Exhibit 99(c)(2)
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 7, 1996
BY AND AMONG
LORAL CORPORATION,
LOCKHEED ▇▇▇▇▇▇ CORPORATION
AND
LAC ACQUISITION CORPORATION
ARTICLE I
THE OFFER
Section 1.1. The Offer................................................. 2
Section 1.2. Company Actions........................................... 3
Section 1.3. Stockholder Lists......................................... 3
Section 1.4. Composition of the Board of Directors; Section 14(f)...... 3
ARTICLE II
THE MERGER
Section 2.1. The Merger................................................ 3
Section 2.2. Effective Time............................................ 4
Section 2.3. Effects of the Merger..................................... 4
Section 2.4. Certificate of Incorporation and By-Laws.................. 4
Section 2.5. Directors................................................. 4
Section 2.6. Officers.................................................. 4
Section 2.7. Conversion of Shares...................................... 4
Section 2.8. Reserved.................................................. 4
Section 2.9. Conversion of Purchaser's Common Stock.................... 4
Section 2.10. Stock Options and Stock Awards........................... 4
Section 2.11. Stockholders' Meeting..................................... 5
Section 2.12. Filing of Certificate of Merger........................... 6
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
Section 3.1. Dissenting Shares......................................... 6
Section 3.2. Exchange of Shares........................................ 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1. Organization.............................................. 7
Section 4.2. Capitalization............................................ 7
Section 4.3. Authority Relative to this Agreement...................... 8
Section 4.4. Consents and Approvals; No Violations..................... 8
Section 4.5. Absence of Certain Changes................................ 9
Section 4.6. No Undisclosed Liabilities................................ 9
Section 4.7. Reports................................................... 9
Schedule 14D-9; Offer Documents; Form 10; Information
Section 4.8. Statement................................................. 10
Section 4.9. No Default................................................ 10
Section 4.10. Litigation; Compliance with Law........................... 11
Section 4.11. Employee Benefit Plans; ERISA............................. 11
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Section 4.12. Assets; Intellectual Property............................... 12
Section 4.13. Reserved.................................................... 12
Section 4.14. Reserved.................................................... 12
Section 4.15. Certain Contracts and Arrangements.......................... 12
Section 4.16. Taxes....................................................... 12
Section 4.17. Retained Business FCC Licenses.............................. 14
Section 4.18. Labor Matter................................................ 14
Section 4.19. Rights Agreement............................................ 14
Section 4.20. Certain Fees................................................ 14
Section 4.21. No Additional Approvals Necessary........................... 14
Section 4.22. Materiality................................................. 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 5.1. Organization................................................ 14
Section 5.2. Authority Relative to this Agreement........................ 15
Section 5.3. Consents and Approvals; No Violations....................... 15
Section 5.4. Information Statement; Schedule 14D-9....................... 15
Section 5.5. Sufficient Funds............................................ 16
Section 5.6. Brokers..................................................... 16
ARTICLE VI
COVENANTS
Section 6.1. Conduct of Business of the Company.......................... 16
Section 6.2. Acquisition Proposals....................................... 18
Section 6.3. Access to Information....................................... 19
Section 6.4. Reasonable Efforts.......................................... 19
Section 6.5. Consents.................................................... 20
Section 6.6. Antitrust Filings........................................... 20
Section 6.7. Public Announcements........................................ 21
Section 6.8. Employee Agreements......................................... 21
Section 6.9. Employee Benefits........................................... 23
Section 6.10. Ancillary Agreements; Spin-Off.............................. 23
Section 6.11. Retained Business Financial Statements...................... 24
Section 6.12. Redemption of Rights........................................ 24
Section 6.13. Pre-Closing Consultation.................................... 24
Section 6.14. Indemnification............................................. 24
Section 6.15 Board of Directors of Parent................................ 25
Section 6.16 Standstill Provisions....................................... 25
Section 6.17 Effectiveness of Rights Agreement........................... 25
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligation to Effect the
Section 7.1. Merger.................................................... 26
Conditions to the Obligation of the Company to Effect the
Section 7.2. Merger.................................................... 26
Conditions to Obligations of Parent and Purchaser to
Section 7.3. Effect the Merger......................................... 26
Section 7.4. Exception................................................. 27
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination............................................... 27
Section 8.2 Effect of Termination..................................... 28
Section 8.3 Fees and Expenses......................................... 28
Section 8.4. Amendment................................................. 29
Section 8.5. Extension; Waiver......................................... 30
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival.................................................. 30
Section 9.2. Entire Agreement.......................................... 30
Section 9.3. Governing Law............................................. 30
Section 9.4. Notices................................................... 30
Section 9.5. Successors and Assigns; No Third Party Beneficiaries...... 31
Section 9.6. Counterparts.............................................. 31
Section 9.7. Interpretation............................................ 31
Section 9.8. Schedules................................................. 32
Section 9.9. Legal Enforceability...................................... 32
Section 9.10. Specific Performance...................................... 32
Section 9.11. Brokerage Fees and Commissions............................ 32
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EXHIBITS
Exhibit A................................................. Tax Sharing Agreement
Exhibit B................................................... Conditions to Offer
Exhibit C............................... Form of Employment Protection Agreement
Exhibit D............................................ Employment Protection Plan
Exhibit E........................................ Supplemental Severance Program
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TABLE OF DEFINED TERMS
TERM SECTION NO.
---- -----------------
1987 Plan..................................................... 2.10(b)
Active Negotiations........................................... 8.3(e)
Acquisition Proposal.......................................... 6.2(b)
Ancillary Agreements.......................................... Recitals
Antitrust Law................................................. 6.6(e)
Asset................................................. Distribution Agreement
Audit......................................................... 4.16(j)(1)
Business Day.......................................... Distribution Agreement
Certificates.................................................. 3.2(b)
Code.......................................................... 4.11(a)
Commission.................................................... 4.4
Company....................................................... Recitals
Company Bonus Employee........................................ 6.8(c)
Company Representative........................................ 6.13
Company SEC Documents......................................... 4.7(a)
Confidentiality Agreement..................................... 6.2(a)
Continuing Director........................................... 8.4
Contracting Subsidiary........................................ 4.3
Credit Agreement.............................................. 4.9
Defense Financial Statements.................................. 4.7(c)
Designated Directors.......................................... 8.4
Disclosure Schedule........................................... 4.2(a)
Dissenting Shares............................................. 3.1
Distribution Agreement........................................ Recitals
Distribution Date..................................... Distribution Agreement
EC Merger Regulations......................................... 4.4
Effective Time................................................ 2.2
Employment Agreements......................................... 6.8(a)
Employment Protection Arrangement............................. 6.8(e)
ERISA......................................................... 4.11(a)
ERISA Affiliate............................................... 4.11(a)
Exchange Act.................................................. 4.4
Exchange Agent................................................ 3.2(a)
Form 10-K..................................................... 4.5
Higher Offer.................................................. 8.3(b)
HSR Act....................................................... 4.4
IB............................................................ 8.3(b)(v)
Important Licenses............................................ 4.17
Information Statement......................................... 2.11(b)
Intellectual Property......................................... 4.12(b)
IRS........................................................... 4.11(a)
LAH........................................................... Recitals
Law................................................... Distribution Agreement
Liabilities........................................... Distribution Agreement
Lien.................................................. Distribution Agreement
Material Adverse Effect....................................... 4.1, 5.1
Merger........................................................ 2.1
Merger Price.................................................. 2.7(a)
NYBCL......................................................... 1.2
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TERM SECTION NO.
---- ---------------------
Offer..................................................... 1.1(a)
Offer Documents........................................... 1.1(d)
Order..................................................... 6.6(b)
Ordinary Course Obligations............................... 6.1
Parent.................................................... Recitals
Parent Representative..................................... 6.13
PBGC...................................................... 4.11(b)
Person........................................ Distribution Agreement, 8.3(b)
Plans..................................................... 4.11(a)
Preferred Stock........................................... 4.2(a)
Public Indenture Merger Opinions.......................... 7.3(b)
Public Indentures......................................... 4.9
Purchaser................................................. Recitals
Recent SEC Documents...................................... 4.10(b)
Record Date................................... Distribution Agreement
Retained Business......................................... 4.1
Retained Business Financial Statements.................... 6.11
Retained Employees............................ Distribution Agreement
Retained Subsidiaries..................................... 4.1
Rights Agreement.......................................... 4.19
Rights Amendment.......................................... 4.19
Schedule 14D-9............................................ 1.2
SEC....................................................... 1.1(d)
Securities Act............................................ 4.4
Severance Agreements...................................... 6.8(a)
Shares.................................................... 1.1(a)
Significant Adverse Effect................................ 6.6(b)
Spin-Off.................................................. Recitals
Spinco.................................................... Recitals
Spinco Bonus Employee..................................... 6.8(c)
Spinco Business............................... Distribution Agreement
Spinco Common Stock........................... Distribution Agreement
Spinco Companies.............................. Distribution Agreement
Standstill Provisions..................................... 6.2(a)
Stock Options............................................. 2.10(a)
Stockholders' Meeting..................................... 2.11(a)
Subsidiaries.................................. Distribution Agreement
Supplemental Severance Plan............................... 6.9(a)
Surviving Corporation..................................... 2.1
Taxes..................................................... 4.16(j)(2)
Tax Returns............................................... 4.16(j)(3)
Tax Sharing Agreement..................................... Recitals
Third Party............................................... 8.3(b)
Third Party Acquisition................................... 8.3(b)
Transaction Bonus......................................... 6.8(d)
Transaction Bonus Employee................................ 6.8(d)
Vesting Date.............................................. 2.10(a)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 7, 1996, is among
LOCKHEED ▇▇▇▇▇▇ CORPORATION, a Maryland corporation ("PARENT"), LAC
ACQUISITION CORPORATION, a New York corporation and a wholly-owned subsidiary
of Parent ("PURCHASER"), and LORAL CORPORATION, a New York corporation (the
"COMPANY").
RECITALS
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser deem
it advisable and in the best interests of their respective stockholders that
Parent acquire the Company (other than certain businesses thereof) pursuant to
the terms and conditions set forth in this Agreement;
WHEREAS, as provided in the Restructuring, Financing and Distribution
Agreement dated as of the date hereof herewith among Parent, the Company,
Loral Telecommunications Acquisition, Inc. (to be renamed Loral Space &
Communications Corporation), a Delaware corporation and wholly-owned
subsidiary of the Company (including any successor in interest, "SPINCO"),
Loral Aerospace Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("LAH"), and Loral Aerospace Corp., a Delaware
corporation and wholly-owned subsidiary of LAH (the "DISTRIBUTION AGREEMENT"),
prior to the expiration of the Offer (as defined in Section 1.1 hereof) the
Company will cause Spinco to be restructured so that as a result thereof the
Company's direct and indirect interests in Space Systems/Loral, Inc., a
Delaware corporation, Globalstar L.P., a Delaware limited partnership, K&F
Industries, Inc., a Delaware corporation, all rights to receive management and
certain (but not all) guarantee fees therefrom, several commercial satellite
and telecommunications projects in progress (including related FCC (as defined
in Section 6.5 hereof) applications), a certain portion of the Company's
leased corporate headquarters office space, the Company's corporate aircraft,
certain rights and liabilities with respect to certain litigation in which the
Company has an interest, the nonexclusive right to use certain intellectual
property of the Company, the exclusive right, subject to a limited license
granted to the Company, to the "Loral" name and such other rights and assets
as shall be deemed Spinco Assets (as defined in the Distribution Agreement),
will be owned directly or indirectly by Spinco and substantially all of the
Company's other assets, liabilities and businesses will be owned directly by
the Company or by Subsidiaries (as defined in the Distribution Agreement) of
the Company other than Spinco and Subsidiaries of Spinco; and
WHEREAS, as provided in the Distribution Agreement, the Company will make a
distribution to the Company's stockholders and to holders of Stock Options (as
defined in Section 2.10 hereof) as of the Record Date (as defined in the
Distribution Agreement), on a pro rata basis, of 100% of the shares of common
stock, par value $.01 per share, of Spinco issued and outstanding immediately
prior to such distribution (the "SPIN-OFF"); and
WHEREAS, as set forth in Section 6.10 hereof, as a condition to and in
consideration of the transactions contemplated hereby, following the date
hereof (a) the Company, Spinco and certain other parties will enter into a Tax
Sharing Agreement substantially in the form attached hereto as Exhibit A with
such changes as shall have been approved prior to the consummation of the
Offer by the Company and Parent (or, following the consummation of the Offer,
by a majority of the Continuing Directors (as defined in Section 8.4 hereof),
if any, and Parent) (the "TAX SHARING AGREEMENT" and, together with the
Distribution Agreement, hereafter are collectively referred to as the
"ANCILLARY AGREEMENTS");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Purchaser and the Company hereby agree as
follows:
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ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER.
(a) Subject to this Agreement not having been terminated in accordance with
the provisions of Section 8.1 hereof, Purchaser shall, and Parent shall cause
Purchaser to, as promptly as practicable, but in no event later than five
Business Days (as defined in the Distribution Agreement) from the date of the
public announcement of the terms of this Agreement, commence an offer to
purchase for cash (as it may be amended in accordance with the terms of this
Agreement, the "OFFER") all of the Company's outstanding shares of common
stock, par value $.25 per share, together with all preferred stock purchase
rights associated therewith (the "SHARES"), subject to the conditions set
forth in Exhibit B attached hereto, at a price of not less than $38.00 per
Share, net to the seller in cash. Subject only to the conditions set forth in
Exhibit B hereto and the express provisions of the Distribution Agreement, the
Purchaser shall, and Parent shall cause Purchaser to, (i) accept for payment
and pay for all Shares tendered pursuant to the terms of the Offer as promptly
as practicable following the expiration date of the Offer, and (ii) extend the
period of time the Offer is open until the first Business Day following the
date on which the conditions set forth in clause (i)(A) and clause (i)(B) of
Exhibit B hereto are satisfied or waived in accordance with the provisions
thereof; provided, that the Purchaser shall be permitted, but shall not be
obligated, to extend the period of time the Offer is open beyond June 30,
1996. Subject to the preceding sentence of this Section 1.1, neither Purchaser
nor Parent will extend the expiration date of the Offer beyond the twentieth
Business Day following commencement thereof unless one or more of the
conditions set forth in Exhibit B hereto shall not be satisfied or unless
Parent reasonably determines that such extension is necessary to comply with
any legal or regulatory requirements relating to the Offer or the Spin-Off.
Purchaser expressly reserves the right to amend the terms or conditions of the
Offer; provided, that without the consent of the Company, no amendment may be
made which (i) decreases the price per Share or changes the form of
consideration payable in the Offer, (ii) decreases the number of Shares
sought, or (iii) imposes additional conditions to the Offer or amends any
other term of the Offer in any manner materially adverse to the holders of
Shares. Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept for payment and purchase, as soon as permitted under the
terms of the Offer, all Shares validly tendered and not withdrawn prior to the
expiration of the Offer.
(b) Parent will not, nor will it permit any of its affiliates to, tender
into the Offer any Shares beneficially owned by it; provided, that Shares held
beneficially or of record by any plan, program or arrangement sponsored or
maintained for the benefit of employees of Parent or any of its Subsidiaries
shall not be deemed to be held by Parent or an affiliate thereof regardless of
whether Parent has, directly or indirectly, the power to vote or control the
disposition of such Shares. The Company will not, nor will it permit any of
its Subsidiaries (other than Retained Subsidiaries (as defined in Section 4.1
hereof)) to, tender into the Offer any Shares beneficially owned by it;
provided, that Shares held beneficially or of record by any plan, program or
arrangement sponsored or maintained for the benefit of employees of the
Company or any of its Subsidiaries shall not be deemed to be held by the
Company regardless of whether the Company has, directly or indirectly, the
power to vote or control the disposition of such Shares.
(c) Notwithstanding anything to the contrary contained in this Agreement,
Parent and Purchaser shall not be required to commence the Offer in any
foreign country where the commencement of the Offer, in Parent's reasonable
opinion, would violate the applicable Law (as defined in the Distribution
Agreement) of such jurisdiction.
(d) On the date of the commencement of the Offer, Purchaser shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer which will contain an offer to
purchase and form of the related letter of transmittal (together with any
supplements or amendments thereto, the "OFFER DOCUMENTS"). The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of such Offer Documents with the SEC.
Purchaser agrees to provide the Company and its counsel in writing with any
comments Purchaser and its counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt thereof.
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SECTION 1.2. COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that its Board of Directors (at a meeting duly called and held) has
unanimously (a) determined as of the date hereof that the Offer, the Merger
(as defined in Section 2.1 hereof) and the Spin-Off are fair to the
stockholders of the Company and are in the best interests of the stockholders
of the Company and (b) resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by the stockholders of
the Company which approval constitutes approval of each of the transactions
contemplated by this Agreement for purposes of Sections 902 and 912 of the New
York Business Corporation Law ("NYBCL"). The Company further represents that
Lazard Freres & Co. LLC has delivered to the Board of Directors of the Company
its opinion that the consideration to be received by the holders of Shares in
the Offer, the Merger and the Spin-Off is fair to the holders of the Company's
common stock from a financial point of view. The Company hereby agrees to file
a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-
9") containing such recommendation with the SEC (and the information required
by Section 14(f) of the Exchange Act if Parent shall have furnished such
information to the Company in a timely manner) and to mail such Schedule 14D-9
to the stockholders of the Company; provided, that subject to the provisions
of Section 6.2(a) hereof, such recommendation may be withdrawn, modified or
amended. Such Schedule 14D-9 shall be, if so requested by Purchaser, filed on
the same date as Purchaser's Schedule 14D-1 is filed and mailed together with
the Offer Documents; provided, that in any event the Schedule 14D-9 shall be
filed and mailed no later than 10 Business Days following the commencement of
the Offer. Purchaser and its counsel shall be given a reasonable opportunity
to review and comment on such Schedule 14D-9 prior to the Company's filing of
the Schedule 14D-9 with the SEC. The Company agrees to provide Parent and its
counsel in writing with any comments the Company or its counsel may receive
from the SEC or its staff with respect to such Schedule 14D-9 promptly after
the receipt thereof.
SECTION 1.3. STOCKHOLDER LISTS. In connection with the Offer, at the request
of Parent or Purchaser, from time to time after the date hereof, the Company
will promptly furnish Purchaser with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and shall
furnish Purchaser with such information and assistance as Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares.
SECTION 1.4. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(F). In the
event that Purchaser acquires at least a majority of the Shares outstanding
pursuant to the Offer, Parent shall be entitled to designate for appointment
or election to the Company's Board of Directors, upon written notice to the
Company, such number of persons so that the designees of Parent constitute the
same percentage (but in no event less than a majority) of the Company's Board
of Directors (rounded up to the next whole number) as the percentage of Shares
acquired in connection with the Offer. Prior to consummation of the Offer, the
Board of Directors of the Company will obtain the resignation of such number
of directors as is necessary to enable such number of Parent designees to be
so elected. In connection therewith, the Company will mail to the stockholders
of the Company the information required by Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder unless such information has previously been provided
to such stockholders in the Schedule 14D-9. Parent and Purchaser will provide
to the Company in writing, and be solely responsible for, any information with
respect to such companies and their nominees, officers, directors and
affiliates required by such Section and Rule. Notwithstanding the provisions
of this Section 1.4, the parties hereto shall use their respective best
efforts to ensure that at least three of the members of the Company's Board of
Directors shall, at all times prior to the Effective Time (as defined in
Section 2.2 hereof) be, Continuing Directors (as defined in Section 8.4
hereof).
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the NYBCL, Purchaser shall be merged (the
"MERGER") with and into the Company as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VII hereof or on
such other date as the parties
3
hereto may agree (such agreement to require the approval of a majority of the
Continuing Directors if at the time there shall be any Continuing Directors).
Following the Merger the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and the separate corporate existence of
Purchaser shall cease.
SECTION 2.2. EFFECTIVE TIME. The Merger shall be consummated by filing with
the New York Secretary of State a certificate of merger or, if applicable, a
certificate of ownership and merger, executed in accordance with the relevant
provisions of the NYBCL (the time the Merger becomes effective being the
"EFFECTIVE TIME").
SECTION 2.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the NYBCL. As of the Effective Time the Company shall be a wholly-
owned subsidiary of Parent.
SECTION 2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Restated
Certificate of Incorporation and By-Laws of the Company as in effect at the
Effective Time, shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until amended in accordance with applicable Law;
provided, that promptly following the Effective Time, the Certificate of
Incorporation shall be amended to change the name of the Surviving Corporation
so that the word "Loral" shall be deleted therefrom.
SECTION 2.5. DIRECTORS. The directors of Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 2.6. OFFICERS. The officers of Purchaser at the Effective Time shall
be the initial officers of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by Law.
SECTION 2.7. CONVERSION OF SHARES. At the Effective Time:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or held by any
Subsidiary of the Company (other than a Retained Subsidiary), and other than
Dissenting Shares (as defined in Section 3.1 hereof)) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive $38.00 in cash, or any higher price paid per Share
in the Offer (the "MERGER PRICE"), payable to the holder thereof, without
interest thereon, upon the surrender of the certificate formerly representing
such Share (except as provided in Section 2.10(c) hereof).
(b) Each Share held in the treasury of the Company or held by any Subsidiary
of the Company (other than a Retained Subsidiary) and each Share held by
Parent or any Subsidiary of Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be cancelled and retired and cease to exist; provided, that
Shares held beneficially or of record by any plan, program or arrangement
sponsored or maintained for the benefit of employees of Parent or the Company
or any Subsidiaries thereof shall not be deemed to be held by Parent or the
Company regardless of whether Parent or the Company has, directly or
indirectly, the power to vote or control the disposition of such Shares.
SECTION 2.8. RESERVED.
SECTION 2.9. CONVERSION OF PURCHASER'S COMMON STOCK. Each share of common
stock, par value $.01 per share, of Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for one share of common stock of the Surviving Corporation.
SECTION 2.10. STOCK OPTIONS AND STOCK AWARDS.
(a) The Company shall take all actions (including, but not limited to,
obtaining any and all consents from employees to the matters contemplated by
this Section 2.10) necessary to provide that all outstanding options and other
rights to acquire Shares ("STOCK OPTIONS") granted under any stock option
plan, program or similar
4
arrangement of the Company or any Subsidiaries, each as amended (the "OPTION
PLANS"), shall become fully exercisable and vested on the date (the "VESTING
DATE") which shall be set by the Company and which, in any event, shall be not
less than 30 days prior to the consummation of the Offer, whether or not
otherwise exercisable and vested. All Stock Options which are outstanding
immediately prior to Purchaser's acceptance for payment and payment for Shares
tendered pursuant to the Offer shall be cancelled as of the consummation of
the Offer and the holders thereof (other than holders who are subject to the
reporting requirements of Section 16(a) of the Exchange Act) shall be entitled
to receive from the Company, for each Share subject to such Stock Option, (1)
an amount in cash equal to the difference between the Merger Price and the
exercise price per share of such Stock Option, which amount shall be payable
upon consummation of the Offer, plus (2) one share of Spinco Common Stock (as
defined in the Distribution Agreement), which shall be held by an escrow agent
pending delivery on the Distribution Date. All applicable withholding taxes
attributable to the payments made hereunder or to distributions contemplated
hereby shall be deducted from the amounts payable under clause (1) above and
all such taxes attributable to the exercise of Stock Options on or after the
Vesting Date shall be withheld from the proceeds received in the Offer or the
Merger, as the case may be, in respect of the Shares issuable on such
exercise.
(b) The Company shall take all actions (including, but not limited to,
obtaining any and all consents from employees to the matters contemplated by
this Section 2.10) necessary to provide that all restrictions on
transferability with respect to each Share which is granted pursuant to the
Company's 1987 Restricted Stock Purchase Plan (the "1987 PLAN") and which is
outstanding and not vested on the Vesting Date shall lapse, and each such
Share shall become free of restrictions as of the Vesting Date. All applicable
withholding taxes attributable to the vesting of restricted Shares shall be
withheld from the proceeds received in respect of such Shares in the Offer or
the Merger, as the case may be.
(c) Except as provided herein or as otherwise agreed to by the parties and
to the extent permitted by the Option Plans and the 1987 Plan, (i) the Option
Plans and the 1987 Plan shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement, providing for the
issuance or grant by the Company or any of its Subsidiaries of any interest in
respect of the capital stock of the Company or any of its Subsidiaries shall
be deleted as of the Effective Time and (ii) the Company shall use all
reasonable efforts to ensure that following the Effective Time no holder of
Stock Options or any participant in the Option Plans or any other such plans,
programs or arrangements shall have any right thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any Subsidiary
thereof.
SECTION 2.11. STOCKHOLDERS' MEETING. If required by applicable Law in order
to consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable Law, its Restated Certificate of
Incorporation and By-Laws and the rules and regulations of the New York Stock
Exchange:
(a) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the consummation of the Offer
for the purpose of considering and taking action upon this Agreement (the
"STOCKHOLDERS' MEETING");
(b) subject to its fiduciary duties under applicable Laws as advised by
counsel, include in the Information Statement prepared by the Company for
distribution to stockholders of the Company in advance of the Stockholders'
Meeting in accordance with Regulation 14C promulgated under the Exchange Act
(the "INFORMATION STATEMENT") the recommendation of its Board of Directors
referred to in Section 1.2 hereof; and
(c) use its best efforts to (i) obtain and furnish the information required
to be included by it in the Information Statement, and, after consultation
with Parent, respond promptly to any comments made by the SEC with respect to
the Information Statement and any preliminary version thereof and cause the
Information Statement to be mailed to its stockholders following the
consummation of the Offer and (ii) obtain the necessary approvals of this
Agreement by its stockholders.
Parent will provide the Company with the information concerning Parent and
Purchaser required to be included in the Information Statement and will vote,
or cause to be voted, all Shares owned by it or its Subsidiaries in favor of
approval and adoption of this Agreement.
5
SECTION 2.12. FILING OF CERTIFICATE OF MERGER. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company shall
execute and file a certificate of merger or, if applicable, a certificate of
ownership and merger, in the manner required by the NYBCL and the parties
hereto shall take all such other and further actions as may be required by Law
to make the Merger effective. Prior to the filings referred to in this Section
2.12, a closing will be held at the offices of O'Melveny & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (or such other place as the parties may
agree), for the purpose of confirming all of the foregoing.
ARTICLE III
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1. DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by stockholders who have not voted such
Shares in favor of the Merger and shall have delivered a written demand for
appraisal of such Shares in the manner provided in the NYBCL (the "DISSENTING
SHARES") shall not be converted into or be exchangeable for the right to
receive the consideration provided in Section 2.7 of this Agreement, unless
and until such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to appraisal and payment under the
NYBCL. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's Shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the consideration provided for in
Section 2.7(a) of this Agreement, without any interest thereon.
SECTION 3.2. EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Immediately prior to the Effective Time, Parent will take all steps necessary
to enable and cause the Company to deposit with the Exchange Agent the funds
necessary to make the payments contemplated by Section 2.7 on a timely basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "CERTIFICATES") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the Certificates
for payment therefor. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor the consideration set forth in Section 2.7(a) hereof, and
such Certificate shall forthwith be cancelled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates. If payment
is to be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction
of the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 3.2, each
Certificate (other than Certificates representing Shares held by Parent or any
subsidiary of Parent, Shares held in the treasury of the Company or held by
any subsidiary of the Company and Dissenting Shares) shall represent for all
purposes only the right to receive the consideration set forth in Section
2.7(a) hereof, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the consideration provided in Article II hereof in
accordance with the procedures set forth in this Article III.
6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
SECTION 4.1. ORGANIZATION. Each of the Company and its Subsidiaries that
will be owned, directly or indirectly, by the Company following the Spin-Off
(the "RETAINED SUBSIDIARIES") is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except in the case of Retained Subsidiaries where the failure to be
so existing and in good standing or to have such power and authority would not
in the aggregate have a Material Adverse Effect (as defined below). For
purposes of this Agreement (except as provided in Section 5.1 hereof), (a) the
term "MATERIAL ADVERSE EFFECT" shall mean any change or effect that is
reasonably likely to be materially adverse to (i) the business, properties,
operations, prospects, results of operations or condition (financial or
otherwise) of the Retained Business (as hereinafter defined) taken as a whole,
or (ii) the ability of (A) the Company to perform its obligations under this
Agreement or the Distribution Agreement, or (B) Spinco to perform its
obligations under the Distribution Agreement; and (b) the term "RETAINED
BUSINESS" shall mean all of the businesses (and the Assets and Liabilities
thereof (each as defined in the Distribution Agreement)) of the Company and
its Subsidiaries, other than the Spinco Business (as defined in the
Distribution Agreement). Each of the Company and the Retained Subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate have a
Material Adverse Effect. The Company has heretofore delivered or made
available to Parent accurate and complete copies of the Certificate of
Incorporation and By-Laws (or other similar organizational documents in the
event of any entity other than a corporation), as currently in effect of the
Company and each of the Retained Subsidiaries.
SECTION 4.2. CAPITALIZATION.
(a) As of December 31, 1995, the authorized capital stock of the Company
consisted of (i) 300,000,000 Shares, of which 173,068,379 Shares were issued
and outstanding (inclusive of Shares subject to restrictions under the
Company's 1987 Restricted Stock Purchase Plan), and (ii) 2,000,000 shares of
Preferred Stock, par value $1.00 per share ("PREFERRED STOCK"), of which
250,000 shares were designated as Series A Preferred Stock, of which no shares
were issued and outstanding. All of the issued and outstanding Shares are
validly issued, fully paid and non-assessable and free of preemptive rights.
As of December 31, 1995, 11,131,234 Shares were issuable upon the exercise of
outstanding vested and non-vested Stock Options. Since December 31, 1995, the
Company has not granted any Stock Options or issued any shares of its capital
stock except as set forth on Schedule 4.2(a) of the disclosure schedule
delivered by the Company to Parent on or prior to the date hereof (the
"DISCLOSURE SCHEDULE") or except upon exercise of Stock Options or pursuant to
any existing Plan in accordance with the current terms of such Plan. Except as
set forth above and as otherwise provided for in this Agreement, there are not
now, and at the Effective Time there will not be, any shares of capital stock
of the Company issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of
any character obligating the Company to issue, transfer or sell any of its
securities other than the Rights (as defined in the Rights Agreement). Except
as permitted by this Agreement, following the Merger, the Company will have no
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
(b) All of the outstanding shares of capital stock of, or ownership interest
in, each of the Retained Subsidiaries have been validly issued and are fully
paid and non-assessable and are owned by either the Company or another of the
Retained Subsidiaries free and clear of all Liens (as defined in the
Distribution Agreement). There are not now, and at the Effective Time there
will not be, any outstanding subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
relating to the issued or
7
unissued capital stock or other securities of any of the Retained
Subsidiaries, or otherwise obligating the Company or any such subsidiary to
issue, transfer or sell any such securities.
(c) There are not now, and at the Effective Time there will not be, any
voting trusts or other agreements or understandings to which the Company or
any of the Retained Subsidiaries is a party or is bound with respect to the
voting of the capital stock of the Company or any of the Retained
Subsidiaries.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the Company and
each Company Subsidiary which is a party to any of the Ancillary Agreements
(each such subsidiary, a "CONTRACTING SUBSIDIARY") has full corporate power
and authority to execute and deliver this Agreement and the Ancillary
Agreements and to consummate the transactions contemplated hereby and thereby
(but only to the extent it is a party thereto). The execution and delivery of
this Agreement by the Company and of the Ancillary Agreements by the Company
and each Contracting Subsidiary (to the extent it is a party thereto) and the
consummation of the transactions contemplated hereby and thereby have been, or
with respect to Contracting Subsidiaries will be prior to the Record Date,
duly and validly authorized by the Boards of Directors of the Company and each
Contracting Subsidiary (to the extent it is a party thereto) and no other
corporate proceedings on the part of the Company or each Contracting
Subsidiary (to the extent it is a party thereto), including, without
limitation, any approval by the stockholders of the Company, are, or with
respect to Contracting Subsidiaries will be prior to the Record Date,
necessary to authorize this Agreement or the Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby (other than (a)
with respect to the Merger, the approval and adoption of this Agreement by the
holders of the requisite number of the outstanding Shares and (b) the
establishment of the Record Date and the Distribution Date (each as defined in
the Distribution Agreement) by the Board of Directors of the Company). This
Agreement has been, and each of the Ancillary Agreements have been or will
prior to the Record Date be, duly and validly executed and delivered by the
Company and each Contracting Subsidiary (to the extent it is a party thereto)
and constitute or (to the extent such agreement is not being entered into as
of the date hereof) will constitute a valid and binding agreement of the
Company and each Contracting Subsidiary (to the extent it is a party thereto),
enforceable against the Company and each Contracting Subsidiary (to the extent
it is a party thereto) in accordance with its terms except to the extent that
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws, now
or hereafter in effect, relating to the creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). The affirmative vote of the
holders of two-thirds of the Shares, determined on a fully-diluted basis, is
the only vote of the holders of any class or series of Company capital stock
necessary to approve the Merger.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for any
applicable requirements of the Securities Exchange Act of 1934, as amended,
and all rules and regulations thereunder (the "EXCHANGE ACT"), the Securities
Act of 1933, as amended, and all rules and regulations thereunder (the
"SECURITIES ACT"), the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), the EC Merger Regulations (as defined below), and
the Communications Act of 1934, as amended, and all rules and regulations
promulgated thereunder (the "COMMUNICATIONS ACT"), the filing and recordation
of a certificate of merger, or a certificate of ownership and merger, as
required by the NYBCL, filing with and approval of the New York Stock
Exchange, Inc. and the SEC with respect to the delisting and deregistering of
the Shares, such filings and approvals as may be required under the "takeover"
or "blue sky" Laws of various states, and as disclosed in Section 4.4 of the
Disclosure Schedule or as contemplated by this Agreement and the Ancillary
Agreements, neither the execution and delivery of this Agreement or the
Ancillary Agreements by the Company or any Contracting Subsidiary (to the
extent it is a party thereto) nor the consummation by the Company or any
Contracting Subsidiary (to the extent it is a party thereto) of the
transactions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or By-Laws
of the Company or any Contracting Subsidiary or Retained Subsidiary (other
than those Retained Subsidiaries which, when taken together, would not be a
"significant subsidiary" within the meaning of Regulation S-X promulgated
under the Securities Act) (any such Retained Subsidiary, other than those
described in the preceding parenthetical, herein called a "SIGNIFICANT
RETAINED SUBSIDIARY"), (ii) require on the part of the Company or any
Contracting Subsidiary or a Significant Retained Subsidiary any filing with,
or the obtaining of any permit,
8
authorization, consent or approval of, any governmental or regulatory
authority or any third party, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation, acceleration
or payment, or to the creation of a lien or encumbrance) under any of the
terms, conditions or provisions of any note, mortgage, indenture, other
evidence of indebtedness, guarantee, license, agreement or other contract,
instrument or obligation to which the Company, any Contracting Subsidiary or
Retained Subsidiary or any of their respective Subsidiaries is a party or by
which any of them or any of their Assets may be bound or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Contracting Subsidiary or Retained Subsidiary, any of their
respective Subsidiaries or any of their Assets, except for such requirements,
defaults, rights or violations under clauses (ii), (iii) and (iv) above (x)
which relate to jurisdictions outside the United States or which would not in
the aggregate have a Material Adverse Effect or materially impair the ability
of the Company or any Contracting Subsidiary to consummate the transactions
contemplated by this Agreement, or (y) which become applicable as a result of
the business or activities in which Parent or Purchaser is or proposes to be
engaged (other than the business or activities of the Retained Business to be
acquired by Purchaser, considered independently of the ownership thereof by
Parent and Purchaser) or as a result of other facts or circumstances specific
to Parent or Purchaser. For purposes of this Agreement, "EC MERGER
REGULATIONS" mean Council Regulation (EEC) No. 4064/89 of December 21, 1989 on
the Control of Concentrations Between Undertakings, OJ (1989) L 395/1 and the
regulations and decisions of the Councilor Commission of the European
Community (the "COMMISSION") or other organs of the European Union or European
Community implementing such regulations.
SECTION 4.5. ABSENCE OF CERTAIN CHANGES. Except (a) as set forth in Section
4.5 of the Disclosure Schedule, (b) as set forth in the Company's Annual
Report on Form 10-K for the year ended March 31, 1995 (the "FORM 10-K") or any
other document filed prior to the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act, or (c) as contemplated by this Agreement or any of
the Ancillary Agreements, from April 1, 1995 until the date hereof, neither
the Company nor any of its Subsidiaries has taken any of the prohibited
actions set forth in Section 6.1 (other than clause (l) thereof) hereof or
suffered any changes that, in each case, either individually or in the
aggregate, would result in a Material Adverse Effect or conducted its business
or operations in any material respect other than in the ordinary and usual
course of business, consistent with past practices.
SECTION 4.6. NO UNDISCLOSED LIABILITIES. Except (a) for Liabilities and
obligations incurred in the ordinary and usual course of business consistent
with past practice since ▇▇▇▇▇ ▇, ▇▇▇▇, (▇) for Liabilities incurred in
connection with the Offer, the Merger and the Spin-Off and (c) as set forth in
Section 4.6 of the Disclosure Schedule, from April 1, 1995 until the date
hereof neither the Company nor any of its Subsidiaries has incurred any
Liabilities that, individually or in the aggregate, would have a Material
Adverse Effect and that would be required to be reflected or reserved against
in a consolidated balance sheet of the Company and its Subsidiaries prepared
in accordance with generally accepted accounting principles as applied in
preparing the consolidated balance sheet of the Company and its Subsidiaries
as of March 31, 1995 contained in the Form 10-K.
SECTION 4.7. REPORTS.
(a) The Company has filed all reports, forms, statements and other documents
required to be filed with the SEC pursuant to the Exchange Act since April 1,
1991 (collectively, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, the "COMPANY SEC
DOCUMENTS"). Each of the Company SEC Documents, as of its filing date and at
each time thereafter when the information included therein was required to be
updated pursuant to the rules and regulations of the SEC, complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act. None of the Company SEC Documents, as of their respective
filing dates or any date thereafter when the information included therein was
required to be updated pursuant to the rules and regulations of the SEC,
contained or will contain any untrue statement of a material fact or omitted
or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets (including the related notes) included in the
Company SEC Documents filed prior to or after the date of this Agreement (but
prior to the date on which the Offer is consummated, and excluding the Company
SEC Documents described in Section 4.8 hereof) fairly presents or
9
will fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
thereof, and the other related statements (including the related notes)
included therein fairly present or will fairly present in all material
respects the results of operations and the cash flows of the Company and its
Subsidiaries for the respective periods or as of the respective dates set
forth therein. Each of the financial statements (including the related notes)
included in the Company SEC Documents filed prior to or after the date of this
Agreement (but prior to the date on which the Offer is consummated, and
excluding the Company SEC Documents described in Section 4.8 hereof) has been
prepared or will be prepared in all material respects in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except (i) as otherwise noted therein, (ii) to the extent
required by changes in generally accepted accounting principles or (iii) in
the case of unaudited financial statements, normal recurring year-end audit
adjustments.
(b) The Company has heretofore made available or promptly will make
available to Purchaser a complete and correct copy of any amendments or
modifications, which have not yet been filed with the SEC, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act.
(c) Except as and to the extent set forth in Section 4.7(c) of the
Disclosure Schedule, the pro forma consolidated balance sheet and the pro
forma statement of operations (including the related notes) of the Retained
Business attached as Annex 1 to Section 4.7(c) of the Disclosure Schedule (the
"DEFENSE FINANCIAL STATEMENTS") fairly presents on a pro forma basis in all
material respects the consolidated financial position of the Retained Business
as of the date thereof, and fairly presents on a pro forma basis in all
material respects the consolidated results of operations of the Retained
Business for the period set forth therein, respectively. The Defense Financial
Statements have been prepared in all material respects in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as otherwise disclosed therein or in the notes
thereto.
SECTION 4.8. SCHEDULE 14D-9; OFFER DOCUMENTS; FORM 10; INFORMATION
STATEMENT. None of the information (other than information provided in writing
by Parent or Purchaser for inclusion therein) included in the Schedule 14D-9,
the Form 10 (as defined in the Distribution Agreement (or any registration
statement contemplated pursuant to Section 3.1(a) of the Distribution
Agreement) or the Information Statement or supplied by the Company for
inclusion in the Offer Documents, including any amendments thereto, will be
false or misleading with respect to any material fact or will 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. Except for information supplied by Parent in writing for
inclusion therein, the Schedule 14D-9, the Form 10 (or any registration
statement contemplated pursuant to Section 3.1(a) of the Distribution
Agreement) and the Information Statement, including any amendments thereto,
will comply in all material respects with the Exchange Act and the Securities
Act.
SECTION 4.9. NO DEFAULT. Except as set forth in Section 4.9 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter or its by-laws, (ii) any note,
mortgage, indenture (including, without limitation, the Indenture dated
January 15, 1992 with respect to the Company's 9 1/8% Senior Debentures due
2022, the Indenture dated September 1, 1993 with respect to the Company's 7
5/8% Senior Notes due 2004, 8 3/8% Senior Debentures due 2024 and 7 5/8%
Senior Debentures due 2025, and the Indenture dated November 1, 1992 with
respect to the Company's 7% Senior Debentures due 2023 and 8 3/8% Senior
Debentures due 2023 (collectively, the "PUBLIC INDENTURES")), other evidence
of indebtedness, guarantee, license, agreement or other contract, instrument
or contractual obligation to which the Company or any of its Subsidiaries is
now a party or by which they or any of their Assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except for defaults or violations under
clause (i) (with respect to Company Subsidiaries other than the Retained
Subsidiaries), clause (ii) (other than defaults under or violations of any of
the Public Indentures or the Amended and Restated Credit Agreement dated as of
November 23, 1994 between the Company and the
10
banks party thereto (the "CREDIT AGREEMENT")), and clause (iii) above which,
(A) in the aggregate would not have a Material Adverse Effect and would not
have a material adverse effect on the ability of the Company or Spinco to
consummate the transactions contemplated by this Agreement or the Distribution
Agreement, or (B) become applicable as a result of the business or activities
in which Parent or Purchaser is or proposes to be engaged (other than the
business or activities of the Retained Business to be acquired by Purchaser,
considered independently of the ownership thereof by Parent and Purchaser) or
as a result of any other facts or circumstances specific to Parent or
Purchaser.
SECTION 4.10. LITIGATION; COMPLIANCE WITH LAW.
(a) Except as set forth in Section 4.10(a) of the Disclosure Schedule, as of
the date hereof (except as provided in the following sentence), there are no
actions, suits, claims, proceedings or investigations pending or, to the best
knowledge of the Company, threatened, involving the Company or any of its
Subsidiaries or any of their respective Assets (or any person or entity whose
liability therefrom may have been retained or assumed by the Company or any of
its Subsidiaries either contractually or by operation of Law), by or before
any court, governmental or regulatory authority or by any third party which,
either individually or in the aggregate, would have a Material Adverse Effect.
None of the Company, any of its Subsidiaries or any of their respective Assets
is subject to any outstanding order, writ, injunction or decree which, insofar
as can be reasonably foreseen, individually or in the aggregate, in the future
would have a Material Adverse Effect.
(b) Except as disclosed by the Company in the Company SEC Documents filed
since April 1, 1995 (the "RECENT SEC DOCUMENTS") or Section 4.10(b) of the
Disclosure Schedule, the Company and its Retained Subsidiaries are now being
and in the past have been operated in substantial compliance with all Laws
except for violations which individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, will not, have a Material Adverse
Effect.
SECTION 4.11. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except for those matters set forth in Section 4.11(a) of the Disclosure
Schedule, (i) each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all other employee benefit, bonus, incentive, stock option (or other equity-
based), severance, change in control, welfare (including post-retirement
medical and life insurance) and fringe benefit plans (whether or not subject
to ERISA) maintained or sponsored by the Company or its Subsidiaries or any
trade or business, whether or not incorporated, that would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA AFFILIATE"),
for the benefit of any employee or former employee of the Company or any of
its ERISA Affiliates (the "PLANS") is, and has been, operated in all material
respects in accordance with its terms and in substantial compliance (including
the making of governmental filings) with all applicable Laws, including,
without limitation, ERISA and the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), (ii) each of the Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified and
is not under audit by the IRS or the Department of Labor and the Company knows
of no fact or set of circumstances that is reasonably likely to adversely
affect such qualification prior to the Effective Time, (iii) no material
withdrawal liability with respect to any "multiemployer pension plan" (as
defined in Section 3(37) of ERISA) would be incurred by the Company and its
ERISA Affiliates if withdrawal from such plan were to occur on the Effective
Time, (iv) no "reportable event", as such term is defined in Section 4043(c)
of ERISA (for which the 30-day notice requirement to the PBGC has not been
waived), has occurred with respect to any Plan that is subject to Title IV of
ERISA, and (v) there are no material pending or, to the best knowledge of
Company, threatened claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto other than
routine benefit claim matters.
(b) (i) No Plan has incurred an "Accumulated Funding Deficiency" (as defined
in Section 302 of ERISA or Section 412 of the Code), whether or not waived,
(ii) neither the Company nor any ERISA Affiliate has incurred any Liability
under Title IV of ERISA except for required premium payments to the Pension
Benefit Guaranty Corporation ("PBGC"), which payments have been made when due,
and no events have occurred
11
which are reasonably likely to give rise to any Liability of the Company or an
ERISA Affiliate under Title IV of ERISA or which could reasonably be
anticipated to result in any claims being made against Buyer by the PBGC, and
(iii) the Company has not incurred any material withdrawal liability
(including any contingent or secondary withdrawal liability) within the
meaning of Section 4201 and 4204 of ERISA to any multiemployer plan (within
the meaning of Section 3(37) of ERISA) which has not been satisfied in full.
(c) Except as set forth in Section 4.11(c) of the Disclosure Schedule, with
respect to each Plan that is subject to Title IV of ERISA (i) the Company has
provided to Purchaser copies of the most recent actuarial valuation report
prepared for such Plan, (ii) the assets and liabilities in respect of the
accrued benefits as set forth in the most recent actuarial valuation report
prepared by the Plan's actuary fairly present the funded status of such Plan
in all material respects, and (iii) since the date of such valuation report
there has been no material adverse change in the funded status of any such
Plan.
(d) Neither the Company nor any ERISA Affiliate has failed to make any
contribution or payment to any Plan or multiemployer plan which, in either
case has resulted or could result in the imposition of a material lien or the
posting of a material bond or other material security under ERISA or the Code.
(e) Except as otherwise set forth on Section 4.11(e) of the Disclosure
Schedule or as expressly provided for in this Agreement, the consummation of
the transactions contemplated by this Agreement or the Distribution Agreement
will not (i) entitle any current or former employee or officer of the Company
or any ERISA Affiliate to severance pay, unemployment compensation or any
other payment, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
SECTION 4.12. ASSETS; INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 4.12(a) of the Disclosure Schedule, upon
consummation of the Spin-Off, the Company and the Retained Subsidiaries will
own or have rights to use all Assets necessary to permit the Company and the
Retained Subsidiaries to conduct the Retained Business as it is currently
being conducted except where the failure to own or have the right to use such
Assets would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) To the knowledge of the Company, based solely upon inquiry of the
Company's General Counsel and Chief Patent Counsel, the Company does not now
and has not in the past used Intellectual Property in the Retained Business
which conflicts with or infringes upon any proprietary rights of others except
where such conflict or infringement would not have, individually or in the
aggregate, a Material Adverse Effect. "INTELLECTUAL PROPERTY" means
trademarks, trade names, service marks, service names, ▇▇▇▇ registrations,
logos, assumed names, copyright registrations, patents and all applications
therefor and all other similar proprietary rights.
SECTION 4.13. RESERVED.
SECTION 4.14. RESERVED.
SECTION 4.15. CERTAIN CONTRACTS AND ARRANGEMENTS. During the twelve months
immediately prior to the date hereof, no significant contracts of the Retained
Business have been cancelled or otherwise terminated and during such time the
Company has not been threatened with any such cancellation or termination
except, in each case, for cancelled or terminated contracts which,
individually or in the aggregate, would not constitute a Material Adverse
Effect.
SECTION 4.16. TAXES. Except as otherwise disclosed in Section 4.16 of the
Disclosure Schedule and except for those matters which, either individually or
in the aggregate, would not result in a Material Adverse Effect:
(a) The Company and each of its Subsidiaries have filed (or have had filed
on their behalf) or will file or cause to be filed, all Tax Returns (as
defined in Section 4.16(j)(3) hereof) required by applicable Law to be filed
12
by any of them prior to the consummation of the Offer, and all such Tax
Returns and amendments thereto are or will be true, complete and correct.
(b) The Company and each of its Subsidiaries have paid (or have had paid on
their behalf) all Taxes (as defined in Section 4.16(j)(2) hereof) due with
respect to any period ending prior to or as of the expiration of the Offer),
or where payment of Taxes is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established before the consummation of the Offer, an
adequate accrual for the payment of all such Taxes which have accrued prior to
expiration of the Offer other than Taxes directly attributable to the
transactions contemplated by the Distribution Agreement.
(c) There are no Liens for any Taxes upon the Assets of the Company or any
of its Subsidiaries used primarily in the Retained Business, other than
statutory liens for Taxes not yet due and payable and Liens for real estate
Taxes being contested in good faith.
(d) No Audit (as defined in Section 4.16(j)(3)) is pending with respect to
any Taxes due from the Company or any Subsidiary. There are no outstanding
waivers extending the statutory period of limitation relating to the payment
of Taxes due from the Company or any Subsidiary for any taxable period ending
prior to the expiration of the Offer which are expected to be outstanding as
of the expiration of the Offer.
(e) Neither the Company nor any subsidiary is a party to, is bound by, or
has any obligation under, a tax sharing contract or other agreement or
arrangement for the allocation, apportionment, sharing, indemnification, or
payment of Taxes, other than the Tax Sharing Agreement.
(f) Neither the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Code.
(g) The statute of limitations for all Tax Returns of the Company and each
of its Subsidiaries for all years through 1987 have expired for all federal,
state, local and foreign tax purposes, or such Tax Returns have been subject
to a final Audit.
(h) Neither the Company nor any of its Subsidiaries has received any written
notice of deficiency, assessment or adjustment from the Internal Revenue
Service or any other domestic or foreign governmental taxing authority that
has not been fully paid or finally settled, and any such deficiency,
adjustment or assessment shown on such schedule is being contested in good
faith through appropriate proceedings and adequate reserves have been
established on the Company's financial statements therefor. To the best of
their knowledge, there are no other deficiencies, assessments or adjustments
threatened, pending or assessed with respect to the Company or any of its
Subsidiaries.
(i) Except as contemplated by this Agreement and the Ancillary Documents or
as disclosed in the Recent SEC Documents, neither the Company nor any of its
Subsidiaries is a party to any agreement, contract or other arrangement that
would result, separately or in the aggregate, in the requirement to pay any
"excess parachute payments" within the meaning of Section 280G of the Code or
any gross-up in connection with such an agreement, contract or arrangement.
(j) For purposes of this Section 4.16, capitalized terms have the following
meaning:
(1) "AUDIT" shall mean any audit, assessment or other examination of
Taxes or Tax Returns by the IRS or any other domestic or foreign
governmental authority responsible for the administration of any Taxes,
proceeding or appeal of such proceeding relating to Taxes.
(2) "TAXES" shall mean all Federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding) including, but not limited to income, excise, property, sales,
use (or any similar taxes), gains, transfer, franchise, payroll, value-
added, withholding, Social Security, business license fees, customs, duties
and other taxes, assessments, charges, or other fees imposed by a
governmental authority, including any interest, additions to tax, or
penalties applicable thereto.
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(3) "TAX RETURNS" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating to Taxes.
SECTION 4.17. RETAINED BUSINESS FCC LICENSES. The licenses and permits
issued to the Company or its Subsidiaries by the Federal Communications
Commission and used in connection with the Retained Business are not
individually or in the aggregate Important Licenses. "IMPORTANT LICENSES"
means licenses or permits which are important to the Retained Business and
which, if terminated, forfeited or otherwise not available to the Retained
Business after the consummation of any of the transactions contemplated by
this Agreement, would adversely affect the Retained Business in a significant
manner.
SECTION 4.18. LABOR MATTERS. Except as set forth in Section 4.18 of the
Disclosure Schedule, neither the Company nor any of the Retained Subsidiaries
has, since April 1, 1993, (i) been subject to, or threatened with, any
material strike, lockout or other labor dispute or engaged in any unfair labor
practice, the result of which could have a Material Adverse Effect, or (ii)
received notice of any pending petition for certification before the National
Labor Relations Board with respect to any material group of Retained Employees
(as defined in the Distribution Agreement) who are not currently organized.
SECTION 4.19. RIGHTS AGREEMENT. The Board of Directors of the Company has
approved a form of Rights Agreement between the Company and the Rights Agent
thereunder (the "RIGHTS AGREEMENT"), and a form of amendment thereto (the
"RIGHTS AMENDMENT"); the Rights Agreement, as amended by the Rights Amendment,
when each are executed and delivered by the Company and the Rights Agent,
shall (a) prevent this Agreement or the consummation of any of the
transactions contemplated hereby or by the Distribution Agreement, including
without limitation, the publication or other announcement of the Offer and the
consummation of the Offer and the Merger, from resulting in the distribution
of separate rights certificates or the occurrence of a Distribution Date (as
defined in the Rights Agreement) or being deemed to be a Triggering Event (as
defined in the Rights Agreement) or a Section 13 Event (as defined in the
Rights Agreement) and (b) provide that neither Parent nor Purchaser shall be
deemed to be an Acquiring Person (as defined in the Rights Agreement) by
reason of the transactions expressly provided for in this Agreement.
SECTION 4.20. CERTAIN FEES. Except for Lazard Freres & Co. LLC and ▇▇▇▇▇▇
Brothers Inc., neither the Company nor any Subsidiary has employed any
financial advisor or finder or incurred any Liability for any financial
advisory or finders' fees in connection with this Agreement or the Ancillary
Agreements or the transactions contemplated hereby or thereby.
SECTION 4.21. NO ADDITIONAL APPROVALS NECESSARY. The Board of Directors of
the Company has taken all actions necessary under the Company's Restated
Certificate of Incorporation and the NYBCL, including approving the
transactions contemplated in this Agreement, to ensure that Section 912 of the
NYBCL will not, prior to any termination of this Agreement, apply to this
Agreement, the Offer, the Merger, the Spin-Off or the transactions
contemplated hereby.
SECTION 4.22. MATERIALITY. The representations and warranties set forth in
this Article IV would in the aggregate be true and correct even without the
materiality exceptions or qualifications contained therein except for such
exceptions and qualifications which, in the aggregate for all such
representations and warranties, are not and could not reasonably be expected
to constitute a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 5.1. ORGANIZATION. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the Laws of the
state of its incorporation and has all requisite corporate power and
14
authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not,
in the aggregate, have a Material Adverse Effect (as defined below) on Parent
or Purchaser. When used in connection with Parent or Purchaser, the term
"MATERIAL ADVERSE EFFECT" means any change or effect that is materially
adverse to the business, properties, operations, prospects results of
operations or condition (financial or otherwise) of Parent and its
Subsidiaries, taken as a whole.
SECTION 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Purchaser has full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements (to the extent it is a party thereto)
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Ancillary Agreements (to the
extent it is a party thereto) and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Boards of Directors of Purchaser and Parent and no other corporate or other
proceedings on the part of Parent, Purchaser or any of their affiliates are
necessary to authorize this Agreement or the Ancillary Agreements (to the
extent it is a party thereto) or to consummate the transactions so
contemplated. This Agreement has been, and each of the Ancillary Agreements
have been, or will prior to the Record Date be, duly and validly executed and
delivered by each of Parent and Purchaser (to the extent it is a party
thereto) and constitute or (to the extent such agreement is not being entered
into as of the date hereof) will constitute valid and binding agreements of
each of Parent and Purchaser, enforceable against each of Parent and Purchaser
in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws, now or hereafter in
effect, relating to creditors' rights generally and general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Securities Act, the Exchange Act, Antitrust Laws, the
Communications Act, the filing and recordation of a certificate of merger, or
a certificate of ownership and merger, as required by the NYBCL, any filings
required by the Investment Canada Act, such filings and approvals as may be
required under the "takeover" or "blue sky" Laws of various states, and as
contemplated by this Agreement and the Ancillary Agreements, neither the
execution and delivery of this Agreement or the Ancillary Agreements by Parent
or Purchaser (to the extent it is a party thereto) nor the consummation by
Parent or Purchaser of the transactions contemplated hereby or thereby will
(i) conflict with or result in any breach of any provision of the charter or
by-laws of Parent or Purchaser, (ii) require on the part of Parent or
Purchaser any filing with, or the obtaining of any permit, authorization,
consent or approval of, any governmental or regulatory authority or any third
party, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation, acceleration or payment, or to
the creation of a lien or encumbrance) under any of the terms, conditions or
provisions of any note, mortgage, indenture, other evidence of indebtedness,
guarantee, license, agreement or other contract, instrument or contractual
obligation to which Parent, Purchaser or any of their respective Subsidiaries
is a party or by which any of them or any of their Assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, Purchaser, any of their Subsidiaries or any of their
Assets, except for such requirements, defaults, rights or violations under
clauses (ii), (iii) and (iv) above which would not in the aggregate have a
material adverse effect on the ability of Parent or Purchaser to consummate
the Offer and the Merger.
SECTION 5.4. INFORMATION STATEMENT; SCHEDULE 14D-9. Neither the Offer
Documents nor any other document filed or to be filed by or on behalf of
Parent or Purchaser with the SEC or any other governmental entity in
connection with the transactions contemplated by this Agreement contained when
filed or will, at the respective times filed with the SEC or other
governmental entity, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided, that the foregoing shall not apply
to information supplied by or on behalf of the Company specifically for
inclusion or incorporation by reference in any such document. The Offer
Documents will comply as to form in all material respects with
15
the provisions of the Exchange Act. None of the information supplied by Parent
or Purchaser in writing for inclusion in the Information Statement or the
Schedule 14D-9 will, at the respective times that the Information Statement
and the Schedule 14D-9 or any amendments or supplements thereto are filed with
the SEC and are first published or sent or given to holders of Shares, and in
the case of the Information Statement, at the time that it or any amendment or
supplement thereto is mailed to the Company's shareholders, at the time of the
Shareholders' Meeting or at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.5. SUFFICIENT FUNDS. Parent and its lenders are negotiating the
terms of a credit facility to provide Purchaser with financing sufficient to
permit Purchaser to consummate the Offer. Parent is highly confident that such
financing will be available and has no reason to believe that Purchaser will
not have sufficient funds available prior to the satisfaction of the
conditions to the Offer set forth in Exhibit B hereto to purchase all Shares
on a fully diluted basis at the Merger Price.
SECTION 5.6. BROKERS. Except for Bear, ▇▇▇▇▇▇▇ & Co. Inc. no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Purchaser.
ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement or the Ancillary Agreements, during the period from the date of
this Agreement to the consummation of the Offer and, if Parent has made a
prompt request therefor pursuant to Section 1.4 hereof, until its Designated
Directors (as defined in Section 8.4 hereof) shall constitute in their
entirety a majority of the Company's Board of Directors, the Company and its
Subsidiaries (other than Spinco and the Spinco Companies (as defined in the
Distribution Agreement)) will each conduct its operations according to its
ordinary course of business, consistent with past practice, will use its
commercially reasonable efforts to (i) preserve intact its business
organization, (ii) maintain its material rights and franchises, (iii) keep
available the services of its officers and key employees, and (iv) keep in
full force and effect insurance comparable in amount and scope of coverage to
that maintained as of the date hereof (collectively, the "ORDINARY COURSE
OBLIGATIONS"); provided, that Spinco and the Spinco Companies shall comply
with the Ordinary Course Obligations to the extent that non-compliance
therewith could adversely affect the Retained Business or adversely affect (or
materially delay) the consummation of the Offer, the Merger or the Spin-Off.
Without limiting the generality of and in addition to the foregoing, and
except as otherwise contemplated by this Agreement or the Ancillary
Agreements, prior to the time specified in the preceding sentence, neither the
Company nor any of its Subsidiaries (other than Spinco and the Spinco
Companies insofar as any action of the type specified below could not
adversely affect the Retained Business and could not adversely affect (or
materially delay) the Offer, the Spin-Off or the Merger) will, without the
prior written consent of Parent:
(a) amend its charter or by-laws other than filing a Certificate of
Amendment of the Company's Restated Certificate of Incorporation as
contemplated by the Rights Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except by the Company in
connection with Stock Options, pursuant to the Rights Agreement as
contemplated by the Distribution Agreement or pursuant to the current terms of
any existing Plan) or amend any of the terms of any such securities or
agreements (other than such securities or agreements of any Subsidiary other
than any of the Retained Subsidiaries, or amendments of the Distribution
Agreement as permitted thereunder) outstanding on the date hereof;
16
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock (other
than pursuant to the Rights Agreement) or redeem or otherwise acquire any of
its securities or any securities of its Subsidiaries (other than pursuant to
the Rights Agreement); provided, that the Company may declare and pay to
holders of Shares regular quarterly dividends of not more than $.08 per Share
on the dividend declaration and payment dates normally applicable to the
Shares.
(d) (i) pledge or otherwise encumber shares of capital stock of the Company
or any of its Subsidiaries; or (ii) except in the ordinary course of business
consistent with past practices, (A) incur, assume or prepay any long-term debt
or incur, assume, or prepay any obligations with respect to letters of credit
or any material short-term debt; (B) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
any material obligations of any other person except wholly owned Subsidiaries
of the Company; (C) make any material loans, advances or capital contributions
to, or investments in, any other person; (iv) change the practices of the
Company and its Retained Subsidiaries with respect to the timing of payments
or collections; or (D) mortgage or pledge any Assets of the Retained Business
or create or permit to exist any material Lien thereupon;
(e) except (i) as disclosed in Section 6.1(e) of the Disclosure Schedule and
except for arrangements entered into in the ordinary course of business
consistent with past practices, (ii) as required by Law or (iii) as
specifically provided for in the Agreement or Distribution Agreement, enter
into, adopt or materially amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans,
funds or other arrangements of or for the benefit or welfare of any Retained
Employee (or any other person for whom the Retained Business will have
Liability), or (except for normal increases in the ordinary course of business
that are consistent with past practices) increase in any manner the
compensation or fringe benefits of any Retained Employee (or any other person
for whom the Retained Business will have Liability) or pay any benefit not
required by any existing plan and arrangement (including, without limitation,
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units) or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing;
(f) transfer, sell, lease, license or dispose of any lines of business,
Subsidiaries, divisions, operating units or facilities (other than facilities
currently closed or currently proposed to be closed) relating to the Retained
Business outside the ordinary course of business or enter into any material
commitment or transaction with respect to the Retained Business outside the
ordinary course of business;
(g) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the Assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any Assets of any other person (other than the purchase of Assets
in the ordinary course of business and consistent with past practice), in each
case where such action would be material to the Retained Business;
(h) except as may be required by Law or as disclosed in Section 6.1(e) of
the Disclosure Schedule, take any action to terminate or materially amend any
of its pension plans or retiree medical plans with respect to or for the
benefit of Retained Employees or any other person for whom the Retained
Business will have Liability;
(i) materially modify, amend or terminate (1) any significant contract
related to the Retained Business or waive any material rights or claims of the
Retained Business except in the ordinary course of business consistent with
past practice; or (2) any contract having an aggregate contract value of $100
million or greater, whether or not in the ordinary course of business
consistent with past practice, unless such modification, amendment or
termination does not materially diminish the projected profit or materially
increase the projected loss anticipated from such contract; provided, that
nothing contained in this Section 6.1(i) shall limit the Company and its
Subsidiaries in connection with programs or contracts with respect to which
Parent or a Subsidiary of Parent has submitted, or is reasonably expected to
submit, a competing bid; provided further, that the provisions of this
17
Section 6.1(i) shall not apply to any arrangement, agreement or contract
proposal previously submitted by the Company or a Subsidiary thereof which
proposal, upon acceptance thereof, cannot be revised or withdrawn;
(j) effect any material change in any of its methods of accounting in effect
as of March 31, 1995, except as may be required by Law or generally accepted
accounting principles;
(k) except as expressly provided in this Agreement, amend, modify, or
terminate the Rights Agreement or redeem any Rights thereunder; provided, that
if the Board of Directors of the Company by a majority vote determines in its
good faith judgment, based as to legal matters upon the written opinion of
legal counsel, that the failure to redeem any Rights would likely constitute a
breach of the Board's fiduciary duty, the Rights may be redeemed;
(l) enter into any material arrangement, agreement or contract that
individually or in the aggregate with other material arrangements, agreements
and contracts entered into after the date hereof, the Company reasonably
expects will adversely affect in a significant manner the Retained Business
after the date hereof; provided, that nothing contained in this Section 6.1(l)
shall limit the Company and its Subsidiaries from submitting bids for programs
or contracts with respect to which the Company reasonably expects Parent or a
Subsidiary of Parent to submit a bid; and
(m) enter into a legally binding commitment with respect to, or any
agreement to take, any of the foregoing actions.
SECTION 6.2. ACQUISITION PROPOSALS.
(a) The Company and its officers, directors, employees, representatives and
agents shall immediately cease any existing discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal (as
defined in Section 6.2(b) hereof). The Company and its Subsidiaries will not,
and will use their best efforts to cause their respective officers, directors,
employees and investment bankers, attorneys, accountants or other agents
retained by the Company or any of its Subsidiaries not to, (i) initiate or
solicit, directly or indirectly, any inquiries with respect to, or the making
of, any Acquisition Proposal, or (ii) except as permitted below, engage in
negotiations or discussions with, or furnish any information or data to any
Third Party (as defined in Section 8.3(b) hereof) relating to an Acquisition
Proposal (other than the transactions contemplated hereby and by the Ancillary
Agreements). Notwithstanding anything to the contrary contained in this
Section 6.2, the Company may furnish information to, and participate in
discussions or negotiations (including, as a part thereof, making any counter-
proposal) with, any Third Party which submits an unsolicited written
Acquisition Proposal to the Company if the Company's Board of Directors by a
majority vote determines in its good faith judgment, based as to legal matters
upon the written opinion of legal counsel, that the failure to furnish such
information or participate in such discussions or negotiations would likely
constitute a breach of the Board's fiduciary duties under applicable Law;
provided, that nothing herein shall prevent the Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules
14D-9 and 14e-2 promulgated under the Exchange Act with regard to any tender
offer; provided further, that the Board shall not recommend that the
shareholders of the Company tender their Shares in connection with any such
tender offer unless the Board by a majority vote determines in its good faith
judgment, based as to legal matters on the written opinion of legal counsel,
that failing to take such action would likely constitute a breach of the
Board's fiduciary duty; provided further, that the Company shall not enter
into any agreement with respect to any Acquisition Proposal except
concurrently with or after the termination of this Agreement (except with
respect to confidentiality and standstill agreements to the extent expressly
provided below). The Company shall promptly provide Parent with a copy of any
written Acquisition Proposal received and a written statement with respect to
any non-written Acquisition Proposal received, which statement shall include
the identity of the parties making the Acquisition Proposal and the terms
thereof. The Company shall promptly inform Parent of the status and content of
any discussions regarding any Acquisition Proposal with a Third Party. In no
event shall the Company provide non-public information regarding the Retained
Business to any Third Party making an Acquisition Proposal unless such party
enters into a confidentiality agreement containing provisions designed to
reasonably protect the confidentiality of such
18
information. In the event that following the date hereof the Company enters
into a confidentiality agreement with any Third Party which does not include
terms and conditions which are substantially similar to the provisions of
Paragraph No. 7 (the "STANDSTILL PROVISIONS") of the letter agreement, dated
as of December 4, 1995, between the Company and Parent (the "CONFIDENTIALITY
AGREEMENT"), then Parent and its affiliates shall be released from their
obligations under such Standstill Provisions to the same extent as such third
party.
(b) For purposes of this Agreement, the term "ACQUISITION PROPOSAL" shall
mean any bona fide proposal, whether in writing or otherwise, made by a Third
Party to acquire beneficial ownership (as defined under Rule 13(d) of the
Exchange Act) of all or a material portion of the Assets of, or any material
equity interest in, any of the Company, a Retained Subsidiary or the Retained
Business pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of Assets, tender offer or exchange
offer or similar transaction involving either the Company, a Retained
Subsidiary or the Retained Business, including, without limitation, any single
or multi-step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of any
material portion of the Assets of, or any material portion of the equity
interest in, either the Company, a Retained Subsidiary or the Retained
Business (other than the transactions contemplated by this Agreement and the
Ancillary Agreements); provided, that the term "ACQUISITION PROPOSAL" shall
not include any transactions which relate solely to the businesses to be owned
by Spinco and the Spinco Companies following the Spin-Off and which could not
have an adverse effect on the consummation of the Offer, the Merger, the Spin-
Off or the transactions contemplated hereby.
SECTION 6.3. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Time, upon
reasonable notice and at reasonable times, and subject to any access,
disclosure, copying or other limitations imposed by applicable Law or any of
the Company's or its Subsidiaries' contracts, the Company will give Parent and
its authorized representatives reasonable access to all offices and other
facilities and to all books and records of it and its Subsidiaries, and will
permit Parent to make such inspections as it may reasonably require, and will
cause its officers and those of its Subsidiaries to furnish Parent with (i)
such financial and operating data and other information with respect to the
Company and its Subsidiaries as Parent may from time to time reasonably
request, or (ii) any other financial and operating data which materially
impacts the Company and its Subsidiaries. Parent and its authorized
representatives will conduct all such inspections in a manner which will
minimize any disruptions of the business and operations of the Company and its
Subsidiaries.
(b) Parent, Purchaser and the Company agree that the provisions of the
Confidentiality Agreement shall remain binding and in full force and effect
(subject, however, to the provisions of Section 6.2(a) hereof) and that the
terms of the Confidentiality Agreement are incorporated herein by reference.
SECTION 6.4. REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement and without limitation to the provisions of Section 6.6 hereof, each
of the parties hereto agrees to use all reasonable efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements (including, without limitation, (i) cooperating
in the preparation and filing of the Offer Documents, the Schedule 14D-9, the
Form 10, the Information Statement and any amendments to any thereof; (ii)
cooperating in making available information and personnel in connection with
presentations, whether in writing or otherwise, to prospective lenders to
Parent and Purchaser that may be asked to provide financing for the
transactions contemplated by this Agreement; (iii) taking of all action
reasonably necessary, proper or advisable to secure any necessary consents or
waivers under existing debt obligations of the Company and its Subsidiaries or
amend the notes, indentures or agreements relating thereto to the extent
required by such notes, indentures or agreements or redeem or repurchase such
debt obligations; (iv) contesting any pending legal proceeding relating to the
Offer, the Merger or the Spin-Off; and (v) executing any additional
instruments necessary to consummate the transactions contemplated hereby and
thereby). In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party hereto shall use all reasonable efforts to take all
such necessary action.
19
SECTION 6.5. CONSENTS. Each of the Company, Parent and Purchaser shall
cooperate and use their respective reasonable efforts to make all filings and
obtain all consents and approvals of governmental authorities (including,
without limitation, the Federal Communication Commission ("FCC")) and other
third parties necessary to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements. Each of the parties hereto will
furnish to the other party such necessary information and reasonable
assistance as such other persons may reasonably request in connection with the
foregoing.
SECTION 6.6. ANTITRUST FILINGS.
(a) In addition to and without limiting the agreements of Parent and
Purchaser contained in Section 6.5 hereof, Parent, Purchaser and the Company
will (i) take promptly all actions necessary to make the filings required of
Parent, Purchaser or any of their affiliates under the applicable Antitrust
Laws (as defined in Section 6.6(e) hereof), (ii) comply at the earliest
practicable date with any request for additional information or documentary
material received by Parent, Purchaser or any of their affiliates from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and from the Commission or other foreign
governmental or regulatory authority pursuant to Antitrust Laws, and (iii)
cooperate with the Company in connection with any filing of the Company under
applicable Antitrust Laws and in connection with resolving any investigation
or other inquiry concerning the transactions contemplated by this Agreement or
the Ancillary Agreements commenced by any of the Federal Trade Commission, the
Antitrust Division of the Department of Justice, state attorneys general, the
Commission, or other foreign governmental or regulatory authorities.
(b) In furtherance and not in limitation of the covenants of Parent and
Purchaser contained in Section 6.5 and Section 6.6(a) hereof, Parent,
Purchaser and the Company shall each use all reasonable efforts to resolve
such objections, if any, as may be asserted with respect to the Offer, the
Spin-Off, the Merger or any other transactions contemplated by this Agreement
or the Ancillary Agreements under any Antitrust Law. If any administrative,
judicial or legislative action or proceeding is instituted (or threatened to
be instituted) challenging the Offer, the Spin-Off, the Merger or any other
transactions contemplated by this Agreement or the Ancillary Agreements as
violative of any Antitrust Law, Parent, Purchaser and the Company shall each
cooperate to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (any such decree,
judgment, injunction or other order is hereafter referred to as an "ORDER")
that is in effect and that restricts, prevents or prohibits consummation of
the Offer, the Spin-Off, the Merger or any other transactions contemplated by
this Agreement or the Ancillary Agreements, including, without limitation, by
pursuing all reasonable avenues of administrative and judicial appeal. Parent
and Purchaser shall each also use their respective reasonable efforts to take
all reasonable action, including, without limitation, agreeing to hold
separate or to divest any of the businesses or Assets of Parent or Purchaser
or any of their affiliates, or, following the consummation of the Offer or the
Effective Time, of the Company or any of the Retained Subsidiaries, as may be
required (i) by the applicable governmental or regulatory authority (including
without limitation the Federal Trade Commission, the Antitrust Division of the
Department of Justice, any state attorney general or any foreign governmental
or regulatory authority) in order to resolve such objections as such
governmental or regulatory authority may have to such transactions under any
Antitrust Law, or (ii) by any domestic or foreign court or other tribunal, in
any action or proceeding brought by a private party or governmental or
regulatory authority challenging such transactions as violative of any
Antitrust Law, in order to avoid the entry of, or to effect the dissolution,
vacating, lifting, altering or reversal of, any Order that has the effect of
restricting, preventing or prohibiting the consummation of the Offer, the
Spin-Off, the Merger or any other transactions contemplated by this Agreement
or the Ancillary Agreements; provided, that Parent shall not be required to
take any action, divest any Asset or enter into any consent decree if the
taking of such action, disposing of such Asset or entering into such decree
would have a Significant Adverse Effect. "SIGNIFICANT ADVERSE EFFECT" shall
mean any change or effect that, in Parent's judgment, is reasonably likely to
adversely affect in a substantial way the benefits and opportunities which
Parent reasonably expects to receive from the acquisition of the Retained
Business or from Parent's current business.
20
(c) Each of the Company, Parent and Purchaser shall promptly inform the
other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
the Commission or any other governmental or regulatory authority regarding any
of the transactions contemplated hereby. Parent and/or Purchaser will promptly
advise the Company with respect to any understanding, undertaking or agreement
(whether oral or written) which it proposes to make or enter into with any of
the foregoing parties with regard to any of the transactions contemplated
hereby.
(d) "ANTITRUST LAW" means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, EC Merger
Regulations and all other federal, state and foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
Laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
SECTION 6.7. PUBLIC ANNOUNCEMENTS. Parent, Purchaser and the Company will
consult with each other before issuing any press release or otherwise making
any public statements with respect to the Offer, the Spin-Off or the Merger
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by Law or by obligations
pursuant to any listing agreement with any securities exchange.
SECTION 6.8. EMPLOYEE AGREEMENTS.
(a) Prior to the Spin-Off, the Company shall use its best efforts to, and
shall use its best efforts to cause its Subsidiaries to, assign to Spinco or
Subsidiaries of Spinco or terminate all employment agreements with employees
of the Company who are not Retained Employees (the "EMPLOYMENT AGREEMENTS")
and all individual severance agreements with employees of the Company who are
not Retained Employees (the "SEVERANCE AGREEMENTS"). The parties hereto
acknowledge and agree that, whether or not such Employment Agreements and
Severance Agreements are so assigned or terminated, all Liabilities under or
arising from such Employment Agreements and Severance Agreements other than as
expressly contemplated in the Distribution Agreement or by this Section 6.8
shall be deemed to be Spinco Liabilities (as defined in the Distribution
Agreement), with respect to which Spinco shall indemnify the Company and
Parent as provided therein.
(b) Parent acknowledges and agrees that all employment agreements and
severance agreements with the Retained Employees will be binding and
enforceable obligations of the Surviving Corporation, except as the parties
thereto may otherwise agree. The parties hereto acknowledge and agree that all
Liabilities under or arising from such agreements with the Retained Employees
from and after the consummation of the Offer shall be deemed to be Company
Liabilities (as defined in the Distribution Agreement), with respect to which
the Company and Parent shall indemnify Spinco as provided therein.
(c) (i) Parent agrees to cause the Company to pay in cash to each Company
Bonus Employee (as defined below) to the extent not previously paid, all bonus
compensation payable with respect to the fiscal year of the Company ending
March 31, 1996 under any bonus program of the Company or its Subsidiaries in
which such Company Bonus Employee participated prior to the consummation of
the Offer or under any employment agreement. Such bonus compensation shall be
paid at the time or times that comparable bonus compensation was paid to any
similarly situated employee after March 31, 1995 with respect to the fiscal
year ended March 31, 1995. Bonus compensation which is based on objective
criteria shall be calculated and paid in accordance with such criteria. With
respect to bonus compensation which is wholly or partially discretionary, such
bonus compensation shall be determined and paid on a basis consistent with
past practices of the Company. Subject to Section 6.8(c)(iii), the amount of
discretionary bonus compensation to be paid to any Company Bonus Employee
shall be determined by the Chief Executive Officer of the Company in office
immediately prior to the date of the consummation of the Offer or by his
designee. "COMPANY BONUS EMPLOYEE" means a person, other than a Spinco
Employee, employed by the Company or any of its Subsidiaries immediately prior
to the date the Offer is consummated, who was eligible to receive a bonus
under any bonus program of the Company or any of its Subsidiaries in effect at
December 31, 1995, or under any employment agreement in effect on such date,
with respect to the fiscal year ending March 31, 1996.
21
(ii) Spinco agrees to pay in cash to each Spinco Bonus Employee (as
defined in this Section 6.8(c)(ii)) to the extent not previously paid, all
bonus compensation payable with respect to the fiscal year of the Company
ending March 31, 1996 under any bonus program of the Company or its
Subsidiaries in which such Spinco Bonus Employee participated prior to the
consummation of the Offer or under any employment agreement. Such bonus
compensation shall be paid at the time or times that comparable bonus
compensation was paid to any similarly situated employee after March 31,
1995 with respect to the fiscal year ended March 31, 1995. Bonus
compensation which is based on objective criteria shall be calculated and
paid in accordance with such criteria. With respect to bonus compensation
which is wholly or partially discretionary, such bonus compensation shall
be determined and paid on a basis consistent with past practices of the
Company. Subject to Section 6.8(c)(iii), the amount of discretionary bonus
compensation to be paid to any Spinco Bonus Employee shall be determined by
Spinco. "SPINCO BONUS EMPLOYEE" means any Spinco Employee employed by the
Company or any of its Subsidiaries immediately prior to the date the Offer
is consummated, who was eligible to receive a bonus under any bonus program
of the Company or any of its Subsidiaries in effect at December 31, 1995,
or under any employment agreement in effect on such date, with respect to
the fiscal year ending March 31, 1996. Upon payment of such bonuses to
Spinco Bonus Employees, Spinco shall submit to Parent a statement showing
the individual and aggregate bonus amounts paid to Spinco Bonus Employees,
and Parent shall thereupon promptly pay to Spinco (or cause the Company to
pay to Spinco) the aggregate amount of bonuses so paid; provided, that if
the consummation of the Offer occurs prior to March 31, 1996, the amount of
such reimbursement shall be a prorated amount of the aggregate bonus
amounts so paid, based on a fraction, the numerator of which is the number
of days of the Company's fiscal year ending March 31, 1996 which had
elapsed as of the consummation of the Offer, and the denominator of which
is 365.
(iii) The aggregate amount of discretionary bonuses payable to all
Company Bonus Employees and Spinco Bonus Employees as a group for the
fiscal year ending March 31, 1996 shall not exceed a dollar amount to be
mutually agreed to by the Chief Executive Officer of Parent and the Chief
Executive Officer of Spinco; provided, that in the event the Chief
Executive Officer of Parent and the Chief Executive Officer of Spinco
cannot agree on such dollar amount, the maximum aggregate amount of
discretionary bonuses payable to Company Bonus Employees and Spinco Bonus
Employees shall be based on the aggregate amount of discretionary bonuses
paid to all such employees for the Company's fiscal year ending March 31,
1995, increased by a percentage equal to the average of the percentage
increases in discretionary bonuses paid to all such employees over the
Company's three fiscal years ending March 31, 1993, 1994 and 1995.
(d) Pursuant to the "change of control" provisions of the Restated
Employment Agreement between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ dated April
1, 1990, as amended June 14, 1994, the Company shall, subject to the following
sentences of this Section 6.8(d), make a cash payment to ▇▇. ▇▇▇▇▇▇▇▇ upon
consummation of the Offer, calculated in accordance with such agreement, less
$18 million. The Company also may make a cash payment of a bonus (inclusive of
the amount paid to ▇▇. ▇▇▇▇▇▇▇▇ pursuant to the preceding sentence, the
"TRANSACTION BONUS") to Transaction Bonus Employees (as defined below) other
than ▇▇. ▇▇▇▇▇▇▇▇; provided, that the aggregate Transaction Bonus paid shall
not exceed $40 million; and provided further, that the Transaction Bonus
payable to any Transaction Bonus Employee shall not exceed the maximum amount
which can be paid at such time without such amounts being treated as "excess
parachute payments" within the meaning of Section 280G of the Code, taking
into account all payments made on or prior to the time the Transaction Bonus
is paid (including the value of accelerated vesting of stock options or
restricted shares granted under the 1987 Plan determined in accordance with
proposed regulations promulgated under Section 280G of the Code) which
constitute parachute payments for purposes of Section 280G of the Code. The
Transaction Bonus may be paid by the Company, in its discretion, prior to, on
or immediately following, the date the Offer is consummated. "TRANSACTION
BONUS EMPLOYEE" means ▇▇. ▇▇▇▇▇▇▇▇ and each person employed by the Company or
any of its Subsidiaries on or prior to the date the Offer is consummated who
is selected by ▇▇. ▇▇▇▇▇▇▇▇ to receive a Transaction Bonus.
(e) The Company may provide for employment protection payments to be made to
certain Company employees upon qualifying terminations of employment pursuant
to "Employment Protection Agreements" and
22
an "Employment Protection Plan," (each substantially in the forms attached
hereto as Exhibits C and D, respectively; together, the "EMPLOYMENT PROTECTION
ARRANGEMENTS") occurring after a change in control of the Company; provided,
that (i) neither the execution of this Agreement and the Distribution
Agreement, nor any transaction contemplated thereby, shall constitute a change
in control of the Company for any purpose under the Employment Protection
Arrangements or give rise to any rights thereunder and (ii) the Employment
Protection Arrangements shall terminate as of the consummation of the Offer
and no rights thereunder shall continue after the consummation of the Offer.
SECTION 6.9. EMPLOYEE BENEFITS.
(a) Prior to the Effective Time, the Company shall adopt a severance plan
substantially in the form attached hereto as Exhibit E (the "SUPPLEMENTAL
SEVERANCE PLAN") covering up to 150 employees of the Company or its
Subsidiaries selected by the Company prior to the Effective Time.
(b) Except with respect to accruals under any defined benefit pension plans,
Parent will, or will cause the Company to, give Retained Employees full credit
for purposes of eligibility, vesting and determination of the level of
benefits under any employee benefit plans or arrangements maintained by the
Parent, the Company or any Subsidiary of Parent or Company for such Retained
Employees' service with the Company or any Subsidiary of the Company to the
same extent recognized by the Company immediately prior to the Effective Time.
Parent will, or will cause the Company to, (i) waive all limitations as to
pre-existing conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Retained Employees
under any welfare plans that such employees may be eligible to participate in
after the Effective Time, other than limitations or waiting periods that are
already in effect with respect to such employees and that have not been
satisfied as of the Effective Time under any welfare plan maintained for the
Retained Employees immediately prior to the Effective Time, and (ii) provide
each Retained Employee with credit for any co-payments and deductibles paid
prior to the Effective Time in satisfying any applicable deductible or out-of-
pocket requirements under any welfare plans that such employees are eligible
to participate in after the Effective Time.
SECTION 6.10. ANCILLARY AGREEMENTS; SPIN-OFF.
(a) Simultaneously with the execution hereof, the Company and certain of its
Subsidiaries are entering into the Distribution Agreement. Immediately prior
to the Record Date, the Company, Spinco and certain other parties will enter
into the Tax Sharing Agreement. From and after the Effective Time, Parent
shall cause the Surviving Corporation to perform any and all obligations and
agreements of the Company set forth herein or in the Ancillary Agreements or
in any other agreements contemplated herein or therein.
(b) Parent and Purchaser accept and agree that, subject to the provisions of
the Distribution Agreement, the form of certificate of incorporation and by-
laws of Spinco adopted in contemplation of the Spin-Off shall be as agreed to
by the Company and Spinco in their sole discretion; provided, that nothing in
the certificates of incorporation and by-laws shall adversely affect or
otherwise limit (i) Spinco's ability to perform its obligations under the
Ancillary Agreements or the other agreements contemplated by the Distribution
Agreement or (ii) the Company's or its affiliates' rights under the
Stockholders Agreement.
(c) In no event shall Parent or Purchaser or any of their Subsidiaries be
entitled to receive any shares of Spinco Common Stock as a distribution with
respect to Shares purchased upon consummation of the Offer. If, for any
reason, any shares of Spinco Common Stock distributed in the Spin-Off are
received by Parent or Purchaser or any of their Subsidiaries with respect to
Shares acquired by Purchaser in the Offer, then Parent or Purchaser shall
convey, on behalf of the Company, such shares of Spinco to the stockholders of
the Company who would have otherwise received such shares of Spinco pursuant
to the Distribution Agreement; provided, that the foregoing provisions shall
not apply with respect to Shares held by Parent or any of its Subsidiaries
prior to the date hereof.
(d) If the Company reasonably determines that the Spin-Off may not be
effected without registering the shares of common stock of Spinco to be
distributed in the Spin-Off pursuant to the Securities Act, the Company,
23
Parent and Purchaser, as promptly as practicable, shall use their respective
best efforts to cause the shares of Spinco to be registered pursuant to the
Securities Act and thereafter effect the Spin-Off in accordance with the terms
of the Distribution Agreement including, without limitation, by preparing and
filing on an appropriate form a registration statement under the Securities
Act covering the shares of Spinco and using their respective best efforts to
cause such registration statement to be declared effective and preparing and
making such other filings as may be required under applicable state securities
Laws.
(e) Parent shall, and shall cause the Surviving Corporation to, treat the
Spin-Off for purposes of all federal and state taxes as an integrated
transaction with the Offer and the Merger and thus report the Spin-Off as a
constructive redemption of a number of Shares equal in value to the value of
the Spinco Common Stock distributed in the Spin-Off.
SECTION 6.11. RETAINED BUSINESS FINANCIAL STATEMENTS. The Company will
forthwith prepare, and retain Coopers & ▇▇▇▇▇▇▇ L.L.P. to audit, balance
sheets for the Retained Business as at March 31, 1993, March 31, 1994, March
31, 1995 and the Effective Time, together with statements of operations and
cash flows for the periods then ended (collectively, the "RETAINED BUSINESS
FINANCIAL STATEMENTS"). The Company hereby agrees to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to assist and otherwise cause Coopers &
▇▇▇▇▇▇▇ L.L.P. to complete the audit of the Retained Business Financial
Statements as promptly as reasonably practicable, but in no event later than
45 days after the date of this Agreement; provided, that with respect to the
period ended the Effective Time, the information will be provided no later
than 15 days prior to the latest date on which Parent may file a Current
Report on Form 8-K with respect to the Merger and still be in compliance with
the regulations promulgated by the SEC under the Exchange Act. The Company
will pay the fees and expenses for auditing the Retained Business Financial
Statements. The Company also agrees to provide promptly to Parent such
quarterly unaudited financial information relating to the Retained Business
and covering the period ending December 31, 1995 and the quarterly and annual
periods following the date hereof within five days after the filing by the
Company with the SEC of its quarterly reports on Form 10-Q and Annual Report
on Form 10-K, as the case may be.
SECTION 6.12. REDEMPTION OF RIGHTS. At Parent's request, the Company will
take such action as Parent may request to effectuate the redemption, at any
time before the purchase by Purchaser pursuant to the Offer of at least a
majority of the outstanding Shares, of the Rights (as defined in the Rights
Agreement).
SECTION 6.13. PRE-CLOSING CONSULTATION. Following the date hereof and prior
to the Effective Time, the Company shall designate a senior officer of the
Company (the "COMPANY REPRESENTATIVE") to consult with an officer of Parent
designated by Parent (the "PARENT REPRESENTATIVE") with respect to major
business decisions to be made concerning the operation of the Retained
Business. Such consultation shall be made on as frequent a basis as may be
reasonably requested by Parent. The parties hereto acknowledge and agree that
the agreements set forth in this Section 6.13 shall be subject to any
restrictions or limitations required under applicable Law.
SECTION 6.14. INDEMNIFICATION.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its Subsidiaries
(the "INDEMNIFIED PARTIES") against all losses, claims, damages, expenses or
liabilities arising out of or related to actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time to the same
extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in the Company's Restated Certificate of
Incorporation and By-Laws and agreements in effect as of December 31, 1995 (to
the extent consistent with applicable Law), which provisions will survive the
Merger and continue in full force and effect after the Effective Time. Without
limiting the foregoing, (i) Parent shall, and shall cause the Surviving
Corporation to, periodically advance expenses (including attorney's fees) as
incurred by an Indemnified Person with respect to the foregoing to the full
extent permitted under the Company's Restated Certificate of Incorporation and
By-Laws in effect on the date hereof (to the extent consistent with applicable
Law) and (ii) any determination required to be made with respect to whether an
Indemnified Party shall be
24
entitled to indemnification shall, if requested by such Indemnified Party, be
made by independent legal counsel selected by the Surviving Corporation and
reasonably satisfactory to such Indemnified Party. Parent hereby guarantees
the obligation of the Surviving Corporation provided for under this Section
6.14(a); provided, that the guarantee obligation of Parent provided for herein
shall, in the aggregate, be limited to an amount equal to the Net Worth of the
Company. "NET WORTH OF THE COMPANY" means an amount equal to (i) the aggregate
value of the consolidated assets of the Retained Business less (ii) the
aggregate value of the consolidated liabilities of the Retained Business, each
as reflected on the books and records of the Company as of the most recent
quarterly period ended prior to the date of the consummation of the Offer.
(b) For a period of six years after the Effective Time, Parent shall use
reasonable efforts to cause to be maintained in effect the current policies of
directors and officers liability insurance maintained by the Company (provided
that Parent may substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
or related to facts or events which occurred at or before the Effective Time;
provided, that Parent shall not be obligated to make annual premium payments
for such insurance to the extent such premiums exceed 150% of the annual
premiums paid as of the date hereof by the Company for such insurance (the
"MAXIMUM AMOUNT"). If the amount of the annual premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, Parent and the
Surviving Corporation shall maintain the most advantageous policies of
directors, and officers' insurance obtainable for an annual premium equal to
the Maximum Amount.
(c) The provisions of this Section 6.14 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
SECTION 6.15 BOARD OF DIRECTORS OF PARENT. Upon the consummation of the
Offer or as soon as practicable thereafter, Parent shall use its best efforts
and take all reasonable steps to cause (a) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to be appointed
a member and Vice Chairman and ▇▇▇▇▇ ▇. ▇▇▇▇▇ to be appointed a member, of the
Board of Directors of Parent; and (b) the bylaws of Parent to be amended to
modify the eligibility requirements of directors to permit ▇▇. ▇▇▇▇▇▇▇▇ to
continue to be eligible to serve as a director through 2001, without prejudice
or commitment with respect to any further continuation of eligibility
thereafter.
SECTION 6.16 STANDSTILL PROVISIONS. The restrictions on Parent and its
affiliates contained in the Standstill Provisions (as defined in Section
6.2(a) hereof) (the "RESTRICTIONS") are hereby waived and Parent and Purchaser
are hereby released therefrom (a) as of and after the date hereof to the
extent necessary to permit Parent and Purchaser to comply with their
respective obligations and to enable Parent and Purchaser to exercise any of
their respective rights, under or as contemplated by this Agreement; and (b)
as of and after the termination of this Agreement (other than by the Company
pursuant to Section 8.1(f) hereof) if at such time or thereafter there is
proposed a Third Party Acquisition (as defined in Section 8.3(b) hereof);
provided, that the Restrictions shall not be waived under this Section 6.16(b)
with respect to any proposal by Parent, Purchaser and their affiliates to
acquire, directly or indirectly, both the Retained Business and all or
substantially all of the Spinco Business, whether by merger, consolidation or
otherwise, unless the proposed Third Party Acquisition also contemplates a
transaction or series of transactions in which both the Retained Business and
all or substantially all of the Spinco Business would be acquired, directly or
indirectly, by the Third Party or its affiliates.
SECTION 6.17 EFFECTIVENESS OF RIGHTS AGREEMENT. On or before January 10,
1996 the Company shall execute and deliver, and cause a person qualified to be
the Rights Agent under the Rights Agreement to execute and deliver, each of
the Rights Agreement and the Rights Amendment so that each shall be valid and
binding agreements of the Company.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) This Agreement shall have been adopted by the affirmative vote of the
stockholders of the Company by the requisite vote in accordance with
applicable Law, if required by applicable Law;
(b) No statute, rule, regulation, order, decree, or injunction shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Merger;
(c) Any waiting period applicable to the Merger under the Antitrust Laws
shall have terminated or expired and all approvals required under the
Antitrust Laws shall have been received;
(d) The Spin-Off shall have been consummated in all material respects; and
(e) The Offer shall not have been terminated in accordance with its terms
prior to the purchase of any Shares.
SECTION 7.2. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Parent and Purchaser contained in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time as if made at and as of such time; and
(b) Each of Parent and Purchaser shall have performed in all material
respects its obligations under this Agreement required to be performed by it
at or prior to the Effective Time pursuant to the terms hereof.
Parent and Purchaser will furnish the Company with such certificates and
other documents to evidence the fulfillment of the conditions set forth in
this Section 7.2 as the Company may reasonably request.
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER TO EFFECT THE
MERGER. The obligations of Parent and Purchaser to effect the Merger are
further subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as such time;
(b) The Company shall have delivered to Purchaser and (i) Bank of America,
Illinois (formerly known as Continental Bank, National Association), one or
more opinions of counsel acceptable to Bank of America, Illinois, stating that
the Merger complies with (A) Article IV of the Indenture dated as of January
15, 1992 between the Company and Continental Bank, National Association, as
trustee; and (B) Article Nine of the Indenture dated as of September 1, 1993
between the Company and Continental Bank, National Association, as trustee, as
supplemented by a First Supplemental Indenture dated as of June 1, 1994
between the Company and Continental Bank, National Association, as trustee;
and (ii) NationsBank of Georgia, National Association, an opinion of counsel
acceptable to NationsBank of Georgia, National Association, stating that the
Merger complies with Article Nine of the Indenture dated as of November 1,
1992 between the Company and NationsBank of Georgia, National Association, as
trustee (collectively, the "PUBLIC INDENTURE MERGER OPINIONS");
(c) The Company shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time pursuant to the terms hereof.
26
The Company will furnish Parent and Purchaser with such certificates and
other documents to evidence the fulfillment of the conditions set forth in
this Section 7.3 as Parent or Purchaser may reasonably request.
SECTION 7.4. EXCEPTION. The conditions set forth in Sections 7.2 and 7.3
hereof shall cease to be conditions to the obligations of any of the parties
hereto if Purchaser shall have accepted for payment and paid for Shares
validly tendered pursuant to the Offer or if Purchaser fails to accept for
payment any Shares pursuant to the Offer in violation of the terms thereof.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the Offer and
the Merger may be abandoned at any time (notwithstanding approval of the
Merger by the stockholders of the Company) prior to the Effective Time:
(a) by mutual written consent of Parent, Purchaser and the Company;
(b) by Parent, Purchaser or the Company if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the consummation of the
Offer, the Spin-Off or the Merger and such order, decree, ruling or other
action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance which
would result in a failure to satisfy any of the conditions set forth in
Exhibit B hereto, Purchaser shall have (i) failed to commence the Offer within
the time required by Regulation 14D under the Exchange Act, (ii) terminated
the Offer or (iii) failed to pay for Shares pursuant to the Offer prior to
June 30, 1996;
(d) by the Company if (i) there shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of the Company and
Purchaser shall have (A) failed to commence the Offer within the time required
by Regulation 14D under the Exchange Act, (B) terminated the Offer or (C)
failed to pay for Shares pursuant to the Offer prior to June 30, 1996 or (ii)
prior to the purchase of Shares pursuant to the Offer, a Third Party shall
have made a bona fide offer that the Board of Directors of the Company by a
majority vote determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel, is a Higher Offer (as defined in Section 8.3(b) hereof); provided,
that such termination under this clause (ii) shall not be effective until
payment of the fee required by Section 8.3(a) hereof;
(e) by Parent or Purchaser prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation or warranty
on the part of the Company or Spinco under either this Agreement or the
Distribution Agreement having a Material Adverse Effect or materially
adversely affecting (or materially delaying) the consummation of the Offer,
(ii) there shall have been a breach of any covenant or agreement on the part
of the Company or Spinco under either this Agreement or the Distribution
Agreement resulting in a Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Offer, which shall
not have been cured prior to the earlier of (A) 10 days following notice of
such breach and (B) two Business Days prior to the date on which the Offer
expires, (iii) the Company shall engage in Active Negotiations (as defined in
Section 8.3(b) hereof) with a Third Party with respect to a Third Party
Acquisition (as defined in Section 8.3(b) hereof), (iv) the Board of Directors
of the Company shall have withdrawn or modified (including by amendment of
Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, the Spin-Off, the Merger, this Agreement or the
Distribution Agreement, shall have recommended to the Company's stockholders
another offer, shall have authorized the redemption of any Rights (whether or
not in accordance with Section 6.1(k) hereof) after the Company's receipt of
an Acquisition Proposal or shall have adopted any resolution to effect any of
the foregoing or (v) there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer at least two-thirds of the
Shares, determined on a fully diluted
27
basis, and on or prior to such date an entity or group (other than Parent or
Purchaser) shall have made and not withdrawn a proposal with respect to a
Third Party Acquisition; or
(f) by the Company if (i) there shall have been a breach of any
representation or warranty in this Agreement or the Distribution Agreement on
the part of Parent or Purchaser which materially adversely affects (or
materially delays) the consummation of the Offer or (ii) there shall have been
a material breach of any covenant or agreement in this Agreement or the
Distribution Agreement on the part of Parent or Purchaser which materially
adversely affects (or materially delays) the consummation of the Offer which
shall not have been cured prior to the earliest of (A) 10 days following
notice of such breach and (B) two Business Days prior to the date on which the
Offer expires.
SECTION 8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without any Liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 8.2 and Sections 6.3(b), 6.14, 8.3, 9.3
and 9.11 hereof. Nothing contained in this Section 8.2 shall relieve any party
from Liability for any breach of this Agreement.
SECTION 8.3 FEES AND EXPENSES.
(a) If:
(i) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(ii), (iii) or (v) hereof and within 12 months thereafter the Company
enters into an agreement with respect to a Third Party Acquisition, or a
Third Party Acquisition occurs, involving any party (or any affiliate
thereof) (A) with whom the Company (or its agents) had negotiations with a
view to a Third Party Acquisition, (B) to whom the Company (or its agents)
furnished information with a view to a Third Party Acquisition or (C) who
had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (A), (B) and (C) after the date
hereof and prior to such termination; or
(ii) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(iii) or (v) hereof and, within 12 months thereafter, a Third Party
Acquisition shall occur involving a Higher Offer; or
(iii) Parent or Purchaser terminates this Agreement pursuant to Section
8.1(e)(iv) hereof; or
(iv) the Company terminates this Agreement pursuant to Section 8.1(d)(ii)
hereof;
then, in each case, the Company shall pay to Parent, within one Business Day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with such determination pursuant to Section
8.1(d)(ii), a fee, in cash, of $175 million; provided, that the Company in no
event shall be obligated to pay more than one such $175 million fee with
respect to all such agreements and occurrences and such termination.
(b) "ACTIVE NEGOTIATIONS" means negotiations with a Third Party that has
proposed a Third Party Acquisition or made an Acquisition Proposal, or with
such Third Party's agents or representatives with respect to the substance of
such Third Party Acquisition or Acquisition Proposal, but will not include (x)
communications in connection with, or constituting, the furnishing of
information pursuant to a confidentiality agreement as contemplated by Section
6.2(a) hereof or (y) communications that include no more than an explicit bona
fide rejection of such proposal and a very brief statement of the reasons
therefor. "THIRD PARTY ACQUISITION" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger or otherwise by
any person (which includes for these purposes a "person" as defined in Section
13(d)(3) of the Exchange Act) or entity other than Parent, Purchaser or any
affiliate thereof (a "THIRD PARTY"); (ii) the acquisition by a Third Party of
more than 30% of the total Assets of the Company and its Subsidiaries, taken
as a whole; (iii) the acquisition by a Third Party of 30% or more of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation
or the declaration or payment of an extraordinary dividend; or (v) the
purchase by the Company or any of its Subsidiaries of more than 20% of the
outstanding Shares. "HIGHER OFFER" means any Third Party Acquisition which
reflects a higher value for the Shares than the aggregate value being provided
28
pursuant to the transactions contemplated by this Agreement and the Ancillary
Agreements including, without limitation, the shares of Spinco Common Stock
distributed in the Spin-Off. Prior to the termination of this Agreement by the
Company pursuant to Section 8.1(d)(ii) hereof, the Board of Directors shall
provide a reasonable opportunity to a nationally recognized investment banking
firm selected by Parent, Purchaser or their designee (the "IB") to evaluate
the proposed Third Party Acquisition, to determine whether it is a Higher
Offer and to advise the Board of Directors of the Company of the basis for and
results of its determination. The Company agrees to cooperate and cause the
Company's financial advisors to cooperate with the IB (including, without
limitation, providing the IB with full access to all such information which
the ▇▇ ▇▇▇▇▇ relevant and which the IB agrees to keep confidential) to the
extent reasonably requested by the IB. The fees and expenses incurred by the
IB shall be paid by Parent. Nothing contained in this Section 8.3(b) shall
prevent Parent and Purchaser from challenging, by injunction or otherwise, the
termination or attempted termination of this Agreement pursuant to Section
8.3(d)(ii) hereof.
(c) If this Agreement is terminated pursuant to Sections 8.1(e)(i) or
8.1(e)(ii) (the "DESIGNATED TERMINATION PROVISIONS") or Parent is entitled to
receive the $175 million fee under Section 8.3(a) hereof, then the Company
shall reimburse Parent, Purchaser and their affiliates (not later than one
Business Day after submission of statements therefore) for actual documented
out-of-pocket fees and expenses, not to exceed $45 million, actually incurred
by any of them or on their behalf in connection with the Offer, the proposed
Merger and the proposed Spin-Off and the transactions contemplated by this
Agreement and the Distribution Agreement (including, without limitation, fees
payable to financing sources, investment bankers (including to the IB),
counsel to any of the foregoing and Accountants), whether incurred prior to or
after the date hereof. The Company shall in any event pay the amount requested
(not to exceed $45 million) within one Business Day of such request, subject
to the Company's right to demand a return of any portion as to which invoices
are not received in due course.
(d) Except as specifically provided in this Section 8.3 and except as
otherwise specifically provided in the Distribution Agreement, each party
shall bear its own respective expenses incurred in connection with this
Agreement, the Offer and the Merger, including, without limitation, the
preparation, execution and performance of this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby, and all fees
and expenses of investment bankers, finders, brokers, agents, representatives,
counsel and accountants.
(e) Notwithstanding anything to the contrary contained in this Agreement,
upon payment by the Company of the amounts referred to in this Section 8.3(a),
the Company shall be released from all Liability hereunder, including any
Liability for any claims by Parent, Purchaser or any of their affiliates based
upon or arising out of any breach of this Agreement or any Ancillary
Agreement. The parties agree that reimbursement of Parent's expenses pursuant
to Section 8.3(c) hereof in connection with a termination of this Agreement
pursuant to any of the Designated Termination Provisions does not constitute
the payment of liquidated damages and, except to the extent of the payment
thereunder, shall not limit the Liability of the Company for any claims by
Parent, Purchaser or any of their affiliates based upon or arising out of any
breach of this Agreement or any Ancillary Agreement.
SECTION 8.4. AMENDMENT. This Agreement may be amended by action taken by the
Company, Parent and Purchaser at any time before or after adoption of the
Merger by the stockholders of the Company, if any; provided that (a) in the
event that any persons designated by Parent pursuant to Section 1.4 hereof
(such directors are hereinafter referred to as the "DESIGNATED DIRECTORS")
constitute in their entirety a majority of the Company's Board of Directors,
no amendment shall be made which decreases the cash price per Share or which
adversely affects the rights of the Company's stockholders hereunder without
the approval of a majority of the Continuing Directors (as hereafter defined)
if at the time there shall be any Continuing Directors and (b) after the date
of adoption of the Merger by the stockholders of the Company, no amendment
shall be made which decreases the cash price per Share or which adversely
affects the rights of the Company's stockholders hereunder without the
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties. For purposes hereof,
the term "CONTINUING DIRECTOR" shall mean (a) any member of the Board of
Directors of the Company as of the date hereof, (b) any member of the Board of
29
Directors of the Company who is unaffiliated with, and not a Designated
Director or other nominee of, Parent or Purchaser or their respective
Subsidiaries, and (c) any successor of a Continuing Director who is (i)
unaffiliated with, and not a Designated Director or other nominee of, Parent
or Purchaser or their respective Subsidiaries and (ii) recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on the
Board of Directors.
SECTION 8.5. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties
hereto contained herein; provided that (x) in the event that any Designated
Directors constitute in their entirety a majority of the Company's Board of
Directors, no extensions or waivers shall be made which adversely affect the
rights of the Company's stockholders hereunder without the approval of a
majority of the Continuing Directors if at the time there shall be any
Continuing Directors and (y) after the date of adoption of the Merger by the
stockholders of the Company, no extensions or waivers shall be made which
adversely affect the rights of the Company's stockholders hereunder without
the approval of such stockholders. Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SURVIVAL. Except as otherwise expressly set forth in the
Distribution Agreement, the representations, warranties, covenants and
agreements made herein shall not survive beyond the Effective Time; provided,
that the covenants and agreements contained in Sections 2.7, 2.10, 3.1, 3.2,
6.3(b), 6.4, 6.5, 6.6, 6.8, 6.9, 6.10, 6.14, 8.2, 8.3, 8.4, 8.5, 9.3, 9.5 and
9.11 hereof shall survive beyond the Effective Time without limitation.
SECTION 9.2. ENTIRE AGREEMENT. Except for the provisions of the
Confidentiality Agreement which shall continue in full force and effect, this
Agreement (including the schedules and exhibits and the agreements and other
documents referred to herein, including, without limitation, the Ancillary
Agreements) constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all other prior negotiations,
commitments, agreements and understandings, both written and oral, between the
parties or any of them with respect to the subject matter hereof.
SECTION 9.3. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York (regardless of
the Laws that might otherwise govern under applicable principles of conflicts
Law) as to all matters, including, without limitation, matters of validity,
construction, effect, performance and remedies.
SECTION 9.4. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given upon (a) transmitter's confirmation of
a receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
Business Days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Parent or Purchaser, to:
Lockheed ▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
30
with a copy to:
O'Melveny & ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to the Company, to:
Loral Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
SECTION 9.5. SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either party (whether by operation
of law or otherwise) without the prior written consent of the other party;
provided, that Parent may assign its rights and obligations hereunder or those
of Purchaser to Parent or any subsidiary of Parent, and Spinco may assign its
rights and obligations hereunder to any successor to Spinco, but in each case
no such assignment shall relieve Parent, Purchaser or Spinco, as the case may
be, of its obligations hereunder. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except for Sections 2.7,
2.10, 6.8 and 6.10 hereof nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
SECTION 9.7. INTERPRETATION. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. Except as
31
otherwise expressly provided in this Agreement, as used in this Agreement, the
term "person" shall have the meaning assigned to that term in the Distribution
Agreement.
SECTION 9.8. SCHEDULES. The Disclosure Schedule shall be construed with and
as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
SECTION 9.9. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
SECTION 9.10. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
and agrees that in the event of any breach of this Agreement, each non-
breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties
hereto (a) will waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addition to any
other remedy to which they may be entitled at law or in equity, to compel
specific performance of this Agreement in any action instituted in any state
or federal court sitting in New York. The parties hereto consent to personal
jurisdiction in any such action brought in any state or federal court sitting
in New York and to service of process upon it in the manner set forth in
Section 9.4 hereof.
SECTION 9.11. BROKERAGE FEES AND COMMISSIONS. Except as set forth in
Sections 4.18 and 5.6, the Company hereby represents and warrants to Parent
with respect to the Company, and Parent hereby represents and warrants to the
Company with respect to Parent and Purchaser, that no person or entity is
entitled to receive from the Company or Parent and Purchaser, respectively,
any investment banking, brokerage or finder's fee or fees for financial
consulting or advisory services in connection with this Agreement and Plan of
Merger or any of the transactions contemplated hereby.
[The remainder of this page has been left blank intentionally.]
32
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan of
Merger to be executed on its behalf by its officers thereunto duly authorized,
all as of the day and year first above written.
Loral Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
Lockheed ▇▇▇▇▇▇ Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
LAC Acquisition Corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Vice President
33
EXHIBITS
Exhibit A............................... Tax Sharing Agreement
Exhibit B............................... Conditions to Offer
Exhibit C............................... Form of Employment Protection Agreement
Exhibit D............................... Employment Protection Plan
Exhibit E............................... Supplemental Severance Program
EXHIBIT A
Form of Tax Sharing Agreement, dated as of , 1996 by and among Loral
Corporation, Loral Telecommunications Acquisition, Inc., Lockheed ▇▇▇▇▇▇
Corporation and LAC Acquisition Corporation--Filed as Exhibit (C)(5) to the
Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT B
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or pay for, and may delay the acceptance for
payment of (whether or not the Shares have theretofore been accepted for
payment), or the payment for, any Shares tendered, and may terminate or extend
the Offer and not accept for payment any Shares, if:
(i) immediately prior to the expiration of the Offer (as extended in
accordance with the terms of the Offer), (A) any applicable waiting period
under the Antitrust Laws shall not have expired or been terminated or any
approvals required under the EC Merger Regulations shall not have been
received, (B) the Record Date for the distribution of shares of Spinco
common stock to stockholders of the Company pursuant to the Distribution
Agreement shall not have been set by the Company's Board of Directors, (C)
the Public Indenture Merger Opinions shall not have been delivered to
Purchaser and the applicable Public Indenture trustees, or (D) the number
of Shares validly tendered and not withdrawn when added to the Shares then
beneficially owned by Parent does not constitute two-thirds of the Shares
then outstanding and represent two-thirds of the voting power of the Shares
then outstanding on a fully diluted basis on the date of purchase; OR
(ii) on or after the date of this Agreement and prior to the acceptance
for payment of Shares, any of the following conditions exist:
(a) any of the representations or warranties of the Company contained
in the Merger Agreement shall not have been true and correct at the
date when made or (except for those representations and warranties made
as of a particular date which need only be true and correct as of such
date) shall cease to be true and correct at any time prior to
consummation of the Offer, except where the failure to be so true and
correct would not, individually or in the aggregate, have a Material
Adverse Effect; provided, that if any such failure to be so true and
correct is curable by the Company through the exercise of its
reasonable efforts, then Purchaser may not terminate the Offer under
this subsection (a) until 10 Business Days after written notice thereof
has been given to the Company by Parent or Purchaser and unless at such
time the matter has not been cured; or
(b) any of the representations or warranties of Spinco contained in
the Distribution Agreement shall not have been true and correct at the
date when made or (except for those representations and warranties made
as of a particular date which need only be true and correct as of such
date) shall cease to be true and correct at any time prior to
consummation of the Offer, except where the failure to be so true and
correct would not individually or in the aggregate, have a Material
Adverse Effect; provided that, if any such failure to be so true and
correct is curable by Spinco through the exercise of its reasonable
efforts, then Purchaser may not terminate the Offer under this
subsection (b) until 10 Business Days after written notice thereof has
been given to the Company by Parent or Purchaser and unless at such
time the matter has not been cured; or
(c) the Company shall have breached any of its covenants or
agreements contained in the Merger Agreement, except for any such
breaches that, individually or in the aggregate, would not have a
Material Adverse Effect; provided that, if any such breach is curable
by the Company through the exercise of its reasonable efforts, then
Purchaser may not terminate the Offer under this subsection (c) until
10 Business Days after written notice thereof has been given to the
Company by Parent or Purchaser and unless at such time the breach has
not been cured; or
(d) Spinco or the Company shall have breached any of its covenants or
agreements contained in the Distribution Agreement, except for any such
breaches that, individually or in the aggregate, would not have a
Material Adverse Effect; provided, that if any such breach is curable
by Spinco or the Company through the exercise of its reasonable
efforts, then Purchaser may not terminate the Offer under this
subsection (d) until 10 Business Days after written notice thereof has
been given to the Company or Spinco, as the case may be, by Parent or
Purchaser and unless at such time the breach has not been cured; or
B-1
(e) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, enacted, entered, enforced or deemed
applicable to the Offer, or any other legal action shall have been
taken, by any state, federal or foreign government or governmental
authority or by any U.S. court, other than the routine application to
the Offer, the Merger or the Spin-Off of waiting periods under the HSR
Act, that presents a substantial likelihood of (1) making the
acceptance for payment of, or the payment for, some or all of the
Shares illegal or otherwise prohibiting, restricting or significantly
delaying consummation of the Offer, (2) imposing material limitations
on the ability of Purchaser or Parent to acquire or hold or to exercise
any rights of ownership of the Shares, or effectively to manage or
control the Retained Business, the Company, the Retained Subsidiaries,
Purchaser or any of their respective affiliates, which individually or
in the aggregate could constitute a Significant Adverse Effect; or
(f) any fact or circumstance exists or shall have occurred that has a
Material Adverse Effect; or
(g) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (2) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory), (3) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States and having a Material Adverse
Effect or materially adversely affecting (or materially delaying) the
consummation of the Offer, (4) any limitation or proposed limitation
(whether or not mandatory) by any U.S. governmental authority or
agency, or any other event, that materially adversely affects generally
the extension of credit by banks or other financial institutions, (5)
from the date of the Merger Agreement through the date of termination
or expiration of the Offer, a decline of at least 25% in the Standard &
Poor's 500 Index or (6) in the case of any of the situations described
in clauses (1) through (5) inclusive, existing at the date of the
commencement of the Offer, a material acceleration, escalation or
worsening thereof; or
(h) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
affiliates, or any group of which any of them is a member shall have
acquired beneficial ownership of more than 20% of the outstanding
Shares or shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any Shares or merger, consolidation or other
business combination with or involving the Company or any of its
Subsidiaries; or
(i) prior to the purchase of Shares pursuant to the Offer, the Board
of Directors of the Company shall have withdrawn or modified (including
by amendment of the Schedule 14D-9) in a manner adverse to Purchaser
its approval or recommendation of the Offer, this Agreement, the Merger
or the Spin-Off, shall have recommended to the Company's stockholders
another offer, shall have authorized the redemption of the Rights
(whether or not in accordance with Section 6.1(k) hereof) after the
Company has received an Acquisition Proposal or shall have adopted any
resolution to effect any of the foregoing which, in the sole judgment
of Purchaser in any such case, and regardless of the circumstances
(including any action or omission by Purchaser) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for
payment; or
(j) the Merger Agreement shall have been terminated in accordance
with its terms; or
(k) the Record Date shall not have occurred; or
(l) the conditions to the Spin-Off shall not have been satisfied or
waived; OR
(iii) Parent and Purchaser shall not have secured financing on terms
reasonably acceptable to Parent to finance the purchase of all of the
Shares at the Merger Price and to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements; provided, that the
condition set forth in this clause (iii) shall be a condition to
Purchaser's obligations with respect to the Offer only if (A) the Offer has
not been consummated on or before ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) Parent has not taken
any significant action outside of the ordinary course of business, which
prevents Parent from obtaining sufficient financing to purchase all of the
Shares at the Merger Price and to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements and (C) Parent and Purchaser
are in substantial compliance with their respective material obligations
under Sections 6.4, 6.5 and 6.6 of the Merger Agreement.
B-2
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
conditions, or may be waived by Purchaser in whole or in part at any time and
from time to time in its sole discretion; provided, that the condition set
forth in clause (ii)(j) above may be waived or modified only by the mutual
consent of Purchaser and the Company.
B-3
EXHIBIT C
Form of Employment Protection Agreement of the Company--Filed as Exhibit (C)
(6) to the Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT D
Employment Protection Plan of the Company--Filed as Exhibit (C)(7) to the
Tender Offer Statement on Schedule 14D-1 dated January 12, 1996.
EXHIBIT E
Supplemental Severance Program of the Company--Filed as Exhibit (C)(8) to the
Tender Offer Statement on Schedule 14D-1 dated on January 12, 1996.