AGREEMENT AND PLAN OF MERGER
Among
CLEAR CHANNEL COMMUNICATIONS, INC.,
CCU II MERGER SUB, INC.
and
SFX ENTERTAINMENT, INC.
Dated as of February 28, 2000
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TABLE OF CONTENTS
Page
ARTICLE 1. THE MERGER.................................................2
Section 1.1.......The Merger.................................................2
Section 1.2.......Closing 2
Section 1.3.......Effective Time.............................................2
Section 1.4.......Effects of the Merger......................................2
Section 1.5.......Certificate of Incorporation and Bylaws of the
Surviving Corporation.....................................2
Section 1.6.......Directors..................................................3
Section 1.7.......Officers 3
ARTICLE 2.........EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES......3
Section 2.1.......Capital Stock of Merger Sub................................3
Section 2.2.......Cancellation of Treasury Stock and Parent Owned Stock......3
Section 2.3.......Conversion of Company Common Stock.........................3
Section 2.4.......Exchange of Certificates...................................4
Section 2.5.......Stock Transfer Books.......................................7
ARTICLE 3.........REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............7
Section 3.1.......Organization, Qualification, Etc...........................7
Section 3.2.......Capital Stock..............................................8
Section 3.3.......Corporate Authority Relative to this Agreement;
No Violation...............................................9
Section 3.4.......Reports and Financial Statements..........................10
Section 3.5.......No Undisclosed Liabilities................................10
Section 3.6.......No Violation of Law.......................................11
Section 3.7.......Environmental Laws and Regulations........................11
Section 3.8.......No Undisclosed Employee Benefit Plan Liabilities or
Severance Arrangements....................................11
Section 3.9.......Absence of Certain Changes or Events......................13
Section 3.10......Investigations; Litigation................................14
Section 3.11......Joint Proxy Statement; Registration Statement;
Other Information.........................................14
Section 3.12......Lack of Ownership of Parent Common Stock..................14
Section 3.13......Tax Matters...............................................14
Section 3.14......Opinion of Financial Advisor..............................15
Section 3.15......Required Vote of the Company Stockholders.................15
Section 3.16......Insurance.................................................15
Section 3.17......Real Property; Title......................................16
Section 3.18......Collective Bargaining Agreements and Labor................16
Section 3.19......Material Contracts........................................16
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TABLE OF CONTENTS
(Continued)
Section 3.20......Takeover Statute..........................................16
Section 3.21......Transactions With Affiliates..............................17
Section 3.22......Intellectual Property.....................................17
ARTICLE 4.........REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB.......................................................17
Section 4.1.......Organization, Qualification, Etc..........................18
Section 4.2.......Capital Stock.............................................18
Section 4.3.......Corporate Authority Relative to this Agreement.
No Violation..............................................19
Section 4.4.......Reports and Financial Statements..........................20
Section 4.5.......No Undisclosed Liabilities................................21
Section 4.6.......No Violation of Law.......................................21
Section 4.7.......Environmental Laws and Regulations........................21
Section 4.8.......No Undisclosed Employee Benefit Plan Liabilities
or Severance Arrangements.................................22
Section 4.9.......Absence of Certain Changes or Events......................22
Section 4.10......Investigations; Litigation................................22
Section 4.11......Joint Proxy Statement; Registration Statement;
Other Information.........................................22
Section 4.12......Lack of Ownership of Company Common Stock.................23
Section 4.13......Tax Matters...............................................23
Section 4.14......Required Vote of Parent Stockholders......................23
Section 4.15......Opinion of Financial Advisor..............................24
Section 4.16......Insurance.................................................24
Section 4.17......Real Property; Title......................................24
Section 4.18......Collective Bargaining Agreements and Labor................24
Section 4.19......Material Contracts........................................24
Section 4.20......Takeover Statute..........................................24
ARTICLE 5.........COVENANTS RELATING TO CONDUCT OF BUSINESS.................24
Section 5.1.......Conduct of Business by the Company or Parent..............24
Section 5.2.......Proxy Material; Registration Statement....................29
Section 5.3.......Stockholders' Meeting.....................................30
Section 5.4.......Approvals and Consents; Cooperation.......................30
Section 5.5.......Access to Information; Confidentiality....................31
Section 5.6.......Affiliates................................................32
Section 5.7.......Rights Under Stock Plans..................................32
Section 5.8.......Filings; Other Action.....................................33
Section 5.9.......Further Assurances........................................34
Section 5.10......No Solicitation by the Company............................34
Section 5.11......Director and Officer Liability............................36
Section 5.12......Accountants' "Comfort" Letters............................39
Section 5.13......Additional Reports........................................39
Section 5.14......Plan of Reorganization....................................39
Section 5.15......Conveyance Taxes..........................................39
Section 5.16......Public Announcements......................................39
Section 5.17......Termination Fee and Expenses..............................40
Section 5.18......Notice of Certain Events..................................41
Section 5.19......Section 16(b) Board Approval..............................42
Section 5.20......Employee Plans and Employment Agreement...................42
ARTICLE 6.........CONDITIONS TO THE MERGER..................................43
Section 6.1.......Conditions to the Obligations of Each Party...............43
Section 6.2.......Conditions to the Obligations of Parent and Merger Sub....44
Section 6.3.......Conditions to the Obligations of the Company..............45
ARTICLE 7.........TERMINATION AND AMENDMENT.................................45
Section 7.1.......Termination...............................................45
Section 7.2.......Effect of Termination.....................................47
ARTICLE 8.........GENERAL PROVISIONS........................................47
Section 8.1.......Notices 47
Section 8.2.......Definitions...............................................48
Section 8.3.......Counterparts..............................................51
Section 8.4.......Agreement; No Third-Party Beneficiaries...................51
Section 8.5.......Assignment................................................51
Section 8.6.......Governing Law.............................................51
Section 8.7.......Enforcement...............................................51
Section 8.8.......Severability..............................................52
Section 8.9.......Interpretation............................................52
Section 8.10......Finders or Brokers........................................52
Section 8.11......Survival of Representations and Warranties................52
Section 8.12......Survival of Covenants and Agreements......................52
Section 8.13......Attorneys' Fees...........................................52
Section 8.14......Amendment.................................................52
Section 8.15......Extension; Waiver.........................................53
Section 8.16......Procedure for Termination, Amendment, Extension or Waiver.53
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This AGREEMENT AND PLAN OF MERGER, dated as of February 28, 2000, is
entered into by and among Clear Channel Communications, Inc., a Texas
corporation ("Parent"), CCU II Merger Sub, Inc., a Delaware ------ corporation
and a wholly owned subsidiary of Parent ("Merger Sub"), and SFX Entertainment,
Inc., a Delaware ----------- corporation (the "Company"). -------
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and
Merger Sub and the Company have approved the combination of the Company and
Parent upon the terms and subject to the conditions set forth in this Agreement
and Plan of Merger, including, without limitation, the exhibits attached hereto
(collectively, this "Agreement");
WHEREAS, the respective Boards of Directors of Parent and
Merger Sub and the Company have determined that it is advisable and in the best
interests of their respective shareholders for the Merger Sub to merge with and
into Company as set forth below (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of Class A common stock, par value $.01 per share, of the Company
("Company Class A Common Stock"), and each issued and outstanding share of Class
B common stock, par value $.01 per share, of the Company ("Company Class B
Common Stock" and, together with the Company Class A Common Stock, the "Company
Common Stock") other than shares owned directly or indirectly by Parent, Merger
Sub or the Company, will be converted into shares of common stock, par value
$0.10 per share, of Parent ("Parent Common Stock") in accordance with the
provisions of Article 2 of this Agreement;
WHEREAS, as a condition and inducement to Parent's willingness
to enter into this Agreement, concurrently with the execution and delivery of
this Agreement, (a) Parent and certain stockholders of the Company are entering
into voting agreements dated as of the date of this Agreement (collectively, the
"Company Stockholders Voting Agreement") pursuant to which such stockholders
have agreed to vote their shares of Company Common Stock in favor of the
proposal to approve and adopt the Merger, the approval of the Charter Amendment
(as defined herein) and this Agreement, (b) Parent and certain stockholders of
the Company are entering into stockholders agreements, dated as of the date of
this Agreement (collectively, the "Stockholder Agreement"), relating to, among
other things, the recapture by Parent of a specified profit amount that would be
realized by such stockholders in connection with certain specified transactions,
and (c) Parent and Robert F.X. Sillerman, Executive Chairman and a member of the
Board of Directors of the Company are entering into a Nondisclosure and
Noncompetition Agreement, dated as of the date of this Agreement
("Noncompetition Agreement") and a Registration Rights Agreement, dated as of
the date of this Agreement ("Registration Rights Agreement");
WHEREAS, for federal income tax purposes, the Merger is
intended to qualify as a reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe certain conditions to the Merger.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1......The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and the Delaware General Corporation Law, as amended
(the "DGCL"), the Merger Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 1.3) of the Merger. Following the Merger,
the separate corporate existence of the Merger Sub shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of the Company and
Merger Sub in accordance with the DGCL.
Section 1.2......Closing. The closing of the Merger shall take place at 10:00
a.m. on a date to be specified by the parties which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article 6 (the "Closing Date") at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 300 Convent Street, Suite 1500, San Antonio, Texas 78205, unless
another date, time or place is agreed in writing by the parties hereto.
Section 1.3 Effective Time. On the Closing Date, the parties shall execute
and file in the office of the Secretary of State of Delaware a certificate of
merger (a "Certificate of Merger") executed in accordance with the DGCL and
shall make all other filings or recordings, and take such other and further
action as may be required under the DGCL in connection with the Merger. The
Merger shall become effective at the time of filing of the Certificate of
Merger, or at such later time as is agreed upon by the parties hereto and set
forth therein (such time as the Merger becomes effective is referred to herein
as the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects set forth
in the DGCL.
Section 1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) The Amended and Restated Certificate of Incorporation of the Company as
in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, and
thereafter may be amended as provided therein and as permitted by law and this
Agreement.
(b) The By-Laws of the Merger Sub as in effect immediately prior to the
Effective Time shall become the By-Laws of the Surviving Corporation after the
Effective Time, and thereafter may be amended as provided therein and as
permitted by law and this Agreement.
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Section 1.6 Directors. The directors of the Merger Sub immediately prior to
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 1.7......Officers. The officers of the Company immediately prior to the
Effective Time shall become the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1......Capital Stock of Merger Sub. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
each share of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become 80,000 fully paid and non-assessable shares of the Class A common stock,
par value $.01 per share, of the Surviving Corporation, and 3,000 fully paid and
non-assessable shares of the Class B common stock, par value $.01 per share, of
the Surviving Corporation, and such shares shall, following the Merger,
represent all of the issued and outstanding capital stock of the Surviving
Corporation.
Section 2.2......Cancellation of Treasury Stock and Parent Owned Stock. As of
the Effective Time, by virtue of the Merger and without any action on the part
of the holder of any shares of Company Common Stock or any shares of capital
stock of Merger Sub, each share of Company Common Stock issued and held,
immediately prior to the Effective Time, in the Company's treasury or by any of
the Company's direct or indirect wholly owned subsidiaries, and each share of
Company Common Stock that is owned by Parent, Merger Sub or any other direct or
indirect wholly-owned subsidiary of Parent, shall automatically be canceled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
Section 2.3......Conversion of Company Common Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
subject to this Section 2.3 and Section 2.4(f), each share of Company Class A
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 2.2) shall be
converted into 0.60 (the "Class A Conversion Number") of duly authorized,
validly issued and nonassessable shares of Parent Common Stock; and each share
of Company Class B Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with Section
2.2) shall be converted into 1.0 (the "Class B Conversion Number") of duly
authorized, validly issued and nonassessable shares of Parent Common Stock;
provided, however, that, in any event, if between the date of this Agreement and
the Effective Time, the outstanding shares of Parent Common Stock shall have
been changed into a different number of shares or a different class of shares,
by reason of any declared or completed stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Class A Conversion Number and the Class B Conversion Number shall be
correspondingly adjusted to the extent appropriate to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares. The shares of Parent Common Stock to be issued to holders of
Company Common Stock in accordance with this Section 2.3 and the amount in cash
to be paid in lieu of fractional shares in accordance with Section 2.4(f)(ii)
are collectively referred to as the "Merger Consideration". As of the Effective
Time, all shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration. The Company represents and warrants that the holders of the
Company Class A Common Stock will not be entitled to appraisal rights in the
Merger.
<PAGE>
Section 2.4......Exchange of Certificates.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall deliver to a
bank or trust company designated by Parent and reasonably satisfactory to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article 2, through
the Exchange Agent, certificates evidencing such number of shares of Parent
Common Stock issuable to holders of Company Common Stock in the Merger pursuant
to Section 2.3 and cash in an amount required to be paid pursuant to Section
2.4(d) and 2.4(f) (such certificates for shares of Parent Common Stock, together
with any dividends or distributions with respect thereto and cash, being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver, out of the Exchange Fund, to
holders of Company Common Stock, Parent Common Stock contemplated to be issued
pursuant to Section 2.3 (and any dividends or other distributions to which such
holders are entitled pursuant to Section 2.4(d)) and the cash in lieu of
fractional shares of Parent Common Stock to which such holders are entitled to
pursuant to Section 2.4(f) hereof, out of the Exchange Fund. Except as
contemplated by Section 2.4(g) hereof, the Exchange Fund shall not be used for
any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (other than shares
cancelled in accordance with Section 2.2 (the "Cancelled Shares")) (i) a letter
of transmittal (which shall be in customary form and shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates evidencing shares of Parent Common Stock, or cash in lieu of
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.4(f) hereof.
(c) Exchange of Certificates. Upon surrender to the Exchange Agent of a
Certificate for cancellation, together with a letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder's shares of Company Common Stock shall have been converted
into pursuant to this Article 2 (and any cash in lieu of any fractional shares
of Parent Common Stock to which such holder is entitled pursuant to Section
2.4(f) and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.4(d)), and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, shares of
Parent Common Stock, cash in lieu of any fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.4(f) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.4(d) may be issued to a transferee if the Certificate representing
such shares of Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the number of whole shares of Parent Common Stock
into which the shares of Company Common Stock formerly represented thereby have
been converted, cash in lieu of any fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.4(f) and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.4(d).
<PAGE>
(d) Distributions with Respect to Unexchanged Shares of Parent Common Stock. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional shares shall be paid to any such holder pursuant to Section
2.4(f), until the holder of such Certificate shall surrender such Certificate.
Subject to the effect of escheat, tax or other applicable laws, following
surrender of any such Certificate, there shall be paid promptly to the holder of
such Certificate representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) the amount of dividends and other
distributions with a record date after the Effective Time and theretofore paid
with respect to such whole shares of Parent Common Stock, (ii) at the
appropriate payment date, the amount of dividends and other distributions, with
a record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock and (iii) the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.4(f).
(e) No Further Rights in Company Common Stock. All shares of Parent Common Stock
into which the shares of Company Common Stock shall be converted in accordance
with the terms hereof (including any cash paid pursuant to Section 2.4(d) or
2.4(f)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common
Stock.
(f) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution of Parent shall relate to such fractional share
interests and such fractional share interests will not entitle the owner thereof
to vote or to any rights of a stockholder of Parent.
<PAGE>
(ii) In lieu of the issuance of fractional shares, each holder of Company Common
Stock shall be entitled to receive an amount in cash equal to the product
obtained by multiplying (A) the fractional share interest to which such holder
(after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) the closing
price for a share of Parent Common Stock as reported on the New York Stock
Exchange ("NYSE") Composite Transaction Tape (as reported in The Wall Street
Journal or, if not reported thereby, any other authoritative source) on the last
trading day prior to the Closing Date.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund (including
any shares of Parent Common Stock) which remains undistributed to the holders of
Company Common Stock for six months after the Effective Time shall be delivered
to Parent, upon demand, and any holders of Company Common Stock who have not
theretofore complied with this Article 2 shall thereafter look only to Parent
for, and Parent shall deliver, the applicable Merger Consideration, any cash in
lieu of fractional shares of Parent Common Stock to which they are entitled
pursuant to Section 2.4(f) and any dividends or other distributions with respect
to Parent Common Stock to which they are entitled pursuant to Section 2.4(d).
Any portion of the Exchange Fund remaining unclaimed by holders of shares of
Company Common Stock as of a date which is immediately prior to such time as
such amounts would otherwise escheat to or become property of any government
entity shall, to the extent permitted by applicable law, become the property of
Parent free and clear of any claims or interest of any Person previously
entitled thereto.
(h) No Liability. None of the Exchange Agent, Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any such shares of Parent Common Stock (or dividends or distributions with
respect thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law.
(i) Withholding Rights. Each of the Surviving Corporation and the Exchange Agent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so properly withheld by the
Surviving Corporation or the Exchange Agent, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock, in respect of which such
deduction and withholding was made by the Surviving Corporation or the Exchange
Agent, as the case may be.
(j) Lost 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 and, if required by the
Surviving Corporation, the posting by such Person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration, any cash in lieu of fractional shares of Parent
Common Stock to which the holder thereof is entitled pursuant to Section 2.4(f)
and any dividends or other distributions to which the holder thereof is entitled
pursuant to Section 2.4(d).
<PAGE>
(k) Further Assurances. If, at any time after the Effective Time, the Surviving
Corporation shall consider or be 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 of the Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
Section 2.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Common Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of Certificates
representing shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock, except as otherwise provided herein or by law. On or after
the Effective Time, any Certificates presented to the Exchange Agent (or Parent
for any reason) shall promptly be exchanged for certificates representing shares
of Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock to which the holders thereof are entitled pursuant to Section 2.4(f) and
any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.4(d).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub that, except as set forth in the disclosure letter delivered by the
Company to Parent and Merger Sub on the date of this Agreement (the "Company
Disclosure Letter"):
Section 3.1......Organization, Qualification, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company. The
copies of the Company's Amended and Restated Certificate of Incorporation and
By-laws which have been made available to Parent are complete and correct and in
full force and effect on the date of this Agreement. Each of the Company's
Significant Subsidiaries (as defined in Regulation S-X promulgated under the
Securities Act of 1933, as amended (the "Securities Act")) (a) is a corporation,
general partnership, limited partnership or limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, (b) has the corporate, general
partnership, limited partnership or limited liability company power and
authority to own its properties and to carry on its business as it is now being
conducted, and (c) is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except in the case of clauses (a) and (c)
for jurisdictions in which such failure to be so qualified or to be in good
standing would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Company and except in the case of clause (b) for such
exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company. All the outstanding shares of capital
stock of, or other ownership interests in, the Company's Subsidiaries are (y)
validly issued, fully paid and nonassessable and (z) owned by the Company,
directly or indirectly, free and clear of all Liens, except in the case of
clause (y) for such exceptions as would not in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company and except in the case
of clause (z) for restrictions and Liens contained in credit agreements and
similar instruments to which the Company is a Party and except for such
exceptions as are disclosed in the Company SEC Reports and those that would be
immaterial to the Company and its Subsidiaries, taken as a whole. Except as set
forth in the Company SEC Reports, there are no outstanding subscriptions,
options, warrants, rights of first refusal, preemptive rights, calls or rights
or other arrangements or commitments of any character obligating any Subsidiary
of the Company to issue any capital stock or other securities of, or other
ownership interests in, any Subsidiary of the Company, except those that would
be immaterial to the Company and its Subsidiaries, taken as a whole.
<PAGE>
Section 3.2 Capital Stock. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Class A Common Stock, 10,000,000
shares of Company Class B Common Stock and 25,000,000 shares of preferred stock,
$.01 par value per share ("Preferred Stock"). As of February 24, 2000,
64,116,270 shares of Company Class A Common Stock and 2,545,557 shares of
Company Class B Common Stock were issued and outstanding, 112,529 shares of
Company Class A Common Stock were held in treasury and no shares of Preferred
Stock were issued and outstanding. All the outstanding shares of the Company
Common Stock have been validly issued and are fully paid and non-assessable. As
of the date of this Agreement, there are no outstanding subscriptions, options,
warrants, rights or other arrangements or commitments, rights of first refusal,
preemptive rights, calls or rights obligating the Company to issue any capital
stock or other securities of, or other ownership interests in, the Company,
other than options, warrants and other rights to receive or acquire an aggregate
of 9,867,512 shares of the Company Class A Common Stock pursuant to the
Company's stock option plans, as amended (the "Company Stock Option Plans") and
the options and warrants described in Section 3.2 of the Company Disclosure
Letter.
Except for the issuance of shares of the Company Common Stock
pursuant to (i) the Company Stock Option Plans, (ii) in connection with
acquisitions permitted under Section 5.1 of this Agreement and (iii) the options
and warrants referred to in Section 3.2 of the Company's Disclosure Letter,
since February 24, 2000, no shares of the Company Common Stock have been issued.
<PAGE>
Section 3.3 Corporate Authority Relative to this Agreement; No Violation.
The Company has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company and, except
for the approval and adoption of the agreement of merger (as such term is used
in Section 251 of the DGCL) contained in this Agreement, the approval of the
Merger and the approval of the amendment to the Company's Amended and Restated
Certificate of Incorporation to repeal Section 5.7 thereof (the "Charter
Amendment"), by the holders of a majority of the outstanding shares of Company
Common Stock (with the holders of Company Class A Common Stock and the holders
of Company Class B Common Stock voting together as a single class) and the
affirmative vote of the holders of a majority of the outstanding shares of each
of the Company Class A Common Stock and Company Class B Common Stock voting as
separate classes, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions contemplated hereby.
As of the date of this Agreement, the Board of Directors of the Company has
determined that the transactions contemplated by this Agreement are advisable
and in the best interest of its stockholders and, subject to the provisions
contained in Section 5.10, to recommend to such stockholders that they vote in
favor thereof. This Agreement has been duly and validly executed and delivered
by the Company and, assuming this Agreement has been duly and validly executed
and delivered by the other parties hereto, and subject to the Company
Stockholder Approval (as defined in Section 5.3 hereof), this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company 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). Other than in connection with or in
compliance with the provisions of the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the rules of the NYSE, the Hart
Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), any
non-United States competition, antitrust and investment laws and the securities
or blue sky laws of the various states, and, other than the filing of the
Certificate of Merger with the Delaware Secretary of State and any necessary
state filings to maintain the good standing or qualification of the Surviving
Corporation and its Subsidiaries (collectively, the "Company Required
Approvals"), no authorization, consent or approval of, or filing with, any
governmental body or authority is necessary for the consummation by the Company
of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings, the failure to obtain or make
which would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; provided that the Company makes no representation
with respect to such of the foregoing as are required by reason of the
regulatory status of Parent or any of its Subsidiaries or facts specifically
pertaining to any of them. Except for the Company Required Approvals, the
Company is not subject to or obligated under any charter, bylaw, material
contract or any governmental license, franchise or permit, or subject to any
order or decree, which would be breached or violated by its executing or,
subject to the approval of its stockholders, carrying out this Agreement, except
for any breaches or violations which would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
<PAGE>
Section 3.4 Reports and Financial Statements. The following reports, proxy
statements and prospectuses filed by the Company with the SEC are publicly
available:
(a) the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "SEC") for the year ended December 31, 1998;
(b) the Company's Quarterly Reports on Form 10-Q filed with the SEC for the
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999;
(c) each definitive proxy statement filed by the Company with the SEC since
April 27, 1998;
(d) each final prospectus filed by the Company with the SEC since April 27,
1998, except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by the Company with the SEC since
December 31, 1998.
As of their respective dates, such reports, proxy statements,
and prospectuses filed on or prior to the date of this Agreement (collectively,
the "Company SEC Reports") (i) complied as to form in all material respects with
the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder and (ii) did not contain any untrue
statement of a material fact or omit 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; provided, that the
foregoing clause (ii) shall not apply to the financial statements included in
the Company SEC Reports (which are covered by the following sentence). The
audited consolidated financial statements and unaudited consolidated interim
financial statements included in the Company SEC Reports (including any related
notes and schedules) fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and their results of operations and cash flows for the periods then
ended (subject, where appropriate, to normal year-end adjustments), in each case
in accordance with past practice and generally accepted accounting principles in
the United States ("GAAP") consistently applied during the periods involved
(except as otherwise disclosed in the notes thereto and except that the
unaudited financial statements therein do not contain all of the footnote
disclosures required by GAAP). Since April 27, 1998, the Company has timely
filed all material reports, registration statements and other filings required
to be filed by it with the SEC under the rules and regulations of the SEC.
Section 3.5 No Undisclosed Liabilities. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, of a
type required by GAAP to be reflected on a consolidated balance sheet except (a)
liabilities or obligations reflected in any of the Company SEC Reports, (b)
liabilities or obligations incurred since September 30, 1999 in the ordinary
course of the Company's business and (c) liabilities or obligations which would
not in the aggregate reasonably be expected to have a Material Adverse Effect on
the Company.
<PAGE>
Section 3.6 No Violation of Law. The businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 3.6 with respect to
Environmental Laws (as defined in Section 3.7 below) which are dealt with
exclusively in Section 3.7) except (a) as described in any of the Company SEC
Reports and (b) for violations or possible violations which would not in the
aggregate reasonably be expected to have a Material Adverse Effect on the
Company. The Company and its Subsidiaries have all permits, licenses and
governmental authorizations material to ownership or occupancy of their
respective properties and assets and the carrying on of their respective
businesses, except for such permits, licenses and governmental authorizations
the failure of which to have would not reasonably be expected to have in the
aggregate a Material Adverse Effect on the Company.
Section 3.7 Environmental Laws and Regulations. Except as described in any
of the Company SEC Reports, (a) to the Knowledge of the Company, the Company and
each of its Subsidiaries is in material compliance with all applicable federal,
state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for noncompliance which would not
in the aggregate reasonably be expected to have a Material Adverse Effect on the
Company, which compliance includes, but is not limited to, the possession by the
Company and its Subsidiaries of material permits and other governmental
authorizations required under applicable Environmental Laws, and material
compliance with the terms and conditions thereof, (b) neither the Company nor
any of its Subsidiaries has received written notice of, or, to the Knowledge of
the Company, is the subject of, any actions, causes of action, claims,
investigations, demands or notices by any Person alleging liability under, or
non-compliance with, any Environmental Law or that the Company or any Subsidiary
is a potentially responsible party at any Superfund site or state equivalent
site ("Environmental Claims") which would in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company, (c) to the Knowledge
of the Company, there are no circumstances that are reasonably likely to prevent
or interfere with such material compliance in the future, (d) to the Knowledge
of the Company, the Company and its Subsidiaries have not disposed of or
released hazardous materials (at a concentration or level which requires
remedial action under any Environmental Law) at any real property currently
owned or leased by the Company or any Subsidiary or at any other real property,
except for such disposals or releases as would not in the aggregate reasonably
be expected to have a Material Adverse Effect on the Company, and (e) neither
the Company nor its Subsidiaries have agreed to indemnify any predecessor or
other party with respect to any environmental liability, other than customary
indemnity provisions contained in agreements entered into in the ordinary course
of business and provisions which would not in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company.
Section 3.8 No Undisclosed Employee Benefit Plan Liabilities or Severance
Arrangements.
(a) All benefit and compensation plans, contracts, policies,
agreements or other arrangements providing for compensation, severance,
termination pay, performance awards, stock or stock related awards, fringe
benefits, change in control, employment agreement, deferred compensation or
other employee benefits of any kind, whether formal or informal, funded or
unfunded, written or oral, or arrangements covering current employees or former
employees of the Company and its Subsidiaries (all such current and former
employees of the Company and its Subsidiaries being herein referred to as the
"Employees") and current or former directors of the Company, including, but not
limited to, "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Benefit Plans") are listed on Section 3.8(a) of the Company Disclosure Letter,
except for those plans, contracts, policies or other arrangements that are not
material to the Company and its Subsidiaries, taken as a whole. There are no
"change in control" or similar provisions covering current employees of the
Company or any of its Subsidiaries, and, to the Knowledge of the Company,
covering any former employees of the Company or any of its Subsidiaries, other
than those set forth in the Benefit Plans identified on Section 3.8(a) of the
Company Disclosure Letter and except for such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect on the
Company.
<PAGE>
(b) All employee benefit plans within the meaning of Section
3(3) of ERISA, other than "multiemployer plans" within the meaning of Section
3(37) of ERISA, covering Employees (the "Plans"), to the extent subject to ERISA
or the Code, are in substantial compliance with ERISA, the Code, and all other
applicable law, except for such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company. Each
Plan which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code, has received a favorable determination letter from
the Internal Revenue Service, or operates as a standardized prototype plan, or
is operating within the remedial amendment period and may still obtain a
favorable determination letter from the Internal Revenue Service and, to the
Company's Knowledge, there exists no circumstances likely to result in
revocation of any such favorable determination letter, except, in each case, for
such exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company. There is no material pending or, to the
Knowledge of the Company, threatened litigation relating to the Plans except for
such litigation as would not in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company. Except for such exceptions as would not
in the aggregate reasonably be expected to have a Material Adverse Effect on the
Company, neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date of this Agreement, could subject the Company
or any Subsidiary to a tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in an amount which would be material.
(c) No current or former Pension Plan of the Company or any of
its Subsidiaries, or any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"), is or has been subject to Title IV of ERISA or Section 412 of the
Code within the past six years, except for such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect on the
Company.
<PAGE>
(d) All contributions required to be made under the terms of
any Benefit Plan have been timely made or have been reflected on the audited
financial statements of the Company, except for such exceptions as would not in
the aggregate reasonably be expected to have a Material Adverse Effect on the
Company.
(e) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Benefit Plan, except
for those under collective bargaining agreements existing on the date of this
Agreement and such exceptions as would not in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company.
(f) Except for such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company, the
consummation of the transactions contemplated by this Agreement will not, solely
as a result of such consummation, (i) entitle any Employees to severance pay,
(ii) accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under,
materially increase the amount payable or trigger any other material obligation
pursuant to, any of the Benefit Plans (other than the Company Stock Option Plans
and the options and warrants described in Section 3.2 of the Company Disclosure
Letter) or (iii) result in any breach or violation of, or a default under, any
of the Benefit Plans.
(g) Any amount that could be received (whether in cash,
property, or vesting of property) as a result of the transactions contemplated
by this Agreement by any officer, director, employee or independent contractor
of the Company or any of its Subsidiaries, who is a "disqualified individual"
(as defined in proposed Treasury Regulation Section 1.280G-1), under any
employment arrangement or Benefit Plan would not be characterized as an "excess
parachute payment" (as defined in Section 280G of the Code) except for such
exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company.
(h) All Benefit Plans covering current or former non-U.S. Employees comply
in all material respects with applicable law, except for such exceptions as
would not in the aggregate reasonably be expected to have a Material Adverse
Effect on the Company. No unfunded liabilities exist with respect to any Benefit
Plan that covers such non-U.S. Employees, except for such exceptions as would
not in the aggregate reasonably be expected to have a Material Adverse Effect on
the Company.
Section 3.9 Absence of Certain Changes or Events. Other than as disclosed
in the Company SEC Reports or previously disclosed in writing to Parent, since
September 30, 1999 and to the date of this Agreement, the businesses of the
Company and its Subsidiaries have been conducted in all material respects in the
ordinary course and there has not been any event, occurrence, development or
state of circumstances or facts that has had a Material Adverse Effect on the
Company. Since September 30, 1999 and to the date of this Agreement, no
dividends or distributions have been declared or paid on or made with respect to
the shares of capital stock or other equity interests of the Company or its
Subsidiaries nor have any such shares been repurchased or redeemed, other than
dividends or distributions paid to the Company or a wholly-owned Subsidiary and
other than dividends, distributions, repurchases and redemptions with respect to
equity interests in Subsidiaries not exceeding $2.0 million in the aggregate.
<PAGE>
Section 3.10 Investigations; Litigation. Except as described in any of the
Company SEC Reports or previously disclosed in writing to Parent:
(a) to the Knowledge of the Company, no investigation or review by any
governmental body or authority with respect to the Company or any of its
Subsidiaries which would in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company is pending nor has any governmental body
or authority notified the Company in writing of an intention to conduct the
same; and
(b) there are no actions, suits or proceedings pending (or, to the
Company's Knowledge, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties or before any federal,
state, local or foreign governmental body or authority, which, in the aggregate,
are reasonably likely to have a Material Adverse Effect on the Company.
Section 3.11 Proxy Statement; Registration Statement; Other Information. The
information, taken as a whole, with respect to the Company or its Subsidiaries
to be included in the Proxy Statement (as defined in Section 5.2) or the
Registration Statement (as defined in Section 5.2) will not, in the case of the
Proxy Statement or any amendments thereof or supplements thereto, at the time of
the mailing of the Proxy Statement or any amendments or supplements thereto, and
at the time of the Company Special Meeting (as defined in Section 5.3), or, in
the case of the Registration Statement, at the time it becomes effective or at
the effective time of any post-effective amendment, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied in
writing by Parent, Merger Sub or any affiliate of Parent specifically for
inclusion in the Proxy Statement. The Proxy Statement (as it relates to the
Company) will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated thereunder.
Section 3.12 Lack of Ownership of Parent Common Stock. Neither the Company nor
any of its Subsidiaries owns any shares of Parent Common Stock or other
securities convertible into shares of Parent Common Stock (exclusive of any
shares owned by the Company's Benefit Plans).
Section 3.13 Tax Matters.
(a) All federal, state, local and foreign Tax Returns required to be filed by or
on behalf of the Company, each of its Subsidiaries, and each affiliated,
combined, consolidated or unitary group of which the Company or any of its
Subsidiaries or was a member (a "Company Group") have been timely filed or
requests for extensions to file such returns or reports have been timely filed
and granted and have not expired, and all returns filed are complete and
accurate except to the extent any failure to file or any inaccuracies in filed
returns would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. All Taxes due and owing by the
Company, any Subsidiary of the Company or any Company Group have been paid, or
adequately reserved for, except to the extent any failure to pay or reserve
would not, individually or in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company. There is no audit examination,
deficiency, refund litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and owing by the Company, any Subsidiary of the Company
or any Company Group nor has the Company or any Subsidiary filed any waiver of
the statute of limitations applicable to the assessment or collection of any
Tax, in each case, which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. All assessments for
Taxes due and owing by the Company, any Subsidiary of the Company or any Company
Group with respect to completed and settled examinations or concluded litigation
have been paid. Neither the Company nor any Subsidiary is a party to any tax
indemnity agreement, tax sharing agreement or other agreement under which the
Company or any Subsidiary could become liable to another Person as a result of
the imposition of a Tax upon any Person, or the assessment or collection of a
Tax, except for such agreements as would not in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company. The Company and each
of its Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except to the extent any such
failure to comply would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
<PAGE>
(b) Neither the Company nor any of its Subsidiaries has Knowledge of any fact or
has taken any action that could reasonably be expected to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
Section 3.14 Opinion of Financial Advisors. On the date of this Agreement,
the Board of Directors of the Company has received an oral opinion from Bear,
Stearns & Co. and the Special Committee of the Board of Directors of the Company
has received an oral opinion from Lehman Brothers (together with Bear, Stearns &
Co., the "Financial Advisors") to the effect that, as of the date of this
Agreement, the Class A Conversion Number is fair to the holders of Company Class
A Common Stock from a financial point of view. Copies of the written opinions of
the Financial Advisors, substantially in the forms previously submitted to
Parent, will be delivered to Parent as soon as practicable after the date of
this Agreement.
Section 3.15 Required Vote of the Company Stockholders. The affirmative vote
of the holders of a majority of the outstanding shares of the Company Common
Stock (with the holders of Company Class A Common Stock and the holders of
Company Class B Common Stock voting together as a single class) and the
affirmative vote of the holders of a majority of the outstanding shares of each
of the Company Class A Common Stock and Company Class B Common Stock voting as
separate classes is required to adopt this Agreement, the Merger and the Charter
Amendment. No other vote of the stockholders of the Company is required by law
or the charter or Bylaws of the Company in order for the Company to consummate
the Merger and the transactions contemplated hereby.
Section 3.16.....Insurance. Except to the extent that the lack of a policy would
not reasonably be expected to have a Material Adverse Effect on the Company, the
Company and its Subsidiaries have insurance policies, including, without
limitation, policies of fire and other casualty and liability insurance, that
the Company believes are sufficient for the respective businesses and operations
of the Company and its Subsidiaries.
<PAGE>
Section 3.17.....Real Property; Title. The Company and its Subsidiaries have
good and marketable title subject to Permitted Liens to all real properties
owned by them, except where the failure to have such title would not in the
aggregate reasonably be expected to have a Material Adverse Effect on the
Company.
Section 3.18.....Collective Bargaining Agreements and Labor. The Company has
previously made available to Parent all labor or collective bargaining
agreements in effect as of the date of this Agreement which pertain to a
material number of the employees of the Company and its Subsidiaries. As of the
date of this Agreement, there are no pending complaints, charges or claims
against the Company or its Subsidiaries filed with any public or governmental
authority, arbitrator or court based upon the employment or termination by the
Company of any individual, except for such complaints, charges or claims which
if adversely determined would not in the aggregate have a Material Adverse
Effect on the Company.
Section 3.19.....Material Contracts.
(a) Neither the Company nor any of its Subsidiaries has Knowledge of, or has
received notice of, any violation or default under any material contract (as
such term is defined in item 601(b)(10) of Regulation S-K of the SEC) to which
the Company or any of its Subsidiaries is a party, except for such violations or
defaults as would not in the aggregate reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries is (i) in violation of or
default under any contract or agreement that restricts its ability to compete or
otherwise conduct its business as presently conducted, except for such
violations or defaults as would not in the aggregate reasonably be expected to
have a Material Adverse Effect on the Company or (ii) a party to, or bound by,
any contract or agreement that restricts or would restrict the ability of the
Company, Parent or any of their respective Subsidiaries from competing or
otherwise conducting their respective businesses as such businesses are
conducted on the date of this Agreement, except for such restrictions that would
not in the aggregate reasonably be expected to have a Material Adverse Effect on
Parent or the Company.
Section 3.20 Takeover Statute. The Board of Directors of the Company, having
considered the Company Stockholders Voting Agreement, the Stockholder Agreement,
the Noncompetition Agreement and the Registration Rights Agreement, has approved
this Agreement and the transactions contemplated hereby and thereby and,
assuming the accuracy of Parent's representation and warranty contained in
Section 4.12, such approval constitutes approval of the Merger and the other
transactions contemplated hereby by the Board of Directors of the Company under
the provisions of Section 203 of the DGCL, such that the restrictions of Section
203 of the DGCL do not apply to this Agreement and the transactions contemplated
hereby, including the Merger. Except as provided in Section 4.20 below, to the
Knowledge of the Company, no other state takeover statute is applicable to the
Merger or the other transactions contemplated hereby.
<PAGE>
Section 3.21 Transactions With Affiliates. Other than the transactions
contemplated by this Agreement or except to the extent disclosed in the Company
SEC Reports, there have been no transactions, agreements, arrangements or
understandings between the Company or its Subsidiaries, on the one hand, and the
Company's Affiliates (other than Subsidiaries of the Company) or any other
Person, on the other hand, that would be required to be disclosed under Item 404
of Regulation S-K under the Securities Act.
Section 3.22 Intellectual Property. Except to the extent disclosed in the
Company SEC Reports and except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on the Company: (a) the Company and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens), all Intellectual
Property (as defined below) necessary for the conduct of its business as
currently conducted; (b) to the Company's Knowledge, the use of any Intellectual
Property by the Company and its Subsidiaries does not infringe on or otherwise
violate the rights of any Person and is in accordance in all material respects
with any applicable license pursuant to which the Company or any Subsidiary
acquired the right to use any Intellectual Property; (c) as of the date of this
Agreement, to the Knowledge of the Company, no Person is challenging, infringing
on or otherwise violating any material right of the Company or any of its
Subsidiaries with respect to any Intellectual Property owned by and/or licensed
to the Company or its Subsidiaries; and (d) as of the date of this Agreement,
neither the Company nor any of its Subsidiaries has received any written notice
of any pending claim with respect to any Intellectual Property used by the
Company and its Subsidiaries and, to the Knowledge of the Company, no
Intellectual Property owned and/or licensed by the Company or its Subsidiaries
is being used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes of
this Agreement, "Intellectual Property" shall mean trademarks, service marks,
brand names and other indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, including any extension, modification
or renewal of any such registration or application; inventions, discoveries and
ideas, whether patentable or not, in any jurisdiction; patents, applications for
patents (including, without limitation, divisions, continuations, continuations
in part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; nonpublic information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any Person; writings and other works, whether
copyrightable or not, in any jurisdiction; registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; any similar intellectual property or proprietary rights; and any claims
or causes of action arising out of or relating to any infringement or
misappropriation of any of the foregoing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent
and warrant to the Company that except as set forth in the disclosure letter
delivered to the Company on the date of this Agreement ("Parent Disclosure
Letter"):
<PAGE>
Section 4.1 Organization, Qualification, Etc. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has the corporate power and
authority to own its properties and assets and to carry on its business as it is
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its properties or the conduct of
its business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
reasonably be expected to have a Material Adverse Effect on Parent or Merger
Sub. The copies of Parent's Articles of Incorporation, as amended, and Amended
and Restated By-laws and Merger Sub's charter and by-laws which have been made
available to the Company are complete and correct and in full force and effect
on the date of this Agreement. Each of Parent's Significant Subsidiaries (a) is
a corporation, partnership or limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, (b) has the corporate, partnership or limited
liability company power and authority to own its properties and to carry on its
business as it is now being conducted, and (c) is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, except in
case of clauses (a) and (c) for jurisdictions in which such failure to be so
qualified or to be in good standing would not in the aggregate reasonably be
expected to have a Material Adverse Effect on Parent or Merger Sub and except in
the case of clause (b) for such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect on Parent or Merger
Sub. All the outstanding shares of capital stock of, or other ownership
interests in, Parent's Subsidiaries and Merger Sub are (y) validly issued, fully
paid and non-assessable and (z) owned by Parent, directly or indirectly, free
and clear of all Liens, except in the case of clause (y) for such exceptions as
would not in the aggregate reasonably be expected to have a Material Adverse
Effect on Parent and except in the case of clause (z) for restrictions contained
in credit agreements and similar instruments to which Parent is a party and for
such exceptions as would be immaterial to Parent. Except as disclosed in Parent
SEC Reports, there are no outstanding subscriptions, warrants, options (except
for those set forth in Section 4.2 below), rights of first refusal, preemptive
rights, calls or rights or other arrangements or commitments obligating any
Subsidiary of the Parent or Merger Sub to issue any capital stock or other
securities of, or other ownership interests in, any Subsidiary of Parent or
Merger Sub, except as would be immaterial to Parent.
Section 4.2 Capital Stock. The authorized capital stock of Parent consists
of 900,000,000 shares of Parent Common Stock, and 2,000,000 shares of Class A
Preferred Stock, par value $1.00 per share and 8,000,000 shares of Class B
Preferred Stock, par value $1.00 per share (collectively, the "Parent Preferred
Stock"). The shares of Parent Common Stock to be issued in the Merger or upon
the exercise of the Company stock options, warrants, conversion rights or other
rights or upon vesting or payment of other Company equity-based awards
thereafter will, when issued, be validly issued fully paid and non-assessable.
As of February 24, 2000, 338,807,036 shares of Parent Common Stock and no shares
of Parent Preferred Stock were issued and outstanding and 12,829 shares of
Parent Common Stock held in treasury. All the outstanding shares of Parent
Common Stock have been validly issued and are fully paid and non-assessable. As
of the date of this Agreement, there are no outstanding subscriptions, options,
warrants, rights or other arrangements or commitments, rights of first refusal,
pre-emptive rights, calls or rights obligating Parent to issue capital stock or
other securities of, or other ownership interests in the Parent other than
options and other rights to receive or acquire an aggregate of up to 42,575,482
shares of Parent Common Stock pursuant to:
<PAGE>
(a) the 1984 Incentive Stock Option Plan of Parent;
(b) the 1994 Non-Qualified Stock Option Plan;
(c) Parent Director's Non-Qualified Stock Option Plan;
(d) the 1998 Stock Incentive Plan;
(e) the 2000 Employee Stock Purchase Plan;
(f) various other option agreements with officers or employees of Parent or
Parent's Subsidiaries, option assumption agreements, and incentive compensation
grants;
(g) Parent's 2-5/8% Senior Convertible Notes due 2003, convertible into Parent
Common Stock;
(h) Parent's 1-1/2% Senior Convertible Notes due 2002, convertible into Parent
Common Stock;
(i) the warrants of Jacor Communications, Inc. ("Jacor") assumed by Parent;
(j) Jacor liquid yield option notes due 2011; and
(k) Jacor liquid yield option notes due 2018.
Section 4.3 Corporate Authority Relative to this Agreement. No Violation.
(a) Parent has the corporate power and authority to enter into this Agreement,
the Registration Rights Agreement, the Company Stockholders Voting Agreement and
the Stockholder Agreement (collectively, the "Ancillary Agreements"), the
Stockholder Agreement and the Company Stockholders Voting Agreement and to carry
out its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of Parent and no other corporate or stockholder proceedings
on the part of Parent are necessary to authorize this Agreement, the Ancillary
Agreements, the issuance of Parent Common Stock in connection with the Merger
and the other transactions contemplated hereby and thereby. This Agreement and
the Ancillary Agreements have been duly and validly executed and delivered by
Parent and, assuming this Agreement and the Ancillary Agreements have been duly
and validly executed and delivered by the other parties hereto and thereto, this
Agreement and the Ancillary Agreements constitute valid and binding agreements
of Parent, enforceable against it in accordance with their respective 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). Other than in connection with or in compliance with the provisions of
the DGCL, the Securities Act, the Exchange Act, the HSR Act, any non-United
States competition, antitrust and investments laws and the securities or blue
sky laws of the various states and the rules of the NYSE, and, other than the
filing of the Certificate of Merger with the Delaware Secretary of State, and
any necessary state filings to maintain the good standing or qualification of
the Surviving Corporation (collectively, the "Parent Required Approvals"), no
authorization, consent or approval of, or filing with, any governmental body or
authority is necessary for the consummation by Parent of the transactions
contemplated by this Agreement or the Ancillary Agreements, except for such
authorizations, consents, approvals or filings, the failure to obtain or make
which would not, in the aggregate, have a Material Adverse Effect on Parent;
provided that Parent makes no representation with respect to such of the
foregoing as are required by reason of the regulatory status of the Company or
any of its Subsidiaries or facts specifically pertaining to any of them. Except
for Parent Required Approvals, neither Parent nor Merger Sub is subject to or
obligated under any charter, bylaw or contract provision or any governmental
license, franchise or permit, or subject to any order or decree, which would be
breached or violated by its executing or carrying out this Agreement or the
Ancillary Agreements, except for any breaches or violations which would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
<PAGE>
(b) Merger Sub has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transaction contemplated hereby
have been duly and validly authorized by the Board of Directors of Merger Sub,
and no other corporate or stockholder proceedings on the part of Merger Sub are
necessary to authorize this Agreement and the transactions contemplated hereby.
The Board of Directors of Merger Sub has determined that the transactions
contemplated by this Agreement are advisable and in the best interest of its
stockholder and recommends to such stockholder that it vote in favor thereof.
This Agreement has been duly and validly executed and delivered by Merger Sub
and, assuming this Agreement has been duly and validly executed and delivered by
the Company, this Agreement constitutes a valid and binding agreement of Merger
Sub, enforceable against it in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar loss affecting creditors' rights
generally, or by principles governing the available of equitable remedies). This
Agreement has been approved by Parent as the sole stockholder of Merger Sub.
(c) Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement.
(d) All of the outstanding capital stock of Merger Sub is owned directly or
indirectly by Parent.
Section 4.4 Reports and Financial Statements. The following reports, proxy
statements and prospectuses filed by Parent with the SEC are publicly available:
(a) Parent's Annual Reports on Form 10-K filed with the SEC for each of the
years ended December 31, 1996, 1997 and 1998;
(b) Parent's Quarterly Reports on Form 10-Q filed with the SEC for the quarters
ended March 31, 1999, June 30, 1999 and September 30, 1999;
<PAGE>
(c) each definitive proxy statement filed by Parent with the SEC since January
1, 1996;
(d) each final prospectus filed by Parent with the SEC since January 1, 1996,
except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by Parent with the SEC since December
31, 1998.
As of their respective dates, such reports, proxy statements
and prospectuses filed on or prior to the date of this Agreement (collectively,
"Parent SEC Reports") (i) complied as to form in all material respect with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations promulgated thereunder and (ii) did not contain any untrue
statement of a material fact or omit 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; provided, that the
foregoing clause (ii) shall not apply to the financial statements included in
Parent SEC Reports (which are covered by the following sentence). The audited
consolidated financial statements and unaudited consolidated interim financial
statements included in Parent SEC Reports (including any related notes and
schedules) fairly present in all material respects the financial position of
Parent and its consolidated Subsidiaries as of the dates thereof and the results
of their operations and their cash flows for the periods then ended (subject,
where appropriate, to normal year-end adjustments), in each case in accordance
with GAAP consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto and except that the unaudited financial
statements therein do not contain all of the footnote disclosures required by
GAAP). Since January 1, 1996, Parent has timely filed all material reports,
registration statements and other filings required to be filed by it with the
SEC under the rules and regulations of the SEC.
Section 4.5 No Undisclosed Liabilities. As of the date of this Agreement,
neither Parent nor any of its Subsidiaries has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, of a type required
by GAAP to be reflected on a consolidated balance sheet except (a) liabilities
or obligations reflected in any of Parent SEC Reports, (b) liabilities or
obligations incurred since September 30, 1999 in the ordinary course of Parent's
business and (c) liabilities or obligations which would not in the aggregate
reasonably be expected to have a Material Adverse Effect on Parent.
Section 4.6 No Violation of Law. The businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority, including the Federal
Communications Commission (provided that no representation or warranty is made
in this Section 4.6 with respect to Environmental Laws) except (a) as described
in any of Parent SEC Reports and (b) for violations or possible violations which
would not in the aggregate reasonably be expected to have a Material Adverse
Effect on Parent.
Section 4.7 Environmental Laws and Regulations. Except as described in any of
Parent SEC Reports, (a) to the Knowledge of Parent, Parent and each of its
Subsidiaries is in material compliance with all applicable Environmental Laws,
except for non-compliance which would not in the aggregate reasonably be
expected to have a Material Adverse Effect on Parent, which compliance includes,
but is not limited to, the possession by Parent and its Subsidiaries of material
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (b)
neither Parent nor any of its Subsidiaries has received written notice of, or,
to the Knowledge of Parent, is the subject of, any Environmental Claims which
would in the aggregate reasonably be expected to have a Material Adverse Effect
on Parent; and (c) to the Knowledge of Parent, there are no circumstances that
are reasonably likely to prevent or interfere with such material compliance in
the future.
<PAGE>
Section 4.8 No Undisclosed Employee Benefit Plan Liabilities or Severance
Arrangements. Except as described in any of Parent SEC Reports, all "employee
benefit plans" as defined in Section 3(3) of ERISA, maintained or contributed to
by Parent or its Subsidiaries are in material compliance with their terms and
all applicable provisions of ERISA, the Code and any other applicable
legislation, and Parent and its Subsidiaries do not have any liabilities or
obligations with respect to any such employee benefit plans, whether or not
accrued, contingent or otherwise, except (a) as described in any of Parent SEC
Reports and (b) for instances of noncompliance or liabilities or obligations
that would not in the aggregate reasonably be expected to have a Material
Adverse Effect on Parent.
Section 4.9 Absence of Certain Changes or Events. Other than as disclosed
in Parent SEC Reports, since September 30, 1999 and to the date of this
Agreement, the businesses of Parent and its Subsidiaries have been conducted in
all material respects in the ordinary course and there has not been any event,
occurrence, development or state of circumstances or facts that has had a
Material Adverse Effect on Parent.
Section 4.10 Investigations; Litigation. Except as described in any of Parent
SEC Reports or previously disclosed in writing to the Company:
(a) to the Knowledge of Parent, no investigation or review by any governmental
body or authority with respect to Parent or any of its Subsidiaries which would
in the aggregate reasonably be expected to have a Material Adverse Effect on
Parent is pending nor has any governmental body or authority notified Parent in
writing of an intention to conduct the same; and
(b) there are no actions, suits or proceedings pending (or, to Parent's
Knowledge, threatened) against or affecting Parent or its Subsidiaries, or any
of their respective properties, or before any federal, state, local or foreign
governmental body or authority which in the aggregate is reasonably likely to
have a Material Adverse Effect on Parent.
Section 4.11 Proxy Statement; Registration Statement; Other Information. The
information, taken as a whole, with respect to Parent or its Subsidiaries to be
included in the Proxy Statement (as defined in Section 5.2) or the Registration
Statement (as defined in Section 5.2) will not, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement or any amendments or supplements thereto, and at
the time of the Company Special Meeting, or, in the case of the Registration
Statement, at the time it becomes effective or at the effective time of any
post-effective amendment, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Parent
or Merger Sub with respect to information supplied in writing by the Company or
any affiliate of the Company specifically for inclusion in the Proxy Statement
or the Registration Statement. Each of the Proxy Statement and Registration
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated thereunder.
<PAGE>
Section 4.12 Ownership of Company Common Stock. Parent and its Subsidiaries and
other Affiliates beneficially own, in the aggregate, less than 10% of the
outstanding shares of Class A Common Stock or other securities convertible into
shares of Class A Common Stock.
Section 4.13 Tax Matters.
(a) All federal, state, local and foreign Tax Returns required to be filed by or
on behalf of Parent, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which Parent or any of its Subsidiaries is or
was a member (a "Parent Group") have been timely filed or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all returns filed are complete and accurate except to
the extent any failure to file or any inaccuracies in filed returns would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. All
Taxes due and owing by Parent, any Subsidiary of Parent or any Parent Group have
been paid, or adequately reserved for, except to the extent any failure to pay
or reserve would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. There is no audit examination, deficiency, refund litigation,
proposed adjustment or matter in controversy with respect to any Taxes due and
owing by Parent, any Subsidiary of Parent or any Parent Group nor has Parent,
any Subsidiary of Parent or any Parent Group filed any waiver of the statute of
limitations applicable to the assessment or collection of any Tax, in each case,
which could individually or in the aggregate reasonably be expected to have a
Material Adverse Effect on Parent. All assessments for Taxes due and owing by
Parent, any Subsidiary of Parent or any Parent Group with respect to completed
and settled examinations or concluded litigation have been paid. Parent and each
of its Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except to the extent any such
failure to comply would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
(b) Neither Parent nor any of its Subsidiaries has Knowledge of any fact or has
taken any action that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.14 Required Vote of Stockholders. Other than the affirmative vote
of the holders of a majority of the outstanding shares of Merger Sub to adopt
this Agreement and approve the Merger, no other vote of the stockholders of
Parent or Merger Sub is required by law, the charter or Bylaws of Parent or
Merger Sub in order for Parent and Merger Sub to consummate the Merger and the
transactions contemplated hereby.
<PAGE>
Section 4.15 Opinion of Financial Advisor. The Board of Directors of Parent has
received the opinion of Salomon Smith Barney Inc. ("Financial Advisor") dated
the date of this Agreement to the effect that, as of such date, the Exchange
Ratios (as defined therein) are fair from a financial point of view to Parent. A
copy of the written opinion of the Financial Advisor will be delivered to the
Company as soon as practicable after the date of this Agreement.
Section 4.16 Insurance. Except to the extent that the lack of a policy would
not reasonably be expected to have a Material Adverse Effect on Parent, Parent
and its Subsidiaries have insurance policies, including without limitation
policies of fire and other casualty and liability insurance, that Parent
believes are sufficient for the respective businesses and operations of Parent
and its Subsidiaries.
Section 4.17 Real Property; Title. Parent and its Subsidiaries have good and
marketable title subject to Permitted Liens to all real properties owned by it,
except where the failure to have such title would not in the aggregate
reasonably be expected to have a Material Adverse Effect on Parent.
Section 4.18 Collective Bargaining Agreements and Labor. As of the date of
this Agreement, there are no pending complaints, charges or claims against
Parent or its Subsidiaries filed with any public or governmental authority,
arbitrator or court based upon the employment or termination by Parent of any
individual, except for such complaints, charges or claims which if adversely
determined would not in the aggregate have a Material Adverse Effect on Parent.
Section 4.19 Material Contracts. Neither Parent nor any of its Subsidiaries
has Knowledge of, or has received notice of, any violation or default under any
material contract (as such term is defined in item 601(b)(10) of Regulation S-K
of the SEC) to which Parent or any of its Subsidiaries is a party, except for
such violations or defaults as would not in the aggregate reasonably be expected
to have a Material Adverse Effect on Parent.
Section 4.20 Takeover Statute. The Board of Directors of Parent has approved
this Agreement, the Company Stockholders Voting Agreement, the Stockholders
Agreement, the Noncompetition Agreement and Registration Rights Agreement and
the transactions contemplated hereby and thereby and, assuming the accuracy of
the Company's representation and warranty contained in Section 3.12, such
approval constitutes approval of the Merger and the other transactions
contemplated hereby and thereby by the Board of Directors of Parent under the
provisions of Article 13.03 of the Texas Business Corporation Act (the "TBCA"),
such that Article 13.03 of the TBCA does not apply to this Agreement and the
transactions contemplated hereby and thereby. Except as provided in Section 3.20
above, to the Knowledge of Parent, no other state takeover statute is applicable
to the Merger or the other transactions contemplated hereby.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company or Parent. Except as
contemplated by this Agreement or as set forth in the Company Disclosure Letter
or Parent Disclosure Letter, or as necessary or appropriate to satisfy the
obligations hereunder or to comply with applicable Law or stock exchange
regulations, between the date of this Agreement and prior to the Effective Time
or the date, if any, on which this Agreement is earlier terminated pursuant to
Section 7.1, and except as may be agreed to by the other parties hereto or as
may be permitted pursuant to this Agreement:
<PAGE>
(a) The Company:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their ordinary and usual course of business;
(ii) shall use its reasonable efforts, and cause each of its Subsidiaries
to use its reasonable efforts, consistent with prudent business practice to (A)
preserve intact its business organization and goodwill in all material respects,
(B) keep available the services of its officers and key employees, subject to
changes in the ordinary course, and (C) maintain satisfactory relationships with
suppliers, distributors, customers and others having significant business
relationships with them, in each case as a group;
(iii) shall notify Parent of any emergency or other change in the normal
course of its or its Subsidiaries' respective businesses or in the operation of
its or its Subsidiaries' respective properties and of any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any governmental body or authority if such emergency, change,
complaint, investigation or hearing would reasonably be expected to have a
Material Adverse Effect on the Company;
(iv) shall not authorize or pay any dividends on or make any distribution
with respect to its outstanding shares of capital stock;
(v) shall not, and shall not permit any of its Subsidiaries to, enter into
or amend any severance or similar agreements or arrangements which would be
triggered by the transactions contemplated hereby, with any of their respective
directors or employees, except to the extent required by Law or the terms of any
agreement or Benefit Plan in existence on the date hereof or any collective
bargaining agreement entered into in the ordinary course of business;
(vi) shall not, and shall not permit any of its Subsidiaries to, without
the consent of Parent, which consent shall not be unreasonably withheld, enter
into any new written employment, consulting or salary continuation agreement
with any employee or director which, in any case, has a term of more than one
year or compensation at an annual rate in excess of $150,000, or grant any
increases in the compensation or benefits to any management employee, officer or
director, other than as required by any agreement or Benefit Plan in existence
on the date of this Agreement and other than (A) salary increases not in excess
of 10% per year of such Person's compensation which increases are awarded in the
ordinary course of business, and (B) wages and benefits to employees pursuant to
collective bargaining agreements entered into in the ordinary course of
business;
<PAGE>
(vii) shall not, and shall not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or enter
into or consummate an agreement with respect to (x) any new Internet initiative,
(y) any merger, consolidation or business combination, any acquisition of any
assets or securities, or any disposition of assets or securities involving
consideration (including stock, debt and all contingent payments) in excess of
$50 million in the aggregate, provided that any merger, business combination or
other acquisition undertaken by the Company is in a line of business the same as
or related to the line of business of the Company and its Subsidiaries as of the
date of this Agreement or (z) any release or relinquishment of any material
contract rights;
(viii) shall not propose or adopt any amendments to its corporate charter
or By-laws (except as contemplated by this Agreement);
(ix) shall not, and shall not permit any of its Subsidiaries to, (A) issue
any shares of their capital stock (other than with respect to issuances by
Subsidiaries, to the Company or a wholly-owned subsidiary of the Company),
except (y) upon exercise of options under the Company Stock Option Plans
existing on the date of this Agreement and the options and warrants listed in
Section 3.2 of the Company Disclosure Letter and (z) shares of capital stock
issued in connection with acquisitions permitted under this Section 5.1 or (B)
effect any stock split not previously announced or (C) otherwise change the
capitalization of the Company as it existed on the date of this Agreement,
except as contemplated by or permitted under this Agreement;
(x) without the consent of Parent, which consent shall not be unreasonably
withheld, shall not, and shall not permit any of its Subsidiaries to, grant,
confer or award any options, warrants, conversion rights or other rights to
acquire any shares of its capital stock, other than as required in any
employment or other agreement or pursuant to any Benefit Plan in existence on
the date of this Agreement or as otherwise contemplated by or permitted under
this Agreement;
(xi) shall not, and shall not permit any of its Subsidiaries to, except in
the ordinary course of business in connection with employee incentive and
benefit plans, programs or arrangements in existence on the date of this
Agreement, purchase, exchange, convert, or redeem any shares of the Company's
capital stock other than shares of preferred stock of Subsidiaries;
(xii) shall not, and shall not permit any of its Subsidiaries to, amend in
any significant respect the terms of their respective Benefit Plans, including
but not limited to employee benefit plans, programs or arrangements in existence
on the date of this Agreement, or adopt any new employee benefit plans, programs
or arrangements, except as required by law, by the terms of any Benefit Plan or
agreement in existence on the date of this Agreement, by the terms of any
collective bargaining agreement entered into in the ordinary course of business
or to maintain tax qualified status or as requested by the Internal Revenue
Service in order to receive a determination letter for such employee benefit
plan;
(xiii) shall not, and shall not permit any of its Subsidiaries to, enter
into any credit facilities or other loan agreements as borrower or as lender,
amend any existing credit facility or loan agreement to increase the borrowing
availability thereunder or increase applicable prepayment penalties or incur
indebtedness that is subject to any prepayment penalty or for which the Company
or its Subsidiaries are obligated to pay any discount, origination or similar
fees, or grant any Liens on any of its assets; provided, however, that nothing
in this clause shall limit the ability of the Company or any of its Subsidiaries
to incur indebtedness or grant Liens under their respective credit facilities or
other loan agreements existing on the date of this Agreement;
<PAGE>
(xiv) except as contemplated by or permitted under this Agreement, shall
not, and shall not permit any of its Subsidiaries to (a) enter into any material
agreement with aggregate consideration in excess of $5.0 million per year or (b)
make any cash touring advance or upfront guarantee in excess of $10 million
individually or $30 million in the aggregate;
(xv) shall not, and shall not permit any of its Subsidiaries to, enter into
an agreement or arrangement with any Affiliate of the Company, any family member
of any Affiliate of the Company or any stockholder who owns more than 10% of the
outstanding capital stock of the Company;
(xvi) shall not, and shall not permit any of its Subsidiaries to, make any
material Tax election or settle or compromise any material Tax liability, other
than in connection with currently pending proceedings or other than in the
ordinary course of business consistent in all material respects with past
practices;
(xvii) shall not, and shall not permit any of its Subsidiaries to, enter
into, amend, or extend any material collective bargaining or other labor
agreement, except as required by law and except in the ordinary course of
business consistent in all material respects with past practices;
(xviii) except as may be required by applicable Law or the terms of any
agreement in existence on the date of this Agreement, shall not, and shall not
permit any of its Subsidiaries to, make any acquisition, by means of a merger or
otherwise, of assets or securities, or any sale, lease, encumbrance or other
disposition of assets or securities, or enter into any similar transaction, or
enter into an agreement to effect any of the foregoing, in each case which would
reasonably be expected to adversely affect the ability of the Company to
consummate the transactions contemplated by this Agreement or materially delay
obtaining any consents or approvals of any Governmental Entity required under
this Agreement or otherwise materially delay the Closing; and
(xix) shall not agree, or permit any of its Subsidiaries to agree, in
writing or otherwise, to take any of the foregoing actions described in clauses
(iv) through (xviii) or take any action that is intended or would reasonably be
expected to result in any of the conditions to the Merger set forth in Article 6
not being satisfied, except, in each case, as may be required by applicable Law.
(b) Parent:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their ordinary and usual course of business; provided,
however, that nothing contained in this clause shall limit Parent's ability to
authorize or propose, or enter into or amend, an agreement with respect to any
acquisitions or credit facilities or to issue or refinance any debt or equity
securities, provided that any such acquisition or issuance of securities would
not reasonably be expected to adversely affect the ability of Parent or Merger
Sub to consummate the transactions contemplated by this Agreement or materially
delay obtaining any consents or approvals of any Government Entity required
under this Agreement or otherwise materially delay the Closing;;
<PAGE>
(ii) shall take all action necessary to cause Merger Sub to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement;
(iii) shall and shall cause Merger Sub to vote all shares of Company Common
Stock, if any, beneficially owned by Parent, Merger Sub or their Affiliates in
favor of adoption and approval of the Merger and this Agreement at the Company
Special Meeting (as defined in Section 5.3);
(iv) except as may be required by applicable Law or the terms of any
agreement in existence on the date of this Agreement, shall not, and shall not
permit any of its Subsidiaries to, make any acquisition, by means of a merger or
otherwise, of assets or securities, or any sale, lease, encumbrance or other
disposition of assets or securities, or enter into any similar transaction, or
enter into an agreement to effect any of the foregoing, in each case which would
reasonably be expected to adversely affect the ability of Parent to consummate
the transactions contemplated by this Agreement or materially delay obtaining
any consents or approvals of any Governmental Entity required under this
Agreement or otherwise materially delay the Closing;
(v) shall not, and shall not permit any of its Subsidiaries to, change any
of the accounting principles or practices used by it or any of its Subsidiaries,
except as required by the Securities Exchange Commission (the "SEC") or required
by GAAP;
(vi) shall not authorize or pay any dividends on or make any distribution
with respect to its outstanding shares of capital stock;
(vii) shall not propose or adopt any amendments to its corporate charter or
By-laws;
(viii) shall not agree, or permit any of its Subsidiaries to agree, in
writing or otherwise, to take any of the foregoing actions described in clauses
(iv) through (vii) or take any action that is intended or would reasonably be
expected to result in any of the conditions to the Merger set forth in Article 6
not being satisfied, except, in each case, as may be required by applicable Law;
and
(ix) shall use its reasonable efforts, and cause each of its Subsidiaries
to use its reasonable efforts, consistent with prudent business practice to (A)
preserve intact its business organization and goodwill in all material respects,
(B) keep available the services of its officers and key employees, subject to
changes in the ordinary course, and (C) maintain satisfactory relationships with
suppliers, distributors, customers and others having significant business
relationships with them, in each case as a group.
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Section 5.2......Proxy Material; Registration Statement.
(a) As promptly as practicable after the execution of this Agreement, the
Company shall prepare and file with the SEC a proxy statement relating to the
meeting of the Company's stockholders to be held in connection with the Merger
(together with any amendments thereof or supplements thereto, in each case in
the form or forms mailed to the Company's stockholders, the "Proxy Statement")
and Parent shall prepare and file with the SEC a registration statement on Form
S-4 (together with all amendments thereto, the "Registration Statement") in
which the Proxy Statement shall be included as a prospectus, in connection with
the registration under the Securities Act of the shares of Parent Common Stock
to be issued to the stockholders of the Company pursuant to the Merger. Each of
Parent and the Company will use all reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Parent shall take all or any
action required under any applicable federal or state securities laws in
connection with the issuance of shares of Parent Common Stock in the Merger.
Each of Parent and the Company shall furnish all information concerning it and
the holders of its capital stock as the other may reasonably request in
connection with such actions and the preparation of the Registration Statement
and Proxy Statement. As promptly as practicable after the Registration Statement
shall have become effective, the Company shall mail the Proxy Statement to its
stockholders. The Proxy Statement shall include the recommendation of the Board
of Directors of the Company in favor of the Merger (subject to Section 5.10(d)
hereof) and the Charter Amendment.
Subject to Section 5.10(d) hereof, no amendment or supplement to the
Proxy Statement or the Registration Statement will be made by Parent or the
Company without the approval of the other party (which approval shall not be
unreasonably withheld or delayed). Parent and the Company each will advise the
other, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order, the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
(b) The information supplied by Parent for inclusion in the Registration
Statement and the Proxy Statement shall not, at (1) the time the Registration
Statement is declared effective, (2) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company, (3) the time of the Company Special Meeting, and (4) the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If at any time prior to the Effective Time
any event or circumstance relating to Parent or any of its Subsidiaries, or
their respective officers or directors, should be discovered by Parent which
should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement, Parent shall promptly inform the Company. All
documents that Parent is responsible for filing with the SEC in connection with
the transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
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(c) The information supplied by the Company for inclusion in the Registration
Statement and the Proxy Statement shall not, at (1) the time the Registration
Statement is declared effective, (2) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company, (3) the time of the Company Special Meeting, and (4) the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If at any time prior to the Effective Time
any event or circumstance relating to the Company or any of its Subsidiaries, or
their respective officers or directors, should be discovered by the Company
which should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement, the Company shall promptly inform Parent. All
documents that the Company is responsible for filing with the SEC in connection
with the transactions contemplated herein will comply as to form and substance
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
Section 5.3 Stockholders' Meeting. The Company shall, in accordance with
applicable law and its Amended and Restated Certificate of Incorporation and
By-laws duly call, give notice of, convene and hold a special meeting (which, as
may be duly adjourned, the "Company Special Meeting") of its stockholders for
the purpose of approving and adopting the agreement of merger (as such term is
used in Section 251 of the DGCL) set forth in this Agreement, approving the
Merger and approving the Charter Amendment, in each case by the holders of a
majority of the outstanding shares of Company Common Stock (with the holders of
Company Class A Common Stock and the holders of Company Class B Common Stock
voting together as a single class) and the affirmative vote of the holders of a
majority of the outstanding shares of each of the Company Class A Common Stock
and Company Class B Common Stock voting as separate classes (the "Company
Stockholder Approval"). The Company agrees to use its reasonable efforts to
cause the Company Special Meeting to occur within seventy-five (75) days after
the date on which the Registration Statement becomes effective, but not earlier
than twenty (20) business days after the date the Proxy Statement is first
mailed to stockholders. The Company shall include in the Proxy Statement the
recommendation of its Board of Directors ("Company Board Recommendation") that
its stockholders vote in favor of the Company Stockholder Approval, subject to
the duties of the Board of Directors of the Company to make any further
disclosure to the stockholders (which shall not, unless expressly stated,
constitute a withdrawal or adverse modification of such recommendation) and
subject to the right to withdraw, modify or change such recommendation in
accordance with Section 5.10 of this Agreement. If the Board of Directors of the
Company withdraws, modifies or changes its recommendation of this Agreement or
the Merger in a manner adverse to Parent or resolves to do any of the foregoing,
the Company shall nevertheless remain obligated to call, give notice of, convene
and hold the Company Special Meeting.
Section 5.4 Approvals and Consents; Cooperation.
(a) The Company and Parent shall together, or pursuant to an allocation of
responsibility to be agreed upon between them:
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(i) as soon as is reasonably practicable take all such action as may be
required under state blue sky or securities laws in connection with the
transactions contemplated by this Agreement;
(ii) promptly prepare and file with the NYSE listing applications covering
the shares of Parent Common Stock issuable in the Merger or upon exercise of the
Company stock options, warrants, conversion rights or other rights or vesting or
payment of other Company equity based awards and use its reasonable best efforts
to obtain, prior to the Effective Time, approval for the listing of such Parent
Common Stock, subject only to official notice of issuance;
(iii) cooperate with one another in seeking any actions, consents,
approvals or waivers or making any filings in connection with the transactions
contemplated by this Agreement; and
(iv) cooperate with one another in obtaining the opinions described in
Section 6.1(g) of this Agreement.
(b) Subject to the limitations contained in Section 5.2, the Company and Parent
shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions.
Section 5.5 Access to Information; Confidentiality. As permitted by law,
each of the Company and Parent shall, upon reasonable notice to an Executive
Officer (as defined in Section 8.2 hereof) of the Company or Parent, as the case
may be, afford to the other party, and to such party's authorized officers,
employees, accountants, counsel, financial advisors and other representatives
(collectively, "Representatives"), reasonable access during normal business
hours, in a manner so as not to interfere with the normal operations of the
Company or Parent and their respective Subsidiaries and subject to reasonable
restrictions imposed by an Executive Officer of the Company or Parent, as the
case may be, during the period prior to the Effective Time to all the
properties, books, contracts, commitments and records of the Company or Parent
and their respective Subsidiaries, and during such period, the Company or Parent
shall furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it or its Subsidiaries during
such period pursuant to the requirements of applicable federal or state
securities laws and (b) all other information concerning its business,
properties and personnel as the other party may reasonably request.
Notwithstanding anything to the contrary in this Agreement, neither party nor
any or its Subsidiaries shall be required to disclose any information to the
other party or its authorized representatives if doing so would (i) violate any
federal, state, local or foreign law, rule or regulation to which such party or
any of its Subsidiaries is subject, (ii) violate the regulations or requirements
of the NYSE, (iii) violate the terms of any confidentiality agreement or similar
agreement or arrangement to which such party or any of its Subsidiaries is a
party (provided that such party shall use all reasonable efforts to cause the
counterparty thereto to waive such agreement) or (iv) directly or indirectly
affect either party's competitive position in any of the markets in which either
party operates or in respect of the activities in which either party is engaged.
No investigation or information furnished pursuant to this Section 5.5 shall
affect any representations or warranties made by the parties herein or the
conditions to the obligations of the parties to consummate the Merger. Each
party will, and will counsel its Representatives to, keep such information
provided to it by the other party confidential in accordance with the terms of
the Confidentiality Agreement, dated February 18, 2000, between Parent and the
Company (the "Confidentiality Agreement") the terms of which are incorporated
herein by reference, as if such information were Confidential Information (as
such term is defined in the Confidentiality Agreement).
<PAGE>
Section 5.6 Affiliates. The Company shall, prior to the Effective Time,
deliver to Parent a list (reasonably satisfactory to counsel for Parent),
setting forth the names and addresses of all Persons who are, at the time of the
Company Special Meeting, in the Company's reasonable judgment, "affiliates" of
the Company for purposes of Rule 145 under the Securities Act. The Company shall
furnish such information and documents as Parent may reasonably request for the
purpose of reviewing such list. The Company will use its reasonable efforts to
cause its affiliates to deliver to Parent not later that 10 days prior to the
date of the Company Special Meeting, a written agreement substantially in the
form attached as Exhibit 5.6, with such modifications as may be appropriate, and
will use its reasonable efforts to cause Persons or entities who become
"affiliates" after such date but prior to the Closing Date to execute and
deliver these agreements at least 5 days prior to the Closing Date.
Section 5.7......Rights Under Stock Plans.
(a) Each outstanding option or warrant to purchase shares of Company Common
Stock ("Option") granted under the Company Stock Option Plans or otherwise,
which is outstanding immediately prior to the Effective Time, whether or not
then exercisable, shall vest in accordance with the terms of such Company Stock
Option Plan or agreement under which it was granted and shall be assumed by
Parent and deemed to constitute an option or warrant to acquire, on the same
terms and conditions, mutatis mutandis (including, without limitation
adjustments for any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or similar
transaction), as were applicable under such Option or agreement prior to the
Effective Time, the number of shares of Parent Common Stock as the holder of
such Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Option in full immediately prior to the Effective Time
(not taking into account whether or not such Option was in fact exercisable) at
a price per share equal to (x) the aggregate exercise price for Company Common
Stock purchasable pursuant to such Option divided by (y) the Class A Conversion
Number; provided, that the number of shares of Parent Common Stock that may be
purchased upon exercise of any such Option or agreement shall not include any
fractional share and, upon exercise of such Option or agreement, a cash payment
shall be made for any fractional share based upon the last sale price per share
of Parent Common Stock on the trading day immediately preceding the date of
exercise. From and after the Effective Time, Parent and the Surviving
Corporation shall comply with the terms of the Company Stock Option Plans and
the agreements governing any Options. The adjustments provided herein with
respect to any Options that are "incentive stock options" (as defined in Section
422 of the Code) shall be effected in a manner consistent with Section 424(a) of
the Code.
(b) Parent shall cause to be taken all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Options in accordance with this Section 5.7. As promptly as
practicable after the Effective Time, Parent shall use its reasonable efforts to
cause Parent Common Stock subject to assumed Options to be registered under the
Securities Act pursuant to a registration statement on Form S-8 (or any
successor or other appropriate forms) and shall use its reasonable efforts to
cause the effectiveness of such registration statement (and current status of
the prospectus or prospectuses contained therein) to occur promptly after the
Effective Time and to be maintained for so long as such Options remain
outstanding.
<PAGE>
(c) At the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any stock appreciation right ("SAR"), each outstanding SAR
issued by the Company on or prior to the date of this Agreement shall, as of the
Effective Time, automatically and without any action on the part of the holder
thereof, be assumed by Parent. The holders of such SARs shall continue to have,
and be subject to, the same terms and conditions set forth in the agreements
pursuant to which the SARs were issued in effect immediately prior to the
Effective Time, except that (i) such SARs shall be exercisable for cash
representing that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Class A Common Stock covered by the SAR
immediately prior to the Effective Time multiplied by the Class A Conversion
Number rounded up to the nearest whole number of shares of Parent Common Stock
and (ii) the per share strike price for the cash representing shares of Parent
Common Stock issuable upon the exercise of such assumed SAR shall be equal to
the quotient determined by dividing the strike price per share of Class A Common
Stock specified for such SAR under the applicable agreement immediately prior to
the Effective Time by the Class A Conversion Number, rounding the resulting
strike price down to the nearest whole cent. The holders of the SARs will be
entitled to receive only cash upon exercise of the SARs in lieu of Parent Common
Stock as