (ii) used any corporate or
other funds for unlawful contributions, payments, gifts, or entertainment, or
made any unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government officials or
others or established or maintained any unlawful or unrecorded funds in
violation of Section 30A of the Exchange Act. Neither Video nor any of its
Subsidiaries, nor, to the knowledge of Video, any director, officer, agent,
employee or other Person acting on behalf of Video or any of its Subsidiaries,
has accepted or received any unlawful contributions, payments, gifts or
expenditures.
Section 4.26. Books and Records. The books of account, minute books,
stock record books and other records of Video and its Subsidiaries, all of
which have been made or will be made available to IPL, are complete and correct
in all material respects and have been maintained in accordance with sound
business practices in all material respects. At the Closing, all of those books
and records will be in the possession of Video and its Subsidiaries.
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Section 4.27. Spin-Off Transaction and Contribution Transaction.
(a) Each party to the Contribution Agreement has all necessary
corporate power and corporate authority to execute and deliver the Contribution
Agreement and to consummate the transactions contemplated thereby. The
execution and delivery of the Contribution Agreement and the consummation of
the transactions contemplated thereby and by the Spin-Off Transaction have been
duly authorized by all necessary corporate action on the part of all parties
thereto. The Contribution Agreement has been, or will be prior to the Effective
Time, duly executed and delivered by each party thereto and constitutes, or
will constitute, the valid and binding agreement of the parties thereto,
enforceable against such parties in accordance with its terms, except as may be
limited by bankruptcy, reorganization, moratorium, fraudulent conveyance and
insolvency Laws and by other Laws affecting the rights of creditors generally
and except as may be limited by the availability of equitable remedies.
(b) The execution and delivery of the Contribution Agreement by the
parties thereto and the consummation of the transactions contemplated thereby
and by the Spin-Off Transaction does not nor will not: (i) conflict with, or
result in any Violation or breach of any provision of the Certificate of
Incorporation or By-Laws of any party thereto; or (ii) assuming the consents,
approvals, authorizations or permits and filings or notifications listed on the
Video Disclosure Schedule are duly and timely obtained or made, result in any
Violation of any of the terms, conditions or provisions of any loan or credit
agreement, note, mortgage, indenture, lease, Video Benefit Plan or other
agreement, obligation, instrument, Video Permit, concession, franchise,
license, Judgment or Law applicable to Video or any of its Subsidiaries or any
of the other parties thereto or their respective properties or assets, except
for such Violations that, individually or in the aggregate, do not have a
Material Adverse Effect .
(c) Except as disclosed on the Video Disclosure Schedule (and the
filing of the merger certificate required pursuant to the mergers contemplated
in the Contribution Agreement), no consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any
Governmental Entity or any other Person is required by or with respect to any
party to the Contribution Agreement or the Spin-Off Transaction to validly
execute and deliver the Contribution Agreement or to consummate the
transactions contemplated thereby and by the Spin-Off Transaction.
(d) No liability or other obligation of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether or not due) of Video or
any of its Subsidiaries or of IPL or any of its Subsidiaries after the Merger
will result from or arise out of the consummation of the transactions
contemplated by the Contribution Agreement or the Spin-Off Transaction, the
existence of which constitutes a breach of the representation and warranties
set forth in this Article IV.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder hereby represents and warrants (all such
representations being made by such Stockholder with respect to himself only),
severally and not jointly, to IPL as follows:
Section 5.1. Ownership of Video Common Stock. Such Stockholder is the
lawful owner of the shares of Video Common Stock set forth by him on the Video
Disclosure Schedule, free and clear of all Liens and (except as set forth on
the Video Disclosure Schedule) options of any nature, and such shares of Video
Common Stock are validly issued, fully paid and nonassessble and not subject to
preemptive rights, subject to any options granted in accordance with the terms
of Section 7.7 hereof.
Section 5.2. Authority Relative to this Agreement.
(a) (i) Such Stockholder has all necessary power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Such Stockholder has executed a unanimous written consent
pursuant to which such Stockholder has approved this Agreement and the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Stockholder.
(ii) This Agreement has been duly executed and delivered by such
Stockholder and, assuming this Agreement constitutes the valid and binding
agreement of IPL, constitutes the valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except as may be limited by bankruptcy, reorganization, moratorium, fraudulent
conveyance and insolvency Laws and by other Laws affecting the rights of
creditors generally and except as may be limited by the availability of
equitable remedies.
(b) The execution and delivery of this Agreement by such Stockholders
does not, and the consummation of the transactions contemplated hereby by such
Stockholder will not, result in any Violation of any Judgment or Law applicable
to such Stockholder or his properties or assets, except for such Violations
that, individually or in the aggregate, would not have a Material Adverse
Effect with respect to Video or would not otherwise effect the consummation of
the Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity or any other
Person is required by or with respect to such Stockholder to validly execute
and deliver this Agreement or to effect the Merger.
Section 5.3. Information Supplied. None of the information supplied or
to be supplied by such Stockholder, with respect to such Stockholder, for
inclusion in: (i) the Registration Statement will, at the time the Registration
Statement is filed with the SEC and at the time it becomes effective
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under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
(ii) the Proxy Statement will, at the date mailed to IPL's stockholders and at
the times of any meetings of stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
Section 5.4. Restricted Securities. Such Stockholder understands that
the shares of IPL Common Stock he is acquiring are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from IPL in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold
without registration under the Securities Act and applicable state securities
laws only in certain limited circumstances. Each Stockholder acknowledges that
he is acquiring such securities for investment and not for distribution except
in compliance with the Securities Act, is able to fend for himself, can bear
the economic risk of his investment and has such knowledge and experience in
financial or business matters that he is capable of evaluating the merits and
risks of the investment in the securities to be acquired hereunder. Each
Stockholder further acknowledges that he is an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act and has received all requested documents from IPL and has had an
opportunity to ask questions of and receive answers from IPL's officers. The
residence address of such Stockholder is as set forth above.
ARTICLE VI
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
Except with respect to the Spin-Off Transaction and the Contribution
Transaction, during the period from the date of this Agreement to the Effective
Time, IPL and Video each agrees as to itself and its Subsidiaries that except
as expressly permitted by this Agreement or otherwise agreed in writing (which
agreement shall not be unreasonably withheld or delayed) by IPL and Video:
Section 6.1. Ordinary Course. Its businesses and the businesses of its
Subsidiaries shall be conducted only in the ordinary course of business and in
a manner consistent with past practice. It shall use commercially reasonable
efforts to preserve substantially intact the business organization of itself
and its Subsidiaries, to keep available the services of its present officers,
employees and consultants (it being understood and agreed that Mr. Arnold P.
Ferolito will cease to be an officer or employee of Video or any of its
Subsidiaries from and after the Closing) and to preserve its present
relationships with customers, suppliers and other Persons with which it has a
significant business relationship.
Section 6.2. Governing Documents. It shall not amend or propose to
amend its Certificate of Incorporation or By-Laws or equivalent organizational
documents.
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Section 6.3. Issuance of Securities. It shall not, nor shall it permit
any of its Subsidiaries to, issue, deliver, sell, redeem, acquire, authorize or
propose to issue, deliver, sell, redeem, acquire or authorize any shares of its
capital stock of any class, any Voting Debt or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, Voting Debt or
convertible securities or other ownership interest, provided that: (i) IPL
shall be permitted to issue shares of IPL Common Stock pursuant to the exercise
of stock options outstanding as of the date hereof and listed on the IPL
Disclosure Schedule (whether such stock options were issued pursuant to the IPL
Option Plan or otherwise); and (ii) Video may issue shares of Video Common
Stock in connection with the transactions contemplated in the Contribution
Agreement.
Section 6.4. Dividends; Changes in Stock. It shall not, nor shall it
permit any of its Subsidiaries which are not wholly-owned by it or its
Subsidiaries to (other than, in the case of IPL, as required in Article V of
the Limited Liability Company Operating Agreement of Cognitive Communications,
LLC in effect as of the date hereof), nor shall it propose to: (i) declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock; or (ii)
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock.
Section 6.5. Acquisition Proposals. It will not and will direct its
respective officers, directors, employees and any investment banker, financial
advisor, attorney, accountant or other representative not to: (i) solicit or
otherwise encourage any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
with respect to it or any of its Subsidiaries; or (ii) agree to or endorse any
Acquisition Proposal with respect to it or any of its Subsidiaries or engage in
negotiations, provide any nonpublic information to, or have any discussions
with, any Person relating to any Acquisition Proposal, with respect to it or
any of its Subsidiaries.
Section 6.6. No Acquisitions. It shall not, nor shall it permit any of
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or in any other manner, any business or any Person or
division thereof or otherwise acquire or agree to acquire any material amount
of assets. Notwithstanding anything contained herein to the contrary
(including, without limitation, in this Section 6.6 and in Sections 6.5 and
7.4), nothing contained in this Agreement shall prohibit either IPL or Video
from: (a) furnishing information to, or entering into discussion or
negotiations with, any Person that makes an unsolicited contact in connection
with an Acquisition Proposal if, and only to the extent that, such company's
Board of Directors determines in good faith, based upon the advice of its
outside legal counsel, that such action is required for such Board of Directors
to comply with its fiduciary duties to such company's stockholders imposed by
Law; or (b) taking or disclosing to such company's stockholders a position with
respect to any Acquisition Proposal or the Merger that, in the judgment of such
Board of Directors, as determined in good faith based upon the advice of its
outside legal counsel, is required for such Board of Directors to comply with
its fiduciary duties to such company's stockholders imposed by Law, provided
that IPL gives Video or Video gives IPL,
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as the case may be, prior written notice (which notice shall generally describe
such action) at least one (1) business day before taking any actions described
in Section 6.6(a) or (b).
Section 6.7. No Dispositions. Other than: (i) as may be required by
Law to consummate the transactions contemplated hereby; or (ii) dispositions in
the ordinary course of business consistent with past practice which are not
material, individually or in the aggregate, to it and its Subsidiaries taken as
a whole, it shall not, nor shall it permit any of its Subsidiaries to, sell,
lease, encumber or otherwise dispose of, or agree to sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise dispose of its
assets.
Section 6.8. Indebtedness; Leases. It shall not, nor shall it permit
any of its Subsidiaries to, incur any indebtedness for borrowed money (other
than in the ordinary course of business and consistent with past practice) or
guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any of its debt securities or any of the debt
securities of any of its Subsidiaries or guarantee any debt or debt securities
of others or enter into, cancel, surrender, amend or modify any lease or
sublease (whether such lease is an operating or capital lease) or permit, allow
or suffer any of its assets to be subject to any Lien (other than a Permitted
Lien), other than in each case in the ordinary course of business, except that:
(i) Video may transfer to an Affiliate in connection with the Spin-Off
Transaction, release, or otherwise terminate, any and all obligations with
respect to those certain loans made by Video or its Subsidiaries to certain of
the officers of Video or to the Stockholders or their Affiliates, which loans
are described or referred to on the Video Disclosure Schedule, the Video
Financial Statements or the Special Purpose Balance Sheet; and (ii) the
Stonehurst Lease may be modified in the manner set forth in Schedule 6.8
hereof. The parties acknowledge that from time to time, Video and its
Subsidiaries provide advances to one another as intercompany transactions.
Those advances are reflected as equity on the books and records and financial
statements of Video and shall not be deemed to constitute indebtedness of any
person following the consummation of the Merger. Any such advances, from and
after the date hereof until the Effective Time of the Merger, shall be incurred
only in the ordinary course of business in a manner consistent with past
practices.
Section 6.9. Advice of Changes; Filings. It shall confer on a regular
and frequent basis with the other corporate party hereto, report on operational
matters and promptly advise the other in writing of any change or event
occurring after the date hereof having a Material Adverse Effect. It shall
promptly provide the other corporate party hereto (or its counsel) with copies
of all filings made by it with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
Section 6.10. Employee Arrangements. Except as set forth in the IPL
Disclosure Schedule or the Video Disclosure Schedule, as applicable, it shall
not and shall not permit any of its Subsidiaries to: (i) increase or agree to
increase the compensation payable or to become payable to its officers or
employees, or modify, change, terminate or supplement its employee benefits,
except for increases in salary or wages of employees (other than officers of it
or any of its Subsidiaries (whether in such capacity or otherwise)) in
accordance with past practices; (ii) except as provided in accordance with the
provisions of any employee benefit plan or arrangement in effect on the date
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hereof, grant any severance or termination pay to, or enter into any employment
or severance agreement with, any officers or employees of it or any of its
Subsidiaries; (iii) enter into or amend any collective bargaining agreement; or
(iv) establish, adopt, enter into or amend any employee benefit or fringe
benefit plans or arrangements for the benefit of any directors, officers or
employees of it or any of its Subsidiaries, including, without limitation, any
plans or arrangements of the type referred to in Sections 3.9 and 4.9 hereof.
For the purposes of this Section 6.10, the term officer shall have the meaning
set forth in Rule 16a-1 of the Exchange Act.
Section 6.11. No Dissolution, Etc. Neither it nor any of its
Subsidiaries shall authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution.
Section 6.12. No Action. It shall not, and shall not permit any of its
Subsidiaries to, take or agree or commit to take any action: (i) that is
reasonably likely to make any of its representations or warranties hereunder
inaccurate; or (ii) is prohibited pursuant to the provisions of this Article VI.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. Preparation of the Registration Statement and Proxy
Statement.
(a) IPL agrees that as promptly as practicable it shall prepare and
file the Proxy Statement with the SEC and prepare and file with the SEC (and
thereafter maintain in effect) the Registration Statement so as to register the
resale by the Stockholders (pursuant to Rule 415 promulgated pursuant to the
Securities Act, or any successor rule or regulation) of all of the shares of
IPL Common Stock to be acquired by them pursuant to this Agreement. IPL shall
use commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing, to cause the Proxy Statement to be mailed to its stockholders at the
earliest practicable date and to obtain all necessary state securities Laws or
"blue sky" permits, approvals and registrations in connection with the issuance
of IPL Common Stock in the Merger pursuant to this Agreement and sales of IPL
Common Stock pursuant to the Registration Statement.
(b) In connection with the foregoing, Video and each of the
Stockholders shall supply to IPL (and be responsible for) such information
related to Video and such Stockholders as is required to be included in the
Proxy Statement and the Registration Statement. If at any time prior to the
Effective Time any event with respect to Video or any of its Subsidiaries or a
Stockholder or with respect to other information supplied by Video or a
Stockholder
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for inclusion in the Proxy Statement or the Registration Statement, shall occur
which is required to be described in an amendment of, or a supplement to, the
Proxy Statement or the Registration Statement, Video or such Stockholder, as
the case may be, shall provide written notice thereof to IPL and such event
shall be so described, and such amendment or supplement shall be promptly filed
with the SEC and, as required by Law, disseminated to the stockholders of IPL.
(c) If, at any time prior to the Effective Time, any event with
respect to IPL or any of its Subsidiaries or with respect to other information
supplied by IPL for inclusion in the Proxy Statement or the Registration
Statement shall occur, which is required to be described in an amendment of, or
a supplement to, the Proxy Statement or the Registration Statement, such event
shall be so described, and such amendment or supplement shall be promptly filed
with the SEC and, as required by Law, disseminated to the stockholders of IPL.
Section 7.2. Letters of Accountants. Video shall use commercially
reasonable efforts to cause to be delivered to IPL and Video a letter of E&Y,
Video's independent public accountants, addressed to each such party, and IPL
shall use commercially reasonable efforts to cause to be delivered to IPL and
Video a letter of Arthur Andersen LLP ("Andersen"), IPL's independent public
accountants, addressed to each such party, in each case in form and substance
satisfactory to each of IPL and Video, containing statements and information of
the type customarily included in accountants' "Comfort Letters" to underwriters
with respect to the historical and pro forma financial statements and certain
financial and statistical information pertaining to IPL and Video contained in
proxy statements similar to the Proxy Statement and registration statements
similar to the Registration Statement.
Section 7.3. Access to Information. From the date hereof to the
Effective Time, each of IPL and Video agrees that it shall (and shall cause
each of its respective Subsidiaries to) afford to the other, and the officers,
employees, accountants, counsel and other representatives of the other, access
at all reasonable times to its officers, employees, agents, properties,
offices, plants and other facilities and to all books and records (including
tax returns), and shall furnish to the other party all financial, operating and
other data and information as the other party, through its officers, employees
or agents, may reasonably request. The confidentiality agreements dated January
13, 1997 and January 14, 1997 between IPL and Video (the "Confidentiality
Agreements") and the activities contemplated thereby shall continue in full
force and effect and shall apply to all information provided pursuant to this
Section 7.3.
Section 7.4. Meeting of IPL Stockholders. Subject to IPL's ability to
terminate this Agreement pursuant to and in accordance with the terms of
Article IX hereof and to take such actions as are permitted pursuant to Section
6.6 hereof: (i) IPL shall promptly take all action necessary in accordance with
the DGCL and its Certificate of Incorporation and By-Laws to convene a meeting
of its stockholders for the purpose of conducting the IPL Vote; (ii) IPL will,
through its Board of Directors, recommend to its stockholders approval of such
matters and shall use commercially reasonable efforts to obtain approval and
adoption of this Agreement and the transactions
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contemplated hereby by its stockholders; and (iii) IPL shall use commercially
reasonable efforts to hold such meeting as soon as practicable after the date
hereof.
Section 7.5. Legal Conditions to Merger. Each of Video and IPL will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be applicable with respect to the Merger (including
furnishing all information required in connection with obtaining approvals of,
or making filings with, any Governmental Entity) and will promptly cooperate
with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in
connection with the Merger.
Section 7.6. NASDAQ. Prior to the Effective Time, IPL shall use
commercially reasonable efforts to cause all of the shares of IPL Common Stock
issuable to the Stockholders in the Merger to be approved for inclusion on The
Nasdaq Stock Market, subject to official notice of issuance.
Section 7.7. Management Options. After the Effective Time, the
Stockholders shall not grant any options to purchase IPL Common Stock to any
former employee or director of Video or its Subsidiaries, or any employee or
director of IPL or its Subsidiaries, if any such options are granted at an
exercise price less than the "fair market value" (as defined in the IPL Option
Plan) per share of IPL Common Stock on the date of grant and, as a result
thereof, such grant would be considered executive compensation from IPL from a
financial reporting point of view, unless such grant is approved by a majority
of the members of Board of Directors of the Surviving Corporation.
Notwithstanding the foregoing, the grants of options set forth on Schedule 7.7
attached hereto shall be permitted. Anything herein to the contrary
notwithstanding, on or prior to the Effective Time the Stockholders may grant
to employees, consultants and officers of Video, IPL and their respective
Subsidiaries, options to purchase shares of Video Common Stock which, following
the Merger will convert into the right to purchase shares of IPL Common Stock
on terms consistent with Schedule 7.7.
Section 7.8. Fees and Expenses. Except as otherwise provided in
Article IX, in the event the Merger is not consummated, all Expenses incurred
by the parties hereto shall be borne solely and entirely by the party that has
incurred such Expenses. In the event the Merger is consummated, all Expenses
incurred by the parties hereto in connection with the Merger and the other
transactions contemplated hereby will be paid by the Surviving Corporation.
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Section 7.9. Indemnification.
(a) For a period of six (6) years after the Effective Time, IPL shall
not amend Article 9 of its Certificate of Incorporation (as in effect at the
Effective Time) in a manner that would adversely affect the rights thereunder
of any individuals who at any time prior to and at the Effective Time were or
are directors or officers of IPL in respect of their terms of office or acts or
omissions occurring at or prior to or after the Effective Time (including,
without limitation, the transactions contemplated by this Agreement) unless
such amendment or modification is required by Law.
(b) After the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted under applicable Law, indemnify and hold harmless each
present and former director, officer, employee, fiduciary and agent of each of
the Constituent Corporations and their respective Subsidiaries, and each
fiduciary and agent of each such director and officer (collectively, the
"Fiduciary Indemnified Parties") against all costs and expenses (including
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
settlement amounts paid in connection with any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission in their capacity as a director, officer, employee,
fiduciary or agent, whether occurring before or after the Effective Time, until
the expiration of the statute of limitations relating thereto (and shall pay
any expenses in advance of the final disposition of such action or proceeding
to each Fiduciary Indemnified Party to the fullest extent permitted under the
DGCL, upon receipt from the Fiduciary Indemnified Party to whom expenses are
advanced of any undertaking to repay such advances required under the DGCL). In
the event of any such claim, action, suit, proceeding or investigation, the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Fiduciary Indemnified Parties, which counsel selected by the
Fiduciary Indemnified Parties shall be reasonably satisfactory to the Surviving
Corporation, promptly after statements therefor are received and (ii) the
Surviving Corporation shall cooperate in the defense of any such matter;
provided, however, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably delayed or withheld); and provided, further, that the Surviving
Corporation shall not be obligated pursuant to this Section 7.9 to pay the fees
and expenses of more than one counsel (plus appropriate local counsel) for all
Fiduciary Indemnified Parties in any single action except to the extent that
two or more of such Fiduciary Indemnified Parties shall have conflicting
interests in the outcome of such action, in which case such additional counsel
(including local counsel) as may be required to avoid any such conflict or
likely conflict may be retained by the Fiduciary Indemnified Parties at the
expense of the Surviving Corporation; and provided further that, in the event
that any claim for indemnification is asserted or made within the period prior
to the expiration of the applicable statute of limitations, all rights to
indemnification in respect of such claim shall continue until the disposition
of such claim.
(c) The Surviving Corporation shall use its reasonable efforts to
maintain in effect for six (6) years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by IPL
and Video (provided that the Surviving Corporation may substitute therefor
policies containing terms and conditions (including, without limitation, the
amounts of
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coverage) 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 7.9(c)
more than an amount per year equal to 150% of current annual premiums paid by
IPL and Video for such insurance. In the event that, but for the proviso to the
immediately preceding sentence, the Surviving Corporation would be required to
expend more than 150% of current annual premiums, the Surviving Corporation
shall obtain the maximum amount of such insurance obtainable by payment of
annual premiums equal to 150% of current annual premiums. Notwithstanding the
foregoing, the board of directors of the Surviving Corporation shall retain the
discretion to obtain directors' and officers' liability insurance in such
greater amounts as it deems appropriate.
(d) In the event the Surviving Corporation or 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 provisions shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 7.9.
(e) This Section 7.9 is intended to be for the benefit of, and shall
be enforceable by, the Fiduciary Indemnified Parties and their respective heirs
and personal representatives.
Section 7.10. Additional Agreements; Commercially Reasonable Efforts.
Subject to the terms and conditions of this Agreement, Video and IPL agree to
use commercially reasonable efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by this Agreement, including cooperating fully with the other. Video shall use
commercially reasonable efforts to cause all of the conditions to the
obligations of IPL set forth in Sections 8.1 and 8.2 to be satisfied. IPL shall
use its commercially reasonable efforts to cause all of the conditions to the
obligations of Video set forth in Sections 8.1 and 8.3 hereof to be satisfied.
Video shall use commercially reasonable efforts to file or obtain all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity or
other Persons required in connection with the consummation of the Merger as set
forth on the Video Disclosure Schedule. IPL shall use commercially reasonable
efforts to file or obtain all authorizations, consents, orders or approvals of,
or declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity or other Persons required in connection with the
consummation of the Merger as set forth on the IPL Disclosure Schedule.
Section 7.11. Reserved Shares of IPL Common Stock. On the date hereof,
IPL has, and at and following the Effective Time IPL shall have, sufficient
shares of IPL Common Stock reserved for issuance upon conversion of shares of
Video Common Stock in the Merger.
Section 7.12. Tax Treatment. IPL and Video shall each use commercially
reasonable efforts to cause the Merger to qualify, and shall not take, and
shall use commercially reasonable efforts to
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prevent any of its Affiliates from taking, any actions that could prevent the
Merger from qualifying as a reorganization under the provisions of Section
368(a) of the Code.
Section 7.13. Spin-Off Transaction/Insurance. Video and its
Subsidiaries shall transfer or otherwise dispose of their ownership interests
in: (i) Videotape, Video Dub and certain other entities (collectively, "Spin
Co.") prior to the Effective Time as set forth in the Section 355 Agreement
(the "Section 355 Agreement") attached hereto as Exhibit 7.13; provided that
Video may dispose of all or any portion of Spin Co., any assets thereof or any
securities in any such entity prior to the Effective Time pursuant to
documents: (a) in a form and substance consented to by IPL (such consent to be
withheld only in the reasonable exercise of its discretion); and (b) on terms
providing that any such transactions shall not be recourse to IPL, its
Subsidiary, Video or its Subsidiaries, other than Spin Co.; and (ii) the
Covered Insurance Policies, and the loans referred to in Section 6.8(i) hereof
which shall be transferred to Spin Co. (collectively, the "Spin-Off
Transaction") . Neither Video or any of its Subsidiaries nor IPL or any of its
Subsidiaries shall have any liability or other obligation of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) with respect to Spin Co. at and after the Effective Time, other than
as set forth on Part (a) of Schedule 7.13 hereto.
Section 7.14. Contribution Agreement. Prior to the Effective Time,
Video shall acquire:
(i) the land and buildings located at 240 Pegasus Avenue,
Northvale, New Jersey and 183 Oak Tree Road, Tappan, New York; and
(ii) a sublease of the building located at 235 Pegasus Avenue,
Northvale, New Jersey (the "Sublease") pursuant to a Contribution
Agreement (the "Contribution Agreement") attached hereto as Exhibit
7.14. The Sublease will be a lease from a newly formed entity owned by
Louis H. Siracusano and Arnold P. Ferolito ("Newco") as a single
purpose entity formed solely for the purposes of; and the actions of
which are limited to, acting as lessor under the Sublease and as
lessee under the Existing Sublease, and actions related thereto, all
pursuant to documentation reasonably acceptable to IPL and the
Stockholders. Contemporaneously with the creation of the Sublease
there will be (x) a surrender and termination of the sublease dated
July 1, 1996 between L.I.M.A. Partners, as sublessor, and Audio Plus
Video International, Inc., as sublessee, and the sublease dated July
1, 1996 between L.I.M.A. Partners, as sublessor, and VSC Corporation,
as sublessee (for purposes of this Section 7.14 collectively, "Space
Leases"), and (y) the creation of two separate further subleases,
respectively between a wholly owned subsidiary of IPL, as lessor, and
each of the sublessees of the Space Leases, as lessee under its
respective further sublease. The terms of the Sublease will mirror the
terms of the Existing Sublease (but will expire one day earlier than
the Existing Lease and will require that all payments be made one day
earlier than under the Existing Sublease) and, as a result, the lessee
thereof will not be required to pay any greater amount as rent to
Newco, than Newco has to pay to its landlord under the Existing
Sublease.
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Newco will have the right to cure any breach of the Sublease that may
result in a breach of the Existing Sublease. IPL will have the right to cure
any breach under the Existing Sublease. None of the terms or provisions of the
Existing Sublease have been modified or otherwise amended since June 30, 1996
nor will be modified or otherwise amended prior to the Effective Time.
Section 7.15. Video Subsidiaries. Video shall dissolve, distribute,
merge or otherwise eliminate those corporations listed on the Video Disclosure
Schedule in order that VSC Corporation, A.F. Associates, Inc., Video Rentals,
Inc., Atlantic Satellite Communications, Inc., Waterfront Communications
Corporation and two newly-formed subsidiaries which shall hold real property as
a result of the Contribution, shall be the sole Subsidiaries of Video at the
Effective Time.
Section 7.16. (a) Stock Resale Agreement. Prior to the Effective Time,
IPL and the Stockholders shall receive an executed copy of an agreement (the
"Stock Resale Agreement") in substantially the form of Exhibit 7.16(a) attached
hereto.
(b) Registration Rights Agreement. Prior to the
Effective Time, IPL and the Stockholders shall receive an executed copy of an
agreement (the "Registration Rights Agreement") in substantially the form of
Exhibit 7.16(b) hereof.
Section 7.17. Fairness Opinion. IPL shall use commercially reasonable
efforts to cause an investment banker retained by it to provide the IPL
Fairness Opinion prior to the execution of this Agreement and to bring the same
down, or to reissue the same, immediately prior to the mailing of the Proxy
Statement.
Section 7.18. Committee Review. From time to time (not less than
semi-annually), and in addition to its other duties as the audit committee of
the Surviving Corporation, the audit committee (which shall be an Independent
Committee) shall review the compliance of IPL and Video with the
representations and warranties set forth herein and shall report the results of
such review to the board of the Surviving Corporation, and, in connection
therewith, shall seek such advice and retain such advisors (including, without
limitation, legal counsel and accountants) as it shall determine to be
appropriate. Upon the vote of a majority of its members, the audit committee
shall have sole authority, on behalf of IPL, to exercise any rights on behalf
of IPL under Article X hereof and under the Losses Escrow Agreement and shall
acknowledge and authorize IPL to perform any obligations or duties it may have
under Article X or under the Losses Escrow Agreement.
Section 7.19. Replacement of Shares. On the date hereof, Mr. Terrence
A. Elkes and Mr. Kenneth F. Gorman shall enter into a letter agreement with VSC
in the form attached hereto as Exhibit 7.19 (the "Option Letter Agreement")
pursuant to which they acknowledge and agree that: (i) certain options to
purchase IPL Common Stock granted to them by Video and the shares of IPL Common
Stock underlying such options shall be cancelled and extinguished at the
Effective Time as contemplated in Article II hereof; and (ii) at the Effective
Time the New Options shall be granted by the Stockholders to Mr. Terrence A.
Elkes and Mr. Kenneth F. Gorman.
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Section 7.20. Voting Agreement. On the date hereof, Equitable, Mr.
Terrence A. Elkes and the Stockholders shall enter into a Voting Agreement in
the form attached hereto as Exhibit 7.20 (the "Voting Agreement") pursuant to
which they shall agree to vote all of their shares of IPL Common Stock and
Video Common Stock in favor of the Merger and the transactions contemplated in
this Agreement.
Section 7.21. Non-Compete. The parties hereto acknowledge and agree
that, following the Effective Time, any agreement existing as of the Effective
Time solely between or among the parties hereto and/or any Subsidiary or
Affiliate thereof, that constitutes a Non-Compete Agreement, shall, for all
purposes, be and be deemed to be, terminated and rendered null and void and of
no further force or effect.
Section 7.22. Tag-Along Rights Agreement. Prior to the Effective Time,
the Stockholders shall receive an executed copy of an agreement (the "Tag-Along
Rights Agreement") in substantially the form of Exhibit 7.22 attached hereto.
ARTICLE VIII
CONDITIONS OF MERGER
Section 8.1. General Conditions to Obligation of IPL and Video. The
respective obligations of each of IPL and Video to engage in the Closing and to
effect the Merger, shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated herein (including, the amendment to IPL's Certificate of
Incorporation increasing the number of authorized shares of IPL Common Stock
and changing IPL's corporate name and the election of the directors identified
in Exhibit 1.3(b), in each case as contemplated by Section 1.3) shall have been
approved by the IPL Vote.
(b) NASDAQ Listing. IPL shall have filed a Notification Form for
Listing of Additional Shares with The Nasdaq Stock Market with respect to the
IPL Common Stock issuable to the Stockholders in the Merger and the same shall
be properly filed and fully paid.
(c) Employment Agreements. The Surviving Corporation shall have
entered into an employment agreement with Mr. Louis H. Siracusano (the
"Siracusano Employment Agreement") and with Mr. Donald H. Buck (the "Buck
Employment Agreement") in the forms attached hereto as Exhibit 8.1(c)(a) and
Exhibit 8.1(c)(b), respectively.
(d) Other Approvals. Other than the filings provided for by Section
1.1, all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity or other Persons required in connection with the consummation of the
Merger as set forth on the IPL and Video Disclosure Schedules shall have
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been filed or obtained. IPL shall have received all state securities Laws or
"blue sky" permits and authorizations necessary to issue IPL Common Stock in
the Merger and to enable the Stockholders to effect the Permitted Sale.
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(f) No Injunction or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction (an "Injunction") prohibiting the consummation of the
Merger or any of the other transactions contemplated herein shall be in effect;
provided, however, that, prior to invoking this condition, the Person subject
to any such Injunction shall use commercially reasonable efforts to have any
such Injunction vacated, except as otherwise contemplated by this Agreement.
(g) Accountants' Letters. E&Y and Andersen shall have delivered the
letters contemplated by Section 7.2 hereof.
(h) Financings. A refinancing (the "Refinancing") of the indebtedness
and other obligations of IPL and its Subsidiaries and Video and its
Subsidiaries (including, without limitation, those of Spin Co. under agreements
set forth on the Video Disclosure Schedule) on the terms set forth in the
commitment letter from Key Bank dated June 11, 1997, and on such other terms as
are reasonably satisfactory to IPL and Video shall close substantially
simultaneously with the Closing. That transaction will involve, among other
things, either: (i) the refinancing of any or all of the mortgages on real
property disclosed on the Video Disclosure Schedule; or (ii) the assumption of
any or all such mortgages by IPL and/or its Subsidiaries, together with the
release of all existing guarantees and obligations of the Stockholders in
respect thereof.
(i) No Pending Proceedings. Neither IPL nor Video, nor their
respective Subsidiaries, shall be required by the United States Department of
Justice, the United States Federal Trade Commission or any other Governmental
Entity to hold separate, sell or otherwise dispose of any Subsidiary or assets
or properties, the effect of any of which would be to materially impair the
value of the Merger.
(j) Fairness Opinion. The IPL Fairness Opinion contemplated in Section
7.17 (and the bring down and reissue thereof) shall have been obtained.
(k) Losses Escrow Agreement. The parties shall have received a fully
executed copy of an agreement (the "Losses Escrow Agreement") in substantially
the form of Exhibit 8.1(k) attached hereto.
(l) Qualification To Do Business. IPL shall have been qualified to do
business in the State of New Jersey.
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Section 8.2. Additional Conditions to Obligation of IPL. The
obligation of IPL to engage in the Closing and to effect the Merger is also
subject to the following conditions (any one or more of which may be waived by
IPL, but only in a writing signed by IPL):
(a) Representations and Warranties. Any representation or warranty of
Video or the Stockholders contained in this Agreement which is qualified as to
materiality shall be true and correct and any such representation or warranty
that is not so qualified shall be true and correct in any material respect, in
each case as if such representation or warranty was made on and as of the
Closing Date, with the same force and effect as if made on and as of the
Closing Date, except that any such representation or warranty made with
reference to a specified date shall have been true on and with reference to
such date.
(b) Agreements and Covenants. Video shall have performed or complied
in all material respects with all of its agreements and covenants contained in
this Agreement.
(c) No Material Adverse Change. Since the date of this Agreement,
there shall have been no Material Adverse Effect with respect to Video.
(d) Compliance Certificate. Video shall have delivered to IPL a
certificate, dated the Closing Date, signed on behalf of Video by the Chairman,
President or any Vice-President of Video, certifying as to the fulfillment of
the conditions specified in subsections (a), (b) and (c) of this Section 8.2
including appropriate certification of Video's and its Subsidiaries' by-laws,
articles of incorporation, and corporate resolutions and the incumbency of
certain of its officers.
(e) Stock Resale Agreement. IPL shall have received a fully executed
copy of the Stock Resale Agreement.
(f) Contribution Agreement. Video shall have entered into and
consummated the transactions contemplated in the Contribution Agreement without
any waiver of any of the conditions precedent to the closing thereof and shall
have delivered to IPL copies of the title commitments with respect to the
Contributed Real Property.
(g) Videotape and Video Dub. Video shall have completed the Spin-Off
Transaction.
(h) Environmental Reports. EEA, Inc., an environmental consulting
company, shall have completed an environmental review of the Video Real
Property, the results of which shall be reasonably satisfactory to IPL (it
being understood and agreed that it would be unreasonable to object to any
matter set forth in the Video Disclosure Schedule).
(i) Authority. All action required to be taken by, or on the part of,
Video to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (including,
without limitation, the Merger) shall have been duly and validly taken by the
Board of Directors of Video and the Stockholders.
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(j) Opinion of Counsel. IPL shall have been furnished with an opinion
of counsel to Video, dated the Closing Date, in the form attached hereto as
Exhibit 8.2(j).
(k) Approvals and Filings. All approvals, consents, authorizations,
licenses and approvals from, and all declarations, filings and registrations
with, the third parties set forth on the Video Disclosure Schedule shall have
been obtained or made, shall be in full force and effect and shall be
reasonably satisfactory in form and substance to IPL and its counsel.
(l) FIRPTA Certificates. Video shall have delivered to IPL at least
five (5) days prior to the Closing Date, an affidavit by Video, dated not more
than twenty (20) days prior to the Closing Date, certifying, under penalty of
perjury, that Video is not and has not been a United States real property
holding corporation (as defined in Section 897(c) (2) of the Code) during the
applicable period specified in Section 897(c) (1) (A) (ii) of the Code, and
that, as of the Closing Date, interests in Video are not United States real
property interests (within the meaning of Section 897(c)(1) of the Code). The
aforementioned affidavit shall be in the form and meet the requirements
prescribed by the Code and the applicable Treasury Regulations (and shall be
acceptable to IPL).
(m) Estoppel Certificates. Video shall deliver to IPL, at or prior to
Closing, an Estoppel Certificate from each of the landlords under each of the
Video Leases in substantially the form annexed hereto as Exhibit 8.2(m).
(n) Certificates of Occupancy. A true, correct and complete copy of a
valid Certificate of Occupancy for each building located on the Video Real
Estate shall be delivered to IPL at or prior to the Closing.
(o) Surveys. Video and its Subsidiaries, at their sole expense, shall
deliver at or prior to the Closing to IPL as-built surveys of each parcel of
land comprising the Video Real Estate as presently exists indicating the true,
correct and complete legal descriptions, and delineating the boundary lines of
the Video Real Estate, all improvements, rights of way, roads, parking areas,
and easements, and contiguous public roads and the names of the record owners
of all contiguous property.
Section 8.3. Additional Conditions to Obligation of Video. The
obligation of Video and the Stockholders to engage in the Closing and to effect
the Merger is also subject to the following conditions (any one or more of
which may be waived by Video or a majority of the Stockholders, but only in a
writing signed by Video or such Stockholders):
(a) Representations and Warranties. Any representation or warranty of
IPL contained in this Agreement which is qualified as to materiality shall be
true and correct or any such representation or warranty that is not so
qualified shall be true and correct in any material respect, in each case as if
such representation or warranty was made on and as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date, except that
any such representation
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or warranty made with reference to a specified date shall have been true on and
with reference to such date.
(b) Agreements and Covenants. IPL shall have performed or complied in
all material respects with all of its agreements and covenants contained in
this Agreement.
(c) No Material Adverse Change. Since the date of this Agreement,
there shall have been no Material Adverse Effect with respect to IPL.
(d) Compliance Certificate. IPL shall have delivered to Video a
certificate, dated the Closing Date, signed on behalf of IPL by the Chairman,
President or any Vice-President of IPL, certifying as to the fulfillment of the
conditions specified in subsections (a), (b) and (c) of this Section 8.3
including appropriate certification of IPL's by-laws, articles of incorporation
and corporation resolutions and the incumbency of certain of its officers.
(e) Environmental Reports. ESA, an environmental consulting company,
shall have completed an environmental review of the IPL Real Property, the
results of which shall be reasonably satisfactory to Video (it being understood
and agreed that it would be unreasonable to object to any matter set forth in
the IPL Disclosure Schedule).
(f) Authority. All action required to be taken by, or on the part of,
IPL to authorize the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby (including, without
limitation, the Merger) shall have been duly and validly taken by the Board of
Directors and the stockholders of IPL.
(g) Opinion of Counsel. Video shall have been furnished with an
opinion of counsel to IPL, dated the Closing Date, in the form attached hereto
as Exhibit 8.3(g).
(h) Approvals and Filings. All approvals, consents, authorizations,
licenses and approvals from, and all declarations, filings and registrations
with, the third parties set forth on the IPL Disclosure Schedule shall have
been obtained or made, shall be in full force and effect and shall be
reasonably satisfactory in form and substance to Video and its counsel.
(i) FIRPTA Certificates. IPL shall have delivered to Video at least
five (5) days prior to the Closing Date, an affidavit by IPL, dated not more
than twenty (20) days prior to the Closing Date, certifying, under penalty of
perjury, that IPL is not and has not been a United States real property holding
corporation (as defined in Section 897(c) (2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, and that,
as of the Closing Date, interests in IPL are not United States real property
interests (within the meaning of Section 897(c)(1) of the Code). The
aforementioned affidavit shall be in the form and shall meet the requirements
prescribed by the Code and the applicable Treasury Regulations and shall be
reasonably acceptable to Video.
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(j) Registration Rights Agreement. The Stockholders shall have
received a fully executed copy of the Registration Rights Agreement.
(k) Estoppel Certificates. IPL shall deliver to Video, at or prior to
Closing, an Estoppel Certificate from each of the Landlords under each of the
IPL Leases in substantially the form of Exhibit 8.2(m).
(l) Certificates of Occupancy. A true, correct and complete copy of a
valid Certificate of Occupancy for each building located on the IPL Real Estate
shall be delivered to Video at or prior to the Closing.
(m) Approval. The issuance of shares of IPL Common Stock shall be
approved in a manner which satisfies the requirements of Rule 16b-3(d)(1)
promulgated under the Exchange Act, in order that such issuance shall be exempt
from Section 16(b) as contemplated in such Rule.
(n) Security Interest. IPL shall enter into a security agreement with
each of Mr. Siracusano and Mr. Ferolito granting to each a first priority lien
security interest in the Sublease, as collateral security for the obligations
of IPL pursuant to Section 10.2(g) hereof.
(o) Surveys. IPL and its Subsidiaries, at their sole expense, shall
deliver at or prior to the Closing to Video as-built surveys of each parcel of
land comprising the IPL Real Estate as presently exists indicating the true,
correct and complete legal descriptions, and delineating the boundary lines of
the IPL Real Estate, all improvements, rights of way, roads, parking areas, and
easements, and contiguous public roads and the names of the record owners of
all contiguous property.
(p) Option Plan. The stockholders of IPL shall have approved the New
Option Plan.
(q) Waivers. Jeffrey Kaplan, Martin Irwin, Terrence A. Elkes and
Kenneth F. Gorman, shall have executed a waiver in the form attached hereto as
Exhibit 8.3(q) with respect to certain rights under the IPL Option Plan and
similar rights under all options granted to them.
(r) Agreements. IPL shall have entered into agreements with Arnold P.
Ferolito and Martin Irwin in the forms attached hereto as Exhibits 8.3(r)(i)
and 8.3(r)(ii), respectively.
(s) Resignation. Video shall have received copies of the resignation
by Kenneth F. Gorman and Jeffrey J. Kaplan from all offices and directorships
they hold with IPL and its Subsidiaries, all in a form reasonably acceptable to
Video.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of IPL of the matters presented in the Proxy Statement, by IPL or
Video as set forth below:
(a) by mutual consent of the Board of Directors of IPL and the Board
of Directors of Video; or
(b) by IPL by written notice to Video, if: (A) any condition to the
obligation of IPL to close contained in Article VIII hereof has not been
satisfied by October 15, 1997 (the "End Date") (unless such failure is the
result of IPL's breach of any of its representations, warranties, covenants or
agreements contained herein); or (B) by the End Date, the conditions to the
obligations of Video to close contained in Article VIII hereof (except for
those which have not been satisfied as a result of a breach by Video of any of
its representations, warranties, covenants or agreements contained herein) have
been satisfied (or have been waived) and IPL is ready, willing and able to
engage in the Closing but Video fails to engage in the Closing; or
(c) by Video by written notice to IPL, if: (A) any condition to the
obligation of Video to close contained in Article VIII hereof has not been
satisfied by the End Date (unless such failure is the result of Video's breach
of any of its representations, warranties, covenants or agreements contained
herein); or (B) by the End Date, the conditions to the obligations of IPL to
close contained in Article VIII hereof (except for those which have not been
satisfied as a result of a breach by IPL of any of its representations,
warranties, covenants or agreements contained herein) have been satisfied (or
have been waived) and Video is ready, willing and able to engage in the Closing
but IPL fails to engage in the Closing; or
(d) by either IPL or Video, in the event that the Board of Directors
of the terminating party determines in good faith, based upon the advice of its
outside legal counsel, that, under all then relevant circumstances, the failure
to do so would be reasonably likely to violate its fiduciary duties to its
stockholders under applicable Law (a "Fiduciary Determination"); or
(e) by IPL, if Montgomery Securities is unable to reissue the IPL
Fairness Opinion immediately prior to the mailing of the Proxy Statement if a
substantial element of such inability consists of the existence of an
Acquisition Proposal with respect to IPL; or
(f) by Video, if this Agreement shall have been voted on by IPL's
stockholders and shall not have been approved by the requisite vote of IPL
stockholders under circumstances in which an Acquisition Proposal with respect
to IPL has been publicly announced and has not been publicly withdrawn at least
five (5) Business Days prior to the latest scheduled date for the IPL Meeting.
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(g) by either IPL or Video, if the condition set forth in Section
8.1(h) is not satisfied by the End Date.
Section 9.2. Fees and Expenses.
(a) In the event that: (i) either IPL or Video terminates this
Agreement pursuant to Section 9.1(d) or (e) hereof, the terminating party shall
pay the non-terminating party, or (ii) Video terminates this Agreement pursuant
to Section 9.1(f) hereof, IPL shall pay to Video, in immediately available
funds: (A) an amount equal to $250,000; plus (B) the other party's Expenses in
an amount which shall not exceed $250,000, in each case payable within ten (10)
Business Days after such termination.
(b) In the event that either IPL or Video terminates this Agreement
pursuant to (i) Section 9.1(b)(A) or 9.1(c)(A) as a result of the breach by the
non-terminating party of any of its representations, warranties, covenants or
agreements contained herein or (ii) Sections 9.1(b)(B) or 9.1(c)(B), the
non-terminating party shall pay, in immediately available funds, the
terminating party's Expenses, in an amount which shall not exceed $400,000,
within ten (10) Business Days after such termination; provided, however, that
if, prior to or within four (4) months after such termination, it is publicly
announced that the non-terminating party has agreed to, intends to, or will
seek to, participate in or complete an Acquisition Proposal, the
non-terminating party shall pay to the terminating party, in immediately
available funds, an additional amount equal to $250,000 within ten (10)
Business Days after such announcement (in addition to the payment provided in
preceding clause).
(c) In the event that either IPL or Video terminates this Agreement
pursuant to Section 9.1(g), IPL and Video shall each pay their own Expenses
incurred in connection with this Agreement and shall bear in equal part any
fees or other amounts payable to any potential financing source pursuant to any
written agreement entered into by IPL, Video and such financing source with
respect to such financing transaction. Neither IPL nor Video shall execute any
documents in connection with the Refinancing without the prior approval of the
other party, which approval shall not be unreasonably withheld or delayed.
Section 9.3. Effect of Termination. Subject to Section 11.11, in the
event of termination of this Agreement as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability on the
part of any party hereto or their respective directors or officers except: (i)
as contemplated in Section 9.2; and (ii) the obligation of the parties under
the following provisions of this Agreement, which shall survive such
termination: the final sentence of Section 7.3 and Article XI (excluding
Section 11.10).
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ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; SHAREHOLDERS' REPRESENTATIONS
Section 10.1. Survival of Representations and Warranties. All
representations and warranties of the parties set forth in this Agreement shall
terminate fifteen (15) months following the Closing and shall be of no further
force or effect, provided that the representations and warranties made by IPL
contained in Sections 3.2, 3.8, 3.9 and 3.14 and the representations and
warranties made by Video and the Stockholders contained in Sections 4.2, 4.8,
4.9, 4.14 and 5.1 shall survive until the later of: (i) three (3) years after
the Closing; or (ii) in the event that any extension of the applicable statute
of limitations relating to any matter contemplated in Sections 3.8, 3.9, 3.14,
4.8, 4.9 or 4.14 is agreed to by IPL and any Governmental Entity, the
expiration of such extension. For purposes of this Article X, such
representations and warranties shall be deemed to have been given and made at
the Effective Time. Following the expiration of the periods set forth above
with respect to any particular representation or warranty, no party hereto
shall have any further liability with respect to such representation or
warranty. Except as set forth herein, all of the covenants, agreements and
obligations of the parties hereto shall survive the Closing indefinitely (or if
indefinite survival is not permitted by Law, then for the maximum period
permitted by applicable Law). Anything herein to the contrary notwithstanding,
any claim for indemnification that is asserted by written notice which notice
specifies in reasonable detail the facts upon which such claim is made as
provided in this Article X within the survival period shall survive until
resolved pursuant to a final non-appealable judicial determination or
otherwise. The liability of any Person for any breach of any representation or
warranty set forth herein shall not be limited by the actual or constructive
knowledge of any Indemnified Party or any Affiliate thereof and the existence
of any such knowledge shall not constitute a defense to any such
indemnification obligation.
Section 10.2. Indemnification.
(a) Agreement to Indemnify.
(i) Subject to the terms of this Article X, each of the
Stockholders hereby covenants and agrees to indemnify IPL and its successors
and assigns and hold them harmless from and against any and all Losses incurred
by any of them resulting from or arising out of any breach of any of the
representations, warranties, covenants or agreements made by Video or the
Stockholders in this Agreement; provided, however, that: (i) each Stockholder
shall have no liability under or in respect of Article V hereof except in
respect of those representations and warranties made by that Stockholder; and
(ii) the sole recourse of IPL and its successors and assigns in respect of such
Losses resulting from any breach of any representation or warranty or in
respect of the Video 7.1 Obligation shall be limited to the rights of such
Persons under the Losses Escrow Agreement and the assets held thereunder and
such Persons shall have no other right, claim or cause of action with respect
to any breach of a representation or warranty or under the Video 7.1
Obligation, against the Stockholders or their assets pursuant to this Agreement
or otherwise.
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(ii) Subject to the terms of this Article X, IPL hereby covenants
and agrees to indemnify each of the Stockholders and each of their respective
estates, heirs, personal representatives and assigns and to hold them harmless
from and against any Losses incurred by any of them resulting from or arising
out of any breach by IPL of any of the representations, warranties, covenants
and agreements made by IPL in this Agreement; provided however that: (A) for
purposes of determining the amount of any Losses resulting from any breach of
any representation or warranty made by IPL under this Agreement, the amount of
such Losses shall be deemed to be equal to 100% of the Losses incurred by IPL
which would not have been incurred had such representation and warranty been
true and correct, notwithstanding that the Stockholders own IPL Common Stock;
(B) any indemnification payment to the Stockholders in respect of any such
Losses for a breach of a representation or warranty by IPL shall be paid in
accordance with the Stockholder Percentages; and (C) any such indemnification
payment in respect of any breach of a representation or warranty by IPL may, at
the option of IPL, be paid in cash or in shares of IPL Common Stock, valued for
this purpose at the Market Value as of the date payment is made.
(iii) Any party may set off any liability or obligation of such
party to pay money under this Article X against any obligation or liability of
any other party to pay money to such person hereunder and the same shall not be
deemed to constitute Losses to the extent claims are set-off against each other
for the purpose of determining whether or not Losses in excess of the Video
Threshold Amount or the IPL Threshold Amount have occurred; it being understood
and agreed that once any applicable indemnification or contribution in respect
of a Loss is paid or agreed in writing to be paid or is applied against the
Video Threshold Amount or IPL Threshold Amount, as the case may be, it is no
longer subject to offset hereunder.
(iv) Notwithstanding the foregoing, none of the Stockholders nor
any of their estates, heirs, personal representatives or assigns shall have any
liability for any Loss relating to Taxes caused by any breach of a
representation or warranty until the aggregate of such Losses is greater than
the amount of the Tax reserves of the Video Entities as of June 30, 1996 which
amount is set forth on Part I of Schedule 10.2(a)(iv) hereof next to the
caption "Video Reserve," and in the event that such aggregate is in excess of
the Video Reserve, IPL shall only be deemed to have a Loss equal to the amount
of such excess and any right to be indemnified in respect of any such excess
shall be subject to the terms of Section 10.2(b) below.
(v) Notwithstanding the foregoing, neither IPL nor any of its
successors or assigns shall have any liability for any Loss relating to Taxes
caused by any breach of a representation or warranty until the aggregate of
such Losses is greater than the amount of the Tax reserves of the IPL Entities
as of January 31, 1997 which amount is set forth on Part II of Schedule
10.2(a)(iv) hereof next to the caption "IPL Reserve," and in the event that
such aggregate is in excess of the IPL Reserve, the Stockholders shall only be
deemed to have a Loss equal to the amount of such excess and any right to be
indemnified in respect of any such excess shall be subject to the terms of
Section 10.2(b) below.
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(b) Threshold.
(i) Notwithstanding the provisions of Sections 10.2(a)(i) and
10.2(e), no claim for indemnification or contribution hereunder shall be made
against any of the Stockholders hereunder with respect to the breach of any
representation or warranty or of the Video 7.1 Obligation, unless and until the
aggregate of such Losses of IPL, its successors and assigns against any of the
Stockholders which give rise to an indemnity obligation under Section
10.2(a)(i) with respect to the breach of any representation or warranty or of
the Video 7.1 Obligation exceeds the Video Threshold Amount in which event the
Stockholders shall be required to indemnify IPL, its successors and assigns
only for those Losses with respect to the breach of any representation or
warranty or of the Video 7.1 Obligation in excess of the Video Threshold
Amount, subject to the provisions of Sections 10.2(a)(i), (iii) and (iv) and
the limitation contained in Section 10.2(c). The "Video Threshold Amount" is
$350,000.
(ii) Notwithstanding the provisions of Sections 10.2(a)(ii) and
10.2(e), no claim for indemnification or contribution shall be made against IPL
hereunder with respect to the breach of any representation or warranty or of
the IPL 7.1 Obligation unless and until the aggregate of such Losses of the
Stockholders, their heirs, personal representatives and assigns against IPL
which give rise to an indemnity obligation under Section 10.2(a)(ii) with
respect to the breach of any representation or warranty or of the IPL 7.1
Obligation exceed the IPL Threshold Amount in which event IPL shall be required
to indemnify the Stockholders, their heirs, personal representatives and
assigns only for those Losses with respect to the breach of any representation
or warranty or of the IPL 7.1 Obligation in excess of the IPL Threshold Amount,
subject to the provisions of Sections 10.2(a)(ii), (iii) and (v) and the
limitation contained in Section 10.2(c), any such payment to be made in
proportion to the Stockholder Percentages. The "IPL Threshold Amount" is
$350,000.
(c) Limitation on Indemnity. Notwithstanding the indemnification
obligations contained in Section 10.2(a) or the contribution obligation set
forth in Section 10.2(e): (i) IPL shall not be required to indemnify the
Stockholders, their heirs, personal representatives or assigns in respect of a
breach or breaches of any representation or warranty of IPL or of the IPL 7.1
Obligation, or to provide any contribution (with any payment made in the form
of IPL Common Stock valued at the Market Value as of the date payment is made)
in an aggregate amount in excess of $5,000,000, for all such indemnification
and contribution payments; and (ii) the Stockholders in the aggregate shall not
be required to indemnify IPL and its successors or assigns in respect of a
breach or breaches of any representation or warranty of Video or the
Stockholders or of the Video 7.1 Obligation, or to provide any contribution
(with any payment made in the form of IPL Common Stock valued at the Market
Value as of the date payment is made), in an aggregate amount in excess of
$5,000,000 for all such indemnification and contribution payments; provided,
however, that the foregoing limitation shall not apply in connection with any
breach of any representation or warranty of the Stockholders contained in
Sections 5.1 and 5.2(a)(i).
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(d) Indemnification Procedure.
(i) An Indemnified Party shall provide written notice to each
Indemnifying Party of any claim of such Indemnified Party for indemnification
under this Agreement promptly after the date on which such Indemnified Party
has actual knowledge of the existence of such claim. Such notice shall specify
the nature of such claim in reasonable detail and the Indemnifying Parties
shall be given reasonable access to any documents or properties within the
control of the Indemnified Parties as may be useful in the investigation of the
basis for such claim. The failure to so notify the Indemnifying Parties shall
not constitute a waiver of such claim but an Indemnified Party shall not be
entitled to receive any indemnification with respect to any Losses that
occurred directly as a result of the failure of such Indemnified Party to give
such notice.
(ii) In the event any Indemnified Party seeks indemnification
hereunder based upon a claim asserted by a third party, the Indemnifying
Parties shall have the right (without prejudice to the right of any Indemnified
Party to participate at its expense through counsel of its own choosing) to
defend or prosecute such claim at its expense and through counsel of its own
choosing if it gives written notice of its intention to do so no later than
twenty (20) days following notice thereof by an Indemnified Party or such
shorter time period as required so that the interests of the Indemnified Party
would not be materially prejudiced as a result of its failure to have received
such notice; provided, however, that, if the Indemnified Party shall have
reasonably concluded that separate counsel is required because a conflict of
interest would otherwise exist, the Indemnified Party shall have the right to
select separate counsel to participate in the defense of such action on its
behalf, at the expense of the Indemnifying Party. If the Indemnifying Party
does not so choose to defend or prosecute any such claim asserted by a third
party for which any Indemnified Party would be entitled to indemnification
hereunder, then the Indemnified Party shall be entitled to recover from the
Indemnifying Party (subject to the limitations set forth in Section 10.2(b) and
(c) above), on a monthly basis, all of the reasonable attorney's fees and other
costs and Expenses of litigation of any nature whatsoever incurred in the
defense of such claim. Notwithstanding the assumption of the defense of any
claim by an Indemnifying Party pursuant to this paragraph, the Indemnified
Party shall have the right to approve the terms of any settlement of a claim
(which approval shall not be unreasonably delayed or withheld).
(iii) The Indemnifying Party and the Indemnified Party shall
cooperate in furnishing evidence and testimony and in any other manner which
the other may reasonably request, and shall in all other respects have an
obligation of good faith dealing, one to the other, so as not to unreasonably
expose the other to undue risk of loss.
(e) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided in Section
10.2(a) is applicable in accordance with its terms, but for any reason is held
by a court of competent jurisdiction to be unavailable in the event of a Loss
incurred due to Violation of the Securities Act or the Exchange Act, the
Stockholders shall contribute to the total losses, claims, damages, liabilities
and expenses (including reasonable fees and disbursements of counsel and costs
of investigation) to which IPL may be subject and IPL shall
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contribute to the total losses, claims, damages, liabilities and expenses
(including reasonable fees and disbursements of counsel and costs of
investigation) to which the Stockholders may be subject, in such proportion as
shall be appropriate to reflect the relative benefits received by, and the
relative fault of, IPL on the one hand and the Stockholders on the other hand,
subject to the limitation set forth in Section 10.2(c) hereof and the IPL
Threshold Amount or Video Threshold Amount, as the case may be; provided,
however that the sole recourse of IPL and its successors and assigns in respect
of such Losses shall be limited to the rights of such Persons under the Losses
Escrow Agreement and such Persons shall have no other right, claim or cause of
action against the Stockholders pursuant to this Agreement or otherwise.
Relative fault shall be determined by reference to whether any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by IPL, the Stockholders
or Video, and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. IPL, the Stockholders and
Video agree that it would not be just and equitable if contributions, fees and
disbursements of counsel pursuant to this paragraph were to be determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein.
(f) Adjustment to Conversion Number. After the Effective Time, any
amount paid by the Stockholders to IPL, on the one hand, or by IPL to the
Stockholders on the other hand, as the case may be, pursuant to this Article X,
shall be treated by the parties, for federal and state income tax purposes, as
an adjustment to the Conversion Number set forth in Section 2.1(a).
(g) Leases. IPL hereby covenants and agrees to indemnify each of the
Stockholders and each of their respective estates, heirs and personal
representatives and to hold them harmless, from and against any and all
expenses, costs, losses, claims, liabilities, obligations, fines, penalties and
damages, (including, without limitation, reasonable fees and disbursements of
counsel and costs of investigation) associated with or relating to any action,
matter, fact or thing associated with any breach or default under the Sublease.
(h) Tax Indemnification. Subject to the terms of this Article X but in
no event subject to the limitations set forth in Section 10.2(a)(iv), each of
the Stockholders hereby covenants and agrees to indemnify IPL and its
successors and assigns and hold them harmless from and against all Losses
relating to Taxes (after taking into account utilization of net operating loss
and/or tax credit carry-overs of Video) which result from the Contribution or
Spin-Off Transactions, including, without limitation, any such taxes which may
result from any failure of the Spin-Off Transaction to qualify as a
reorganization pursuant to Section 355 of the Code (but not including any Taxes
attributable to the ordinary operations of any entity). The obligations under
this Section 10.2(h) shall be treated in the same manner as a breach of a
representation or warranty and shall be subject to the limitations applicable
under this Article X with respect to any such breach.
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ARTICLE XI
GENERAL PROVISIONS
Section 11.1. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made upon receipt, if made or given by hand delivery, telecopier or
facsimile transmission, or upon receipt by registered or certified mail
(postage prepaid, return receipt requested) at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to IPL:
International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Telephone: (212) 986-6300
Fax: (212) 986-1364
with copies to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Telephone: (212) 758-9500
Fax: (212) 758-9526
(b) if to Video:
Video Services Corporation
240 Pegasus Avenue
Northvale, New Jersey 07647-1904
Attention: General Counsel
Telephone: (201) 767-1000
Fax: (201) 784-9779
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with copies to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
21st Floor
New York, New York 10036-1510
Attention: Keith L. Schaitkin, Esq.
Telephone: (212) 626-0800
Fax: (212) 626-0799
(c) if to Mr. Siracusano, to:
Louis H. Siracusano
13 Lexington Lane
Montvale, New Jersey 07645
Telephone: (201) 573-8660
(d) if to Mr. Ferolito, to:
Arnold P. Ferolito
c/o Video Services Corporation
240 Pegasus Avenue
Northvale, New Jersey 07647-1904
(e) if to Mr. Buck, to:
Donald H. Buck
2 Deerburn Court
Florham Park, New Jersey 07932
Section 11.2. Interpretation; Certain Definitions. When a reference is
made in this Agreement to Sections, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is
to be made available. Any reference to "the knowledge of" Video or IPL, as
applicable, shall be deemed to refer to: (i) in the case of IPL, to the actual
knowledge of any of its executive officers; and (ii) in the case of Video, to
the actual knowledge of any of its executive officers.
Section 11.3. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or
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more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
Section 11.4. Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. Except as expressly provided herein, this Agreement (including
the documents and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof,
including, without limitation, that certain letter of intent between IPL and
Video dated January 7, 1997 as amended from time to time. Except as expressly
provided herein, this Agreement is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder. The parties hereby
acknowledge that no Person shall have the right to acquire or shall be deemed
to have acquired shares of common stock of the other party pursuant to the
Merger until consummation thereof.
Section 11.5. Governing Law. This Agreement shall be governed by, and
interpreted under, the laws of the State of New York applicable to contracts
made and to be performed therein without regard to conflicts of law principles,
except that the consummation and effectiveness of the Merger shall be governed
by, and construed in accordance with, the DGCL.
Section 11.6. Severability. Each party agrees that, should any court
or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby.
Section 11.7. Publicity. Video and IPL will consult with each other
and will mutually agree upon any press release or public announcement
pertaining to the Merger and shall not issue any such press release or make any
such public announcement prior to such consultation and agreement, except as
may be required by applicable Law or by obligations pursuant to any listing
agreement with any national securities exchange or The Nasdaq Stock Market, in
which case the party proposing to issue such press release or make such public
announcement shall use commercially reasonable efforts to consult in good faith
with the other party before issuing any such press release or making any such
public announcement.
Section 11.8. Assignment. Prior to the Closing, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
heirs and personal representatives which, in any event, shall not include any
purchaser from any Stockholder of any shares of the IPL Common Stock issuable
in the Merger, except that a party may transfer this Agreement and any of the
rights, interests or obligations hereunder to any Permitted Transferee, and
further, provided that any claims, liabilities or other obligations of any of
the parties hereto in connection with this Agreement or the
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transactions contemplated hereby shall not in any way be diminished as a result
of any such assignment or a sale by a party hereto of its shares of IPL Common
Stock.
Section 11.9. Remedies Cumulative. Subject to Section 11.11 hereof,
all rights, powers and remedies provided under this Agreement shall be
cumulative and not alternative, and the exercise or beginning of the exercise
of any thereof by any party shall not preclude the simultaneous or later
exercise of any other rights, powers or remedies by such party.
Section 11.10. Representations of Video and IPL. (a) All
representations and warranties of IPL are made subject to the IPL Disclosure
Schedule and all representations and warranties of Video are made subject to
the Video Disclosure Schedule, whether or not the representation or warranty
itself makes reference to the IPL Disclosure Schedule or Video Disclosure
Schedule, as the case may be.
(b) If the Closing occurs, all representations and warranties (to the
extent the same survive the Closing as contemplated in Article X hereof) of:
(i) Video made pursuant to Article IV of this Agreement shall be deemed to be
representations and warranties of the Stockholders for purposes of Article X
hereof; and (ii) IPL made pursuant to Article III of this Agreement made to
Video shall also be deemed to have been made by IPL to each Stockholder for
purposes of Article X hereof.
Section 11.11. Remedies Exclusive. Prior to the Closing, the rights,
remedies and obligations of the parties hereto under this Agreement set forth
in Article IX hereof shall be deemed to be exclusive of all other rights,
remedies and obligations under this Agreement and the related documents that
would otherwise be available to the parties hereto at Law, in equity or
otherwise. After the Closing, the rights, remedies and obligations under this
Agreement and the related documents and agreements of the parties hereto set
forth in Article X hereof shall be deemed to be exclusive of all other rights,
remedies and obligations under this Agreement that would otherwise be available
to the parties hereto.
Section 11.12. Waiver. IPL hereby waives, and shall cause each of its
Affiliates to waive, all rights for contribution or other similar rights of
recovery with respect to any and all damage, loss, liability and expense
(including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) arising under or relating to environmental laws that IPL or any of
its Affiliates might have by statute or otherwise against the Stockholders.
Section 11.13. Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of the Boards of Directors of
Video and IPL at any time prior to the Effective Time; provided, however,
that, after approval of the Merger by the Stockholders of Video and IPL, no
amendment may be made which would require further approval by such
stockholders without such further approval and provided further that any
amendment after the Effective Time shall be approved
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by a majority of the members of the Independent Committee. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 11.14. Extension; Waiver. At any time prior to the Effective
Time, any party hereto may, to the extent legally allowed: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the Agreements or conditions contained
herein. Any such extension or waiver shall be valid and binding only if set
forth in an instrument in writing signed by the party to be bound thereby. A
majority of the members of the IPL Special Committee shall approve any such
extension or waiver on behalf of IPL.
ARTICLE XII
GLOSSARY
The following terms as used in this Agreement shall have the meanings
indicated below.
"Acquisition Proposal" means any proposal or offer involving (i) a
merger, consolidation, share exchange, recapitalization, business combination
or other similar transaction with respect to any Person or its Subsidiaries;
(ii) any sale, lease, exchange, transfer, or other disposition of any assets of
or securities issued or to be issued by, any Person or its Subsidiaries (other
than an immaterial portion thereof disposed of in the ordinary course of
business) or (iii) any tender offer or exchange offer for all or any portion of
the outstanding shares of capital stock of any Person, in each case, other than
the transactions contemplated by this Agreement.
"Affiliate" (and "Affiliates") has the meaning set forth in Regulation
12b-2 promulgated under the Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504 of the Code (or any similar group defined under a similar
provision of state, local or foreign Law).
"Agreement" has the meaning set forth in preamble.
"Andersen" means Arthur Andersen LLP, IPL's independent public
accountants.
"Associate" (and "Associates") has the meaning set forth in Regulation
12b-2 promulgated under the Exchange Act.
"Buck Employment Agreement" has the meaning set forth in Section
8.1(c).
"Business Day" means any day other than: (i) a Saturday or Sunday; or
(ii) a day on which banks in the State of New York are required or permitted to
be closed.
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"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, as amended, and the rules and regulations promulgated
thereunder.
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" has the meaning set forth in Section 7.3.
"Constituent Corporations" has the meaning set forth in Section
1.3(a).
"Contributed Real Property" means the real property located in
Northvale, New Jersey owned by L.I.M.A. Partners, located at 240 Pegasus
Avenue, the leasehold estate in the real property subleased by the successor in
interest to L.I.M.A. Partners pursuant to the Sublease, located at 235 Pegasus
Avenue, and the real property located in Tappan, New York owned by M.A.L.
Partners located at 183 Oaktree Road.
"Contribution Agreement" has the meaning set forth in Section 7.14.
"Contribution Transaction" means the transactions contemplated in the
Contribution Agreement and Section 7.14 hereto.
"Covered Insurance Policies" means those policies set forth on Part
(b) of Schedule 7.13.
"Conversion Number" has the meaning set forth in Section 2.l(a).
"Delaware Certificate" has the meaning set forth in Section 1.1.
"DGCL" has the meaning set forth in Section 1.1.
"E&Y" means Ernst & Young LLP, Video's independent public accountants.
"Effective Time" has the meaning set forth in Section 1.1.
"Environmental Claim" with respect to any Person, means any written
notice, claim, demand or other communication by any other Person alleging or
asserting such Person's liability for investigatory costs, cleanup costs,
Governmental Entity response costs, damages to natural resources or other
property, personal injuries, fines or penalties arising out of, based on or
resulting from (a) the presence, or release into the environment, of any
hazardous material at any location, whether or not owned by such Person, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. The term "Environmental Claim" shall include any claim by
any
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Governmental Entity for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and any
claim by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
hazardous materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Laws" means any Laws relating to the regulation or
protection of human health or the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the environment
(including ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes.
"Equitable" means The Equitable Life Assurance Society of the United
States, a New York insurance company, and Equitable Deal Flow Fund, L.P., a
Delaware limited partnership.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Sublease" means a master lease dated April 5, 1971 between
South-Cap Company of West Orange (predecessor in interests of Bergen Vale
Associates), as landlord and Bendix Mouldings (predecessors in interest of LIMA
Partners) as tenant, with respect to premises, located at 235 Pegasus Avenue,
Northvale, N.J.
"Expenses" means all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its Affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Registration Statement and the
Proxy Statement, the solicitation of applicable stockholder approvals and all
other matters related to the consummation of the transactions contemplated by
this Agreement.
"FCC" means the Federal Communications Commission.
"Fiduciary Determination" has the meaning set forth in Section 9.1(d).
"Fiduciary Indemnified Party" has the meaning set forth in Section
7.9.
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<PAGE>
"GAAP" means generally accepted accounting principles.
"DGCL" means Delaware General Corporation Law.
"Governmental Entity" has the meaning set forth in Section 3.3(c).
"Hazardous Materials" means any pollutants, hazardous or toxic
materials, substances or wastes, including: petroleum and petroleum products
and derivatives; asbestos; radon; polychlorinated biphenyls (PCBs);
urea-formaldehyde foam insulation; explosives; radioactive materials; and any
chemicals, materials or substances designated or regulated, as hazardous or as
toxic substances, materials, or wastes under any Environmental Law.
"Indemnified Party" means any Person entitled to indemnification
pursuant to Article X hereof.
"Indemnifying Party" means any Person obligated to provide
indemnification pursuant to Article X hereof.
"Independent Committee" means a committee of the Board of Directors of
the Surviving Corporation which shall consist of at least three (3)
"independent directors." For purposes hereof, a person shall be deemed to be an
"independent director" if he or she (i) was not an executive officer or
employee of, or consultant to, Video or any Subsidiary or Affiliate of Video
(other than IPL and its Subsidiaries) at any time during the five (5) years
preceding his or her election as a director of the IPL and prior to such five
(5) year period has not served in such capacity for a period exceeding one (1)
year, (ii) is not a Stockholder, and (iii) is not a family member (i.e.,
parent, sibling, grandparent, mother-in-law, father-in-law, spouse, former
spouse, child, stepchild, grandchild or any other blood or legal relative) of
any executive officer or any other employee or consultant described in clauses
(i) above or of any Stockholder.
"Injunction" has the meaning set forth in Section 8.1(f).
"Intellectual Property Rights" has the meaning set forth in Section
3.16.
"IPL" has the meaning set forth in preamble.
"IPL Benefit Plans" has the meaning set forth in Section 3.9(a).
"IPL Common Stock" means the authorized common stock, $.01 par value
per share, of IPL.
"IPL Contracts" has the meaning set forth in Section 3.15.
"IPL Convertible Notes" has the meaning set forth in Section 3.2(c).
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<PAGE>
"IPL Disclosure Schedule" has the meaning set forth in the first
paragraph of Article III.
"IPL Entities" or "IPL Entity" means and includes and is deemed to
refer, individually, to IPL and all past and current Subsidiaries of IPL.
"IPL ERISA Affiliate" has the meaning set forth in Section 3.9(f).
"IPL Fairness Opinion" has the meaning set forth in Section 3.18.
"IPL Insurance" has the meaning set forth in Section 3.12.
"IPL Lease" has the meaning set forth in Section 3.13(a).
"IPL Leased Property" has the meaning set forth in Section 3.13.
"IPL Option Plan" means the IPL 1993 Long Term Incentive Plan.
"IPL Permits" has the meaning set forth in Section 3.11.
"IPL Personal Property" has the meaning set forth in Section 3.25.
"IPL Preferred Stock" means the authorized preferred stock, $.01 par
value per share, of IPL.
"IPL Real Estate" has the meaning set forth in Section 3.13.
"IPL Real Property" has the meaning set forth in Section 3.13.
"IPL SEC Documents" has the meaning set forth in Section 3.4(a).
"IPL 7.1 Obligation" means the obligations of IPL under Section 7.1(c)
hereof.
"IPL 10-K" means IPL's Annual Report on Form 10-K for the fiscal year
ended July 31, 1996 as filed with the SEC.
"IPL 10-Q" means IPL's Quarterly Report on Form 10-Q for the quarterly
period ended April 30, 1997 as filed with the SEC.
"IPL Threshold Amount" has the meaning set forth in Section 10.2(b).
"IPL Vote" has the meaning set forth in Section 3.3(a).
"IRS" means the Internal Revenue Service.
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<PAGE>
"Judgment" means any judgment, writ, injunction, determination or
decree of or by any Governmental Entity.
"Law" means any statute, ordinance, code, rule, regulation, ruling,
order or other law enacted or adopted by any Governmental Entity.
"Lien" means any mortgage, deed of trust, lien, claim, pledge, lease,
sublease, rights of occupancy, security interest, encumbrance or easement.
"Losses" means any and all out-of-pocket: (i) expenses; (ii) costs;
(iii) losses; (iv) claims; (v) liabilities; (vi) obligations; (vii) fines;
(viii) penalties and (ix) damages (including, without limitation, reasonable
fees and disbursements of counsel and costs of investigations, including those
incurred enforcing the terms of this Agreement and the related documents)
reduced by (a) the amount of any foreign, United States federal, state and/or
local Tax savings ("Tax Benefits") realized by an Indemnified Party arising as
a result of any payment made and/or expense or expenditure incurred by an
Indemnified Party in respect of any such expenses, costs, losses, claims,
liabilities, obligations, fines, penalties and damages (including, without
limitation, reasonable fees and disbursements of counsel and costs of
investigation) and (b) the amount of any insurance proceeds and any other
amount, if any recovered from third parties by the Indemnified Party, or its
affiliates with respect to such Losses. In the event that any Tax Benefits are
not realized by the Indemnified Party in the year the Loss was incurred, or
insurance proceeds are not obtained prior to the time of any indemnification in
respect of a Loss based upon the occurrence applicable to the payment of such
proceeds, the Indemnified Party shall reimburse the indemnifying party no later
than 2 1/2 months after the close of the taxable year of the Indemnified Party
in which such Tax Benefits are actually realized or such insurance proceeds are
actually received.
"Losses Escrow Agreement" means the escrow agreement in the form of
Exhibit 8.1(k) hereto entered into between IPL and the Stockholders.
"Made available" has the meaning set forth in Section 11.2.
"Management Options" has the meaning set forth in Section 7.7.
"Market Value" means the average of the closing bid and asked prices
of a share of IPL Common Stock on The Nasdaq Stock Market during the five (5)
trading days immediately prior to the date such calculation is made,
appropriately adjusted for stock dividends, splits, combinations, subdivision,
recapitalizations and similar events.
"Material Adverse Effect" shall mean, with respect to any Person and
its Subsidiaries, any change or effect that is or is reasonably likely to be
materially adverse to the business, operations, properties (including
intangible properties), condition (financial or otherwise), assets, liabilities
or prospects of such Person and its Subsidiaries, taken as a whole. For
purposes of Article III, the term
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<PAGE>
"Material Adverse Effect" shall be deemed to refer solely to IPL and its
Subsidiaries. For purposes of Article IV, the term "Material Adverse Effect"
shall be deemed to refer solely to Video and its Subsidiaries.
"Merger" means the merger of Video with and into IPL.
"NASD" means the National Association of Securities Dealers, Inc.
"New Option Plan" means the new option plan for IPL contemplated in
the Proxy Statement which will have available for issuance of shares thereunder
equal to 735,000.
"NJBCA" means the New Jersey Business Corporation Act.
"New Jersey Certificate" has the meaning set forth in Section 1.1.
"New Options" means options to purchase 30,000 shares of IPL Common
Stock granted by the Stockholders in favor of each of Messrs. Elkes and Gorman
in replacement of existing options granted by Video with respect to shares of
IPL Common Stock owned by Video on substantially the same terms as the existing
options.
"Non-Compete Agreement" means any agreement or obligation that
purports to restrict or limit the right or ability of any Person to engage in
any investment, activity or line of business.
"NPL" means the National Priorities List under CERCLA.
"Permitted Lien" means: (i) any encumbrances disclosed on any
financial statement referred to in Section 3.4 or 4.4 hereof; (ii) Tax Liens
which are not yet due and payable or which are being contested in good faith
and, with respect to which have adequately been provided for on applicable
financial statements (whether or not required to be disclosed under GAAP);
(iii) liens incurred in the ordinary course of business in connection with
workers compensation, unemployment insurance and other types of social security
benefits; (iv) mechanics', carriers', workmen's, repairmen's or other like
liens arising out of or incurred in the ordinary course of business; (v) liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business; (vi)
liens created by or existing from any litigation or legal proceeding that is
being contested and (vii) with respect to real property and interests therein)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), zoning requirements, rights of way, covenants, consents,
agreements, reservations, encroachments, variances and other similar
restrictions, charges or encumbrances (whether or not recorded) that do not,
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<PAGE>
individually or in the aggregate, impair the continued use and operation of the
assets to which they relate the applicable business.
"Permitted Sale" means the sales contemplated in Section 7 of the
Stock Resale Agreement.
"Permitted Transferee" means any immediate family member (including
without limitation, any spouse or former spouse, child or trust for the benefit
of such individuals) or Affiliate or entity owned by one or more such Persons.
"Person" and "person" shall mean any natural person and any
corporation, trust, partnership, limited liability partnership, limited
liability company, limited liability corporation, venture or business entity.
"Proxy Statement" has the meaning set forth in Section 3.3(c).
"Refinancing" has the meaning set forth in Section 8.1(h).
"Registration Rights Agreement" has the meaning set forth in Section
7.16(b).
"Registration Statement" has the meaning set forth in Section 3.3(c).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Siracusano Employment Agreement" has the meaning set forth in Section
8.1(c).
"Special Purpose Balance Sheet" has the meaning set forth in Section
4.4.
"Spin-Off Transaction" has the meaning set forth in Section 7.13.
"Stockholder" means, each individually, Louis H. Siracusano, Arnold P.
Ferolito and Donald H. Buck.
"Stockholder Percentages" means: (i) with respect to Louis H.
Siracusano, 46.062%; (ii) with respect to Arnold P. Ferolito, 46.062%; and
(iii) with respect to Donald H. Buck, 7.876%.
"Stock Resale Agreement" has the meaning set forth in Section 7.16.
"Stonehurst Lease" means that certain lease agreement between
Stonehurst Associates Limited and A.F. Associates, Inc. dated May 9, 1997 with
respect to property located at 100 Stonehurst Court, Northvale, New Jersey.
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<PAGE>
"Sublease" has the meaning set forth in Section 7.14.
"Subsidiary" (including, with correlative meaning, "Subsidiaries")
means any Person (other than a natural person), whether incorporated or
unincorporated, of which: (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership interests
of which held by such party or any Subsidiary of such party do not have a
majority of the voting interests in such partnership); or (ii) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries.
"Surviving Corporation" means IPL after the Effective Time.
"Tag-Along Rights Agreement" has the meaning set forth in Section
7.22.
"Tax" or "Taxes" means any United States federal, state, local or
foreign tax, levy, imposition, deduction, charge, withholding, premium, custom,
duty or other governmental fee or assessment or charge of any kind whatsoever
including (without limitation) net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, goods and services, ad valorem, value
added, real estate, transfer, franchise, profits, license, withholding on
amounts paid to or by the Surviving Corporation, IPL, Video or any of their
respective Subsidiaries, payroll, employment, excise, severance, stamp, capital
stock, occupation, property, environmental or windfall profit tax, or customs
duty, together with any interest, penalty, addition to tax or additional
amount, whether disputed or not, imposed by any governmental agency or
authority (a "Taxing Authority") responsible for the imposition of any such tax
on the Surviving Corporation, IPL, Video or any of their respective
Subsidiaries.
"Tax Lien" or "Tax Liens" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest for Taxes (other than a lien
for current Taxes not yet due and payable).
"Tax Return" or "Tax Returns" means any United States federal, state,
local and/or foreign return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tax Sharing Agreements" means all Tax sharing or similar agreements
or arrangements (whether or not written) binding IPL, Video or any of the
respective Subsidiaries.
"The Knowledge Of" has the meaning set forth in Section 11.2.
"Video" has the meaning set forth in preamble.
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<PAGE>
"Videotape" means Videotape Distributors, Inc., a New Jersey
corporation.
"Video Benefit Plans" has the meaning set forth in Section 4.9(a).
"Video Common Stock" means the common stock, without par value, of
Video.
"Video Contracts" has the meaning set forth in Section 4.15.
"Video Disclosure Schedule" has the meaning set forth in the first
paragraph of Article IV.
"Video Dub" means Video Dub, Inc., a New Jersey corporation.
"Video Entities" or "Video Entity" means and includes and is deemed to
refer, individually and collectively, to Video and all past and current
Subsidiaries of Video.
"Video ERISA Affiliate" has the meaning set forth in Section 4.9(f).
"Video Financial Statements" has the meaning set forth in Section
4.4(a).
"Video Insurance" has the meaning set forth in Section 4.12.
"Video Lease" has the meaning set forth in Section 4.13(a).
"Video Leased Property" has the meaning set forth in Section 4.13(a).
"Video Permit" has the meaning set forth in Section 4.11.
"Video Personal Property" has the meaning set forth in Section 4.22.
"Video Real Estate" has the meaning set forth in Section 4.13.
"Video Real Property" has the meaning set forth in Section 4.13.
"Video 7.1 Obligation" means the obligations of Video and its
Stockholders under Section 7.1(b) hereof.
"Video Threshold Amount" has the meaning set forth in Section 10.2(b).
"Violation" has the meaning set forth in Section 3.3(b)
"Voting Debt" has the meaning set forth in Section 3.2(c).
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<PAGE>
IN WITNESS WHEREOF, IPL and Video have caused this Agreement and Plan
of Merger to be executed by the respective officers hereunto duly authorized
and the Stockholders have hereunto set their hands as of the date first above
written.
INTERNATIONAL POST LIMITED
By:
--------------------------------
Title:
VIDEO SERVICES CORPORATION
By:
--------------------------------
Title:
-----------------------------------
Louis H. Siracusano
-----------------------------------
Arnold P. Ferolito
-----------------------------------
Donald H. Buck
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<PAGE>
VOTING AGREEMENT
VOTING AGREEMENT, dated as of June __, 1997 (this "Agreement"), by and
among International Post Limited, a Delaware corporation ("IPL"), Video
Services Corporation, a New Jersey corporation ("Video"), and the stockholders
of IPL and/or Video who are signatories hereto (the "Stockholders").
R E C I T A L S:
- - - - - - - -
WHEREAS, IPL, Video and all of the stockholders of Video have entered
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), relating to the merger (the "Merger") of IPL and Video;
WHEREAS, Video and the Stockholders beneficially own in the aggregate
3,106,201 shares of the common stock, par value $.01 per share, of IPL (the
"IPL Common Stock"), representing approximately 50% of the currently
outstanding shares of IPL Common Stock; and
WHEREAS, in order to induce each of IPL, Video and the stockholders of
Video to enter into the Merger Agreement, the parties hereto have agreed to
enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Voting. Each of Video and the Stockholders agrees to vote all of
his/its shares of IPL Common Stock for the approval of the Merger Agreement (in
the form executed as of the date hereof, with such changes thereto as the
parties hereto may agree prior to such changes), and the transactions
contemplated therein (including the issuance of an aggregate of 7,011,349
shares of IPL Common Stock to Video's stockholders in exchange for their shares
of Video's Common Stock, plus an additional 212,096 shares of IPL Common Stock
which will replace an equal number of shares of IPL Common Stock owned by Video
which will be cancelled upon the Merger, and amendments to IPL's Certificate of
Incorporation changing its corporate name and increasing the number of
authorized shares of IPL Common Stock), and of the 1997 Long Term Incentive
Plan.
2. Term. This Agreement shall terminate on October 15, 1997, or upon
the earlier termination of the Merger Agreement in accordance with its terms.
3. Representations, Warranties and Covenants.
(a) Each of Video and the Stockholders hereby, severally and not
jointly, represents and warrants as follows:
<PAGE>
(i) Such stockholder is the beneficial owner of the shares
of IPL Common Stock set forth on Schedule A hereto, free and clear of all
liens, charges and encumbrances whatsoever.
(ii) Such stockholder has all necessary power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of such stockholder. This Agreement has
been duly executed and delivered by such stockholder and constitutes the legal,
valid and binding obligation of such stockholder, enforceable against such
stockholder in accordance with its terms, except as may be limited by
bankruptcy, reorganization, moratorium, fraudulent conveyance and insolvency
laws and by other laws affecting the rights of creditors generally and except
as may be limited by the availability of equitable remedies.
(iii) No consent, approval, order or authorization of any
third party (including any federal, state or local governmental authority) is
required by or with respect to such stockholder to validly execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(b) Each of Video and the Stockholders agrees that, until this
Agreement has been terminated, such stockholder will not sell, transfer, assign
or otherwise dispose of any of his/its shares of IPL Common Stock, unless the
proposed transferee of such shares agrees to become a signatory to this
Agreement.
4. Registration Rights Agreement. The parties hereto agree and
acknowledge that as a result of the acquisition by The Equitable Life Assurance
Society of the United States and Equitable Deal Flow Fund, L.P. (collectively,
"Equitable") of an aggregate of 2,562,105 shares of IPL Common Stock from MTE
Holdings, Inc. ("Holdings"), Equitable is entitled to exercise, and shall be
afforded, all of the rights and privileges granted to Holdings under that
certain Registration Rights Agreement (the "Registration Rights Agreement")
among IPL, Holdings, Video, Martin Irwin, Jeffrey J. Kaplan, Adrien Macaluso,
Terrence A. Elkes and Kenneth F. Gorman with respect to such shares in
Holdings' place and stead. The parties hereto further agree and acknowledge
that, except as set forth herein, the Registration Rights Agreement shall
remain in full force and effect.
5. Tag-Along Rights Agreement. Each of the parties hereto agree and
acknowledge that, simultaneously with the closing of the transactions
contemplated by the Merger Agreement, it will execute and deliver the Tag-Along
Rights Agreement, substantially in the form attached hereto as Exhibit A, with
such changes thereto as the parties may agree.
6. Further Assurances. Each party hereto shall perform such further
acts and execute such further documents as may be required to carry out the
provisions of this Agreement.
2
<PAGE>
7. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
8. Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that each party shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof or thereof in any court of the United States or
any state thereof having jurisdiction, this being in addition to any other
remedy to which he/it is entitled at law or in equity, and the parties waive
any requirement to post any bond as a condition to seeking or obtaining
equitable relief.
9. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (a) on the date of
service if personally served, (b) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered,
return receipt requested, postage prepaid, (c) on the next day after sending,
if sent by overnight service, or (d) on the date sent if sent by facsimile, to
the parties at the following addresses or facsimile numbers with a copy sent by
mail as aforesaid on the same date (or at such other address or facsimile
number for a party as shall be specified by like notice):
If to IPL:
International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Telephone: (212) 986-6300
Fax: (212) 986-1364
if to Video:
Video Services Corporation
240 Pegasus Avenue
Northvale, New Jersey 07647-1904
Attention: President
Telephone: (201) 767-1000
Fax: (201) 784-9779
If to any Stockholder, at his/its address set forth on the
signature page hereto.
10. Severability. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, in whole
3
<PAGE>
or in part, the validity of the remaining provisions shall not be affected and
the remaining portion of any provision held to be invalid, illegal or
unenforceable shall in no way be affected, prejudiced or disturbed thereby.
11. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which together shall
constitute a single agreement.
12. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the State of New York, without
giving effect to the principles of conflict of laws thereof. Any legal action,
suit or proceeding arising out of or relating to this Agreement may be
instituted in any state or federal court located within the County of New York,
State of New York, and each party hereto agrees not to assert, by way of
motion, as a defense, or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of such court or
that such court is an inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced in or by such court. Each party hereto further irrevocably
submits to the jurisdiction of any such court in any such action, suit or
proceeding.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
INTERNATIONAL POST LIMITED
By:
--------------------------------
Name:
Title:
VIDEO SERVICES CORPORATION
By:
--------------------------------
Name:
Title:
-----------------------------------
TERRENCE A. ELKES
Address:
---------------------------
-----------------------------------
Telephone:
-------------------------
Fax:
-------------------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By:
--------------------------------
Name:
Title:
Address:
---------------------------
-----------------------------------
Telephone:
-------------------------
Fax:
-------------------------------
5
<PAGE>
EQUITABLE DEAL FLOW FUND, L.P.
By: Equitable Managed Assets, L.P.,
as general partner
By: The Equitable Life Assurance
Society of the United States,
as general partner
By:
--------------------------------
Name:
Title:
Address:
---------------------------
-----------------------------------
Telephone:
-------------------------
Fax:
-------------------------------
-----------------------------------
LOUIS H. SIRACUSANO
Address:
---------------------------
-----------------------------------
Telephone:
-------------------------
Fax:
-------------------------------
-----------------------------------
ARNOLD P. FEROLITO
Address:
---------------------------
-----------------------------------
Telephone:
-------------------------
Fax:
-------------------------------
6
<PAGE>
-----------------------------------
DONALD H. BUCK
Address:
---------------------------
-----------------------------------
Telephone:
-------------------------
Fax:
-------------------------------
7
<PAGE>
SCHEDULE A
----------
NUMBER OF SHARES OF IPL
NAME COMMON STOCK
- ---- ------------
Video Services Corporation 212,096
Terrence A. Elkes1 516,012
The Equitable Life Assurance
Society of the United States2 2,562,105
Equitable Deal Flow Fund, L.P.2 2,562,105
Louis H. Siracusano3 3,500
Arnold P. Ferolito3 1,000
Donald H. Buck3 1,000
- --------------
(1) Includes (i) 10,000 shares of IPL Common Stock owned by Mr.Elkes'
children, as to which Mr. Elkes disclaims beneficial ownership, (ii) five-year
options to purchase 30,000 shares of IPL Common Stock granted by Video and
(iii) six-year, non-qualified options to purchase 149,512 shares of IPL Common
Stock granted by MTE Holdings, Inc. ("Holdings"). The Equitable Life Assurance
Society of the United States and Equitable Deal Flow Fund, L.P. have foreclosed
upon Holdings' IPL Common Stock and will issue the shares of IPL Common Stock
to Mr. Elkes pursuant to such options granted by Holdings.
(2) The Equitable Life Assurance Society of the United States and
Equitable Deal Flow Fund, L.P. are related parties and each is deemed to
beneficially own 2,562,105 shares of IPL Common Stock.
(3) Each of Messrs. Siracusano, Ferolito and Buck is also deemed to
beneficially own the 212,096 shares of IPL Common Stock owned by Video as a
result of his relationship with Video.
8
<PAGE>
[IPL LOGO]
NEWS RELEASE
------------
CONTACT: GARY R. STRACK
VICE PRESIDENT,
TREASURER AND SECRETARY
(212) 986-6300
CARL HYMANS
FOR IMMEDIATE RELEASE C.S. SCHWARTZ & CO.
(212) 725-4500
INTERNATIONAL POST LIMITED SIGNS MERGER AGREEMENT WITH VIDEO
SERVICES CORPORATION
New York, New York, July 2, 1997 - International Post Limited (Nasdaq National
Market: POST) and Video Services Corporation, a privately-held company located
in Northvale, New Jersey, announced the execution of a merger agreement between
the two companies. The respective boards of directors of the two companies
previously announced their approval of the merger. Montgomery Securities,
International Post's investment bankers, have delivered an opinion to
International Post's board of directors that the consideration to be paid by
International Post in the merger is fair to International Post from a financial
point of view.
Under the terms of the merger agreement, International Post will issue
approximately 7.0 million shares of common stock, which will represent in
excess of 50% of the outstanding common stock of International Post after the
merger, in exchange for 100% of the common stock of Video Services. Among other
things, the merger is contingent upon the approval of the stockholders of
International Post. The terms of the merger agreement were negotiated and
approved by a
<PAGE>
special committee of the International Post board of directors consisting of
three independent directors.
The directors, executives officers and certain affiliates of International Post
have agreed to, or otherwise informed International Post that they intend to,
vote their approximately 3,241,118 shares of International Post Common stock,
representing approximately 52% of the outstanding shares of International Post
common stock, in favor of the merger agreement. The affirmative vote of these
stockholders will be sufficient to approve the merger agreement.
Video Services, through its operating subsidiaries, Atlantic Satellite
Communications, Inc., Waterfront Communications Corporation, A.F. Associates,
Inc. and Video Rentals, Inc., is a leading provider of value-added video
services to a diverse base of customers within the television network, cable
and syndicated programing markets. Video's services include (i) the commercial
integration and distribution of broadcast quality video content via a satellite
and fiber optic transmission network routed through its digital/analog
switching center, and (ii) the design, engineering and production of advanced
digital and analog video systems for the television, cable, post-production and
corporate markets as well as the rental of professional video equipment to
sports, entertainment and other segments of the broadcast and cable television
and professional markets.
International Post, through its operating subsidiaries, Manhattan
Transfer/Edit, Inc., Audio Plus Video International, Inc., CABANA corp., Post
Edge, Inc. and Cognitive Communications LLC,
<PAGE>
is a leading international provider of technical and creative services to
owners, producers and distributors of television programming, television
advertising and other programming content. IPL provides (i) producers of
original programming with technical and creative services necessary to
transform original film or video to final product for airing on network,
syndicated, cable or foreign television; (ii) users of special video effects
with services required to digitally create or manipulate images in high
resolution formats for integration into television commercials and programming;
(iii) international programmers with studio facilities and multi-standard
post-production services necessary to assemble programming; (iv) international
programmers and owners of television and film libraries with standards
conversion, network playback, and duplication and studio services, all in
multiple standards and formats (v) and the design and production of intranets,
extranets and internets, as well as consulting and supporting services related
to those technologies.
