EXHIBIT 7(C)
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AGREEMENT AND PLAN OF MERGER
Dated as of December 10, 1999
Among
AT&T CORP.,
B-GROUP MERGER CORP.,
LIBERTY MEDIA CORPORATION
And
THE ▇▇▇▇-▇▇ CORPORATION
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND CONSTRUCTION........................................................................ 1
1.1 Certain Definitions.................................................................................. 1
1.2 Additional Definitions............................................................................... 7
1.3 Terms Generally...................................................................................... 9
ARTICLE II THE MERGER AND RELATED MATTERS..................................................................... 9
2.1 The Reclassification................................................................................. 9
2.2 The Merger........................................................................................... 10
2.3 Closing.............................................................................................. 11
2.4 Conversion of Securities............................................................................. 13
2.5 Exchange of Shares................................................................................... 14
2.6 Treatment of Company Stock Options................................................................... 18
2.7 Treatment of Convertible Debentures.................................................................. 19
2.8 Post-Merger Restructuring Transactions............................................................... 20
2.9 Convertible Debt Facility............................................................................ 20
2.10 Changes in Class A Liberty Group Stock............................................................... 20
ARTICLE III CERTAIN ACTIONS................................................................................... 21
3.1 Stockholder Meeting.................................................................................. 21
3.2 Proxy Statements and Other Commission Filing......................................................... 21
3.3 Identification of Rule 145 Affiliates................................................................ 23
3.4 State Takeover Statutes.............................................................................. 23
3.5 Reasonable Efforts................................................................................... 23
3.6 Stock and Other Plans................................................................................ 25
3.7 Expenses............................................................................................. 25
3.8 Acquisition of Company Stock......................................................................... 26
3.9 Compensation......................................................................................... 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 28
4.1 Organization and Qualification....................................................................... 28
4.2 Authorization and Validity of Agreement.............................................................. 29
4.3 Capitalization....................................................................................... 29
4.4 Reports and Financial Statements..................................................................... 31
4.5 No Approvals or Notices Required; No Conflict with Instruments....................................... 32
4.6 Absence of Certain Changes or Events................................................................. 34
4.7 Information Supplied................................................................................. 34
4.8 Legal Proceedings.................................................................................... 35
4.9 Licenses; Compliance with Regulatory Requirement..................................................... 35
4.10 Brokers or Finders................................................................................... 36
4.11 Tax Matters.......................................................................................... 36
4.12 Employee Matters..................................................................................... 37
4.13 Fairness Opinion..................................................................................... 40
4.14 Recommendation of Company Board...................................................................... 40
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4.15 Vote Required; Consents Under Employee Plans......................................................... 40
4.16 Adequacy of Properties; Intangible Property.......................................................... 40
4.17 Transactions with Affiliates and Certain Agreements.................................................. 41
4.18 No Investment Company................................................................................ 41
4.19 No Excise Tax Obligations............................................................................ 41
4.20 Full Disclosure...................................................................................... 42
4.21 British Telecommunications........................................................................... 42
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................................................ 42
5.1 Organization and Qualification....................................................................... 42
5.2 Authorization and Validity of Agreement.............................................................. 42
5.3 Capitalization of Parent............................................................................. 43
5.4 Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub................................... 43
5.5 Ownership of Company Stock........................................................................... 44
5.6 Information Supplied................................................................................. 44
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF LIBERTY.......................................................... 44
6.1 Organization and Qualification....................................................................... 44
6.2 Authorization and Validity of Agreement.............................................................. 45
6.3 Ownership of Company Stock........................................................................... 45
6.4 Information Supplied................................................................................. 45
6.5 Liberty Group Information............................................................................ 46
6.6 No Approvals or Notices Required..................................................................... 47
6.7 Absence of Certain Changes or Events................................................................. 47
6.8 Legal Proceedings.................................................................................... 48
6.9 No Other Merger Agreements........................................................................... 48
ARTICLE VII CERTAIN AGREEMENTS AND TRANSACTIONS PRIOR TO CLOSING.............................................. 48
7.1 Access to Information Concerning Properties and Records.............................................. 48
7.2 Confidentiality...................................................................................... 48
7.3 Public Announcements................................................................................. 50
7.4 Conduct of the Company's Business Pending the Effective Time......................................... 50
7.5 No Solicitation...................................................................................... 52
7.6 Notification of Certain Matters...................................................................... 54
7.7 Defense of Litigation................................................................................ 54
7.8 Additional Financial Statements...................................................................... 54
7.9 Actions by Merger Sub................................................................................ 55
7.10 Listing.............................................................................................. 55
7.11 Certain Agreements................................................................................... 55
7.12 Certificates as to Indebtedness...................................................................... 55
7.13 Indemnification of Directors and Officers; Insurance................................................. 55
7.14 Tax Matters.......................................................................................... 57
7.15 Certain Obligations of Liberty....................................................................... 58
ARTICLE VIII CONDITIONS PRECEDENT............................................................................. 59
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8.1 Conditions Precedent to the Obligations of Parent, Liberty, Merger Sub and the Company............... 59
8.2 Conditions Precedent to the Obligations of Parent and Merger Sub for the Benefit of Liberty.......... 59
8.3 Conditions Precedent to the Obligations of Parent and Merger Sub for the Benefit of Parent........... 61
8.4 Conditions Precedent to the Obligations of the Company............................................... 64
ARTICLE IX TERMINATION........................................................................................ 66
9.1 Termination and Abandonment.......................................................................... 66
9.2 Termination Fee; Effect of Termination............................................................... 67
9.3 No Employment........................................................................................ 67
ARTICLE X MISCELLANEOUS....................................................................................... 67
10.1 Certain Tax Positions................................................................................ 67
10.2 No Waiver of Representations and Warranties; Survival................................................ 68
10.3 Notices.............................................................................................. 68
10.4 Entire Agreement..................................................................................... 70
10.5 Assignment; Binding Effect; Benefit.................................................................. 70
10.6 Amendment............................................................................................ 71
10.7 Extension; Waiver.................................................................................... 71
10.8 Headings............................................................................................. 71
10.9 Counterparts......................................................................................... 71
10.10 Applicable Law....................................................................................... 72
10.11 Enforcement.......................................................................................... 72
10.12 Disclosure Schedule.................................................................................. 72
10.13 Parent Transactions.................................................................................. 72
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of
this 10th day of December, 1999, by and among AT&T Corp. ("Parent"), B-Group
Merger Corp., a Delaware corporation and wholly-owned subsidiary of Parent
("Merger Sub"), Liberty Media Corporation ("Liberty"), and The ▇▇▇▇-▇▇
Corporation, a Delaware corporation (the "Company").
WHEREAS the parties wish to provide for the terms and conditions upon
which Parent will acquire stock in the Company possessing not less than 80% of
the voting power of the Company (on a fully-diluted basis) by means of a merger
of Merger Sub, a direct wholly-owned subsidiary of Parent, with and into the
Company (the "Merger"); and
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger qualify as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereby agree as follows
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Certain Definitions. As used in this Agreement, the following terms
have the corresponding meanings:
An "Affiliate" of any Person means any other Person that, directly or
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indirectly, controls or is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Company Plan). A Person shall be deemed to "control," be
"controlled by" or be "under common control with" any other Person if such other
Person possesses, directly or indirectly, power to direct or cause the direction
of the management or policies of such Person whether through the ownership of
voting securities or partnership interests, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this Agreement, neither Parent
nor any of its Affiliates shall be deemed to be an Affiliate of Liberty Media or
any of its Affiliates, and neither Liberty Media nor any entity that is a member
of the Liberty Media Group nor any of the Affiliates of any of the foregoing
shall be deemed to be an Affiliate of Parent or any of its Affiliates.
"Agreement" means this Agreement and Plan of Merger, including all
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Exhibits and Schedules hereto.
"Class A Liberty Group Stock" means the Class A Liberty Media Group
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Common Stock, par value $1.00 per share, of Parent.
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"Class B Liberty Group Stock" means the Class B Liberty Media Group
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Common Stock, par value $1.00 per share, of Parent.
"Closing" means the consummation of the transactions contemplated by
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this Agreement.
"Closing Date" means the date on which the Closing occurs pursuant to
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Section 2.3.
"Commission" means the Securities and Exchange Commission.
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"Common Stock Group" has the meaning given to such term in the Parent
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Charter.
"Company Class A Stock" means the Class A Common Stock, par value $.01
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per share, of the Company, after giving effect to the Reclassification.
"Company Class B Stock" means the Class B Common Stock, par value $.01
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per share, of the Company, after giving effect to the Reclassification.
"Company Commission Filings" means and includes all reports,
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registration statements, definitive proxy statements and other documents (in
each case together with all amendments thereto) filed or to be filed by the
Company with the Commission since September 1, 1993.
"Company Stock" means, prior to the Reclassification, the Old Class A
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Common Stock and the Old Class B Common Stock, collectively, and, from and after
the Reclassification, the Company Class A Stock and the Company Class B Stock,
collectively.
"Contract" means and includes any note, bond, indenture, mortgage,
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deed of trust, lease, franchise, permit, authorization, license, contract,
instrument, employee benefit plan or practice, or other agreement, obligation,
commitment or concession of any nature.
"Contribution Agreement" means the Contribution Agreement dated as of
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March 9, 1999, among Liberty, Liberty Media Management LLC, Liberty Media Group
LLC and Liberty Ventures Group LLC.
"Convertible Debentures" means the 5% Convertible Debentures issued by
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the Company as listed on Schedule 4.3.
"Common Stock Group" has the meaning given to such term in the Parent
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Charter.
"Covered Entity" has the meaning ascribed thereto in the Parent
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Charter.
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"Disclosure Schedule" means the Schedules constituting a part of this
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Agreement as contemplated by Article IV, copies of which have been delivered to
Parent and Liberty, on or prior to the date hereof.
"Effective Time" means the time when the Merger becomes effective
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under applicable law.
"Exchange Act" means the Securities Exchange Act of 1934, and the
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rules and regulations thereunder.
"GAAP" means generally accepted accounting principles in the United
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States as in effect from time to time.
"Governmental Entity" means and includes any court, arbitrators,
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administrative or other governmental department, agency, commission, authority
or instrumentality, domestic or foreign.
"▇▇▇▇▇▇▇▇▇" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
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"▇▇▇▇-▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
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Act of 1976, and the rules and regulations thereunder.
"Inter-Group Agreement" shall mean the Inter-Group Agreement, dated as
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of March 9, 1999, as amended, among Parent, on the one hand, and Liberty,
Liberty Media Group LLC and each Covered Entity (as defined therein), on the
other hand.
"Inter-Group Supplement" shall mean the Fifth Supplement to
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Inter-Group Agreement between and among Parent, on the one hand, and Liberty,
Liberty Media Group LLC and each Covered Entity (as defined therein), on the
other hand, dated as of the date hereof.
"Letter of Intent" means the letter of intent dated July 30, 1999,
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among Liberty, the Company, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
"Liberty Affiliate", "Affiliate of Liberty" and similar phrases means
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Liberty, each Covered Entity, each member of the Liberty Media Group, and each
subsidiary of Liberty, any member of the Liberty Media Group or a Covered Entity
and from and after the Closing Date, the Surviving Corporation.
"Liberty Group Information" means the information regarding the
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Liberty Media Group described in Section 6.5.
"Liberty Material Adverse Effect" means (i) a material adverse effect
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on the transactions contemplated hereby (including a material adverse effect on
the ability of Liberty to perform its obligations hereunder) or (ii) an adverse
effect on the business, assets, liabilities,
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operations, results of operations, or financial condition of the Liberty Media
Group that is material to the Liberty Media Group taken as a whole.
"Liberty Media Group" has the meaning given to such term in the Parent
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Charter and shall include Ranger Acquisition Corp., A-Group Merger Corp.,
C-Group Merger Corp., D-Group Merger Corp., and each of their respective
Subsidiaries and successors.
"Lien" means any security interest, mortgage, pledge, hypothecation,
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charge, claim, option, right to acquire, adverse interest, assignment, deposit
arrangement, encumbrance, restriction, statutory or other lien, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" means (i) a material adverse effect on the
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transactions contemplated hereby (including a material adverse effect on the
ability of any party hereto to consummate such transactions or perform its
material obligations hereunder) or (ii) an adverse effect on the business,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company or any subsidiary of the Company (or of
the Surviving Corporation or any subsidiary of the Surviving Corporation) that
is material to the Company and its subsidiaries taken as a whole (or the
Surviving Corporation and its subsidiaries taken as a whole, as the case may
be), except to the extent that any such effect shall apply to, or be experienced
by, the post-production industry in general. Without limiting the generality of
the foregoing, for purposes of Article IV hereof, an adverse effect shall be
deemed to be material for purposes of clause (ii) of this definition if it
involves an amount of $5,000,000 or more.
"Merger Consideration" means the Class A Liberty Group Stock into
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which shares of Company Class B Stock are converted pursuant to Section
2.4(a)(iii).
"NYSE" means The New York Stock Exchange.
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"Parent Adverse Effect" means any of (i) an effect which is adverse
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to, or burdensome on the business, assets, liabilities, condition (financial or
otherwise), results of operations, operations or prospects of any business of
Parent or its Subsidiaries being conducted on the date hereof (other than any
such effect which is insignificant in nature or consequence) or (ii) an adverse
effect on the relationship between Parent or any of its Subsidiaries and any
federal or state Governmental Entity having jurisdiction over any business of
Parent or its Subsidiaries or the operations or assets thereof (other than such
an effect which is insignificant in nature or consequence).
"Parent Charter" means the Amended Certificate of Incorporation of
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Parent.
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"Parent Common Stock" means the Common Stock, par value $1.00 per
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share, of Parent.
"Parent/Liberty Commission Filings" means and includes all reports,
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registration statements, definitive proxy statements and other documents (in
each case together with all amendments thereto) filed or to be filed by Parent
or Liberty with the Commission during the period from the effectiveness of the
acquisition by Parent of Tele-Communications, Inc., through the Closing Date, to
the extent (and only to the extent) that such documents include any financial
statements of, or narrative description (including management's discussion and
analysis) specifically regarding, the Liberty Media Group.
"Parent Material Adverse Effect" means (i) a material adverse effect
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on the transactions contemplated hereby (including a material adverse effect on
the ability of Parent and Merger Sub to perform their respective obligations
hereunder) or (ii) an adverse effect on the business, assets, liabilities,
operations, results of operations, or financial condition of Parent or any of
its subsidiaries that is material to the Parent and all of its subsidiaries
taken as a whole.
"Parent Transaction" means any merger, acquisition, business
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combination, stock repurchase, stock issuance or other transaction or business
opportunity, even if such Parent Transaction would materially interfere with the
transactions contemplated by this Agreement.
"Permitted Encumbrances" means the following Liens with respect to the
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properties and assets of the Company: (a) Liens for taxes, assessments or other
governmental charges or levies not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate proceedings and
for which adequate reserves shall have been set aside on the Company's books in
accordance with GAAP (to the extent required thereby); (b) Liens of carriers,
warehousemen, mechanics, materialmen and landlords incurred in the ordinary
course of business for sums not overdue or being contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on the Company's books in accordance with GAAP (to the extent required
thereby); (c) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; (d) purchase money security interests or Liens on
property acquired or held by the Company in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such property (provided
that any Lien permitted under clause (d) of this definition, and securing an
obligation in excess of $50,000 shall be disclosed in Section 4.16(a) of the
Disclosure Schedule) ; and (e) easements, restrictions and other minor defects
of title which are not, in the aggregate, material and which do not,
individually or in the aggregate, materially and adversely affect the value of
the property affected thereby.
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"Person" means an individual, partnership, corporation, limited
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liability company, trust, unincorporated organization, association, or joint
venture or a government, agency, political subdivision, or instrumentality
thereof.
"Post-Merger Restructuring Transactions" means each of the
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transactions described in paragraphs 1 through 3 of Exhibit 1.1.
"Restriction" means, with respect to any capital stock or other
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security, any voting or other trust or agreement, option, warrant, escrow
arrangement, proxy, buy-sell agreement, power of attorney or other Contract, any
law, rule, regulation, order, judgment or decree which, conditionally or
unconditionally, (i) grants to any Person the right to purchase or otherwise
acquire, or obligates any Person to sell or otherwise dispose of or issue, or
otherwise results or, whether upon the occurrence of any event or with notice or
lapse of time or both or otherwise, may result in any person acquiring, (A) any
of such capital stock or other security; (B) any of the proceeds of, or any
distributions paid or which are or may become payable with respect to, any of
such capital stock or other security; or (C) any interest in such capital stock
or other security or any such proceeds or distributions; (ii) restricts or,
whether upon the occurrence of any event or with notice or lapse of time or both
or otherwise, may restrict the transfer or voting of, or the exercise of any
rights or the enjoyment of any benefits arising by reason of ownership of, any
such capital stock or other security or any such proceeds or distributions; or
(iii) creates or, whether upon the occurrence of any event or with notice or
lapse of time or both or otherwise, may create a Lien or purported Lien
affecting such capital stock or other security, proceeds or distributions.
"Securities Act" means the Securities Act of 1933, and the rules and
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regulations thereunder.
"Sixth Tax Sharing Amendment" shall mean the Sixth Amendment to Tax
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Sharing Agreement, by and among Parent, Liberty, for itself and each member of
the Liberty Media Group, Tele-Communications, Inc., Liberty Ventures Group LLC,
Liberty Media Group LLC, TCI STARZ, Inc., TCI CT Holdings, Inc., and each
Covered Entity (as defined therein), dated as of the date hereof.
"Subsidiary," when used with respect to any Person, shall mean any
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corporation or other organization, whether incorporated or unincorporated, of
which such Person or any other Subsidiary of such Person is a general partner or
at least 50% of the securities or other interests having by their terms ordinary
voting power to elect at least 50% of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person, by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries. Notwithstanding the foregoing, for purposes of this Agreement,
Parent's Subsidiaries shall be deemed not to include Liberty or any entity that
is a member of the Liberty Media Group or any of the Affiliates of any of the
foregoing, whether or not they otherwise would be Subsidiaries of Parent under
the foregoing definition.
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"Surviving Corporation" means the Company as the Surviving Corporation
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after the Merger as provided in Section 2.2(a).
"Surviving Corporation Class A Stock" means the Class A Common Stock,
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par value $.01 per share, of the Surviving Corporation.
"Surviving Corporation Class B Stock" means the Class B Common Stock,
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par value $.01 per share, of the Surviving Corporation.
"Voting Agreement" means that Agreement, dated as of the date hereof,
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between Liberty and certain stockholders of the Company, substantially in the
form of Exhibit 7.11(i) attached hereto.
1.2 Additional Definitions. The following additional terms are used as
defined in the indicated Sections:
Defined Term Section Defined In
Applicable Period 7.5(b)
April 14 Letters 4.10
BAS 4.10
BT 4.21
Breaching party 3.7
Capital Budget 7.4(d)
Certificates 2.5(b)
Certificate of Merger 2.2(a)
Claim 7.13(a)
Code Preamble
Company Preamble
Company Board 3.1
Company Charter 3.1
Company Form 10-Q 4.4
Company Plans 4.12(a)
Company Stock Options 4.3(d)
Company Stock Plans 4.3(h)
Confidential Information 7.2
Convertible Debt Facility Agreement 2.9
Convertible Loans 2.9
Consolidated Returns 4.11
Designated Directors 2.2(e)
Disclosing Party 7.2
DGCL 2.1
Environmental and Health Laws 4.9
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Defined Term Section Defined In
ERISA 4.12(a)
ERISA Affiliate 4.12(a)
Excess Shares 2.5(f)
Exchange Agent 2.5(a)
Exchange Agent Agreement 2.5(a)
Exchange Fund 2.5(a)
Extraordinary Transaction 7.5
Fairness Opinion 4.13
Fractional Fund 2.5(f)
Governmental Consents and Filings 4.5(ii)
Indemnified Liabilities 7.13(a)
Indemnified Parties 7.13(a)
Injunction 3.5
IRS 4.11
Lazard 4.10
Licenses 4.9
Local Approvals 4.5(ii)
Merger Preamble
Merger Proposal 3.1
Merger Sub Preamble
Multiemployer Plan 4.12(b)
non-breaching party 3.7
Old Class A Common Stock 2.1
Old Class B Common Stock 2.1
Parent Preamble
Parent Preferred Stock 5.3
Party's Certificate 7.14
Parties' Certificates 7.14
Preliminary Proxy Statement 3.2(a)
Proxy Statement 3.2(a)
Receiving Party 7.2
Reclassification 2.1
Representatives 7.2
Rollover Debentures 2.7
Rollover Options 2.6(a)
Rule 145 Agreement 3.3
S-4 Registration Statement 3.2(a)
Special Meeting 3.1
Superior Proposal 7.5(b)
tax 4.11
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Defined Term Section Defined In
tax return 4.11
Termination Fee 9.2
Violation 4.5(iv)
Voting Debt 4.3(c)
1.3 Terms Generally. The definitions in Sections 1.1 and 1.2 apply
equally to both the singular and plural forms of the terms defined. Whenever the
context requires, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be construed as if followed by the words "without limitation". The words
"herein", "hereof" and "hereunder" and words of similar import refer to this
Agreement (including the Exhibits and Schedules) in its entirety and not to any
part hereof, unless the context otherwise requires. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context otherwise requires. Unless the context otherwise requires, any
references to any agreement or other instrument or statute or regulation are to
such agreement, instrument, statute or regulation as amended and supplemented
from time to time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall mean a calendar day or
number of calendar days. If any action or notice is to be taken or given on or
by a particular day, and such day is not a business day, then such action or
notice shall be deferred until, or may be taken or given on, the next business
day. As applied to Parent and its Subsidiaries, the phrases "as soon as
reasonably practicable," "as promptly as practicable" and similar phrases shall
mean "reasonably promptly under the circumstances, in light of the other burdens
on the time and attention of the directors, officers, employees and agents of
Parent and the relative benefits to Parent of this Agreement and such other
burdens."
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 The Reclassification. On or before the Closing Date, after the votes
required by Section 4.15 have been received and prior to the effectiveness of
the Merger, and subject to and upon the terms and conditions of this Agreement,
the Company shall cause the certificate of incorporation of the Company to be
duly amended in accordance with the Delaware General Corporate Law ("DGCL"), and
in a form reasonably acceptable to Parent and Liberty, to reclassify (the
"Reclassification") each share of the Class A Common Stock, par value $.01 per
share, of the Company as in effect on the date hereof (the "Old Class A Common
Stock") and each share of the Class B Common Stock, par value $.01 per share, of
the Company as in effect on the date hereof (the "Old Class B Common Stock"),
into (i) four-tenths of a share (0.4 shares) of Company Class A Stock and (ii)
six-tenths of a share (0.6 shares) of Company Class B Stock. The certificate of
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incorporation of the Company, as in effect immediately following the
Reclassification, shall provide (A) for the Company Class A Stock and the
Company Class B Stock to vote together as a single class on all matters
presented to the shareholders of the Company (except as otherwise required by
the DGCL), (B) for the Company Class A Stock and the Company Class B Stock to be
identical in all respects, except that holders of shares of Company Class A
Stock shall be entitled to ONE vote per share, and holders of shares of Company
Class B Stock shall be entitled to TEN votes per share, on all matters as to
which the shareholders of the Company may vote or act by written consent and (C)
for the elimination of certain sections of the Company's certificate of
incorporation, including, without limitation, Section 6 of Article 4 thereof. A
certificate of amendment to effect the Reclassification shall be filed with the
Delaware Secretary of State only if the Merger is approved by the requisite vote
of the stockholders of the Company and the Reclassification shall become
effective immediately prior to Effective Time.
2.2 The Merger.
(a) Merger; Effective Time. At the Effective Time, after the
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effectiveness of the Reclassification and subject to and upon the terms and
conditions of this Agreement, Merger Sub shall be merged with and into the
Company in accordance with the provisions of the DGCL (including, without
limitation, Section 103 of the DGCL), the separate corporate existence of Merger
Sub shall cease, and the Company shall continue as the surviving corporation.
The Effective Time shall occur upon the filing with the Delaware Secretary of
State of a certificate of merger (the "Certificate of Merger") substantially in
the form of Exhibit 2.2(a) and executed in accordance with the applicable
provisions of the DGCL, or at such later time as may be agreed to by Parent,
Liberty and the Company and specified in the Certificate of Merger. Provided
that this Agreement has not been terminated pursuant to Article IX, the parties
will cause the Certificate of Merger to be filed with the Delaware Secretary of
State on the Closing Date or as soon as practicable after the Closing.
(b) Effects of the Merger. The Merger shall have the effects set
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forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation. If, at any time after the Effective Time, the Surviving
Corporation considers or is advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties, or
assets of either the Company or Merger Sub, or otherwise to carry out the intent
and purposes of this Agreement, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of each of the Company and Merger Sub, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of the Company and Merger Sub, all such other actions and things as the board of
directors of the Surviving Corporation may determine to be necessary or
desirable to vest, perfect or confirm any and all right, title and interest
10
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out the intent and purposes of this Agreement.
(c) Certificate of Incorporation of Surviving Corporation. The
-----------------------------------------------------
Certificate of Incorporation of the Company in effect immediately prior to the
Effective Time shall be amended by virtue of the Merger, so as to read in its
entirety in the form set forth in Exhibit 2.2(c), and as so amended shall, from
and after the Effective Time, be the Certificate of Incorporation of the
Surviving Corporation until thereafter further amended as provided by law.
(d) Bylaws of the Surviving Corporation. The bylaws of the Company
-----------------------------------
in effect immediately prior to the Effective Time shall be amended by the
directors of the Surviving Corporation immediately following the Effective Time,
so as to read in their entirety in the form set forth in Exhibit 2.2(d), and as
so amended shall, from and after the Effective Time, be the bylaws of the
Surviving Corporation until thereafter further amended as provided by law.
(e) Directors of Surviving Corporation. Immediately prior to the
----------------------------------
Effective Time, all directors of the Surviving Corporation, other than ▇▇▇▇▇▇▇▇▇
and such additional members, if any, as may be designated by Liberty in writing
prior to the Closing (the "Designated Directors"), shall resign and ▇▇▇▇▇▇▇▇▇
and any other Designated Directors shall take all necessary action to fill the
resulting vacancies on the Board of Directors of the Company by electing to the
Board of Directors the Persons designated in writing by Liberty, and such
directors shall be the directors of the Surviving Corporation at the Effective
Time. Such directors will hold office until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and bylaws of the Surviving Corporation, or as otherwise provided
by applicable law.
2.3 Closing.
(a) Closing Date and Location. The Closing shall take place (i) at
-------------------------
10:00 a.m. (New York time) at the offices of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on the first business day following
the date on which the last of the conditions set forth in Article VIII (other
than the filing of the Certificate of Merger and other than any such conditions
which by their terms are not capable of being satisfied by the Closing Date) is
satisfied or, to the extent permissible, waived, or (ii) on such other date and
at such other time or place as is mutually agreed by the parties hereto.
(b) Obligations of the Company. At the Closing, the Company shall
--------------------------
deliver to Parent and Liberty the following documents:
(i) a long form certificate of good standing from the State of
Delaware dated as of a date not more than two business days prior to the
Closing Date and certifying that the Company is duly qualified and in good
standing as of the date of such certificate;
11
(ii) the officers' certificates provided for in
Section 8.2(c) and 8.3(c);
(iii) the opinions of ▇▇▇▇▇▇▇▇▇ Glusker Fields Claman &
Machtinger LLP, as counsel for the Company, pursuant to Section 8.2(g) and
8.3(f);
(iv) any required consents and approvals required pursuant to
Section 4.5;
(v) written resignations from the directors of the Company
other than ▇▇▇▇▇▇▇▇▇ and any other Designated Directors, effective
immediately prior to the Effective Time, and evidence of the appointment,
effective immediately prior to the Effective Time, by ▇▇▇▇▇▇▇▇▇ and any
other Designated Directors, as the remaining director(s) of the Surviving
Corporation, of Liberty's designees for directors;
(vi) the executed Certificate of Merger substantially in the
form of Exhibit 2.2(a); and
(c) Obligations of Liberty. At the Closing, Liberty shall deliver
----------------------
to the Company the following documents:
(i) the officer's certificate provided for in Section
8.4(c)(i);
(ii) the opinion of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., or other counsel
acceptable to the Company, pursuant to Section 8.4(f); and
(iii) any required consents and approvals required to be obtained
at or prior to the Closing by Section 4.5 and not previously delivered.
(d) Obligations of Parent and Merger Sub. At the Closing, Parent and
------------------------------------
Merger Sub shall deliver to the Company the following documents:
(i) the officer's certificate provided for in Section
8.4(c)(ii); and
(ii) the Certificate of Merger in the form of Exhibit 2.2(a),
executed by Merger Sub.
(e) Proceedings Satisfactory to Counsel. It shall be a condition
-----------------------------------
to the effectiveness of all deliveries at the Closing that the actions,
proceedings, instruments and documents required to carry out the transactions
contemplated by this Agreement to be effected at the Closing, and related legal
matters be reasonably satisfactory to and approved by counsel for each party and
such counsel shall have been furnished with such certified or other copies of
such actions and proceedings and such other instruments and documents as it
shall reasonably have requested. All deliveries at the Closing shall be deemed
to occur simultaneously unless the parties otherwise agree or the context
otherwise requires.
12
2.4 Conversion of Securities.
(a) Conversion of Company Stock. At the Effective Time, by virtue
---------------------------
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any of their securities:
(i) Each share (or fraction thereof) of Company Class
A Stock and Company Class B Stock that immediately prior to the
Effective Time is held by the Company as a treasury share shall
be canceled and retired without payment of any consideration
therefor (and without any conversion thereof into the Merger
Consideration);
(ii) Subject to Section 2.5(f), shares of Company
Class A Stock outstanding immediately prior to the Effective Time
(other than shares referred to in Section 2.4(a)(i) above) shall
remain outstanding and continue as an equal number of shares of
Surviving Corporation Class A Stock; and
(iii) Subject to Section 2.5(f), shares of Company
Class B Stock outstanding immediately prior to the Effective Time
(other than shares referred to in Section 2.4(a)(i) above) shall
be converted into and represent the right to receive, and shall
be exchangeable for, shares of validly issued, fully paid and non-
assessable Class A Liberty Group Stock at the rate of 1.0 share
of Class A Liberty Group Stock for each 2.4 shares of Company
Class B Stock.
(b) Conversion of Merger Sub Stock. At the Effective Time, by
------------------------------
virtue of the Merger and without any action on the part of Parent, Liberty,
Merger Sub, the Company or the holders of any of their securities, the shares of
capital stock of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into and represent the right to receive, and shall be
exchangeable for, in the aggregate, that number of shares of Surviving
Corporation Class B Stock as is equal to the number of shares of Company Class B
Stock that was converted into the Merger Consideration in accordance with
Section 2.4(a)(iii).
(c) No Future Ownership Rights in Converted Company Class B Stock.
-------------------------------------------------------------
All shares of Company Class B Stock that are converted into the right to receive
the Merger Consideration shall, after the Effective Time, no longer be
outstanding and shall automatically be canceled and retired, and each holder of
a certificate representing any such shares shall cease to have any rights with
respect to such Company Class B Stock, except the right to receive the Merger
Consideration for such Company Class B Stock upon the surrender of such
certificate in accordance with the provisions of Section 2.5.
13
2.5 Exchange of Shares.
(a) Appointment of Exchange Agent; Exchange Fund. On or before the
--------------------------------------------
Closing Date, Parent and the Company shall enter into an agreement (the
"Exchange Agent Agreement") with Boston Equiserve Trust Company, N.A. or, at
Parent's option, another exchange agent selected by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), authorizing such Exchange
Agent to act as exchange agent in connection with the Merger and the
Reclassification. Promptly following the effective time of the Reclassification,
but prior to the Effective Time, the Company shall make available to the
Exchange Agent, for the benefit of those Persons who immediately prior to the
Reclassification were the holders of shares of Old Class A Common Stock or Old
Class B Common Stock, certificates representing a sufficient number of shares of
Company Class A Stock and Company Class B Stock (including fractions thereof
resulting from the Reclassification) to effect the delivery of shares of Company
Class A Stock and Company Class B Stock pursuant to the Reclassification.
Promptly following the Effective Time, Parent shall make available to the
Exchange Agent, for the benefit of those Persons who immediately prior to the
Effective Time (and giving effect to the Reclassification) were the holders of
Company Class B Stock, certificates representing a sufficient number of shares
of Class A Liberty Group Stock to effect the delivery of the aggregate Merger
Consideration issuable pursuant to Section 2.4(a)(iii). (The certificates
representing the shares of Class A Liberty Group Stock comprising the aggregate
Merger Consideration are referred to herein as the "Exchange Fund").
(b) Letter of Transmittal. As soon as reasonably practicable after
---------------------
the Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that prior to the Reclassification represented
issued and outstanding shares of Old Class A Common Stock or Old Class B Common
Stock (and which, as reclassified pursuant to the Reclassification, are
outstanding immediately prior to the Effective Time), whose shares of Company
Class B Stock (as so reclassified) were converted into the right to receive the
Merger Consideration ("Certificates"): (i) a notice of the effectiveness of the
Reclassification and the Merger and (ii) a letter of transmittal (which shall
state that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent) with instructions for use in effecting the surrender and exchange of the
Certificates. Such notice, letter of transmittal and instructions shall contain
such provisions and be in such form as Parent, Liberty and the Company
reasonably specify.
(c) Exchange Procedure. Promptly following the surrender, in
------------------
accordance with such instructions, of a Certificate to the Exchange Agent (or
such other agent or agents as may be appointed by the Exchange Agent or Parent
pursuant to the Exchange Agent Agreement), together with such letter of
transmittal (duly executed) and any other documents required by such
instructions or letter of transmittal, the Exchange Agent shall, subject to
Section 2.5(d), cause to be distributed to the Person in whose name such
Certificate shall have been issued (or, subject to Section 2.5(d), such Person's
designee):
14
(i) a certificate registered in the name of such Person (or,
subject to Section 2.5(d), such Person's designee) representing the number
of whole shares of Class A Liberty Group Stock into which the shares of
Company Class B Stock issued in the Reclassification and previously
represented by the surrendered Certificate shall have been converted in the
Merger at the Effective Time pursuant to this Article II;
(ii) a certificate registered in the name of such Person (or,
subject to Section 2.5(d), such Person's designee) representing the number
of whole shares of Company Class A Stock into which the shares of Old Class
A Common Stock or Old Class B Common Stock previously represented by the
surrendered Certificate shall have been reclassified pursuant to the
Reclassification (which shares shall remain outstanding following the
Merger as shares of Surviving Corporation Class A Stock); and
(iii) payment (which shall be made by check) of any cash payable
in lieu of fractional shares of Class A Liberty Group Stock and Surviving
Corporation Class A Stock pursuant to Section 2.5(f).
Each Certificate so surrendered shall forthwith be canceled.
(d) Unregistered Transfers of Company Stock. In the event of a
---------------------------------------
transfer of ownership of Company Stock which is not registered in the transfer
records of the Company, certificates representing the proper number of whole
shares of Class A Liberty Group Stock and Surviving Corporation Class A Stock
may be issued (and cash in lieu of fractional shares of Class A Liberty Group
Stock and Surviving Corporation Class A Stock may be paid) to the transferee if
the Certificate representing such Company Stock surrendered to the Exchange
Agent in accordance with Section 2.5(c) is properly endorsed for transfer or is
accompanied by appropriate and properly endorsed stock powers and is otherwise
in proper form to effect such transfer, if the Person requesting such transfer
pays to the Exchange Agent any transfer or other taxes payable by reason of such
transfer or establishes to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid and if such Person
establishes to the satisfaction of Parent that such transfer would not violate
applicable federal or state securities laws.
(e) Lost, Stolen or Destroyed Certificates. If any Certificate
--------------------------------------
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed satisfactory to Parent and the Surviving Corporation and complying
with any other reasonable requirements imposed by Parent and the Surviving
Corporation, the Exchange Agent will cause to be delivered to such Person in
respect of such lost, stolen or destroyed Certificate the Merger Consideration,
shares of Surviving Corporation Class A Stock, and any cash in lieu of
fractional shares of Class A Liberty Group Common Stock or Surviving Corporation
Class A Stock to which such Person is entitled pursuant to Section 2.5(f), in
respect thereof as determined in accordance with this Article II. Each of Parent
and the Surviving Corporation may, in its discretion, require the owner of such
lost, stolen or destroyed Certificate to
15
give it a bond in such reasonable sum as it may direct as indemnity against any
claim that may be made against Parent or the Surviving Corporation with respect
to the Certificate alleged to have been lost, stolen or destroyed.
(f) No Fractional Shares. No fractional shares of Class A Liberty
--------------------
Group Stock or Surviving Corporation Class A Stock shall be issued or delivered
in the Merger or as a result of the Reclassification. In lieu of any such
fractional shares, each holder of shares of Company Stock who would otherwise
have been entitled to a fraction of a share of Class A Liberty Group Stock or a
fraction of a share of Surviving Corporation Class A Stock upon the
effectiveness of the Reclassification and the Merger and the surrender of
Certificates for exchange pursuant to this Section 2.5 will be paid an amount in
cash (without interest) equal to such holder's proportionate interest in the
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional shares of Class A
Liberty Group Stock and Surviving Corporation Class A Stock which, but for this
Section 2.5(f), would be issuable in, or be outstanding as a result of, the
Reclassification and the Merger. As soon as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (i) the number of full
shares of Class A Liberty Group Stock and Surviving Corporation Class A Stock,
respectively, delivered to the Exchange Agent by Parent and the Company over
(ii) the aggregate number of full shares of Class A Liberty Group Stock and
Surviving Corporation Class A Stock, respectively, to be distributed to holders
or former holders of Company Stock hereunder (such excess being herein called
the "Excess Shares"). The Exchange Agent, as agent for the former holders of
Company Stock, shall sell the Excess Shares at the prevailing prices on the NYSE
or Nasdaq National Market, as applicable. The sales of the Excess Shares by the
Exchange Agent shall be executed on the NYSE (or Nasdaq National Market, as
applicable) through one or more member firms of the NYSE (or of the National
Association of Securities Dealers, Inc., as applicable) and shall be executed in
round lots to the extent practicable. All commissions, transfer taxes and other
out-of-pocket transaction costs, if any, including the expenses and
compensation, if any, of the Exchange Agent, incurred in connection with such
sale of Excess Shares, shall be deducted from the proceeds otherwise
distributable to the holders and former holders of Company Stock. Until the
proceeds of such sale have been distributed to the holders and former holders of
Company Stock, the Exchange Agent will hold such proceeds in trust for such
holders and former holders (the "Fractional Fund"). As soon as practicable after
the determination of the amount of cash to be paid to former holders of Company
Stock in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with this Agreement such amounts to such holders and
former holders.
(g) No Dividends Before Surrender of Certificates. Until the
---------------------------------------------
surrender of a Certificate for exchange pursuant to Section 2.5, any dividends
or other distributions in respect of shares of Class A Liberty Group Stock or
Surviving Corporation Class A Stock issuable in exchange for the shares of
Company Stock formerly represented by such Certificate, shall be accumulated and
not paid or delivered, but (i) any such dividends or distributions that shall
have become payable with respect to such Class A Liberty Group Stock or
Surviving Corporation Class A Stock between the Effective Time and the time of
such surrender shall be paid (by the issuer of such shares) upon the
16
surrender of such Certificate (without interest thereon) to the Person in whose
name the certificates representing the Class A Liberty Group Stock or Surviving
Corporation Class A Stock issued in exchange therefor shall have been registered
and (ii) any such dividends or distributions that shall have a record date prior
to such surrender and a payment date after such surrender, shall be paid (by the
issuer of such shares) (without interest thereon) on such payment date to the
Person in whose name the certificates representing the Class A Liberty Group
Stock or Surviving Corporation Class A Stock issued in exchange therefor shall
have been registered. Payment of the Merger Consideration, delivery of shares
Surviving Corporation Class A Stock pursuant to this Section 2.5 and any such
accumulated dividends or distributions shall be subject to applicable escheat,
abandoned property and similar laws, and neither Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Stock or Class A
Liberty Group Stock for the Merger Consideration, Surviving Corporation Class A
Stock or for any dividends or distributions with respect thereto which may be
delivered to any public official pursuant to any escheat, abandoned property or
similar law. Notwithstanding the foregoing, no Person shall have a claim against
Parent or Liberty for any failure of the Surviving Corporation to issue shares
of Surviving Corporation Class A Stock pursuant to this Section 2.5.
(h) No Further Transfers of Converted Shares. All shares of Class A
----------------------------------------
Liberty Group Stock and all shares of Surviving Corporation Class A Stock issued
and all cash in lieu of fractional shares paid upon the surrender for exchange
of shares of Company Stock in accordance with the terms hereof shall be deemed
to have been issued and paid in full satisfaction of all rights pertaining to
the shares of Company Stock so exchanged. At and after the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of shares of Company Stock that were converted into the right to receive the
Merger Consideration. Each share of Class A Liberty Group Stock and Surviving
Corporation Class A Stock into which shares of Company Stock shall be converted
in the Merger shall be deemed to have been issued at the Effective Time .
(i) Termination of Exchange Fund and Fractional Fund; Abandoned
-----------------------------------------------------------
Property Laws. Any portion of the Exchange Fund and the Fractional Fund (and
-------------
any dividends or other distributions with respect to such portion of the
Exchange Fund) that remains unclaimed by the former stockholders of the Company
for six months after the Effective Time shall be delivered to Parent, upon
demand of Parent (except for any portion of the Fractional Fund attributable to
the Surviving Corporation Class A Stock, all of which shall at such time be
delivered to the Surviving Corporation), and any former stockholders of the
Company shall, after such delivery, look only to (i) Parent for payment of their
claim for the Merger Consideration (and any such dividends or other
distributions), (ii) Parent for any cash in lieu of fractional shares of Class A
Liberty Group Stock, (iii) Surviving Corporation for payment of their claim for
shares of Surviving Corporation Class A Stock, and (iv) Surviving Corporation
for any cash in lieu of fractional shares of Surviving Corporation Class A
Stock. Neither Parent nor the Surviving Corporation shall be liable to any
holder of shares of Company Stock, or Class A Liberty Group Stock for any such
shares, for any
17
dividends or distributions with respect thereto or for any cash in lieu of
fractional shares which may be delivered to any public official pursuant to any
abandoned property, escheat or similar law.
2.6 Treatment of Company Stock Options.
(a) Appropriate action shall be taken by the Company under the
Company Stock Plans and any other agreements pursuant to which Company Stock
Options were issued to adjust such Company Stock Options pursuant to this
Section 2.6. Each outstanding Company Stock Option shall be adjusted so that
(taking into account any automatic adjustment to the Company Stock Options as a
result of the Reclassification, pursuant to the terms of such Company Stock
Options and any applicable Company Stock Plans or other agreements pursuant to
which such Company Stock Options were issued) any exercise of such option
entitles the holder thereof to purchase:
(i) that number of shares of Class A Liberty Group Stock
equal to the number of shares of Old Class A Common Stock subject to
such Company Stock Option immediately prior to the Reclassification
times 0.25; and
(ii) that number of shares of Surviving Corporation Class A
Stock equal to the number of shares of Old Class A Common Stock subject
to such Company Stock Option immediately prior to the Reclassification
times 0.4;
for an aggregate exercise price equal to the exercise price under such Company
Stock Option as in effect immediately prior to the Effective Time. (The Company
Stock Options, as so adjusted, collectively, the "Rollover Options"). If the
foregoing calculation results in a Rollover Option being exercisable for a
fraction of a share of Class A Liberty Group Stock or Surviving Corporation
Class A Stock then upon exercise the number of shares of Class A Liberty Group
Stock or Surviving Corporation Class A Stock subject to such option, as the case
may be, shall be rounded to the nearest whole number of such shares, and the
aggregate exercise price shall be prorated accordingly. The terms and conditions
of each Rollover Option shall otherwise remain as set forth in the Company Stock
Option corresponding to such Rollover Option, including any terms and conditions
applicable to such Company Stock Option under any applicable Company Stock Plan.
(b) The Rollover Options shall remain obligations of the
Surviving Corporation and shall not under any circumstances be obligations of
Parent. Following the Effective Time, Liberty will make available to the
Surviving Corporation from time to time sufficient numbers of shares of Class A
Liberty Group Stock to fulfill the Surviving Corporation's obligations under the
Rollover Options, or will cause the Surviving Corporation to purchase such
shares on the open market (or in block transactions from persons not affiliated
with Parent). The Surviving Corporation undertakes to have available (or to
acquire, if it does not have available) sufficient numbers of shares of Class A
Liberty Group Stock to fulfill its obligations under the Rollover Options as the
same may be exercised from time to time.
18
(c) All shares of Class A Liberty Group Stock and Surviving
Corporation Class A Stock issued upon the exercise of any Rollover Option will
be validly issued, fully paid and non-assessable.
(d) The Surviving Corporation shall use commercially reasonable
efforts to cause the issuance of shares of Surviving Corporation Class A Stock
issuable upon exercise of any Rollover Options to be registered as soon as
practicable (but no later than 15 days) after the Effective Time pursuant to an
effective registration statement on Form S-8 (or other comparable form) under
the Securities Act, and shall use its commercially reasonable efforts to
maintain the effectiveness of such registration statement thereafter for so long
as any Rollover Options remain exercisable.
(e) Parent shall use commercially reasonable efforts to cause the
issuance of shares of Class A Liberty Group Stock issuable upon exercise of any
Rollover Options to be registered as soon as practicable (but no later than 15
days) after the Effective Time pursuant to an effective registration statement
on Form S-8 (or other comparable form) under the Securities Act, and shall use
its commercially reasonable efforts to maintain the effectiveness of such
registration statement thereafter for so long as any Rollover Options remain
exercisable.
(f) The adjustments to Company Stock Options made pursuant to this
Section 2.6 shall be made in accordance with the terms of such Company Stock
Options and any applicable Company Stock Plans.
2.7 Treatment of Convertible Debentures. Appropriate action shall be
taken by the Company to adjust the Convertible Debentures pursuant to this
Section 2.7. Each outstanding Convertible Debenture shall be adjusted so that
(taking into account any automatic adjustment to the Convertible Debentures as a
result of the Reclassification, pursuant to the terms of such Convertible
Debentures) it is convertible, in whole and not in part, into:
(i) that number of shares of Class A Liberty Group Stock equal
to the number of shares of Old Class A Common Stock into which such
Convertible Debenture was convertible (if converted in full) immediately
prior to the Effective Time (after giving effect to the Reclassification)
times 0.25; and
(ii) that number of shares of Surviving Corporation Class A Stock
equal to the number of shares of Old Class A Common Stock into which such
Convertible Debenture was convertible (if converted in full) immediately
prior to the Effective Time (after giving effect to the Reclassification)
times 0.4.
(The Convertible Debentures, as so adjusted, collectively, the "Rollover
Debentures"). The Rollover Debentures shall be obligations of the Surviving
Corporation and shall not under any circumstances be obligations of Parent. The
terms and conditions of each Rollover Debenture shall otherwise remain as set
forth in such Rollover Debenture. All shares of Class A Liberty Group Stock and
Surviving Corporation Class A Stock issued upon the exercise of any Rollover
Debenture will be
19
validly issued, fully paid and non-assessable. The adjustments to the
Convertible Debentures made pursuant to this Section 2.7 shall be made in
accordance with the terms of such Convertible Debentures. Following the
Effective Time, Liberty will make available to the Surviving Corporation from
time to time sufficient numbers of shares of Class A Liberty Group Stock to
fulfill the Surviving Corporation's obligations under the Rollover Debentures,
or will cause the Surviving Corporation to purchase such shares on the open
market (or in block transactions from persons not affiliated with Parent).
2.8 Post-Merger Restructuring Transactions. As soon as practicable
following the Effective Time, to the extent permitted by applicable law, Parent
and Liberty shall cause the Post-Merger Restructuring Transactions to be
consummated, as described in Exhibit 1.1, as the same may be modified or amended
by mutual agreement of the parties hereto.
2.9 Convertible Debt Facility. Immediately following the Post-Merger
Restructuring Transactions, the Surviving Corporation and Liberty will enter
into a convertible debt facility agreement in such form as the Surviving
Corporation and Liberty shall mutually agree, consistent with the terms and
conditions set forth in this Section 2.9 (the "Convertible Debt Facility
Agreement"). The Convertible Debt Facility Agreement shall provide for aggregate
credit commitments of $125 million, drawable at the option of the Surviving
Corporation in whole or in part at any time during the 48-month period following
the Closing Date, subject to borrowing conditions consistent with those provided
for in the Company's existing bank credit facility. Such commitments shall be
provided by Liberty and, subject to the prior written consent of the Surviving
Corporation (which consent shall not unreasonably be withheld), one or more
other Persons designated by Liberty (and agreed by such Person). Amounts
borrowed by the Surviving Corporation under the Convertible Debt Facility
Agreement ("Convertible Loans") shall be unsecured senior subordinated
obligations of the Surviving Corporation, ranking junior to the Company's
existing bank credit facility and any refinancings thereof, and senior to, or
pari passu with, all other existing or subsequently incurred indebtedness of the
Surviving Corporation. The Convertible Loans will bear interest at 4.00% per
annum, payable quarterly in arrears in cash, and will be convertible at the
option of the holder, in whole or in part, at any time prior to maturity, into
shares of Surviving Corporation Class B Stock, at a conversion price of $13.00
per share, subject to customary adjustments for stock dividends, stock splits,
reverse stock splits, reclassifications, mergers, consolidations and the like.
The Convertible Loans will be due and payable in full on the fifth anniversary
of the Closing Date and will not be subject to any mandatory principal payments
or sinking fund prior to that date. Once borrowed, Convertible Loans will not be
prepayable by the Surviving Corporation without the consent of the holder.
2.10 Changes in Class A Liberty Group Stock. If prior to the Effective
Time, the Class A Liberty Group Stock shall be recapitalized or reclassified or
Parent shall effect any stock dividend, stock split, or reverse stock split of
Class A Liberty Group Stock, then the shares of Class A Liberty Group Stock to
be delivered upon conversion and exchange of the Company Stock under this
Agreement shall be appropriately and equitably adjusted to the kind and amount
of shares of stock
20
and other securities and property which the holders of such shares of Company
Stock would have been to receive had the Merger occurred prior to the record
date for determining those stockholders entitled to participate in such
corporate event.
ARTICLE III
CERTAIN ACTIONS
3.1 Stockholder Meeting. The Company and its Board of Directors (the
"Company Board") shall take all action necessary in accordance with applicable
law and the Company's Amended and Restated Certificate of Incorporation (the
"Company Charter") and bylaws to duly call and hold, as soon as reasonably
practicable after the date hereof, a meeting of the Company's stockholders (the
"Special Meeting") for the purpose of considering and voting upon the approval
and adoption of (a) this Agreement, (b) the Merger, (c) the Reclassification and
(d) any other action or transaction by the Company contemplated by this
Agreement that requires approval of the Company's stockholders under the Company
Charter, the Company's bylaws, the DGCL or the rules of the Nasdaq National
Market (the "Merger Proposals"); provided, however, the Company's stockholders
shall vote on the Reclassification first. The only matters the Company shall
propose to be acted on by the Company's stockholders at the Special Meeting
shall be the Merger Proposals. Subject to Section 7.5(b), the Company Board will
recommend that the Company's stockholders vote in favor of approval of the
Merger Proposals and the Company will use its commercially reasonable efforts to
solicit from its stockholders proxies in favor of such approval and to secure
the votes of the stockholders of the Company (and of any class or series of
stockholders of the Company) required by the DGCL and the Company Charter to
effect the Merger and the Reclassification. The Company shall not require any
vote greater than the affirmative vote of the holders of a majority of the
issued and outstanding shares of the Old Class A Common Stock and a majority of
the issued and outstanding shares of the Old Class B Common Stock, each voting
separately as a class, for the approval of the Reclassification. The Company
shall not require any vote greater than a majority of the combined voting power
of the issued and outstanding shares of Old Class A Common Stock and Old Class B
Common Stock, voting together as a single class, for the approval of the Merger.
3.2 Proxy Statements and Other Commission Filing.
(a) S-4 Registration Statement and Proxy Statement. As soon as
----------------------------------------------
reasonably practicable after the execution of this Agreement, Parent, Liberty
and the Company shall cooperate in the preparation of, and the Company shall
file confidentially with the Commission, a preliminary proxy statement (the
"Preliminary Proxy Statement") in form and substance reasonably satisfactory to
each of Parent, Liberty and the Company, and following resolution of comments,
if any, of the Commission on the preliminary proxy statement, Liberty and Parent
shall prepare and Parent shall file with the Commission a registration statement
on Form S-4 (the "S-4 Registration Statement"), containing a form of prospectus
that includes such proxy statement (as amended or supplemented, if applicable)
registering under the Securities Act the issuance of the shares of Class A
Liberty
21
Group Stock issuable upon conversion of Company Stock pursuant to the Merger.
Each of Parent, Liberty and the Company shall use its reasonable efforts to
respond to any comments of the Commission, to have the S-4 Registration
Statement declared effective as promptly as practicable after such filing and to
cause the proxy statement as filed with the Commission and as thereafter amended
or supplemented to be approved by the Commission and mailed to the Company's
stockholders at the earliest practicable time (such proxy statement in the
definitive form mailed to the Company's stockholders, as thereafter amended or
supplemented, being referred to as the "Proxy Statement"). The Company and
Parent will notify each other party promptly of the receipt of any comments from
the Commission or its staff and of any request by the Commission or its staff or
any other government officials for amendments or supplements to the S-4
Registration Statement, the Proxy Statement or any other filing or for
additional information, and will supply the other parties with copies of all
correspondence between it and any of its representatives, on the one hand, and
the Commission or its staff or any other governmental officials on the other
hand, with respect to the S-4 Registration Statement, the Proxy Statement, the
Merger or any filing with the Commission relating thereto. Whenever a party
becomes aware of any event that is required to be set forth in an amendment or
supplement to the Proxy Statement, the S-4 Registration Statement or any other
filing with the Commission in connection with this Agreement or the transactions
contemplated hereby, such party shall promptly inform the other parties of such
occurrence and cooperate in the prompt filing with the Commission or its staff
or any other governmental officials, and/or mailing to stockholders of the
Company, of an amendment or supplement that shall comply in all material
respects with the provisions of the Securities Act and the Exchange Act. The
Company, and Parent and Liberty, each shall promptly provide the other (or its
counsel) copies of all filings made by such party with any Governmental Entity
in connection with this Agreement or the transactions contemplated hereby. Prior
to making any application to or filing with any Governmental Entity or other
Person in connection with this Agreement, each party shall provide the other
party with drafts thereof and afford the other party a reasonable opportunity to
comment on such drafts.
(b) Company Board Recommendation. Subject to Section 7.5(b), the
----------------------------
Proxy Statement shall include the recommendation of the Company Board in favor
of approval and adoption of this Agreement and the Merger. The Company shall use
all reasonable efforts to cause the Proxy Statement to be mailed to its
stockholders as promptly as practicable after the S-4 Registration Statement
becomes effective.
(c) Comfort Letters. The Company will use its reasonable efforts
---------------
to cause to be delivered to Parent and Liberty a letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
the Company's independent auditors, dated a date within two business days before
the date on which the S-4 Registration Statement becomes effective and addressed
to Parent and Liberty, in form reasonably satisfactory to Parent and Liberty and
customary in scope and substance for letters delivered by nationally recognized
independent auditors in connection with registration statements similar to the
S-4 Registration Statement. Liberty will use its reasonable efforts to cause to
be delivered to the Company a letter of Liberty's independent auditors,
addressed to the Company and dated a date within two business days prior to the
date the Proxy Statement is first mailed, in form reasonably
22
satisfactory to the Company and customary in scope and substance for letters
delivered by nationally recognized independent auditors in connection with proxy
statements similar to the Proxy Statement.
3.3 Identification of Rule 145 Affiliates. Within 30 days after the
execution of this Agreement, the Company shall deliver to Parent and Liberty a
letter identifying all Persons who the Company knows are or who the Company has
reason to believe may be, as of the date of the Special Meeting, "affiliates" of
the Company for purposes of Rule 145 under the Securities Act. The Company will
supplement such letter, if applicable, with the name and address of any other
Person subsequently identified by either Parent or the Company as a Person who
may be deemed to be such an affiliate; provided, however, that no Person so
identified shall remain on such list of affiliates if Parent shall receive, on
or before the date of the Special Meeting, an opinion of outside counsel
reasonably satisfactory to Parent to the effect that such Person is not such as
affiliate. The Company shall use its reasonable efforts to cause each Person who
is identified as an "affiliate" in the letter referred to above (as so
supplemented) to deliver to Parent, on or prior to the Closing Date, a written
agreement, in substantially the form attached hereto as Exhibit 3.3 (each a
"Rule 145 Agreement"). Parent shall not be required to maintain the
effectiveness of the S-4 Registration Statement or any other registration
statement under the Securities Act for the purposes of resale of Class A Liberty
Group Stock received by such affiliates in the Merger.
3.4 State Takeover Statutes. The Company will take all reasonable steps to
(i) exempt the Merger from the requirements of any applicable state takeover law
and (ii) assist in any challenge by Parent or Liberty to the validity or
applicability to the Merger of any state takeover law.
3.5 Reasonable Efforts. Subject to the terms and conditions of this
Agreement (including Section 7.4 hereof) and applicable law, and (with respect
to Parent) subject to the last proviso of the following sentence, each of the
parties hereto shall use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as soon as reasonably practicable, including such
actions or things as any other party hereto may reasonably request in order to
cause any of the conditions to such other party's obligation to consummate such
transactions specified in Article VIII to be fully satisfied. Without limiting
the generality of the foregoing, the parties shall (and shall cause their
respective directors, officers and Subsidiaries, and use their reasonable
efforts to cause their respective Affiliates, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide reasonable assistance to each other in (i) the preparation and filing
with the Commission of the S-4 Registration Statement, the Preliminary Proxy
Statement, the Proxy Statement and any necessary amendments or supplements to
any of the foregoing; (ii) seeking to have such S-4 Registration Statement
declared effective by the Commission as soon as reasonably practicable after
filing; (iii) taking such actions as may reasonably be required under applicable
state securities or blue sky laws in connection with the issuance of the Merger
Consideration; (iv) using commercially reasonable efforts to obtain all
necessary consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications, or other permission or action by, and giving all
necessary notices to and
23
making all necessary filings with and applications and submissions to, any
Governmental Entity or other Person required in order to cause any of the
conditions to each other party's obligation to consummate the Merger and the
transactions contemplated hereby to be fully satisfied; (v) filing all pre-
merger notification and report forms required under the ▇▇▇▇-▇▇▇▇▇ Act and
responding to any requests for additional information made by any Governmental
Entity pursuant to the ▇▇▇▇-▇▇▇▇▇ Act; (vi) using commercially reasonable
efforts (which in the case of Parent do not require the commencement of
litigation) to lift any permanent or preliminary injunction or restraining order
or other similar order issued or entered by any court or Governmental Entity (an
"Injunction") of any type referred to in Sections 8.2(d), 8.3(e) and 8.4(f);
(vii) using commercially reasonable efforts to obtain (1) the tax opinions
referred to in Sections 8.2(f), 8.3(e) and 8.4(f), (2) the officer's
certificates (forms of which have been delivered to the parties prior to the
date hereof) to be relied upon by such counsel in rendering such opinions) and
(3) the opinions of its counsel referred to in Sections 8.2(g), and 8.3(f);
(viii) providing all such information about such party, its Subsidiaries and its
officers, directors, partners and Affiliates and making all applications and
filings as may be necessary or reasonably requested in connection with any of
the foregoing; and (ix) in general, using commercially reasonable efforts to
consummate and make effective the transactions contemplated thereby; provided,
however, that in making any such filing and in order to obtain any consent,
approval, waiver, license, permit, authorization, registration, qualification,
or other permission or action or the lifting of any Injunction referred to in
this sentence, (A) no party shall be required to (and without the prior written
consent of Liberty and Parent, the Company and its Affiliates shall not) (1) pay
any consideration, (2) surrender, modify or amend in any substantive respect any
License or Contract (including this Agreement), (3) hold separately (in trust or
otherwise), divest itself of, or otherwise rearrange the composition of, any of
its assets, (4) agree to any limitations on any such Person's freedom of action
with respect to future acquisitions of assets or with respect to any existing or
future business or activities or on the enjoyment of the full rights of
ownership, possession and use of any asset now owned or hereafter acquired by
any such Person or (5) agree to any other condition or requirement that is
materially adverse or burdensome; (B) neither Parent nor Liberty shall be
required to take any action pursuant to the foregoing if the taking of such
action is reasonably likely to result in the imposition of a condition or
restriction of the type referred to in Section 8.2(e) or 8.3(g); and (C) Liberty
and the Company recognize that Parent may allocate resources in whatever manner
it reasonably deems appropriate; and provided, further, that Parent and its
Subsidiaries shall not be required to take any such action, or any other action
pursuant to this Section 3.5, except to the extent that such action is required
by statute, rule or regulation to be taken by or in the name of Parent or such
Subsidiary (as opposed to by or in the name of Liberty or the Company or a
Subsidiary thereof) in connection with the transactions contemplated by this
Agreement and, in such event, Parent (or such Subsidiary of Parent) shall be
required only to make filings and statements of fact and shall not under any
circumstances be required to commit or be committed to take or refrain from
taking any action or be subject to any restriction that relates to any business,
asset, liability, operation or employee of Parent or any of its Subsidiaries.
Prior to making any application to or filing with any Governmental Entity or
other Person in connection with this
24
Agreement, each party shall provide the other party with drafts thereof and
afford the other party a reasonable opportunity to comment on such drafts.
3.6 Stock and Other Plans. Promptly following the mailing of the Proxy
Statement, the Company shall cause a notice to be sent to each holder of Company
Stock Options, whether vested or unvested, in such form as is reasonably agreed
in writing upon by the Company, Parent and Liberty.
3.7 Expenses.
(a) Except as otherwise may be provided in this Agreement, the
Inter-Group Supplement, the Sixth Tax Sharing Amendment, the Parent Charter or
any document referred to herein or therein or executed in connection herewith or
therewith to which the Company, Liberty Media or any of their respective
Subsidiaries or Affiliates is a party, whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense, except that the costs and expenses incurred in connection with
printing and mailing the Proxy Statement, the S-4 Registration Statement (and
any amendment or supplement thereto) and any prospectus included in the S-4
Registration Statement (and any amendment or supplement thereto) and the costs
of filing under the ▇▇▇▇-▇▇▇▇▇ Act shall be borne one-half by Liberty and
one-half by the Company. The filing fee payable to the Commission in connection
with the filing of the S-4 Registration Statement shall be borne by Liberty.
Notwithstanding the foregoing: (i) if this Agreement is terminated by a party
(the "non-breaching party") as a result of a material willful breach by the
other party (the "breaching party") of its covenants or agreements contained
herein or the representations and warranties made by it herein, the breaching
party shall reimburse the non-breaching party for all out-of-pocket costs and
expenses incurred in connection with the transactions contemplated by this
Agreement; and (ii) if this Agreement is terminated by either party pursuant to
Section 9.1(ii), solely or primarily as a result of the failure of the
conditions set forth in Sections 8.1(b) (if the failure to satisfy such
condition is the result of any material acquisition or other transaction or
event, or agreement with respect thereto, engaged in, or entered into, by Parent
or Liberty or any of their respective Affiliates, whether prior to or after the
date hereof), 8.1(c), 8.2(d), 8.2(f), 8.3(h), 8.3(e), 8.4(d) or 8.4(f) to be
satisfied or waived, then Liberty shall reimburse the Company for all
out-of-pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement, up to a maximum of $1,900,000.
(b) Except as may otherwise be set forth in this Agreement, the
Inter-Group Supplement, the Sixth Tax Sharing Amendment, the Parent Charter or
any document referred to herein or therein or executed in connection herewith or
therewith to which the Company, Liberty or any of their respective Subsidiaries
or Affiliates is a party, each of Parent and Merger Sub (i) has not paid and
will not pay, directly or indirectly (which does not include any payments by or
to Liberty or any member of the Liberty Media Group or any Affiliate of the
foregoing or any allocations pursuant to the Parent Charter or the Inter-Group
Agreement), any expenses of any of the holders of Company Stock incurred in
connection with the Merger and (ii) has not agreed to assume and will
25
not assume, directly or indirectly (which does not include any payments by or to
Liberty or any member of the Liberty Media Group or any Affiliate of the
foregoing or any allocations pursuant to the Parent Charter or the Inter-Group
Agreement), any expense or other liability, whether fixed or contingent, of any
holder of Company Stock. Liberty and its Subsidiaries and Affiliates will not
execute in connection with this Agreement or any document referred to herein,
any document that would require Parent or any member of the Common Stock Group
(i) to pay, directly or indirectly, any expenses of any of the holders of
Company Stock incurred in connection with the Merger or (ii) to assume, directly
or indirectly, any expense or other liability, whether fixed or contingent, of
any holder of Company Stock, without the prior written approval of the Company
and Parent. The Company and its Subsidiaries and Affiliates will not execute in
connection with this Agreement or any document referred to herein, any document
that would require Parent or any member of the Common Stock Group (i) to pay,
directly or indirectly, any expenses of any of the holders of Company Stock
incurred in connection with the Merger or (ii) to assume, directly or
indirectly, any expense or other liability, whether fixed or contingent, of any
holder of Company Stock, without the prior written approval of Liberty and
Parent.
3.8 Acquisition of Company Stock.
(a) On and after the date hereof and through the Effective Time,
Parent and Liberty shall not, and each shall cause its respective Subsidiaries
and Affiliates not to, acquire any shares of or interests in stock of the
Company or rights to acquire shares of or interests in stock of the Company
other than pursuant to the Merger or this Agreement; provided, however, that
this Section 3.8(a) shall not prohibit (i) Parent or any of the Subsidiaries or
Affiliates from engaging in any Parent Transaction (or the acquisition of shares
of or interests in stock of the Company pursuant thereto) so long as a principal
purpose of such transaction is not the acquisition of shares of or interests in
stock of the Company, (ii) any direct or indirect acquisition by Liberty or any
member of the Liberty Media Group so long as a principal purpose of such
transaction is not the acquisition of shares of or interests in stock of the
Company, or (iii) the acquisition of any securities by or for the benefit of any
employee benefit plan.
(b) Subject to the last sentence of this paragraph (b), notwithstanding
any other provision of this Agreement, Parent shall, if so requested by Liberty
at least 30 days prior to the Closing Date, use commercially reasonable efforts
to determine whether Parent or any Subsidiary of Parent that is a member of the
Common Stock Group (i) has acquired any shares of or interests in stock of the
Company on or prior to the date hereof and such acquisition of shares of or
interests in stock of the Company would not have been made but for a plan that
includes the Merger, or (ii) has acquired after the date hereof and prior to the
Effective Time any shares of or interests in stock of the Company in any direct
or indirect acquisition in which gain or loss is recognized by the Person who
directly held such shares or interests immediately prior to such acquisition or,
following such acquisition, the adjusted tax basis of such shares or interests
in the hands of the Person that holds them is not solely determined by the
adjusted tax basis of such shares or interests in the hands of the Person that
held them immediately before such acquisition. In the event that such efforts of
Parent
26
result in Parent determining that Parent or a member of the Common Stock Group
has so acquired such shares of or interests in stock of the Company, then Parent
or such Subsidiary of Parent shall use commercially reasonable efforts to sell
such shares of or interests in Company Stock in the open market at least five
business days prior to the Closing Date (or, if such acquisition occurs within
ten business days prior to the anticipated Closing Date, then prior to the
Effective Time), excluding for purposes of this sentence and the immediately
preceding sentence any shares of or interests in stock of the Company (x) that
are acquired by or for the benefit of an employee benefit plan or the Liberty
Media Group or (y) are acquired pursuant to this Agreement, the Inter-Group
Supplement, the Sixth Tax Sharing Amendment or any document referred to herein
or therein or executed in connection herewith or therewith to which the Company,
Liberty or any of their respective Subsidiaries or Affiliates is a party.
Notwithstanding the foregoing, Parent shall not be liable for (or in breach of
this Section 3.8(b) in the event of) any failure of such reasonable efforts to
detect ownership or acquisition of any such shares or interests.
(c) Notwithstanding the provisions of Sections 3.8(a) and (b), as of the
Effective Time, the aggregate of shares of Company Stock and rights to acquire
ownership of shares of Company Stock (which rights are not subject to any
significant condition other than payment of consideration, it being acknowledged
and agreed that Parent's acquisition of MediaOne Group, Inc. is subject to
significant conditions other than the payment of money) owned directly by (a)
Parent or any member of the Common Stock Group that is wholly-owned directly by
Parent and treated under Treasury Regulation Section 301.7701-3 as an entity
that is disregarded as an entity separate from Parent for U.S. federal income
tax purposes or (b) any other member of the Common Stock Group to the extent
such other member acquired such shares or rights directly in contemplation of
and in connection with the Merger (except in the case of (a) or (b), any shares
of or interests in stock of the Company which may be owned (i) by or for the
benefit of any (x) employee benefit plan of Parent, Liberty or any of their
respective Subsidiaries or (y) the Liberty Media Group or (ii) pursuant to this
Agreement (other than Sections 3.8(a)(i) and 3.8(b) hereof), including Exhibit
1.1 hereto, the Inter-Group Supplement, the Sixth Tax Sharing Amendment or any
document referred to herein or therein or executed in connection herewith or
therewith to which the Company, Liberty or any of their respective Subsidiaries
or Affiliates is a party) will not constitute more than 5 percent of the shares
of Company Stock outstanding on the date hereof (it being agreed and understood
that any acquisition of a Subsidiary holding Company Stock or rights to acquire
ownership of shares of Company Stock shall not be considered a direct
acquisition of Company Stock or rights to acquire Company Stock).
(d) Liberty and its Subsidiaries and Affiliates will not execute in
connection with the Merger, this Agreement, the Inter-Group Agreement, the
Inter-Group Supplement, the Sixth Tax Sharing Amendment, the Post-Merger
Restructuring Transactions, or any document referred to herein or therein, any
other document that would require Parent or any member of the Common Stock Group
to acquire or own any shares of or interests in stock of the Company (other than
the
27
acquisition of shares of Company Stock pursuant to the Merger or the Post-Merger
Restructuring Transactions), without the prior written approval of the Company
and Parent.
(e) The Company and its Subsidiaries and Affiliates will not execute in
connection with the Merger, this Agreement (or any document referred to herein),
any other document that would require Parent or any member of the Common Stock
Group to acquire or own any shares of or interests in stock of the Company
(other than the acquisition of shares of Company Stock pursuant to the Merger or
the Post-Merger Restructuring Transactions), without the prior written approval
of Liberty and Parent.
3.9 Compensation. Except as may otherwise be provided in or required by
this Agreement, the Inter-Group Supplement, the Sixth Tax Sharing Amendment or
as has been or will be negotiated by Liberty or any member of the Liberty Media
Group with Parent or any other Person, any compensation paid or to be paid by
Parent, Merger Sub or any member of the Common Stock Group to any stockholder of
the Company who will be an employee of or perform advisory services for Parent,
Merger Sub or any member of the Common Stock Group before the Merger, or for
Parent or any member of the Common Stock Group after the Merger, will be in
consideration of services actually rendered or to be rendered, will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services, and has been or will be bargained for independent of
negotiations regarding the consideration to be paid for shares of Company Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company makes the representations and warranties set forth below,
except as expressly set forth in the applicable section of the Disclosure
Schedule. Each exception to the representations and warranties set forth in the
Disclosure Schedule shall reference by Section number the representation and
warranty to which it applies. For purposes of this Article IV, an item shall be
deemed to be material if it involves an amount of $5,000,000 or more.
4.1 Organization and Qualification.
(a) Each of the Company and each of its subsidiaries (i) is a
corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and (ii) has all requisite corporate or
partnership power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each of the Company and each
of its subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of its activities makes such qualification necessary, except
in such jurisdictions where the failure to be so duly qualified or in good
standing has not had and is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect.
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(b) The Company has delivered to Liberty and Parent true and complete
copies of the Company Charter and bylaws, as amended through and in effect on
the date hereof, and the organization documents of its subsidiaries as amended
through and in effect on the date hereof. The Company's minute books, true and
complete copies of which have been made available to Liberty, contain the
minutes of all meetings of incorporators, directors and stockholders of the
Company since its inception and such minutes completely and correctly reflect
all of their respective actions in all material respects.
4.2 Authorization and Validity of Agreement. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject to
obtaining the approval of its stockholders specified in Section 4.15, to perform
its obligations hereunder and consummate the transactions contemplated hereby.
The execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Company Board and by all other corporate action on the part of
the Company, subject, in the case of consummation of the Reclassification and
the Merger, to such approval of the Company's stockholders. The execution,
delivery and performance by the Company of the Letter of Intent and the
performance by the Company of its obligations thereunder were duly and validly
authorized by the Company Board prior to the execution and delivery of the
Letter of Intent by the parties thereto, in accordance with Section 203 and
other applicable provisions of the DGCL. This Agreement has been duly executed
and delivered by the Company and is a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
4.3 Capitalization.
(a) Prior to the Reclassification, the authorized capital stock of
the Company consists of 30,000,000 shares of Old Class A Common Stock, 6,000,000
shares of Old Class B Common Stock and 1,000,000 shares of preferred stock, none
of which have been designated or are outstanding. As of the close of business on
the business day immediately preceding the date of this Agreement, (i) 8,157,309
shares of Old Class A Common Stock were issued and outstanding, 1,174,544 shares
of Old Class A Common Stock were reserved for issuance upon exercise of
outstanding Company Stock Options, 643,341 shares of Old Class A Common Stock
were reserved for issuance upon conversion of outstanding Convertible
Debentures, and 6,000 shares were issued and held by the Company in its treasury
or by subsidiaries of the Company, (ii) 1,747,178 shares of Old Class B Common
Stock were issued and outstanding, no shares of Old Class B Common Stock were
reserved for issuance upon exercise of outstanding Company Stock Options, and no
shares were issued and held by the Company in its treasury or by subsidiaries of
the Company.
29
(b) All issued and outstanding shares of Company Stock have been
validly issued and are fully paid and non-assessable, are not subject to and
have not been issued in violation of any preemptive rights and have not been
issued in violation of any federal or state securities laws.
(c) As of the close of business on the date hereof, the only
outstanding bonds, debentures, notes or other indebtedness of the Company or any
of its subsidiaries that have the right to vote (or that are convertible into
other securities having the right to vote) on any matters on which stockholders
may vote ("Voting Debt") in existence are the Convertible Debentures.
(d) Section 4.3 of the Disclosure Schedule includes a true and
complete list of all outstanding options ("Company Stock Options") to purchase
Company Stock, showing for each Company Stock Option the following: the holder
thereof, the date of issuance, the expiration date, the exercise price, the
number of shares of Old Class A Stock covered thereby and the vesting schedule
for such option. The Company has delivered to Liberty and Parent true and
complete copies of the Company Stock Options. Such copies represent the terms,
conditions, provisions, agreements, obligations and undertakings of the Company
with respect to all Company Stock Options.
(e) Section 4.3 of the Disclosure Schedule also includes a true and
complete list and description of all outstanding Convertible Debentures, showing
for each: the holder thereof, date of issuance, maturity date, conversion price,
principal amount, interest rate and any other material provisions with respect
thereto. The Company has delivered to Liberty and Parent true and complete
copies of the Convertible Debentures. Such copies represent the terms,
conditions, provisions, agreements, obligations and undertakings of the Company
or any of its subsidiaries with respect to all Convertible Debentures.
(f) Except for this Agreement, the Convertible Debt Facility
Agreement, the Company Stock Options and Convertible Debentures outstanding as
of the date hereof, and the obligation of the Company, pursuant to the Company
Charter, to issue one share of Old Class A Common Stock for each share of
outstanding Old Class B Common Stock under the circumstances provided for
therein, there are no outstanding or authorized subscriptions, options,
warrants, calls, rights, commitments or other agreements or instruments of any
kind or character, to or by which the Company or any of its subsidiaries is a
party or is bound, that directly or indirectly (i) obligate the Company or any
of its subsidiaries (conditionally or unconditionally) to issue, deliver or sell
or cause to be issued, delivered or sold, (ii) entitle any Person (conditionally
or unconditionally) to purchase or otherwise acquire, or (iii) otherwise
represent or evidence: (A) any additional shares of Company Stock or any other
capital stock, equity interest or Voting Debt of the Company or any subsidiary
of the Company, (B) any securities convertible into, or exercisable or
exchangeable for, any such shares, interests or Voting Debt, or (C) any phantom
shares, phantom equity interests or stock or equity appreciation rights.
(g) Neither the Company nor any subsidiary thereof is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
30
Since the close of business on the business day immediately preceding the date
of this Agreement, no shares of capital stock of the Company have been issued or
have been transferred from the Company's treasury, except shares of Company
Stock issued upon the exercise or conversion, in accordance with their terms, of
Company Stock Options outstanding at the close of business on such date.
(h) Except for this Agreement, the Convertible Debt Facility
Agreement, and the Company's stock option plans of 1986, 1994, 1995, 1997 and
1998 and the Company's "executive pay out" arrangement with certain executives,
as described in Section 4.3 of the Disclosure Schedule (collectively, the
"Company Stock Plans"), the Convertible Debentures and those Company Stock
Options granted pursuant to individual agreements with the grantees and not
pursuant to the Company Stock Plans (as described in Section 4.3 of the
Disclosure Schedule), true and complete copies of all of which have been
provided to Liberty and Parent by the Company, neither the Company nor any of
its subsidiaries has adopted, authorized or assumed any plans, arrangements or
practices for the benefit of its officers, employees, directors or any other
Persons, that require or permit the issuance, sale, purchase or grant of any
capital stock, other equity interests or Voting Debt of the Company or any
subsidiary of the Company, any other securities convertible into, or exercisable
or exchangeable for, any such stock, interests or Voting Debt, or any phantom
shares, phantom equity interests or stock or equity appreciation rights.
(i) All shares of capital stock of, and all partnership, membership
or other equity interests in, each subsidiary of the Company and in each
Affiliate of the Company owned directly or indirectly by the Company are owned
free and clear of any Lien or Restriction, except as set forth in Section 4.3(i)
of the Disclosure Schedule, and the shares of capital stock of each corporate
subsidiary of the Company are validly issued, fully paid and non-assessable.
There are not, and immediately after the Effective Time, there will not be, any
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or other agreements of any character that, directly or indirectly,
(x) provide for or relate to the sale, pledge, transfer or other disposition by
the Company or any subsidiary of the Company of any shares of capital stock of,
any partnership, membership or other equity interests in, or any Voting Debt of
any subsidiary of the Company or any Affiliate owned directly or indirectly by
the Company or any subsidiary of the Company, or (y) relate to the voting or
control of such capital stock, partnership or other equity interests or Voting
Debt.
(j) Except for the transactions listed in Section 7.4(e) of the
Disclosure Schedule, neither the Company nor any subsidiary of the Company nor
any controlled Affiliate of the Company is under any obligation to contribute
any additional capital to, or to acquire any additional interest in, any other
Person.
4.4 Reports and Financial Statements. The Company has made available to
Liberty and Parent true and complete copies of all Company Commission Filings
filed prior to the date hereof and agrees to provide Liberty with true and
complete copies of all Company Commission Filings filed after the date hereof.
The Company Commission Filings constitute all of the documents (other than
preliminary material) required to be filed by the Company with the Commission
since
31
September 1, 1993. As of their respective dates, each of the Company Commission
Filings complied and, in the case of filings after the date hereof, will comply
in all material respects with the applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations under each such Act, and none of
the Company Commission Filings contained as of such date any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When filed with the
Commission, the financial statements included in the Company Commission Filings
complied as to form in all material respects with the applicable rules and
regulations of the Commission and were prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and such financial statements fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as at the dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal, recurring year-end
audit adjustments. Except as and to the extent reflected or reserved against in
the financial statements included in the Company's Quarterly Report on Form 10-Q
for the quarter ended August 31, 1999 (the "Company Form 10-Q") or as disclosed
therein, the Company did not as of such date have any material liability or
obligation of any kind, whether accrued, absolute, contingent, unliquidated or
other and whether due or to become due (including any liability for breach of
contract, breach of warranty, torts, infringements, claims or lawsuits). Since
August 31, 1999, the Company has not incurred any liability or obligation of any
kind that alone or in the aggregate is material, except in the ordinary course
of business.
4.5 No Approvals or Notices Required; No Conflict with Instruments. The
execution and delivery by the Company of this Agreement do not and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby will not:
(i) conflict with or violate the Company Charter or bylaws or
the charter or bylaws of any corporate subsidiary of the Company or the
partnership agreement of any partnership subsidiary of the Company,
assuming approval of the Merger Proposal by the Company's stockholders as
contemplated by Section 4.15;
(ii) require any consent, approval, order or authorization of or
other action by, or any registration, qualification, declaration or filing
with or notice to, any Governmental Entity (collectively, "Governmental
Consents and Filings"), with respect to the Company or any subsidiary of
the Company, except (A) the filing with the Commission of the Proxy
Statement and such reports under Sections 13(a) and 16(a) of the Exchange
Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (B) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (C) such
Governmental Consents and Filings (the "Local Approvals") with foreign,
state and local Governmental Entities as may be required with respect to
any Licenses held by the Company or any of its subsidiaries, or as may
otherwise be required under laws applicable to the conduct of the
businesses of the Company and its subsidiaries,
32
(D) such consents and filings as may be required in connection with the
issuance of Class A Liberty Group Stock as contemplated hereby pursuant to
state securities and blue sky laws; (E) all filings required to be made
pursuant to the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇ Act;
(F) the filing by Parent of the S-4 Registration Statement; and (G) any
other filings the absence of which would not, individually or in the
aggregate, result in a Material Adverse Effect.
(iii) assuming approval of the Merger Proposal by the Company's
stockholders as contemplated by Section 4.15, require, on the part of the
Company or any subsidiary of the Company, any consent by or approval or
authorization of or notice to any Person (other than a Governmental
Entity), whether under any Contract or otherwise, except as set forth in
Section 4.5(iii) of the Disclosure Schedule and except for any other
consents, approvals, authorizations and notices the absence of which would
not, individually or in the aggregate, result in a Material Adverse Effect;
(iv) assuming that the consents and notices described in
Section 4.5(iii) of the Disclosure Schedule are obtained and given,
conflict with or result in any violation or breach of or default under, or
give rise to a right of termination, cancellation, suspension, modification
or acceleration of any obligation or any increase in any payment required
by or the impairment, loss or forfeiture of any benefit, rights or
privileges under or the creation of a Lien or other encumbrance on any
assets pursuant to (any of the foregoing, a "Violation") any Contract to
which the Company or any subsidiary is a party, by which the Company or any
subsidiary or any of their respective assets or properties is bound or
affected, or pursuant to which the Company or any subsidiary is entitled to
any rights or benefits (in any such case, with or without notice or lapse
of time, or both), other than any Violations that would not, individually
or in the aggregate, result in a Material Adverse Effect; or
(v) assuming that the Merger Proposal is so approved by the
Company's stockholders and assuming that the Governmental Consents and
Filings specified in clauses (A) through (E) of Section 4.5(ii) are
obtained, made and given, result in a Violation of any law, rule,
regulation, order, judgment or decree applicable to the Company or any
subsidiary or by which any of their respective properties or assets are
bound or affected, other than any such Violations that would not,
individually or in the aggregate, result in a Material Adverse Effect.
Section 4.5(ii)(C) of the Disclosure Schedule identifies all Local Approvals
required by the Company in connection with the execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation of the Merger as contemplated hereby, other than
any such Local Approvals that meet both of the following requirements: (x) the
failure of such Local Approvals to be obtained would not, individually or in
33
the aggregate, have a Material Adverse Effect, and (y) the Company is not aware,
after due diligence, that such Local Approval is so required.
4.6 Absence of Certain Changes or Events. Except as otherwise expressly
disclosed in Company Commission Filings filed with the Commission between August
31, 1998, and the date of this Agreement, since August 31, 1999: (i) there has
not been any material adverse change in the business, assets, liabilities,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole, and no event
has occurred and no condition exists that, individually or together with any
other events or conditions, has had or is reasonably likely to have a Material
Adverse Effect and (ii) other than any actions that in the ordinary course of
the Company's business consistent with prior practice would not have required,
and would have been taken without, the approval of the Company Board, no action
has been taken by the Company or any subsidiary of the Company that, if Section
7.4 had then been in effect, would have been prohibited by such Section without
the consent or approval of Liberty, and no agreements, understandings,
obligations or commitments, whether in writing or otherwise, to take any such
action have been entered into.
4.7 Information Supplied. None of the information supplied or to be
supplied by the Company or any of its Affiliates, directors, officers,
employees, agents or representatives in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the S-4 Registration Statement or any amendment or supplement
thereto filed or to be filed by Parent with the Commission under the Securities
Act in connection with the Class A Liberty Group Stock to be issued in the
Merger (or any other securities issued or deemed to be issued in connection with
this Agreement and the transactions contemplated hereby), (ii) the Proxy
Statement or (iii) any other documents filed or to be filed with the Commission
or any other Governmental Entity in connection with the transactions
contemplated hereby, will, at the respective times such documents are filed,
and, in the case of the S-4 Registration Statement or any amendment or
supplement thereto, when the same becomes effective, at the time of the Special
Meeting and at the Effective Time, and, in the case of the Proxy Statement or
any amendment or supplement thereto, at the time of mailing of the Proxy
Statement to the Company's stockholders and at the time of the Special Meeting
or any other meeting of the Company's stockholders to be held in connection with
the Merger, be false or misleading with respect to any 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 or necessary to correct any statement in any earlier
communication. For this purpose, any such information included or incorporated
by reference in any such document will be deemed to have been so supplied in
writing specifically for inclusion or incorporation therein if such document was
available for review by the Company a reasonable time before such document was
filed (but the foregoing shall not be the exclusive manner in which it may be
established that such information was so supplied). The S-4 Registration
Statement (to the extent that the Proxy Statement constitutes the prospectus
thereunder) and the
34
Proxy Statement will comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and the respective
rules and regulations under each such Act.
4.8 Legal Proceedings. Except as set forth in the Company Commission
Filings filed with the Commission prior to the date hereof, (i) there is no
suit, action or proceeding pending or, to the best knowledge of the Company, any
investigation pending or any suit, action, proceeding or investigation
threatened, against, involving or affecting the Company or any subsidiary or any
of its or their properties or rights, that is, if adversely determined,
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect; (ii) there is no judgment, decree, Injunction, rule or order of
any Governmental Entity applicable to the Company or any subsidiary that has or
is reasonably likely to have, either individually or in the aggregate, any such
effect; and (iii) to the best knowledge of the Company, there is no action,
suit, proceeding or investigation pending or threatened against the Company that
seeks to restrain, enjoin or delay the consummation of the Merger or any of the
other transactions contemplated hereby or that seeks damages in connection
therewith, and no Injunction of any type referred to in Sections 8.2(d), 8.3(h)
and 8.4(d) has been entered or issued.
4.9 Licenses; Compliance with Regulatory Requirement. The Company and its
subsidiaries hold all licenses, franchises, ordinances, authorizations, permits,
certificates, variances, exemptions, concessions, leases, rights of way,
easements, instruments, orders and approvals, domestic or foreign (collectively,
the "Licenses") that are material to the ownership of the assets and operation
of the businesses of the Company and its subsidiaries to which such Licenses
relate. The Company's material Licenses are listed on Section 4.9 of the
Disclosure Schedule attached hereto. The Company and each of its subsidiaries is
in compliance with, and has conducted its business so as to comply with, the
terms of its Licenses and with all applicable laws, rules, regulations,
ordinances and codes, domestic or foreign. Without limiting the generality of
the foregoing, the Company and its subsidiaries (i) have all Licenses of
foreign, state and local governmental authorities required for the operation of
the facilities being operated on the date hereof by the Company and its
subsidiaries, (ii) have duly and currently filed all reports and other
information required to be filed by any Governmental Entity in connection with
such Licenses, and (iii) are not in violation of any of such Licenses. Without
limiting the generality of the foregoing, to the best knowledge of the Company,
the Company has duly complied with, and the operation of its business, equipment
and other assets and the facilities owned or leased by the Company are in
compliance with the provisions of all applicable federal, state and local
environmental, health and safety laws, statutes, ordinances, rules and
regulations of any governmental or a quasi governmental authority relating to
(i) errors or omissions, (ii) discharges to surface water or ground water, (iii)
solid or liquid waste disposal, (iv) the use, storage, generation, handling,
transport, discharge, release or disposal of toxic or hazardous substances or
waste, (v) the emission of non-ionizing electromagnetic radiation or (vi) other
environmental, health or safety matters, including all matters set forth in the
Comprehensive Environmental Response Compensation and Liability Act of 1980 as
amended by the Superfund Amendments and Authorization Act of 1986; the
Occupational Safety and Health Act; the Resource Conservation Recovery Act of
1976; the Federal Water Pollution Control Act of 1970;
35
the Safe Drinking Water Act of 1974; the Toxic Substances Control Act of 1976;
the Emergency Planning Community Right to Know Act of 1986, as amended; and the
Clean Air Act, as amended (collectively "Environmental and Health Laws"). To the
knowledge of the Company, there are no investigations, administrative
proceedings, judicial actions, orders, claims or notices that are pending,
anticipated or threatened against the Company relating to violations of the
Environmental and Health Laws. The Company has not received any notice of, and
does not know or have any reason to suspect, any facts that would constitute a
violation of any Environmental and Health Laws that relate to the use, ownership
or occupancy of any property or facilities used by the Company in connection
with the operation of its business or any activity of the business of the
Company that would result in a violation or threatened violation of any
Environmental or Health Laws.
4.10 Brokers or Finders. No agent, broker, investment banker, financial
advisor or other Person is or will be entitled, by reason of any agreement, act
or statement by the Company or any of its subsidiaries, Affiliates, directors,
officers, employees or agents, to any financial advisory, broker's, finder's or
similar fee or commission, to reimbursement of expenses or to indemnification or
contribution in connection with any of the transactions contemplated by this
Agreement, except to the extent provided for in (a) the engagement letter and
indemnification letter, each dated April 14, 1999 (the "April 14 Letters"),
between the Company and Lazard Freres & Co. LLC ("Lazard"), and (b) the
engagement letter dated September 24, 1999, between the Company and Banc of
America Securities LLC ("BAS"), true, correct and complete copies of which have
been delivered by the Company to Liberty and Parent prior to the date of this
Agreement, and the Company agrees to indemnify and hold Parent, Liberty, Merger
Sub and their respective subsidiaries, Affiliates, directors, officers,
employees and agents harmless from and against any and all claims, liabilities
or obligations with respect to any other fees, commissions, expenses or claims
for indemnification or contribution asserted (i) by any other Person on the
basis of any act or statement made or alleged to have been made by the Company
or any of its subsidiaries, Affiliates, directors, officers, employees or
agents, (ii) by Lazard on the basis of any act or statement made or alleged to
have been made by the Company or any of its subsidiaries, Affiliates, directors,
officers, employees or agents other than the April 14 Letters or (iii) by BAS on
the basis of any act or statement made or alleged to have been made by the
Company or any of its subsidiaries, Affiliates, directors, officers, employees
or agents.
4.11 Tax Matters. There have been duly filed by or on behalf of the
Company and each of its subsidiaries (and each of their respective predecessors,
if any), or filing extensions from the appropriate federal, state, foreign and
local Governmental Entities have been obtained with respect to, all federal,
state, foreign and local tax returns and reports required to be filed on or
prior to the date hereof; (ii) payment in full or adequate provision, in
accordance with GAAP, for the payment of all taxes required to be paid in
respect of the periods covered by such tax returns and reports has been made;
(iii) a reserve that the Company reasonably believes to be adequate has been set
up for the payment of all such taxes anticipated to be payable in respect of
periods through the date hereof; (iv) there are no material "deferred
intercompany transactions" or "intercompany transactions," the gain or loss in
which has not yet been taken into account under the Consolidated Returns (as
defined
36
below); and (v) there are no liens for taxes on the assets of the Company and
each of its subsidiaries, except for statutory liens for current taxes not yet
due and payable (and except for liens that do not and would not, individually or
in the aggregate, have a Material Adverse Effect). No income tax returns
required to be filed by or on behalf of the Company and each of its subsidiaries
consolidated in such returns (and their respective predecessors, if any) (the
"Consolidated Returns") have been examined by or settled with the Internal
Revenue Service ("IRS") or other Governmental Entity, except as set forth in
Section 4.11 of the Disclosure Schedule. No deficiencies or assessments have
been asserted in writing by any Governmental Entity with respect to any alleged
deficiency in any tax, except as set forth in Section 4.11 of the Disclosure
Schedule. For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include all federal,
state, local and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, use, property, withholding, excise and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts. The term "tax return" means a
report, return or other information required to be supplied to or filed with a
Governmental Entity with respect to any tax, including any information return,
claim for refund, amended tax return or declaration of estimated tax.
(b) Neither the Company nor any of its Subsidiaries (i) is a party to
any tax allocation or tax sharing agreement, (ii) has been a member of an
affiliated group filing a consolidated federal income tax return other than a
group the common parent of which was the Company or (iii) has any liability for
taxes of any Person (other than the Company and its Subsidiaries) under Reg.
(S)1.1502-6 (or any similar provision of state, local or foreign law), as
transferee or successor, by contract or otherwise.
4.12 Employee Matters.
(a) Section 4.12(a) of the Disclosure Schedule contains a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits, profit-
sharing, pension or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to at any time since
January 1, 1994, by the Company or by any trade or business, whether or not
incorporated ("ERISA Affiliate"), that together with the Company would be deemed
a "single employer" within the meaning of Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), for the benefit of
any employee or former employee of the Company or any ERISA Affiliate, including
any such type of plan established, maintained or contributed to under the laws
of any foreign country (the "Company Plans"). Section 4.12(a) of the Disclosure
Schedule identifies each Company Plan that is an "employee benefit plan," as
defined in Section 3(3) of ERISA. The Company has delivered to Liberty true and
complete copies of each Company Plan and, if the Company Plan is funded through
a trust or any third party funding vehicle, a copy of the trust or other funding
document, the most recent determination letter issued by the IRS with respect to
each Company Plan for which
37
such a letter has been obtained, annual reports on Form 5500 required to be
filed with any Governmental Entity for each Company Plan that is an employee
pension benefit plan for the three most recent plan years and all required
actuarial reports for the last two plan years of each Company Plan.
(b) Except as set forth in Section 4.12(b) of the Disclosure
Schedule, none of the Company Plans is a "multiemployer plan", as defined in
Section 3(37) of ERISA ("Multiemployer Plan"), and neither the Company nor any
ERISA Affiliate has completely or partially withdrawn from any Multiemployer
Plan with respect to which the Company or any ERISA Affiliate has any
unsatisfied withdrawal liability, nor has any of them incurred any unsatisfied
liability due to the termination or reorganization of a Multiemployer Plan; and
with respect to each Company Plan that is a Multiemployer Plan: (i) none of the
Company, any of its Subsidiaries nor any ERISA Affiliate would be subject to any
withdrawal liability under Part I of Subtitle E of Title IV of ERISA if, as of
the close of the most recent fiscal year of any such plan, the Company or any of
its subsidiaries or any of their respective ERISA Affiliates were to experience
a complete withdrawal from such plan; and (ii) to the Company's knowledge, none
of the Company, any of its Subsidiaries, nor any of their respective ERISA
Affiliates has received any notification, nor has any reason to believe, that
such Multiemployer Plan is in reorganization, has been terminated, is insolvent,
or may reasonably be expected to be in reorganization, to be insolvent, or to be
terminated; and (iii) the Company and its ERISA Affiliates have made all
contributions to such Multiemployer Plan that they are required to make under
the terms of such plan or under any applicable law or contract, except in the
case of clauses (i), (ii) and (iii), which would not reasonably be expected to
have a Material Adverse Effect.
(c) Each Company Plan that utilizes a funding vehicle described in
Section 501(c)(9) of the Code or is subject to the provisions of Section 505 of
the Code has been the subject of a notification by the IRS that such funding
vehicle qualifies for tax-exempt status under Section 501(c)(9) of the Code
and/or such Company Plan complies with Section 505 of the Code, unless the IRS
does not as a matter of policy issue such notification with respect to that
particular type of plan. Each such Company Plan satisfies, where appropriate,
the requirements of Sections 501(c)(9) and 505 of the Code.
(d) There has been no event or circumstance that has resulted in any
liability being asserted by any Company Plan, the Pension Benefit Guaranty
Corporation or any other person or entity under Title IV of ERISA against the
Company or any ERISA Affiliate nor is there or has there been any event or
circumstance that could reasonably be expected to result in such liability.
(e) Except as set forth in Section 4.12(e) of the Disclosure
Schedule, neither the Company nor any subsidiary of the Company is a party to or
bound by the terms of any collective bargaining agreement. The Company and each
subsidiary of the Company is in compliance in all material respects with all
applicable laws respecting the employment and employment practices, terms and
conditions of employment and wage and hours of its employees and is not engaged
in any unfair labor practice. There is no labor strike or labor disturbance
pending or, to the knowledge of the Company, threatened against the Company or
any subsidiary of the Company, and during the
38
past five years neither the Company nor any subsidiary of the Company has
experienced a work stoppage.
(f) Each Company Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including,
but not limited to, Section 406 of ERISA and Section 4975 of the Code.
(g) To the Company's knowledge, each Company Plan that is intended to
be "qualified" within the meaning of Section 401(a) of the Code is so qualified
and the trusts maintained thereunder are exempt from taxation under
Section 501(a) of the Code.
(h) Except as set forth in Section 4.12(h) of the Disclosure
Schedule, no Company Plan provides welfare benefits, including death or medical
benefits, with respect to current or former employees or consultants of the
Company or any subsidiary of the Company beyond their retirement or other
termination of service (other than coverage mandated by applicable law).
(i) Except as set forth in Section 4.12(i) of the Disclosure
Schedule, there are no material pending, threatened or anticipated claims by or
on behalf of any Company Plan, by any employee or beneficiary covered under any
such Company Plan with respect to such Company Plan, or otherwise involving any
such Company Plan (other than routine claims for benefits).
(j) Section 4.12(j) of the Disclosure Schedule sets forth a true and
complete list as of the date hereof of each of the following agreements,
arrangements and commitments to which the Company or any of its subsidiaries is
a party or by which any of them may be bound (true and complete copies of which
have been made available to Liberty): (i) each employment, consulting, agency or
commission agreement not terminable without liability to the Company or any of
its subsidiaries upon 60 days' or less prior notice to the employee, consultant
or agent and involving compensation or remuneration of more than $90,000 per
annum; (ii) each labor union or collective bargaining agreement; (iii) each
agreement with any executive officer or other key employee of the Company or any
subsidiary of the Company, the benefits of which are contingent, or the terms of
which are materially altered, upon the consummation of the transactions
contemplated by this Agreement; (iv) each agreement with respect to any officer
or other key employee of the Company or any subsidiary of the Company providing
any term of employment or compensation guarantee extending for a period longer
than one year; and (v) each other material agreement or Company Plan any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. Except as set forth in Section 4.12(j) of the Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any agreement,
arrangement, commitment or understanding that has resulted or would result, upon
the consummation of the transactions contemplated under this Agreement or
otherwise, separately or in the aggregate, in the payment of any "excess
parachute payment" within the meaning of Section 280G of the Code.
39
4.13 Fairness Opinion. The Company Board has received the oral opinion
(which will be memorialized in writing prior to the filing of the Preliminary
Proxy Statement) of BAS that, as of the date hereof, the Merger Consideration
payable with respect to the Company Class B Stock pursuant to the Merger, and
the ownership of the Surviving Corporation Class A Stock to be retained in the
Merger by the record holders thereof, taken as a whole, is fair, from a
financial point of view, to the holders of the Old Class A Common Stock, other
than (if holders) Parent, Liberty and any Affiliates of the Company, Parent or
Liberty (the "Fairness Opinion"). The Company has provided, or prior to the
filing of the Preliminary Proxy Statement will provide, Liberty and Parent with
a true and complete copy of the Fairness Opinion will include an executed copy
of the Fairness Opinion in the Proxy Statement.
4.14 Recommendation of Company Board. The Company Board, by vote at
meetings duly called and held, has approved this Agreement and the Merger and
has declared them advisable, determined that the Reclassification and the Merger
are in the best interests of the Company's stockholders, and has adopted
resolutions recommending approval and adoption of the Reclassification, this
Agreement and the Merger by the stockholders of the Company.
4.15 Vote Required; Consents Under Employee Plans. The only vote of
stockholders (or holders of Convertible Debentures) of the Company required
under the DGCL, the Nasdaq National Market and the Company Charter and bylaws in
order to approve and adopt the Reclassification is the affirmative vote of a
majority of the aggregate voting power of the issued and outstanding shares of
Old Class A Common Stock and Old Class B Common Stock, each voting separately as
a class, and no other vote or approval of or other action by the holders of any
capital stock or Voting Debt of the Company is required. The only vote of
stockholders (or holders of Convertible Debentures) of the Company required
under the DGCL, the Nasdaq National Market and the Company Charter and bylaws in
order to approve and adopt the Merger is the affirmative vote of a majority of
the aggregate voting power of the issued and outstanding shares of Old Class A
Common Stock and Old Class B Common Stock voting together as a single class, and
no other vote or approval of or other action by the holders of any capital stock
or Voting Debt of the Company is required. No consent, approval or other action
by any holder of any Company Stock Option or Convertible Debenture or any
participant in any Company Stock Plan is necessary in order to effect the
provisions of Section 2.6 and 2.7.
4.16 Adequacy of Properties; Intangible Property.
(a) The properties and assets owned or leased by the Company and its
subsidiaries are suitable and adequate for the conduct of their respective
businesses and operations and, except as otherwise disclosed in the Company
Commission Filings filed with the Commission prior to the date hereof, the
Company and its subsidiaries have good and marketable title to or valid
leasehold or other contractual interests in such properties and assets, free and
clear of all Liens other than Permitted Encumbrances. All such real properties
and material assets encumbered by Permitted Encumbrance are listed in
Section 4.16(a) of the Disclosure Schedule.
40
(b) The Company and its subsidiaries own or have adequate rights to
use all patents, trademarks, trade names, service marks, brands, logos,
copyrights, trade secrets, customer lists and other proprietary intellectual
property rights (each of which are listed in Section 4.16(b) of the Disclosure
Schedule) required for, used in or incident to the businesses of the Company and
its subsidiaries as now conducted or proposed to be conducted. Except as
otherwise described in the Company Commission Filings, the Company has not
received notice, and has no reason to know, of any claim or threatened
infringement of the rights of others with respect to any patents, trade secrets,
trademarks, service marks, trade names, brands, logos, copyrights or licenses
used or owned by the Company. The Company has no reason to believe that it is
infringing upon or otherwise violating, or has in the past infringed upon or
otherwise violated, the rights of any third party with respect to any patent,
trade secret, trademark, trade name, service ▇▇▇▇ or copyright. To the best
knowledge of the Company, no current or former employee of the Company is or was
a party to any confidentiality agreement and/or agreement not to compete which
restricts or prohibits or restricted or prohibited at any time during such
employee's employment by the Company, such employee's performance of the
Company's business, as the case may be, or any activity that such employee was
hired to perform. To the best knowledge of the Company, the Company is not now
using, and has not in the past used without appropriate authorization, any
confidential information or trade secrets of any third party. The Company has
never received any notice alleging such conduct.
4.17 Transactions with Affiliates and Certain Agreements. Section 4.17 of
the Disclosure Schedule sets forth an accurate and complete listing of (a) all
Contracts, leases, agreements and understandings, whether written or oral, to
which the Company or any of its subsidiaries is a party, or by which the
Company, any of its subsidiaries or any of their respective assets is bound,
that contain any material restriction or limitation on the ability of the
Company or any of its subsidiaries or Affiliates to engage in any business
anywhere in the world and (b) all Contracts, leases, agreements and
understandings, whether written or oral, giving any person the right to require
the Company to register under the Securities Act any securities of the Company
or to participate in any registration of such securities. The Company has
previously provided or made available to Liberty true and complete copies of
each of the foregoing agreements. Except as expressly disclosed by the Company
in the Company Commission Filings filed with the Commission prior to the date
hereof, there are no relationships or transactions involving the Company or any
subsidiary or Affiliate of the Company of a type required to be disclosed in any
Company Commission Filings pursuant to Item 404 of Regulation S-K promulgated
under the Securities Act.
4.18 No Investment Company. The Company is not an "investment company"
subject to the registration requirements of, or regulation as an investment
company under, the Investment Company Act of 1940, as amended.
4.19 No Excise Tax Obligations. The Company does not have, and following
the consummation of the Merger the Surviving Corporation will not have, any
obligation to make payments to any past or present employees of the Company or
its subsidiaries or Affiliates as a result
41
of the imposition of any excise taxes pursuant to Section 4999 of the Code or
the imposition of any excise or similar taxes pursuant to any similar provision
of state or local law.
4.20 Full Disclosure. No statement in this Agreement (including without
limitation the Schedules and Exhibits thereto) or in any certificate delivered
pursuant to the requirements of this Agreement by or on behalf of the Company to
Parent, Liberty or Merger Sub (or to any officer, director, agent, employee,
subsidiary or Affiliate of any of them) contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
4.21 British Telecommunications. As of the date hereof, the Company and
its Subsidiaries do not, directly or indirectly, beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) any shares of any
class of capital stock of British Telecommunications plc, a company organized
under the laws of England and Wales ("BT"), or any of its Subsidiaries, or any
direct or indirect rights or options to acquire (through purchase, exchange,
conversion or otherwise) any shares of any class of capital stock of BT or any
of its Subsidiaries. Between the date of this Agreement and the Effective Time,
neither the Company nor its Subsidiaries will voluntarily acquire or agree to
acquire (through purchase, exchange, conversion or otherwise) beneficial
ownership of any shares of any class of capital stock of BT or its Subsidiaries
or any direct or indirect rights or options to so acquire any shares of any
class of capital stock of BT or any of its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company and, solely with
respect to Sections 5.1 and 5.2, to Liberty, as follows:
5.1 Organization and Qualification. Each of Parent and Merger Sub (i) is
a corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and (iii) is duly qualified or licensed and is
in good standing to do business in each jurisdiction in which the properties
owned, leased or operated by it or the nature of its activities makes such
qualification necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing has not had and is not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect.
5.2 Authorization and Validity of Agreement. This Agreement has been
duly executed and delivered by Parent and Merger Sub. Each of Parent and Merger
Sub has all requisite corporate power and authority to enter into this Agreement
and each of Parent and Merger Sub has all requisite
42
corporate power and authority to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by
each of Parent and Merger Sub of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Parent and Merger Sub (including in the case of Merger Sub, approval and
adoption of this Agreement and the Merger by Parent, as the sole stockholder of
Merger Sub). This Agreement is a legal, valid and binding obligation of Parent
and Merger Sub, enforceable in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
The shares of Class A Liberty Group Stock to be issued and delivered by Parent
pursuant to Sections 2.4, 2.5, 2.6 and 2.7 will be, when the Merger has become
effective and such shares are issued and delivered as provided in Sections 2.4,
2.5, 2.6 and 2.7 duly authorized, validly issued, fully paid and non-assessable
assuming, with respect to Sections 2.6 and 2.7, that such issuance and delivery
is consistent with the terms and conditions of the Company Stock Options and the
Convertible Debentures, respectively, and no stockholder of Parent will have any
preemptive right of subscription or purchase in respect thereof.
5.3 Capitalization of Parent. As of the date hereof, Parent's authorized
capital stock consists of 8,850,000,000 shares, consisting of (a) 100,000,000
preferred shares, par value $1.00 per share ("Parent Preferred Stock"), and (b)
8,750,000,000 common shares, par value $1.00 per share, of which (i)
6,000,000,000 shares are Parent Common Stock, (ii) 2,500,000,000 shares are
Class A Liberty Group Stock and (iii) 250,000,000 shares are Class B Liberty
Group Stock.
5.4 Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub
(a) Merger Sub was formed by Parent solely for the purpose of
engaging in the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock
of Merger Sub is and will be owned 100% by Parent directly. Except as
contemplated by this Agreement and the Inter-Group Supplement, the Post-Merger
Restructuring Transactions and the Contribution Agreement there are not as of
the date hereof, and there will not be at the Effective Time, any outstanding or
authorized options, warrants, calls, rights, commitments or any other agreements
of any character to or by which Merger Sub is a party or may be bound requiring
it to issue, transfer, sell, purchase, redeem or acquire any shares of capital
stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for or acquire, any shares of capital stock of
Merger Sub.
(c) As of the date hereof and immediately prior to the Effective
Time, except for agreements, obligations or liabilities entered into or incurred
in connection with its incorporation or organization and the transactions
contemplated hereby and by the Inter-Group Supplement and the Sixth Tax Sharing
Amendment or any other documents referred to herein or therein or executed in
connection herewith or therewith to which any of the Company or its subsidiaries
or Affiliates is a
43
party, Merger Sub has not and will not have incurred, any obligations or
liabilities or engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
(d) Parent will take all commercially reasonable actions necessary to
ensure that Merger Sub at no time prior to the Effective Time owns any material
assets other than an amount of cash necessary to capitalize Merger Sub and to
pay the expenses of the Merger attributable to Merger Sub if the Merger is
consummated. If, notwithstanding the foregoing sentence, any assets are
contributed to Merger Sub, Parent will take all commercially reasonable actions
necessary to ensure that no assets will be withdrawn from Merger Sub at any time
prior to the Effective Time.
5.5 Ownership of Company Stock. As of the date hereof, neither Parent nor
any Subsidiary or Affiliate of Parent "owns", and has not within the past three
years "owned" (as such terms are defined in Section 203 of the DGCL), more than
5% of the shares of Company Stock (other than pursuant to this Agreement,
including Exhibit 1.1 hereto, the Inter-Group Supplement, the Sixth Tax Sharing
Amendment or any document referred to herein or therein or executed in
connection herewith or therewith to which the Company, Liberty or any of their
respective Subsidiaries or Affiliates is a party) outstanding on the date
hereof; provided, however, that for purposes of this representation Parent and
its Subsidiaries that are members of the Common Stock Group shall not be deemed
to own or have owned any shares or interests in stock of the Company that may be
owned by or for the benefit of any member of the Liberty Media Group.
5.6 Information Supplied. None of the information supplied or to be
supplied by Parent or Merger Sub in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in, (i) the S-4 Registration Statement or any amendment or supplement
thereto, (ii) the Proxy Statement or (iii) any other documents filed or to be
filed with the Commission or any other Governmental Entity in connection with
the transactions contemplated hereby, will, at the respective times such
documents are filed, and, in the case of the S-4 Registration Statement or any
amendment or supplement thereto, when the same becomes effective and at the
Effective Time, be false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF LIBERTY
Liberty hereby represents and warrants to Parent and the Company as
follows:
6.1 Organization and Qualification. Liberty (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and (iii) is duly qualified or licensed and in good
standing to do
44
business in each jurisdiction in which the properties owned, leased or operated
by it or the nature of its activities makes such qualification necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing has not had and is not reasonably likely to have, individually
or in the aggregate, a Liberty Material Adverse Effect. As of September 30,
1999, (a) 1,156,751,950 shares of Class A Liberty Group Stock, (b) 49,265,043
shares of Class A Liberty Group Stock were reserved for issuance upon exercise
of outstanding options for Class A Liberty Group Stock, (c) 108,421,708 shares
of Class B Liberty Group Stock were issued and outstanding and (d) 2,912,000
shares of Class B Liberty Group Stock were reserved for issuance upon exercise
of outstanding options for Class B Liberty Group Stock.
6.2 Authorization and Validity of Agreement. This Agreement has been duly
executed and delivered by Liberty. Liberty has all requisite corporate power and
authority to enter into this Agreement and Liberty has all requisite corporate
power and authority to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Liberty of this Agreement and the consummation by Liberty of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on its part. This Agreement is a legal, valid and binding
obligation of Liberty, enforceable in accordance with its terms (except insofar
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
6.3 Ownership of Company Stock. Neither Liberty nor any member of the
Liberty Media Group nor any Subsidiary or Affiliate of Liberty "owns" (as such
term is defined in Section 203 of the DGCL), any shares of Company Stock;
provided that the foregoing representation is to the best knowledge of Liberty
with respect to shares of Company Stock so "owned" by Liberty by virtue of the
ownership of shares of Company Stock by Liberty's "affiliates" or "associates"
(as such terms are defined in the DGCL). Between the date of this Agreement and
the Effective Time, neither Liberty nor any member of the Liberty Media Group
nor any Subsidiary or Affiliate of Liberty will acquire any additional shares of
Company Stock, except in accordance with Section 3.8.
6.4 Information Supplied. None of the information supplied or to be
supplied by Liberty relating to Liberty or any of its subsidiaries or the
Liberty Media Group for inclusion or incorporation by reference in, and which is
included or incorporated by reference in, (i) the S-4 Registration Statement, or
any amendment or supplement thereto, filed or to be filed by Parent with the
Commission under the Securities Act in connection with the issuance of the
Merger Consideration, (ii) the Proxy Statement or (iii) any documents filed or
to be filed with the Commission or any other Governmental Entity in connection
with the transactions contemplated hereby, will, at the respective times such
documents are filed, and, in the case of the S-4 Registration Statement or any
amendment or supplement thereto, when the same becomes effective and at the
Effective Time, be false or misleading with respect to any 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 or necessary to correct any statement
45
in any earlier communication. The S-4 Registration Statement, including any
amendments or supplements thereto, will comply as to form in all material
respects with the provisions of the Securities Act.
6.5 Liberty Group Information.
(a) The narrative information contained in the proxy statement of
Tele-Communications, Inc. dated January 8, 1999, with respect to the Liberty
Media Group (referred to in such proxy statement as the "New Liberty Media
Group"), giving effect to the transactions described in such proxy statement,
did not as of such date contain any untrue statement of a material fact, or 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. The items of selected pro forma financial information with
respect to such "New Liberty Media Group" in such proxy statement, giving effect
to the transactions described in such proxy statement and on the basis described
therein, were accurate in all material respects as of the dates and for the
periods for which such information is presented.
(b) The narrative information contained in the Annual Report on Form
10-K for the fiscal year ended December 31, 1998 with respect to the Liberty
Media Group (referred to therein as the "Liberty/Ventures Group"), giving effect
to the acquisition of Tele-Communications, Inc. by Parent described therein, the
combination of the Ventures Group referred to therein with the predecessor of
the Liberty Media Group, and the related transfers of assets by the Ventures
Group in exchange for approximately $5.5 billion in cash, did not as of the date
such report was filed with the Commission contain an untrue statement of a
material fact, or 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.
(c) Liberty has made available to the Company true and complete
copies of all Parent/Liberty Commission Filings filed prior to the date hereof
and agrees to provide the Company, upon request, with true and complete copies
of all Parent/Liberty Commission Filings filed after the date hereof. As of
their respective dates, each of the Parent/Liberty Commission Filings complied
and, in the case of filings after the date hereof, will comply in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations under each such Act, and none of the
Parent/Liberty Commission Filings contained as of such date any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. When filed with the
Commission, the financial statements included in the Parent/Liberty Commission
Filings complied as to form in all material respects with the applicable rules
and regulations of the Commission and were prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in the
notes or schedules thereto), and such financial statements fairly present the
consolidated financial position of the Liberty Media Group as at the dates
thereof and the consolidated results of their operations and their consolidated
cash
46
flows for the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments.
6.6 No Approvals or Notices Required. The execution and delivery by
Liberty of this Agreement do not and the performance by Liberty of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not:
(i) conflict with or violate the certificate of incorporation
or bylaws of Parent or Liberty as in effect on the date hereof;
(ii) require any consent, approval, order or authorization of
or other action by, or any registration, qualification, declaration or
filing with or notice to, any Governmental Entity, with respect to Liberty,
except (A) the filing by Parent of the S-4 Registration Statement, (B) the
filing with the Commission of such reports under Sections 13(a) and 16(a)
of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated hereby, (C) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (D) such
consents and filings as may be required in connection with the issuance of
Class A Liberty Group Stock as contemplated hereby pursuant to state
securities and blue sky laws, and any other Governmental Consents and
Filings required with foreign, state and local Governmental Entities with
respect to any Licenses of Parent or any of its Affiliates or as may
otherwise be required under any laws applicable to the conduct of the
business of Parent and its Affiliates; (E) all filings required to be made
pursuant to the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇ Act;
(F) the filing by the Company of the Proxy Statement and all other
Government Consents and Filings required to be filed by or on behalf of the
Company or any of its Affiliates; and (G) any other filings the absence of
which would not, individually or in the aggregate, result in a Parent
Material Adverse Effect;
(iii) conflict with or result in any Violation of, any Contract
to which Liberty or any Liberty Affiliate is a party, other than any
Violations that would not, individually or in the aggregate, result in a
Liberty Material Adverse Effect; or
(iv) assuming approval and adoption of the Merger and this
Agreement by Parent as sole stockholder of Merger Sub and assuming that the
Governmental Consents and Filings specified in clauses (A) through (F) of
Section 6.6(ii) are obtained, made and given, result in a Violation of any
law, rule, regulation, order, judgment or decree applicable to Liberty,
other than any such Violations that would not, individually or in the
aggregate, result in a Liberty Material Adverse Effect.
6.7 Absence of Certain Changes or Events. Except as disclosed in the
Liberty Group Information, since December 31, 1998, there has not been a
material adverse change in, and no event has occurred and no condition exists
that, individually or together with all such changes, events and
47
conditions has had or, insofar as Liberty can reasonably foresee, is reasonably
likely to have a Liberty Material Adverse Effect.
6.8 Legal Proceedings. There is no suit, action or proceeding pending to
which Liberty is a party that relates to this Agreement or the Merger and, if
adversely determined, is reasonably likely to have, either individually or in
the aggregate, a Liberty Material Adverse Effect. There is no judgment, decree,
Injunction, rule or order of any Governmental Entity applicable to Liberty that
relates to this Agreement or the Merger and has, or is reasonably likely to
have, either individually or in the aggregate, a Liberty Material Adverse
Effect. To the best knowledge of Liberty, there is no action, suit, proceeding
or investigation pending or threatened against Liberty that seeks to restrain,
enjoin or delay the consummation of the Merger or any other material transaction
contemplated hereby or that seeks damages in connection therewith, and no
Injunction of any type referred to in Sections 8.2(d), 8.3(h) and 8.4(d) has
been entered or issued.
6.9 No Other Merger Agreements. Neither Liberty nor any Liberty Affiliate
is a party to any agreement, whether or not in writing, that requires Parent,
Merger Sub or any of their respective subsidiaries to effect a merger of the
Company or the Surviving Corporation with and into any other corporation, other
than the Merger, or that provides for Parent, Merger Sub or any of their
respective subsidiaries or Affiliates to suffer or incur any damage, cost,
liability or other penalty or onerous condition if such a merger is not
effected.
ARTICLE VII
CERTAIN AGREEMENTS AND TRANSACTIONS PRIOR TO CLOSING
7.1 Access to Information Concerning Properties and Records. Upon
reasonable notice, the Company shall (and shall cause each of its subsidiaries,
and use its reasonable efforts to cause its other Affiliates, to) afford to the
officers, employees, counsel, accountants and other authorized representatives
of Parent and Liberty full access during normal business hours to all its
properties, personnel, books and records and furnish promptly to such Persons
such financial and operating data and other information concerning its business,
operations, results of operation, personnel, assets, liabilities, condition and
prospects as such Persons shall from time to time reasonably request, and
instruct the officers, directors, employees, counsel and financial advisors of
the Company to discuss the same and otherwise fully cooperate with the other
party in its investigation of the Company and its business. No investigation
pursuant to this Section 7.1 will affect any representation or warranty given by
the Company to Parent or Liberty hereunder.
7.2 Confidentiality. Each of the parties hereto (the "Receiving Party")
agrees, except as otherwise provided in this Section 7.2, that it will keep
confidential in accordance with this Section 7.2 and not disclose to any person
other than its officers, directors, employees, accountants, counsel, financial
advisors and other representatives (collectively, "Representatives") or use for
any purpose other than the performance by the Receiving Party of its obligations
under this Agreement and compliance with, and enforcement of, the terms and
conditions hereof, and the Receiving Party's
48
due diligence review and business evaluations relating to the Disclosing Party
and the transactions contemplated hereby, all proprietary and/or confidential
information provided to the Receiving Party or any of its Representatives by any
other party hereto (the "Disclosing Party") or any of its Representatives
("Confidential Information"). In addition, each of Liberty and the Company
agrees not to contact any of the Disclosing Party's customers or vendors for any
reason related to this Agreement or the transactions contemplated hereby without
the Disclosing Party's consent. All information provided to the Receiving Party
or its Representatives by the Disclosing Party in connection with the
Transaction shall be presumed to constitute "Confidential Information" unless
(i) the Disclosing Party indicates otherwise in writing, (ii) the information
was or becomes generally available to the public other than as a result of a
disclosure in violation of this paragraph by the Receiving Party or its
Representatives, (iii) the information was or becomes available to the Receiving
Party or its Representatives on a non-confidential basis from a source other
than the Disclosing Party, (iv) the information was within the possession of the
Receiving Party or any of its Representatives prior to being furnished by or on
behalf of the Disclosing Party, provided that in each case the source of such
information was not bound by a confidentiality agreement in respect thereof
preventing disclosure to such Receiving Party or (v) the information is
independently developed by the Receiving Party (but only if it does not contain
or reflect, and is not based upon, in whole or in part, any information
furnished hereunder which constitutes Confidential Information). Notwithstanding
the foregoing, if the Receiving Party is required in any judicial or
administrative proceeding or by any regulatory or judicial authority or pursuant
to any applicable law or regulation to disclose any Confidential Information,
then any disclosure of such information to the extent so required shall not be
prohibited by this paragraph. The Receiving Party shall give the Disclosing
Party prompt written notice of any disclosure of Confidential Information
pursuant to the immediately preceding sentence, including the circumstances
requiring such disclosure, which notice shall be (to the extent permitted by
law) sufficiently prior to such disclosure to permit the Disclosing Party to
seek an appropriate protective order or other relief. A party's obligations
hereunder with respect to Confidential Information that (i) is disclosed to a
third party with the disclosing party's written approval, (ii) is required to be
produced under order of a court of competent jurisdiction or other similar
requirements of a governmental agency, or (iii) is required to be disclosed by
applicable law or regulation, will, subject in the case of clauses (ii) and
(iii) above to the Receiving Party's compliance with the preceding sentence,
cease to the extent of the disclosure so consented to or required, except to the
extent otherwise provided by the terms of such consent or covered by a
protective order. If a Receiving Party uses a degree of care to prevent
disclosure of the Confidential Information that is at least as great as the care
it normally takes to preserve its own information of a similar nature, it will
not be liable for any disclosure that occurs despite the exercise of that degree
of care, and in no event will a Receiving Party be liable for any indirect,
punitive, special or consequential damages unless such disclosure resulted from
its willful misconduct or gross negligence in which event it will be liable in
damages for the disclosing party's lost profits resulting directly and solely
from such disclosure; provided, however, that notwithstanding the foregoing,
Parent will not be liable under any circumstances for damages other
49
than direct damages (and not lost profits or indirect, special, punitive, or
consequential damages) resulting directly and solely from such wrongful
disclosure by Parent.
7.3 Public Announcements. Neither Liberty nor the Company shall or shall
permit any of its subsidiaries to (and each of Liberty and the Company shall use
its reasonable efforts to cause its Affiliates, directors, officers, employees,
agents and representatives not to) issue any press release, make any public
announcement or furnish any written statement to its employees or stockholders
generally concerning the transactions contemplated by this Agreement without the
consent of the other (which consent shall not be unreasonably withheld), except
to the extent required by applicable law, including the rules and regulations of
the Commission, the applicable requirements of the National Association of
Securities Dealers, Inc. with respect to issuers whose securities are quoted on
the Nasdaq Stock Market or by any securities exchange or association on which
such party's securities are traded (including pursuant to any listing agreement)
(and in such case such party shall, to the extent consistent with timely
compliance with such requirement, consult with the other party prior to making
the required release, announcement or statement).
7.4 Conduct of the Company's Business Pending the Effective Time. The
Company shall, and shall cause each of its subsidiaries to, except as permitted,
required or specifically contemplated by this Agreement or consented to or
approved in writing by Liberty alone and, in the case of clauses (c)(i), (c)(ii)
and (h), Liberty and Parent (which consent or approval shall not be unreasonably
withheld) during the period commencing on the date hereof and ending at the
Effective Time:
(a) conduct its business only in, and not take any action except in,
the ordinary and usual course of its business and consistent with past practice;
(b) use reasonable efforts, in the ordinary and usual course of its
business and consistent with past practice, to preserve intact its business
organization, preserve its Licenses in full force and effect, keep available the
services of its present officers and key employees, and preserve the good will
of those having business relationships with it (provided, however, that this
provision will not preclude the Company from terminating any officer or key
employee for "cause" with the prior approval of Liberty, which approval need not
be in writing and shall not be unreasonably withheld or delayed);
(c) not (i) make any change or amendments in its charter, bylaws,
partnership agreement or membership agreement (as the case may be); (ii) issue,
grant, sell or deliver any shares of its capital stock or any of its other
equity interests or securities, or any securities convertible into, or options,
warrants or rights of any kind to subscribe to or acquire, any shares of its
capital stock or any of its other equity interests or securities, or any phantom
shares, phantom equity interests or stock or equity appreciation rights, other
than issuances of Company Class A Stock upon exercise of Company Stock Options
or Convertible Debentures outstanding on the date of and disclosed pursuant to
this Agreement in accordance with their existing terms, and issuances of capital
stock or partnership or other equity interests by a direct or indirect wholly
owned subsidiary of the
50
Company to its immediate parent; (iii) split, combine or reclassify the
outstanding shares of its capital stock or any of its other outstanding equity
interests or securities or issue any capital stock or other equity interests or
securities in exchange for any such shares or interests; (iv) redeem, purchase
or otherwise acquire, directly or indirectly, any shares of capital stock or any
other securities of the Company or any subsidiary of the Company; (v) amend or
modify any outstanding options, warrants, or rights to acquire, or securities
convertible into shares of its capital stock or other equity interests or
securities, or any phantom shares, phantom equity interests or stock or equity
appreciation rights, or amend or modify any Company Stock Plan or Convertible
Debentures or adopt or authorize any other stock or equity appreciation rights,
restricted stock or equity, stock or equity purchase, stock or equity bonus or
similar plan, arrangement or agreement; (vi) make any other changes in its
capital, partnership or membership structure; (vii) declare, set aside, pay or
make any dividend or other distribution or payment (whether in cash, property or
securities) with respect to its capital stock or other securities; (viii) sell
or pledge any stock, equity or partnership interest owned by it in any
subsidiary of the Company or any Affiliate, except in the ordinary course of
business consistent with prior practice; or (ix) enter into or assume any
contract, agreement, obligation, commitment or arrangement with respect to any
of the foregoing;
(d) not (i) modify or change in any material respect any material
License or Contract, other than in the ordinary course of business consistent
with past practice; (ii) enter into any new employment, consulting, agency or
commission agreement, make any amendment or modification to any existing such
agreement or grant any increases in compensation, (x) in each case other than in
the ordinary course of business consistent with past practice, and with or
granted to persons who are not officers or directors of the Company or any
subsidiary of the Company, and that do not, in the aggregate, materially
increase the compensation or benefit expense of the Company or any subsidiary of
the Company or any Affiliate, (y) other than the regular annual salary increase
granted in the ordinary course of business and consistent with past practice to
officers and employees of the Company or its subsidiaries and (z) other than
entering into the consulting agreement with ▇▇▇▇▇▇▇▇▇ substantially in the form
of Exhibit 7.11(ii); (iii) establish, amend or modify any Company Plan or any
other employee benefit plan of any kind referred to in Section 4.12(a), except
to the extent required by any applicable law or the existing terms of such
Company Plan or by the provisions of this Agreement; (iv) secure any of its
outstanding unsecured indebtedness, provide additional security for any of its
outstanding secured indebtedness or grant, create or suffer to exist any Lien on
or with respect to any property, assets or rights of the Company or any
subsidiary of the Company, except for Permitted Encumbrances (provided that
Liens qualifying as Permitted Encumbrances pursuant to clause (d) of the
definition thereof shall not exceed $2,500,000 in the aggregate, without the
prior written consent of Liberty, which consent shall not unreasonably be
withheld or delayed); (v) pay, discharge or satisfy claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
its latest balance sheet included in the Company Form 10-Q or incurred since the
date of such balance sheet in the ordinary course of business and consistent
with past practice and scheduled repayments of indebtedness reflected on the
latest balance sheet included in the Company Form 10-Q; (vi) cancel
51
any debts or waive any claims or rights, except in the ordinary course of
business and consistent with past practice; (vii) make any capital expenditures
in excess of $20,000 individually or $200,000 in the aggregate from the date
hereof through the Closing Date, other than the proposed capital expenditures
set forth on Section 7.4(d)(vii) of the Disclosure Schedule, which contains the
capital budget for the Company and its subsidiaries approved by the Company
Board and in effect as of September 30, 1999 (the "Capital Budget"); (viii)
accelerate the payment of, or otherwise prepay, any existing outstanding
indebtedness for borrowed money; (ix) other than as contemplated or otherwise
permitted by this Agreement and other than the normal cash management practices
of the Company and its subsidiaries conducted in the ordinary and usual course
of their business and consistent with past practice, make any advance or loan to
or engage in any transaction with any director, officer, partner or affiliate
not required by the terms of an existing Contract described on Section
7.4(d)(ix) of the Disclosure Schedule; or (x) enter into or assume any contract,
agreement, obligation, commitment or arrangement with respect to any of the
foregoing;
(e) other than any acquisitions listed on Section 7.4(e) of the
Disclosure Schedule, not acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to otherwise acquire any substantial assets (it being
understood that any acquisition that would constitute a capital expenditure
within the meaning of the Capital Budget shall be subject to the provisions of
clause (d) of this Section and not to this clause (e));
(f) not sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets, except in the
ordinary course of business consistent with prior practice;
(g) not incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its subsidiaries or
guarantee any debt security or obligation of any other Person, other than in the
ordinary course of business consistent with past practice; and
(h) not take any action that would or is reasonably likely to result
in (i) any of the representations or warranties made in Article IV hereof being
untrue on and as of the Closing Date as though made on and as of the Closing
Date (except for any changes expressly permitted or contemplated by this
Agreement) or (ii) any of the conditions set forth in Section 8.1, 8.2 or 8.3
not being satisfied.
7.5 No Solicitation.
(a) During the term of this Agreement, the Company shall not,
directly or indirectly, through any Representative or otherwise (i) engage in
any Extraordinary Transaction (as defined below), (ii) enter into any agreement
or understanding with any person other than Liberty with respect to any
Extraordinary Transaction, (iii) participate or engage in any discussions or
52
negotiations with any person other than Liberty relating to any of the foregoing
(whether or not initiated by the Company or any Representative), or (iv) provide
any material non-public information regarding the Company or any of its
subsidiaries or any of the Company's securities to any person other than Liberty
or Parent in connection with any of the foregoing; provided, however, that this
Section 7.5(a) shall not be construed to prohibit the Company from engaging in
any or all of the transactions specified in Section 7.4(e) of the Disclosure
Schedule. If the Company receives any inquiry or proposal regarding the
possibility of an Extraordinary Transaction, or regarding any of the matters
described in clauses (ii) through (iv) of the immediately preceding sentence, it
shall promptly notify Liberty thereof in writing and shall provide Liberty with
such information regarding such inquiry or proposal and the person making the
same as Liberty shall reasonably request, to the full extent such information is
reasonably available to the Company. "Extraordinary Transaction" means any
investment in, acquisition of, business combination with or other extraordinary
transaction regarding the Company or any direct or indirect subsidiary or
division thereof, including, without limitation, any merger, purchase or sale of
securities or purchase or sale of assets outside the ordinary course of
business.
(b) Notwithstanding Section 7.5(a), if at any time prior to approval
and adoption of this Agreement and the Merger by the Company's stockholders at
the Special Meeting (the "Applicable Period") (i) the Company receives a
Superior Proposal (as defined below) that was not solicited or initiated by the
Company or any affiliate or representative of the Company in violation of
Section 7.5(a), and (ii) the Company Board reasonably determines in good faith
(after consultation with the Company's outside legal counsel) that it is
required to do so in order to discharge properly its fiduciary duties under
applicable law, the Company may, in response to such unsolicited Superior
Proposal, (A) take any or all of the actions referred to in clauses (ii) through
(iv) of Section 7.5(a) with respect to such Superior Proposal (and in connection
therewith the Company and any Subsidiary of the Company (x) may enter into one
or more customary confidentiality agreements with the Person or Persons making
the Superior Proposal but (y) may not agree to any exclusive right to negotiate
with the Company), and/or (B) withdraw or modify its recommendation of this
Agreement and the Merger (provided that in such event this Agreement and the
Merger shall nevertheless be submitted to a vote of the Company's stockholders
at the Special Meeting), and nothing contained in this Agreement shall prevent
the Company Board or the Company from complying with Rule l4d-9 and Rule l4e-2
promulgated under the Exchange Act with regard to any Extraordinary Transaction
relating to any such unsolicited Superior Proposal. For all purposes of this
Agreement, "Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, business combination, asset purchase,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the shares
of Company Stock then outstanding or all or substantially all the assets of the
Company, on terms that the Company Board reasonably determines in its good faith
judgment (after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the
53
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Company Board, is reasonably capable of
being obtained by such third party.
7.6 Notification of Certain Matters. Between the date hereof and the
Effective Time, each of Liberty and the Company will give prompt notice in
writing to the other and to Parent of: (i) any information that indicates that
any of its representations or warranties contained herein was not true and
correct as of the date hereof or will not be true and correct at and as of the
Effective Time with the same force and effect as if made at and as of the
Effective Time (except for changes permitted or contemplated by this Agreement),
(ii) the occurrence of any event that will result, or has a reasonable prospect
of resulting, in the failure of any condition specified in Article VIII hereof
to be satisfied, (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or that such
transactions otherwise may violate the rights of or confer remedies upon such
third party and (iv) any notice of, or other communication relating to, any
litigation referred to in Section 7.7 or any order or judgment entered or
rendered therein.
7.7 Defense of Litigation. Each of Liberty and the Company agrees to
vigorously defend against any and all actions, suits or proceedings in which
such party is named as a defendant that seek to enjoin, restrain or prohibit the
transactions contemplated hereby or seek damages with respect to such
transactions. The Company shall not settle any such action, suit or proceeding
or fail to perfect on a timely basis any right to appeal any judgment rendered
or order entered against the Company therein without the consent of Parent and
Liberty (which consent shall not unreasonably be withheld or delayed). Liberty
and Merger Sub shall not settle any such action, suit or proceeding, if such
settlement would have, or could reasonably be expected to have, a Material
Adverse Effect, without the consent of the Company (which consent shall not
unreasonably be withheld or delayed). Liberty and the Company further agrees to
use its reasonable efforts to cause each of its Affiliates, directors and
officers to vigorously defend any action, suit or proceeding in which such
Affiliate, director or officer is named as a defendant and which seeks any such
relief to comply with this Section to the same extent as if such person were a
party hereto.
7.8 Additional Financial Statements. Promptly after the same become
available, the Company shall furnish to Parent and Liberty such additional
financial data concerning the Company and its subsidiaries as Parent or Liberty
may reasonably request, including any audited consolidated financial statements
of the furnishing party for any year ending on or after the date hereof,
prepared in conformity with the requirements of the Commission applicable to
annual financial statements to be included in Form 10-K under the Exchange Act,
and all interim quarterly consolidated financial statements of the furnishing
party prepared on or after the date of this Agreement, accompanied by a
statement of the principal financial officer of the Company that, in the opinion
of such officer, such quarterly financial statements were prepared in conformity
with the requirements of the Commission applicable to financial statements to be
included in Form 10-Q under the Exchange Act, applied (in each such case) on a
consistent basis (except as otherwise stated in the quarterly financial
statements) and present fairly the consolidated financial position, results of
operations and cash flows of the
54
Company and its consolidated subsidiaries as of the date and for the period
indicated (subject in the case of quarterly financial statements to normal,
recurring year-end audit adjustments).
7.9 Actions by Merger Sub. In its capacity as the sole stockholder of
Merger Sub and subject to the terms and conditions of this Agreement, Parent
shall use all reasonable efforts to cause Merger Sub to approve and adopt the
Merger Proposal and to take all corporate action necessary on its part to
consummate the Merger Proposal and the transactions contemplated hereby.
7.10 Listing. Each party agrees to use its reasonable efforts to cause
the shares of Class A Liberty Group Stock to be issued in the Merger to be
authorized for listing on the NYSE, subject to official notice of issuance, and
to cause the shares of Class A Liberty Group Stock issuable upon the exercise of
Rollover Options or the conversion after the Effective Time of outstanding
Convertible Debentures to be listed on the NYSE.
7.11 Certain Agreements. Concurrently with the execution and delivery of
this Agreement, the following additional agreements are being entered into by
the parties thereto:
(i) a Voting Agreement in the form attached hereto as
Exhibit 7.11(i) (the "Voting Agreement"), among Liberty and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (each in their individual capacities and as trustees
under certain trusts established for the benefit of certain family
members); and
(ii) a Consulting Agreement in the form attached hereto as
Exhibit 7.11(ii), among the Company, Liberty, SMH Entertainment, Inc.,
a California corporation, and ▇▇▇▇▇▇▇▇▇.
In addition, a Noncompetition Agreement substantially in the form of
Exhibit 7.11(iii) among the Company, Liberty, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
will be entered into prior to the Closing.
7.12 Certificates as to Indebtedness. At the Closing, the Company shall
cause the lenders under its existing bank credit facility to deliver a
certificate to Liberty certifying the amount of outstanding indebtedness of the
Company under such facility at such time.
7.13 Indemnification of Directors and Officers; Insurance.
(a) Liberty, Merger Sub and the Company agree that all right to
indemnification, exculpation, advancement of expenses and the like now existing
in favor of any present or former director or officer of the Company and its
subsidiaries (the "Indemnified Parties") as provided in the respective charters
or bylaws of the Company and such subsidiaries or in an agreement between an
Indemnified Party and the Company or one of its subsidiaries, are contract
rights and shall survive the Merger. In addition, and without limiting the
foregoing, from and after the Effective Time, Liberty and the Surviving
Corporation shall jointly and severally indemnify, defend and hold harmless each
of the Indemnified Parties (and shall also, subject to Section 7.13(b), advance
55
expenses as incurred, to the fullest extent permitted under the DGCL, provided
that the Person to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such Person is not entitled to
indemnification), against all losses, costs, expenses, claims, damages,
judgments or liabilities arising out of, or in connection with, any claim,
action, suit, proceeding or investigation based in whole or in part on the fact
that the Indemnified Party is or was an officer, director or employee of the
Company or any of its subsidiaries, or is or was serving at the request of the
Company as an officer, director or employee or agent of another Person,
pertaining to any matter existing or occurring before or at the Effective Time
and whether asserted or claimed before, at or after, the Effective Time (the
"Indemnified Liabilities") (including all such Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement, the Merger or any other transactions contemplated hereby or
thereby), in each case to the fullest extent permitted under the DGCL
(notwithstanding the charter, bylaws or similar organizational documents of the
Company, the Surviving Corporation, Parent or Liberty); provided, however, that
such indemnification shall be provided only to the extent any directors' and
officers' liability insurance policy of the Company or its subsidiaries does not
provide coverage and actual payment thereunder with respect to the matters that
would otherwise be subject to indemnification hereunder (it being understood
that Liberty or the Surviving Corporation shall, subject to Section 7.13(b),
advance expenses on a current basis as provided in this paragraph (a)
notwithstanding such insurance coverage to the extent that payments thereunder
have not yet been made, in which case Liberty or the Surviving Corporation, as
the case may be, shall be entitled to repayment of such advances from the
proceeds of such insurance coverage). Liberty and Merger Sub agree that all
rights to indemnification, including provisions relating to advances of expenses
incurred in defense of any action, suit or proceeding, whether civil, criminal,
administrative or investigative (each, a "Claim"), existing in favor of the
Indemnified Parties as provided in the Company Charter or the Company's bylaws
or pursuant to other agreements, or certificates of incorporation or bylaws or
similar documents of any of the Company's subsidiaries, as in effect as of the
date hereof, with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time; provided, however, that all
rights to indemnification in respect of any Claim asserted, made or commenced
within such period shall continue until the final disposition of such Claim. The
Surviving Corporation shall, and Liberty shall cause the Surviving Corporation
to, maintain in effect for not less than three years after the Effective Time
the current policies of directors' and officers' liability insurance maintained
by the Company and the Company's subsidiaries with respect to matters occurring
prior to or at the Effective Time; provided, however, that (i) the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
Indemnified Parties with an insurance company or companies, the claims paying
ability of which is substantially equivalent to the claims paying ability of the
insurance company or companies providing currently such insurance coverage for
directors and officers of the Company, and (ii) the Surviving Corporation shall
not be required to pay an annual premium for such insurance in excess of 1.75
times the last annual premium paid prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount. Anything contained
herein to the contrary notwithstanding (but without limiting the obligations of
Liberty and
56
the Surviving Corporation to indemnify, defend and hold harmless the Indemnified
Parties as set forth in this Section 7.13), as between Liberty and the Surviving
Corporation, the Indemnified Liabilities and all costs and expenses incurred by
Liberty or the Surviving Corporation in connection with or arising from the
Indemnified Liabilities, or in connection with or arising from any obligation to
indemnify, defend and hold harmless any Indemnified Party, or to advance
expenses or maintain insurance in connection therewith, shall be borne by the
Surviving Corporation, and if any liability, loss, cost, damage, claim or
expense (including any attorneys' fees and expenses) is paid or incurred by
Liberty as a result of any Indemnified Liability or any obligation to indemnify,
defend, hold harmless, advance expenses to or maintain insurance for any
Indemnified Party, Liberty shall be entitled to reimbursement in full therefor
by the Surviving Corporation and shall be subrogated to all rights of the
Indemnified Parties vis-a-vis the Surviving Corporation with respect to such
Indemnified Liabilities and obligations.
(b) Subject to the rights conferred by the foregoing, the Company,
Liberty and the Surviving Corporation, with respect to any Claim relating hereto
or to the transactions contemplated by this Agreement commenced before the
Effective Time, agree to cooperate and use their respective reasonable efforts
vigorously to defend against and respond thereto. Any Indemnified Party wishing
to claim indemnification with respect to such a Claim under paragraph (a) of
this Section 7.13, upon learning of any such claim, action, suit, proceeding or
investigation (whether arising before, at or after the Effective Time), shall
promptly notify Liberty thereof (but the failure so to notify shall not relieve
the Company, Liberty or the Surviving Corporation from any liability that it may
have under this Section 7.13 except to the extent such failure prejudices such
party), whereupon Liberty shall have the right, from and after the Effective
Time, to assume from such Indemnified Party and control the defense thereof on
behalf of such Indemnified Party, and upon such assumption, Liberty shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof. Notwithstanding the foregoing, if there are
issues that raise existing or potential conflicts of interest between Liberty or
the Surviving Corporation and the Indemnified Parties, or among any of the
Indemnified Parties, the Indemnified Parties or those of them so affected may
retain separate counsel as appropriate to resolve any such conflict or conflicts
and Liberty shall pay or cause to be paid all reasonable fees and expenses of
such counsel. Neither Liberty nor the Surviving Corporation shall be liable for
any settlement effected without its prior written consent, which consent,
however, shall not be unreasonably withheld. This Section 7.13 is intended to
benefit the Indemnified Parties and shall be enforceable by each Indemnified
Party, his or her heirs and representatives, and shall be binding on all
successors and assigns of Liberty, Merger Sub and the Surviving Corporation. Any
Indemnified Party seeking judicial enforcement of the right to indemnification
or advancement hereunder shall also be entitled to be paid the reasonable
expenses (including attorneys' fees) of prosecuting such claim if successful in
whole or in part.
7.14 Tax Matters. Each party represents and warrants to the other parties
that the statements in the proposed form of certificate of such party (each, a
"Party's Certificate" and,
57
together, the "Parties' Certificates") attached, respectively, as Exhibits 7.14
(i) through (iii) to be delivered by such party in connection with the opinions
to be delivered pursuant to Sections 8.2(f), 8.3(e) and 8.4(f), are true and
correct as of the date hereof, assuming for purposes of this sentence that the
Merger had been consummated on the date hereof. Each party agrees that, at and
prior to the Effective Time, it will not take any action that would cause any of
the statements in the Party's Certificate to be false as of the Effective Time.
Unless (and then only to the extent) otherwise required by a "determination" (as
defined in Section 1313(a)(1) of the Code) or by a similar applicable provision
of state or local income or franchise tax law, each party agrees (i) to report
the Merger on all tax returns and other filings as a tax-free reorganization
within the meaning of Section 368(a) of the Code and (ii) not to take any
position in any audit, administrative proceeding or litigation that is
inconsistent with the characterization of the Merger as such a reorganization.
7.15 Certain Obligations of Liberty. Following the Effective Time, so
long as (i) Liberty controls a majority of the voting power of the Surviving
Corporation and (ii) any shares of Surviving Corporation Class A Stock remain
outstanding and are owned beneficially and of record by persons other than
Liberty and its affiliates:
(a) Liberty shall use commercially reasonable efforts to cause the
Surviving Corporation Class A Stock to be included for trading on the Nasdaq
National Market (or, if the Surviving Corporation Class A Stock does not meet
the standards of The Nasdaq Stock Market for continued inclusion on the Nasdaq
National Market, on the Nasdaq SmallCap Market) or an equivalent stock exchange
or quotation system; and
(b) Liberty shall not, and shall cause its controlled affiliates not
to, purchase any shares of Surviving Corporation Class A Stock from any person
not affiliated with Liberty, if such purchase would result in the number of
shares of Surviving Corporation Class A Stock then outstanding and held by
persons not affiliated with Liberty to be less than one-half the number of
shares of Surviving Corporation Class A Stock outstanding immediately following
the Effective Time (other than pursuant to a tender offer or exchange offer, on
commercially reasonable terms, for any and all shares of Surviving Corporation
Class A Stock, or a merger, consolidation or similar transaction in which
Liberty and/or one or more affiliates of Liberty acquires all the outstanding
shares of Surviving Corporation Class A Stock);
provided, however, that the obligations of Liberty under this Section 7.15 shall
immediately terminate if Liberty or any affiliate of Liberty shall make, and
keep open for the period required by law, a tender offer or exchange offer, on
commercially reasonable terms, for any and all shares of Surviving Corporation
Class A Stock.
58
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions Precedent to the Obligations of Parent, Liberty, Merger Sub
and the Company. The respective obligations hereunder of Parent, Liberty,
Merger Sub and the Company to be performed on the Closing Date are subject to
the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which, to the extent permitted by applicable law, may be
waived by Parent and Liberty, acting concurrently, for themselves and Merger Sub
(but not for the Company), or by the Company for itself (but not for Parent,
Liberty or Merger Sub):
(a) Approval of Stockholders. This Agreement and the Merger
------------------------
Proposal shall have been adopted by the stockholders of the Company as set forth
in Sections 3.1 and 4.15.
(b) Registration. The S-4 Registration Statement (as amended or
------------
supplemented) shall have become effective under the Securities Act and shall not
be subject to any stop order, and no action, suit, proceeding or investigation
by the Commission seeking a stop order or to suspend the effectiveness of the S-
4 Registration Statement shall have been initiated and be continuing. Parent
shall have received all state securities law or blue sky permits and
authorizations necessary to issue the Merger Consideration as contemplated
hereby and such permits and authorizations shall be in full force and effect,
and no action, suit, proceeding or investigation seeking to revoke or suspend
the effectiveness of any such permit or authorization shall have been initiated
and be continuing or shall have been threatened and be unresolved.
(c) ▇▇▇▇-▇▇▇▇▇ Act. Any applicable waiting period (and any extension
--------------
thereof) under the ▇▇▇▇-▇▇▇▇▇ Act shall have expired or been terminated.
(d) NYSE Listing. The shares of Class A Liberty Group Stock to be
------------
issued in the Merger shall have been authorized for listing on the NYSE subject
to official notice of issuance.
(e) Reclassification. The Reclassification shall have occurred as
----------------
contemplated by this Agreement.
8.2 Conditions Precedent to the Obligations of Parent and Merger Sub for
the Benefit of Liberty. The obligations of Parent and Merger Sub to consummate
the Merger are also subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, which conditions are solely for the benefit
of Liberty, and any or all of which may be asserted or waived solely by Liberty
acting alone:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Company contained in this Agreement shall, if specifically
qualified by materiality, be true and correct and, if not so qualified, be true
and correct in all material respects, in each case as of the date of this
Agreement and, except to the extent such representations and warranties speak
59
as of a specified earlier date, on and as of the Closing Date as though made on
and as of the Closing Date, except for any changes permitted or contemplated by
this Agreement.
(b) Performance of Agreements. The Company shall have performed in
-------------------------
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to or on the Closing Date.
(c) Compliance Certificate. The Company shall have delivered to
----------------------
Parent and Liberty a certificate, dated the Closing Date, signed by the
President or any Vice President of the Company, certifying as to the fulfillment
of the conditions specified in Sections 8.2(a) and 8.2(b).
(d) Absence of Injunctions and Proceedings. No permanent or
--------------------------------------
preliminary Injunction or restraining order or other order by any court or other
Governmental Entity of competent jurisdiction or other legal restraint or
prohibition shall be in effect, (i) preventing consummation of the transactions
contemplated hereby as provided herein, or permitting such consummation only
subject to any condition or restriction that has had or would have a Liberty
Material Adverse Effect, (ii) requiring the divestiture, as a result of
consummation of the Merger, of a material portion of the business or assets of
Liberty and its subsidiaries and Affiliates taken as a whole, (iii) imposing
material limitations on the ability of Liberty effectively to exercise full
rights of ownership of shares of capital stock or other ownership interests of
the Surviving Corporation (including the right to vote such shares or other
ownership interests on all matters properly presented to the stockholders or
other equity holders of the Surviving Corporation) or making the holding by
Liberty of any such shares or other ownership interests illegal or subject to
any materially burdensome requirement or condition, or (iv) requiring Liberty,
its subsidiaries or the Company or any of its subsidiaries to cease or refrain
from engaging in any line of business, including any line of business conducted
by the Company or any of its subsidiaries, as a result of the consummation of
the Merger.
(e) No Adverse Enactments. No statute, rule, regulation, law, order,
---------------------
judgment or decree enacted, promulgated, entered, issued, enforced or deemed
applicable by any foreign or United States federal, state or local court or
other Governmental Entity of competent jurisdiction shall be in effect that (i)
makes this Agreement, the Merger or any other transaction contemplated hereby
illegal or imposes or is reasonably likely to impose material damages or
penalties in connection therewith or otherwise prohibits or unreasonably delays
any of such transactions, (ii) requires or is reasonably likely to require, as a
result of the consummation of the Merger, the divestiture of or any restrictions
or conditions on the conduct of (A) any substantial portion of the business or
assets of the Company and its subsidiaries or (B) any substantial portion of the
business or assets of Liberty and its subsidiaries, or of any Affiliate of
Liberty, (iii) imposes or is reasonably likely to result in imposition of
material limitations on the ability of Liberty effectively to exercise full
rights of ownership of shares of capital stock or other ownership interests of
the Surviving Corporation (including the right to vote such shares or other
ownership interests on all matters properly presented to the stockholders or
other equity holders of the Surviving Corporation), or
60
makes the holding by Liberty of any such shares or other ownership interests
illegal or subject to any materially burdensome requirement or condition, or
(iv) requires or is reasonably likely to require Liberty or its subsidiaries or
any Affiliate of Liberty, or the Company or any of its subsidiaries to cease or
refrain from engaging in any material business, including in the case of Liberty
any material business conducted by the Company or any of its subsidiaries prior
to the Merger, as a result of the consummation of the Merger.
(f) Tax Opinion. Liberty shall have received a letter from ▇▇▇▇▇ &
-----------
▇▇▇▇▇, L.L.P., dated the Effective Time, entitling Liberty to rely on the
opinion of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. to Parent delivered pursuant to Section 8.3(e),
to the same effect as if such opinion were addressed and delivered to Liberty.
(g) Opinion of Counsel for the Company. Parent and Merger Sub shall
----------------------------------
have received a favorable opinion from ▇▇▇▇▇▇▇▇▇ Glusker Fields Claman &
Machtinger LLP, dated the Closing Date, substantially to the effect set forth in
Exhibit 8.2(g). In rendering its opinion, such counsel may rely as to factual
matters upon certificates or other documents furnished by officers of the
Company and by government officials, and upon such other documents and data as
such counsel deems appropriate as a basis for the opinion. Such counsel may
specify the jurisdiction or jurisdictions in which the members or partners, as
applicable, thereof are admitted to practice, that they are not admitted to
practice in any other jurisdiction or experts in the law of any other
jurisdiction and that, to the extent the foregoing opinion concerns the laws of
any other jurisdiction or pertains to matters beyond the scope of such counsel's
engagement, such counsel may rely upon the opinion of counsel admitted to
practice in such other jurisdiction. Any opinion relied upon by such counsel
shall be delivered together with the opinion of such counsel, which shall state
that such counsel believes that reliance thereon is justified.
(h) Termination of Registration Rights. The Company shall have
----------------------------------
received (and the Company shall have provided to Liberty a copy of) a written
acknowledgment from each party who is a party to (or beneficiary of) any of the
Company's registration rights agreements (pursuant to which the Company agreed
to register shares of Company Stock or other securities of the Company), listed
in the Disclosure Schedule, that the rights of each such party thereunder, shall
be terminated as of the Effective Time.
8.3 Conditions Precedent to the Obligations of Parent and Merger Sub for
the Benefit of Parent. The obligations of Parent and Merger Sub to consummate
the Merger are also subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, which conditions are solely for the benefit
of Parent, and any or all of which may be waived solely by Parent acting alone:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of the Company contained in this Agreement shall, if specifically
qualified by materiality, be true and correct and, if not so qualified, be true
and correct in all material respects in each case as of the date of this
Agreement and (except to the extent such representations and warranties speak
61
as of a specified earlier date) on and as of the Closing Date as though made on
and as of the Closing Date, except for changes permitted or contemplated by this
Agreement.
(b) Performance of Agreements. The Company shall have performed in
-------------------------
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to or on the Closing Date.
(c) Compliance Certificate. The Company shall have delivered to
----------------------
Parent a certificate, dated the Closing Date, signed by the President or any
Vice President of the Company, certifying as to the fulfillment of the
conditions specified in Sections 8.1(a), 8.3(a), 8.3(b), 8.3(h), and 8.3(n).
(d) Documents Under Section 3.3. Parent shall have received from
---------------------------
each person named in the letter referred to in Section 3.3 an executed copy of
the agreement specified in such Section.
(e) Tax Opinion. Parent shall have received the opinion of ▇▇▇▇▇ &
-----------
▇▇▇▇▇, L.L.P., dated the Effective Time, to the effect that, for United States
federal income tax purposes, (i) the Merger should be treated as a
reorganization within the meaning of Section 368(a) of the Code; (ii) each of
Parent and the Company should be a party to the reorganization within the
meaning of Section 368(b) of the Code; (iii) no gain or loss should be
recognized by Parent or any member of its consolidated group as a result of the
Merger and the issuance of shares of Class A Liberty Group Stock in connection
therewith, except to the extent of any gain or loss that may be recognized by
Parent or any member of its consolidated group in its capacity as a shareholder
or owner of any other interest in the Company prior to the Merger; and (iv) no
gain or loss should be recognized by the Company as a result of the Merger. In
rendering such opinion, ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. may require and rely upon (and may
incorporate by reference) representations and covenants made in the Parties'
Certificates, and upon such other documents and data as such counsel deems
appropriate as a basis for such opinions.
(f) Opinion of Counsel for the Company. Parent and Merger Sub shall
----------------------------------
have received a favorable opinion (upon which Liberty shall be entitled to rely)
from ▇▇▇▇▇▇▇▇▇ Glusker Fields Claman & Machtinger LLP, dated the Closing Date,
substantially to the effect set forth in Exhibit 8.2(g). In rendering its
opinion, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers of the Company and by government officials, and
upon such other documents and data as such counsel deems appropriate as a basis
for the opinion. Such counsel may specify the jurisdiction or jurisdictions in
which the members or partners, as applicable, thereof are admitted to practice,
that they are not admitted to practice in any other jurisdiction or experts in
the law of any other jurisdiction and that, to the extent the foregoing opinion
concerns the laws of any other jurisdiction or pertains to matters beyond the
scope of such counsel's engagement, such counsel may rely upon the opinion of
counsel admitted to practice in such other jurisdiction.
62
Any opinion relied upon by such counsel shall be delivered together with the
opinion of such counsel, which shall state that such counsel believes that
reliance thereon is justified.
(g) No Adverse Enactments. No statute, rule, regulation, law, order,
---------------------
judgment or decree enacted, promulgated, entered, issued, enforced or deemed
applicable by any foreign or United States federal, state or local Governmental
Entity of competent jurisdiction shall be in effect which (i) makes this
Agreement, the Merger, the Reclassification or the Post-Merger Restructuring
Transactions or any other transaction contemplated hereby illegal or imposes or
is reasonably likely to impose material damages or penalties in connection
therewith or otherwise prohibits or unreasonably delays any of such
transactions, (ii) requires or is reasonably likely to require the divestiture
or holding separate of any portion of the business or any assets of Parent or
any of its Subsidiaries (or any reorganization or restructuring thereof), in any
such case as a result of the consummation of the Merger, or would require Parent
or any of its Subsidiaries to take or refrain from, or would prohibit Parent or
any of its Subsidiaries from taking or refraining from, any action (other than
actions required to be taken or refrained from (or prohibited to be taken or
refrained from, as the case may be) by Parent of its Subsidiaries pursuant to
the final proviso of the penultimate sentence of Section 3.5 hereof or otherwise
specifically agreed to by Parent or one of its Subsidiaries in this Agreement),
(iii) imposes or is reasonably likely to impose any material limitations on the
ability of Parent or Liberty effectively to exercise full rights of ownership of
shares of capital stock or other ownership interests of the Surviving
Corporation (including the right to vote such shares or other ownership
interests on all matters properly presented to the stockholders or other equity
holders of the Surviving Corporation), or makes the holding by Parent or Liberty
of any such shares or other ownership interests illegal or subject to any
materially burdensome requirement or condition, (iv) increases in any material
respect the liabilities or obligations of Parent arising out of this Agreement,
the Merger or any of the other transactions contemplated by this Agreement or
(v) requires Parent or any of its subsidiaries to cease or refrain from engaging
in any business, whether or not such business is conducted by the Company or any
of its subsidiaries, as a result of the consummation of the Merger.
(h) Absence of Injunctions and Proceedings. No action or
--------------------------------------
proceeding by any Governmental Entity seeking a permanent or preliminary
Injunction or restraining order or other order by any court or other
Governmental Entity of competent jurisdiction or other legal restraint or
prohibition shall be pending which, if determined in a manner adverse to the
Company, Liberty or Parent, could have the effect of, and no such Injunction or
other order, restraint or prohibition in an action or proceeding (whether by a
Governmental Entity or otherwise) shall be in effect, preventing consummation of
the transactions contemplated hereby as provided herein, or permitting such
consummation only subject to any condition or restriction that (i) has had or
would have (x) a material adverse effect on this Agreement and the transactions
contemplated hereby or (y) a material adverse effect on Parent and its
Subsidiaries, their respective businesses, assets, results of operation or
financial conditions, taken as a whole, or (ii) would require Parent or any of
its Subsidiaries to take or refrain from, or would prohibit Parent or any of its
Subsidiaries from taking or refraining from, any action (other than actions
required to be taken or refrained from (or
63
prohibited to be taken or refrained from, as the case may be)) by Parent or any
of its Subsidiaries pursuant to the final proviso of the penultimate sentence of
Section 3.5 hereof or otherwise specifically agreed to by Parent or one of its
Subsidiaries in this Agreement.
(i) Certain Agreements. Neither the Company nor any of its
------------------
subsidiaries shall be a party to any contract, agreement or understanding that
would at the Effective Time be legally enforceable against Parent or any of its
subsidiaries (other than Liberty, the Liberty Affiliates, the Company and their
respective subsidiaries), except as would not have a Parent Adverse Effect.
(j) Certain Licenses. The Company and its respective subsidiaries,
----------------
shall hold, and be in compliance with the terms of, and shall have duly and
currently filed all reports and other information required to be filed by them
in connection with, all Licenses required for the ownership and operation of the
assets and facilities of their respective businesses, except for any such
failure that in the reasonable judgment of Parent would not have a Parent
Adverse Effect.
(k) No Liberty Notice. Parent shall not have been notified by
-----------------
Liberty that any of the Conditions set forth in this Article VIII (other than
Section 8.4) shall remain unsatisfied.
(l) Performance of Agreements. Liberty shall have performed in all
-------------------------
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, to be performed or complied with by
it hereunder prior to or on the Closing Date and Liberty shall have delivered to
Parent a certificate dated as of the Closing Date, signed by the President or
any Vice President of Liberty certifying as to the matters described in this
Section 8.3(l).
(m) ▇▇▇▇-▇▇▇▇▇. Any applicable waiting period under the ▇▇▇▇-▇▇▇▇▇
----------
Act shall have expired or been terminated without receipt of any objections or
commencement of litigation or threat thereof by the appropriate Governmental
Entity to restrain the transactions contemplated hereby.
(n) Governmental Consents, Etc. Other than the filing of the
--------------------------
Certificate of Merger with the Delaware Secretary of State and filings due after
the Effective Time, all Local Approvals, and all other Governmental Consents as
are required in connection with the consummation of the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect without any condition, limitation or restriction, all Governmental
Filings as are required in connection with the consummation of the transactions
contemplated hereby shall have been made, and all waiting periods, if any,
applicable to the consummation of such transactions imposed by any Governmental
Entity shall have expired, other than any of the foregoing which, if not so
obtained, in force or effect, made or expired (as the case may be) would not, in
Parent's reasonable judgement, either individually or in the aggregate, have a
Parent Adverse Effect.
8.4 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to consummate the transactions contemplated by this
Agreement is also subject to the
64
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by the Company:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties of Parent and Liberty contained in this Agreement shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects in each case as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of a specified earlier date) on and as of the Closing Date
as though made on and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
(b) Performance of Agreements. Each of Merger Sub, Liberty and
-------------------------
Parent shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(c) Officers' Certificates. (i) Liberty shall have delivered to the
----------------------
Company a certificate dated the Closing Date, signed by the President or any
Vice President of Liberty certifying as to the fulfillment of the conditions
specified in Sections 8.4(a) and 8.4(b) (insofar as each relates to Liberty) and
(ii) Parent shall have delivered to the Company a certificate, dated the Closing
Date, signed by the President or any Vice President of Parent (but without
personal liability thereto) certifying as to the fulfillment of the conditions
specified in Sections 8.4(a) and 8.4(b) (insofar as each relates to Parent and
Merger Sub).
(d) Absence of Injunctions. No permanent or preliminary Injunction
----------------------
or restraining order or other by any court or other Government Entity of
competent jurisdiction, or other legal restraint or prohibition, shall be in
effect preventing consummation of the transactions contemplated hereby as
provided herein, or permitting such consummation only subject to any condition
or restriction that has had or would have a Liberty Material Adverse Effect.
(e) No Adverse Enactments. No statute, rule or regulation enacted,
---------------------
promulgated, entered, issued, enforced or deemed applicable by any foreign or
United States federal, state or local Governmental Entity of competent
jurisdiction shall be in effect, and there shall be no action, suit or
proceeding brought by any such Governmental Entity and pending which has or is
reasonably likely to have a Material Adverse Effect or Liberty Material Adverse
Effect.
(f) Tax Opinion. The Company shall have received the opinion of
-----------
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., dated the Effective Time, to the effect that, for United
States federal income tax purposes, (i) the Merger should be treated as a
reorganization within the meaning of Section 368(a) of the Code; (ii) each of
Parent and the Company should be a party to the reorganization within the
meaning of Section 368(b) of the Code; (iii) no gain or loss should be
recognized by the Company as a result of the Merger; and (iv) no gain or loss
should be recognized by the stockholders of the Company upon the receipt in the
Merger of shares of Class A Liberty Group Stock. In rendering such opinion,
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. may require and rely upon (and may incorporate by
reference)
65
representations and covenants made in the Parties' Certificates, and upon such
other documents and data as such counsel deems appropriate as a basis for such
opinions.
ARTICLE IX
TERMINATION
9.1 Termination and Abandonment. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval and adoption of this Agreement
by the stockholders of the Company:
(i) by mutual consent of Parent, Liberty and the Company;
(ii) by any of the Company, Parent or Liberty: (A) if the Merger
shall not have been consummated on or before March 29, 2000, provided that
the right to terminate this Agreement pursuant to this clause (ii)(A) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement resulted in, or has been the cause or a
substantial cause of, the failure of the Merger to be consummated on or
before such date, and provided further that if the Merger has not been
consummated on or before March 29, 2000, solely or primarily as a result of
the failure of the conditions set forth in Sections 8.1(b) (if the failure
to satisfy such condition is the result of any material acquisition or
other transaction or event, or agreement with respect thereto, engaged in,
or entered into, by Parent or Liberty or any of their respective
Affiliates, whether prior to or after the date hereof), 8.1(c), 8.2(d),
8.3(h), or 8.4(d) to be satisfied or waived, any party, by written notice
to each other party, may extend such date up to May 29, 2000, (B) if there
has been a material breach of any representation, warranty, covenant or
agreement on the part of any other party contained in this Agreement, in
each case that is not curable, such that the conditions set forth in
Sections 8.2(a) or (b) or Sections 8.3(a) or (b), in the case of such a
breach by the Company, or Sections 8.4(a) or (b), in the case of such a
breach by Parent, Merger Sub or Liberty, cannot be satisfied, (C) if any
court of competent jurisdiction or other competent Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable, or (D) the stockholders of the Company fail to approve and
adopt the Merger by the requisite vote (I) at the Special Meeting, or (II)
by the date one day prior to the applicable date referred to in (A) above,
provided that the S-4 Registration Statement became effective (unless the
failure of the S-4 Registration Statement to become effective is the result
of the Company's material breach of Section 3.2(a)) and remained effective
such that the Proxy Statement could be mailed to the Company stockholders
and the Special Meeting held prior to such applicable date (provided that
Parent shall not terminate this Agreement pursuant to this clause (D)
without the concurrence of Liberty); or
66
(iii) by Liberty if the Company Board withdraws or modifies, in
a manner adverse to Parent or Liberty, its approval or recommendation of
the Merger.
9.2 Termination Fee; Effect of Termination.
(a) If (i) the Company or the Company Board take any action during
the term of this Agreement pursuant to Section 7.5(b)(A) or (B), and (ii) this
Agreement is thereafter terminated pursuant to Section 9.1(ii)(D) or Section
9.1(iii), and (iii) prior to the expiration of six months after such termination
the Company enters into any definitive agreement with respect to or consummates
an Extraordinary Transaction with any Person other than Liberty, then the
Company shall promptly, but in no event later than the consummation of, or the
effectiveness of a definitive agreement regarding, such Extraordinary
Transaction, pay Liberty a fee of $3,400,000 (the "Termination Fee"), payable by
wire transfer of same day funds.
(b) If this Agreement is terminated by the Company, Parent or
Liberty pursuant to Section 9.1, this Agreement forthwith shall become void and
there shall be no liability or obligation on the part of Parent, Liberty, Merger
Sub, the Company or any of their respective Affiliates, stockholders, directors,
officers, agents, employees or Representatives except (i) as provided in
Sections 4.10, 7.2, 7.5, 7.6, and 9.3, which shall survive such termination (for
a period of three years in the case of Section 7.2 and, in the case of Section
9.3, for the period specified in such Section); and (ii) subject to Section
10.11, to the extent such termination results from the willful breach by Parent
or Liberty, Merger Sub or the Company of any of its representations, warranties,
covenants or agreements contained in this Agreement.
(c) In the event of any termination of this Agreement pursuant to
Section 9.1, Parent shall have no further obligation or liability hereunder,
except for its confidentiality obligations pursuant to Section 7.2.
9.3 No Employment. If this Agreement is terminated prior to the Effective
Time pursuant to Section 9.1, Liberty shall not, for a period of one year
following such termination, solicit any of the Company's employees listed on
Exhibit 9.3 attached hereto for employment with Liberty or any subsidiary of
Liberty, or identify such scheduled employees to any person or entity for
potential employment, without in either case the prior written consent of the
Company.
ARTICLE X
MISCELLANEOUS
10.1 Certain Tax Positions. The parties intend the Merger to qualify as a
reorganization under Section 368(a) of the Code. Each of the Company and Liberty
covenants and agrees that it shall not take, and that it shall cause its
respective subsidiaries not to take (including, in the case of Liberty following
the consummation of the Post-Merger Restructuring Transactions, that it shall
67
cause the Surviving Corporation not to take) any action that would cause the
Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
10.2 No Waiver of Representations and Warranties; Survival. The
respective representations and warranties of Parent, Merger Sub, Liberty and the
Company contained herein or in any certificate or other instrument delivered
pursuant hereto prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto, and all such
representations and warranties (other than representations and warranties
contained in Article V, except for those contained in the last sentence of
Section 5.2, of Parent and Merger Sub, which shall expire at the Effective Time)
shall survive the Closing, until the date on which the Company files an Annual
Report on Form 10-K for the first full fiscal year (of 10 months or longer) of
operations after the Effective Time, whereupon such representations and
warranties shall expire, except to the extent that notice of breach is given
prior to such date. Notwithstanding the foregoing, the provisions of
Section 2.8, 3.8(c), 3.8(d), 3.9, 4.11, 7.2, 7.5, 7.14 (including the
representations, warranties and covenants in the Parties' Certificates), 9.2,
the last sentence of Section 5.2 and any other applicable provisions of this
Article X shall survive indefinitely.
10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
telegram or confirmed telex or telecopier, as follows:
68
(a) If to Parent or Merger Sub:
AT&T Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Vice President-Law and Corporate Secretary
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Silk, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Liberty:
Liberty Media Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Leaf
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
69
Liberty Media Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to the Company:
The ▇▇▇▇-▇▇ Corporation
▇▇▇ ▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman & Machtinger LLP
21st Floor
1900 Avenue of the Stars
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other Person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof, except that any notice of a
change of address shall be effective only upon actual receipt thereof.
10.4 Entire Agreement. This Agreement (including the Disclosure Schedule
and other Schedules, Exhibits and other documents referred to herein)
constitutes the entire agreement between the parties and supersedes all prior
agreements and understandings, oral and written, between the parties with
respect to the subject matter hereof.
10.5 Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, benefits or obligations hereunder may be assigned by any party
(whether by operation of law or otherwise) without the prior written consent of
each other party. Subject to the immediately preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
70
10.6 Amendment. This Agreement may be amended by the parties, at any time
before or after approval of any matters presented in connection with the Merger
by the stockholders of the Company, but, after any such approval by the
stockholders of the Company, no amendment shall be made that by law requires
further approval by such stockholders of the Company without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties. Notwithstanding the foregoing, (a) the
provisions of Sections 7.4 (other than to the extent related to Sections
7.4(c)(i), 7.4(c)(ii) and 7.4(h)) and 7.5 may be amended by an instrument signed
in writing by the Company and Liberty, without any action on the part of Parent
or Merger Sub and (b) following the Effective Time, this sentence of Section
10.6 may only be amended by an instrument signed in writing by Parent, Liberty
and, on behalf of the Company, by at least one individual who was serving on the
Company Board immediately prior to the Effective Time.
10.7 Extension; Waiver. At any time prior to the Effective Time, either
the Company on the one hand, or Liberty and Parent acting together on the other
hand, without the requirement of any vote of the stockholders of the Company or
Merger Sub, may, unless prohibited by law, (i) extend the time specified herein
for the performance of any of the obligations of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto, (iii) waive compliance by
the other party with any of the agreements or covenants of such other party
contained herein or (iv) waive any condition to such waiving party's obligation
to consummate the transactions contemplated hereby or to any of such waiving
party's other obligations hereunder. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party (or, in the case of a waiver by
Liberty or Parent, signed on behalf of Liberty and Parent). No such waiver shall
constitute a waiver of, or estoppel with respect to, any subsequent or other
breach or failure to strictly comply with the provisions of this Agreement. Any
failure of a party to insist on strict compliance with this Agreement or to
assert any of its rights or remedies hereunder or with respect hereto shall not
constitute a waiver of such rights or remedies. Whenever this Agreement requires
or permits consent or approval by any party, such consent or approval shall be
effective if given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 10.7. Any waiver by either
Parent or Liberty shall require the consent of both Parent and Liberty.
Notwithstanding the foregoing, the provisions of Sections 7.4 (other than to the
extent related to Sections 7.4(c)(i), 7.4(c)(ii) and 7.4(h)) and 7.5 may be
waived by an instrument signed in writing by the Company and Liberty without any
action on the part of Parent or Merger Sub.
10.8 Headings. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
10.9 Counterparts. This Agreement may be executed in counterparts, and
on separate counterparts, each of which shall be deemed to be an original, and
all of which together shall constitute one and the same agreement.
71
10.10 Applicable Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to the conflict of laws rules thereof.
10.11 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
in Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(a) consents to submit itself to the non-exclusive jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement, and (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court.
10.12 Disclosure Schedule. The parties acknowledge that the Disclosure
Schedule (i) relates to certain matters concerning the disclosures required and
transactions contemplated by this Agreement, (ii) is qualified in its entirety
by reference to specific provisions of this Agreement and (iii) is not intended
to constitute and shall not be construed as indicating that such matter is
required to be disclosed, nor shall such disclosure be construed as an admission
that such information is material with respect to the Company, or any of its
subsidiaries or will have or is likely to have a Material Adverse Effect,
Liberty Material Adverse Effect, Parent Material Adverse Effect or Parent
Adverse Effect. Disclosure of the information contained in one section or part
of the Disclosure Schedule shall be deemed as proper disclosure for other
sections or parts of the Disclosure Schedule only if appropriately cross-
referenced.
10.13 Parent Transactions. Notwithstanding anything to the contrary
contained in this Agreement, the pursuit and/or consummation by Parent or any of
its Subsidiaries or Affiliates of any Parent Transaction shall be deemed not to
be a breach of any provision of this Agreement.
72
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and Plan of Merger as of the date first above written.
AT&T CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President-Law and Secretary
THE ▇▇▇▇-▇▇ CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and CEO
LIBERTY MEDIA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
B-GROUP MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Treasurer
Exhibit 1.1
POST-MERGER RESTRUCTURING TRANSACTIONS/1/
1. Parent shall contribute all of its stock in the Surviving Corporation
(other than any stock of the Surviving Corporation received in respect of
Company Stock held by Parent immediately prior to the Merger) to Tele-
Communications, Inc. (or its successor) ("TCI"), provided that TCI remains
an entity controlled by Parent within the meaning of Section 368(c) of the
Code (or Parent is the sole equity holder of TCI), in exchange for equity
of TCI.
2. TCI shall contribute all of the stock of the Surviving Corporation to
Liberty Ventures Group LLC as a contribution to capital, provided that
Liberty Ventures Group LLC is treated as a disregarded entity for purposes
of Section 7701 of the Code.
3. Liberty Ventures Group LLC shall transfer all of the stock of the Surviving
Corporation to Liberty as a contribution to capital, provided that Liberty
remains an entity controlled by TCI within the meaning of Section 368(c) of
the Code.
___________________
/1/Capitalized terms used herein and not otherwise defined have the meanings
ascribed thereto in the Agreement and Plan of Merger, dated as of December 10,
1999, by and among AT&T Corp., a New York corporation ("Parent"), B-Group Merger
Corp., a Delaware corporation and a wholly owned subsidiary of Parent, Liberty
Media Corporation, a Delaware corporation and a wholly owned indirect subsidiary
of Parent ("Liberty"), and The ▇▇▇▇-▇▇ Corporation, a Delaware corporation.
2