MERGERS AND ACQUISITIONS§12.109
January 199912-1047
APPENDIX A
AGREEMENT AND PLAN OF MERGER
dated as of March 17, 1997
by and among
THE NEWS CORPORATION LIMITED,
HMC ACQUISITION CORP. and
HERITAGE MEDIA CORPORATION
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 17, 1997, by and among HERITAGE
MEDIA CORPORATION, a Delaware corporation (the “Company”), THE NEWS CORPORATION
LIMITED (ACN 007 910 330), a South Australia corporation (“News Corp.”), and HMC
ACQUISITION CORP., a Delaware corporation and a wholly-owned direct subsidiary of News Corp.
(“Merger Sub”).
RECITALS
WHEREAS, it is the intention of the parties that the Company merge with and i nto Merger Sub (the
“Merger”), with the Merger Sub surviving as a wholly-owned direct subsidiary of News Corp.;
WHEREAS, for federal income tax purposes, it is intended that the Merger qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amende d,
and any successor statute (the “Code”);
WHEREAS, as a condition to the willingness of News Corp. and Merger Sub to enter into this
Agreement, the Company has agreed to enter into an agreement providing for the transfer of ti tle of all
outstanding shares of HMI Broadcasting Corp., an indirect wholly-owned subsidiary of the Company
(“HMI”), to a trust for the sole benefit of the Company; and
WHEREAS, the Boards of Directors of News Corp., Merger Sub and the Company have determined
that the transactions contemplated by this Agreement (the “Transactions”), includi ng, without limitation,
the Merger, are advisable and in the best interest of their respective corporations and stockholders and
have approved this Agreement;
NOW, THEREFORE, in consideration of the mutual representations, warranties and agreements
contained herein and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.2), in accordance with the General Corporati on Law of the State
of Delaware (the “DGCL”), the Company shall be merged with and into Merger Sub in ac cordance with
this Agreement and the separate existence of the Company shall cease. Merger Sub shall be the surviving
corporation in the Merger (hereinafter sometimes referred to as the “Surviving Corporation”).
Section 1.2 Effective Time of the Merger. Upon the terms and subject to the conditions hereof, a
certificate of merger (the “Certificate of Merger”) shall be duly prepared, exec uted and acknowledged by
the Surviving Corporation and thereafter delivered to the Secretary of State of the State of Delaware, for
filing, on the Closing Date (as defined in Section 1.3). The Merger shall become effect ive as of the date
and at such time as the Certificate of Merger pursuant to Section 251 of the DGCL and any other
documents necessary to effect the Merger in accordance with the DGCL are duly filed (the “Merger
Filing”) with the Secretary of State of the State of Delaware or at such subsequent dat e or time as shall be
agreed by the Company and News Corp. and specified in the Certificate of Merger (the t ime the Merger
becomes effective pursuant to the DGCL being referred to herein as the “Effective Time”).
Section 1.3 Closing. Subject to the satisfaction or waiver of all of the conditions to closing contained
in Article VII hereof, the closing of the Merger (the “Closing”) will take place at 10:00 a.m., New York
City time, on a date to be specified by the parties, which shall be no late r than the fifth Business Day (as
defined below) after the satisfaction or waiver of the conditions to Closing containe d in Article VII
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January 199912-1049
hereof, at the offices of Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York,
New York 10176, unless another date or place is agreed to in writing by the parties hereto. The date and
time at which the Closing occurs is referred to herein as the “Closing Date.” “Busi ness Day” shall mean
any day other than a Saturday, a Sunday or a day on which banking institutions in New York Ci ty are not
required to be open
Section 1.4 Effects of the Merger. The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective Ti me, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall be come the debts,
liabilities and duties of the Surviving Corporation.
Section 1.5 Certificate of Incorporation and By-Laws.
(a) The Certificate of Incorporation of Merger Sub as in effect immediately prior to t he Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation until amended in accordance
with the terms thereof and with applicable law.
(b) The By-Laws of Merger Sub in effect at the Effective Time shall be the By-Laws of the
Surviving Corporation until amended in accordance with the terms thereof and with applicable law.
Section 1.6 Directors. The directors of Merger Sub at the Effective Time shall be the initial dire ctors
of the Surviving Corporation, each to hold office from the Effective Time in accordance wi th the
Certificate of Incorporation and By-Laws of the Surviving Corporation and until his or her successor is
duly elected and qualified.
Section 1.7 Officers. The officers of Merger Sub at the Effective Time shall be the initial officers of
the Surviving Corporation, each to hold office from the Effective Time in accordance wi th the Certificate
of Incorporation and By-Laws of the Surviving Corporation and until his or her successor is duly
appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any outstanding shares of capital stock of the Com pany or of the
holder of any shares of capital stock of Merger Sub:
(a) Exchange Ratio for Company Common Stock. Subject to Section 2.2(e), each issued and
outstanding share of Common Stock, par value $.01 per share (the “Company Common Stock”), of
the Company shall be converted into the right to receive that number of American Deposi tary Shares
of News Corp. (the “News Corp. Preferred ADRs”), each of which represents four fully paid and
nonassessable Preferred Limited Voting Ordinary Shares, par value A$.50 per share, of News Corp.
(the “News Corp. Preferred Stock”), equal to the quotient (the “Exchange Ratio”) of (x) $20.50
divided by (y) the average of the daily closing price of News Corp. Preferred ADRs on the New
York Stock Exchange (“NYSE”) Composite Tape on the twenty consecutive trading days ending on
the date which is five Business Days prior to the date of the Company Meeting (as defined in Section
6.8 hereof) (the “Effective Date Price”); provided, however, that, if the Effective Time has not
occurred within two days after the date of the Company Meeting, the denominator of the Exchange
Ratio referred to in the foregoing subclause (y) shall be equal to the average of the da ily closing price
of the News Corp. Preferred ADRs on the NYSE Composite Tape on the twenty consecutive trading
days ending on the date which is five Business Days prior to the Effective Time. All such shares of
Company Common Stock, when-so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a c ertificate that, immediately
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
prior to the Effective Time, represented outstanding shares of Company Common Stock (the
“Common Stock Certificates”) shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of such Common Stock Certificate, the News Corp. Preferred ADRs to
which such holder is entitled pursuant to this Section 2.1(a), as represented by one or more
certificates, and any cash in lieu of fractional News Corp. Preferred ADRs to be issued or paid in
consideration therefor in accordance with Section 2.2(e) and any dividends or distributions to whic h
such holder is entitled pursuant to Section 2.2(c), in each case without interest. All sha res of capital
stock of the Company that are owned by the Company as treasury stock shall not convert int o the
right to receive News Corp. Preferred ADRs in accordance with this Section 2.1(a).
(b) Exchange Ratio for Company Stock Options.
(i) At the Effective Time, each outstanding Company Stock Option (as defined in Sect ion
3.2) shall, to the extent provided for in the Company Stock Option Plans (as defined in Secti on
3.2), vest and be exercisable, if not vested and exercisable at such time, and all Company Stock
Options shall be adjusted in accordance with the terms thereof and this Agreement t o be
exercisable to purchase News Corp. Preferred ADRs, as provided below. Following the Effective
Time, each Company Stock Option shall continue to have, and shall be subject to, the same terms
and conditions set forth in the Company Stock Option Plans or any other agreement pursuant to
which such Company Stock Option was subject immediately prior to the Effective T ime, except
as set forth in this Section 2.1(b) and except that (A) each such Company Stock Option shall be
exercisable for that number of News Corp. Preferred ADRs equal to the product of (1) the
aggregate number of shares of Company Common Stock for which such Company Stock Option
was exercisable and (2) the Exchange Ratio; provided, however, that no Company Stock Option
shall be exercisable for a fractional News Corp. Preferred ADR, and holders of a Company St ock
Option exercisable for a fractional News Corp. Preferred ADR shall be entitled to recei ve, upon
exercise thereof, an offset against the aggregate exercise price of the Company Stock Options
being exercised therewith, such offset to be determined by multiplying the fraction of a Ne ws
Corp. Preferred ADR to which a holder of a Company Stock Option would be entitled to recei ve
times the excess of the closing price of the News Corp. Preferred ADRs as reported on the NYSE
Composite Tape on the date of exercise over the exercise price of such Company Stock Opt ion,
and (B) the exercise price per News Corp. Preferred ADR issuable pursuant to such Company
Stock Option shall be equal to the aggregate exercise price of such Company Stock Option a t the
Effective Time divided by the number of News Corp. Preferred ADRs for which such Company
Stock Option shall be exercisable as determined in accordance with the preceding c lause (A),
rounded up to the next highest cent, if necessary.
(ii) Prior to the Effective Time, the Company shall make such amendments, if any, to the
Company Stock Option Plans as shall be necessary to permit the assumption and adjustme nt and
other terms referred to in this Section 2.1(b) and, if requested by News Corp., to comply with t he
requirements of the Australian Stock Exchange (“ASX”) or Australia law; provided, however,
that any such amendments requested by News Corp. shall not affect in any respect the num ber of
News Corp. Preferred ADRs issuable upon exercise of Company Stock Options or the exercise
price thereof. As soon as practicable after the Effective Time, the Surviving Corporation shall
deliver to the participants in the Company Option Plans notices advising them of the Merger and
setting forth the formula for converting shares of Company Common Stock issuable upon the
exercise of Company Stock Options into News Corp. Preferred ADRs.
(iii) At the time that a Company Stock Option is exercised in accordance with t he terms
hereof, News Corp. shall, pursuant to the terms of the Deposit Agreement (as defined below), (x)
deposit with the Custodian (as defined in the Deposit Agreement) the shares of News Corp.
Preferred Stock underlying the News Corp. Preferred ADRs to be issued upon such exercise and
(y) instruct the Depositary (as defined below) to deliver the News Corp. Preferred ADRs to be
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issued upon such exercise in accordance with the written instructions of the holder of such
Company Stock Option so exercised. For purposes of this Agreement, “Depositary” shall mean
Citibank, N.A., as Depositary, pursuant to the Amended and Restated Deposit Agreement, dated
as of December 3, 1996, among News Corp., the Depositary and the holders from time to time of
News Corp. Preferred ADRs (the “Deposit Agreement”).
(iv) News Corp. shall (i) file a registration statement on Form S-8 (or amend an existi ng
registration statement on Form S-8) to become effective as of the Effective Time with respect to
the News Corp. Preferred ADRs subject to Company Stock Options; (ii) maintain the
effectiveness of such registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding; (iii) promptly
prepare and submit to the NYSE applications covering the News Corp. Preferred ADRs subject
to Company Stock Options and use commercially reasonable efforts to cause such securiti es to
be approved for listing on the NYSE prior to the Effective Time, subject to official noti ce of
issuance; and (iv) within ten days after the Effective Time, prepare and submit to the ASX,
pursuant to the Listing Rules of the ASX, applications covering the News Corp. Preferred Stock
underlying the News Corp. Preferred ADRs to be issued upon the exercise of Company Stock
Options.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent; Depositary. News Corp., pursuant to the terms of the Deposit Agreement, shall
(i) prior to the Effective Time, (A) deposit with the Custodian the shares of News Corp. Prefe rred Stock
underlying the News Corp. Preferred ADRs to be issued in the Merger and (B) instruct the Deposi tary to
deposit the News Corp. Preferred ADRs to be issued in the Merger with News Corp.'s transfer agent for
the News Corp. Preferred ADRs or with such other bank or trust company designated by News Corp.
with an office or agency in the City of New York, New York (the “Exchange Agent”), for the be nefit of
the holders of shares of Company Common Stock. for exchange in the Merger in accordance with t his
Article II, through the Exchange Agent; and (ii) from time to time as necessary at or after the Effective
Time, deposit with the Exchange Agent cash to be paid in lieu of fractional News Corp. Preferred ADRs
pursuant to Section 2.2(e) (such certificates representing News Corp. Preferred ADRs, together with any
dividends or distributions with respect thereto to which the holders of shares of Company Common Stock
may be entitled to pursuant to Section 2.2(c), and cash in lieu of fractional News C orp. Preferred ADRs,
being hereinafter referred to as the “Exchange Fund”).
(b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, News C orp.
shall cause the Exchange Agent to mail to each holder of record of Company Common St ock
immediately prior to the Effective Time whose shares were converted, pursuant to the Merger, into the
right to receive News Corp. Preferred ADRs ii) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other c ustomary provisions
as News Corp., in consultation with the Company, may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates representing News Corp. Preferred
ADRs which such holder has the right to receive pursuant to the provisions of this Article II. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such other age nt or agents as may
be appointed by News Corp., together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor certificat es representing that whole number of
News Corp. Preferred ADRs which such holder has the right to receive pursuant to the provisions of thi s
Article II, and the Certificate so surrendered shall forthwith be canceled. News Corp. or t he Surviving
Corporation shall pay any transfer or other similar taxes required by reason of the issuance and receipt by
the former stockholders of the Company of the News Corp. Preferred ADRs pursuant to the provisions of
this Article II; provided, however, 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, certificates represent ing the proper
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
number of News Corp. Preferred ADRs 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 doc uments
required to evidence and effect such transfer and by evidence that any applicable st ock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed,
at any time after the Effective Time, to represent only the right to recei ve upon such surrender certificates
representing the News Corp. Preferred ADRs and any cash in lieu of fractional News Corp. Preferred
ADRs, as contemplated by this Section 2.2 and any dividends or distributions to which a holde r may be
entitled. No interest will be paid or will accrue on any cash paid or payable in l ieu of any fractional News
Corp. Preferred ADRs.
(c) Distributions with Respect to Unexchanged Company Common Stock. No dividends or other
distributions declared or made after the Effective Time with respect to News Corp. Preferred ADRs with
a record date after the Effective Time shall be paid to the holder of any unsurre ndered Certificate with
respect to the News Corp. Preferred ADRs issuable hereunder in respect thereof, and no cash payment in
lieu of fractional News Corp. Preferred ADRs shall be paid to any such holder pursuant to Se ction 2.2(e),
until the holder of record of such Certificate shall surrender such Certificate. Subjec t to the effect of
applicable Laws (as defined in Section 3.4(a)), following surrender of any such Certifica te there shall be
paid to the record holder of the certificates representing News Corp. Preferred ADRs issued in exchange
therefor, without interest, (i) at the later of (A) the time of such surrender and (B) t he day following the
Effective Time, the amount of any cash payable in lieu of a fractional News Corp. Pre ferred ADR to
which such holder is entitled pursuant to Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with respe ct to such whole
News Corp. Preferred ADRs, and (ii) if the payment date for any dividend or distribution payabl e with
respect to such whole News Corp. Preferred ADRs has not occurred prior to the surrender of such
Certificate, at the appropriate payment date therefor, the amount of dividends or other distributions with a
record date after the Effective Time but prior to the surrender of such Certificate. (d) No Further Ownership Rights in Company Common Stock. All News Corp. Preferred ADRs
issued upon the surrender for exchange of shares of Company Common Stock pursuant to the Merger
and in accordance with the terms hereof (including any cash paid pursuant to Section 2.2(c) or 2.2(e))
shall be deemed to have been issued in full satisfaction of all rights pertaining t o such shares of Company
Common Stock, subject, however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time which may have been
declared or trade by the Company on such shams of Company Common Stock in accordance with t he
terms of this Agreement or prior to the date hereof and which remain unpaid at the Effe ctive Time, and
from and after the Effective Time there shall be no further registration of transfe rs on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which are converted
pursuant to the Merger and were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any re ason, they shall be
canceled and exchanged for News Corp. Preferred ADRs, together with any cash in lieu of frac tional
News Corp. Preferred ADRs and any dividends or distributions with respect to News Corp. Preferred
ADRs, as provided in this Article II. (e) No Fractional Shares. No certificate or scrip representing fractional News Corp. Preferred ADRs
shall be issued upon the surrender for exchange of Certificates, and such fractional share inte rests shall
not entitle the owner thereof to any rights as a security holder of News Corp. All holders enti tled to
receive a fractional News Corp. Preferred ADR shall be entitled to receive, in l ieu thereof, an amount in
cash determined by multiplying (i) the fraction of a News Corp. Preferred ADR to which such holder
would otherwise have been entitled times (ii) the Effective Date Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed
to the holders of shares of Company Common Stock on the second anniversary of the Effective Time
shall be delivered to News Corp., upon demand, and any holders of shares of Company Common Stock
who have not theretofore delivered all of their Certificates in accordance with Se ction 2.2 shall thereafter
MERGERS AND ACQUISITIONS§12.109
January 199912-1053
look only to News Corp. for payment of their claim for News Corp. Preferred ADRs, any cash in lieu of
fractional News Corp. Preferred ADRs and any dividends or distributions with respect to News Corp.
Preferred ADRs.
(g) No Liability. Neither News Corp., the Company nor the Exchange Agent shall be liable t o any
holder of shares of
Company Common Stock or News Corp. Preferred ADRs, as the case may be, for
such shares (or dividends or distribution with respect thereto) or cash in lieu of fractional sha res
delivered to a public official pursuant to any applicable abandoned property, escheat, or similar Law.
(h) Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock (the “Shares”) outstanding immediately prior to the Effective Ti me and held
by a holder who has not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262 of the DGCL if such Sect ion 262
provides for appraisal rights for such Shares in the Merger (“Dissenting Shares”), shall not be converte d
into a right to receive the Merger consideration, as provided in Section 2, unless such holde r fails to
perfect or withdraws or otherwise loses his right to appraisal. If, after the Effective Tim e, such holder
fails to perfect or withdraws or loses his right to appraisal, such Shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger conside ration, without interest
thereon. The Company shall give News Corp. prompt notice of any demands received by the C ompany
for appraisal of Shares, and, prior to the Effective Time, News Corp. shall have the right t o participate in
all negotiations and proceedings with respect to such demands. Prior to the Effective Tim e. the Company
shall not, except with the prior written consent of News Corp., make any payment with respect to. or
settle or offer to settle, any such demands.
Section 2.3 Closing of Transfer Books. From and after the Effective Time, the stock transfer books
of the Company shall be closed and no transfer of shares of Company Common Stock converted pursuant
to the Merger shall thereafter be made. If, after the Effective Time, Certifi cates representing such shares
are presented to News Corp., they shall be canceled and exchanged for News Corp. Preferred ADR s,
together with any cash in lieu of fractional News Corp. Preferred ADRs and any dividends or
distributions with respect to News Corp. Preferred ADRs, as provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to News Corp. and Merger Sub that: Section 3.1 Organization and Qualifications: Subsidiaries.
(a) The Company and each Company Subsidiary (as defined below) is a corporation, partnership or
other legal entity duly incorporated or organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization and has the requisite power and authorit y and all
governmental permits, approvals and other authorizations necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and governmental permits,
approvals and other authorizations would not, individually or in the aggregate, have a materia l adverse
effect on the business, assets, financial or other condition, or results of operations of the Com pany and
the Subsidiaries (as defined below) of the Company (each, a “Company Subsidiary”), taken as a whole (a
“Company Material Adverse Effect”).
(b) Attached as Schedule 3.1 is an organizational chart that includes the Company and a ll Company
Subsidiaries. Except as set forth on Schedule 3.1, all outstanding shares of capital stock of ea ch Company
Subsidiary are owned either by the Company or another Company Subsidiary. For purposes of this
Agreement, a “Subsidiary” of any person means (A) a corporation in which such person, a subsidiary of
such person, or such person and one or more subsidiaries of such person, directly or indirectly, at the da te
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
of determination, has either (i) a majority ownership interest or (ii) the power, under ordinary
circumstances, to elect, or to direct the election of, a majority of the board of directors of such
corporation or (B) a partnership in which such person, a subsidiary of such person, or such person and
one or more subsidiaries of such person (i) is, at the date of determination, a general part ner of such
partnership, or (ii) has a majority ownership interest in such partnership or the fight to el ect, or to direct
the election of, a majority of the governing body of such partnership, or (C) any other person (othe r than
a corporation or a partnership) in which such person, a subsidiary of such person, or such person and one
or more subsidiaries of such person has either (i) at least a majority ownership interest or (ii) the power to
elect, or to direct the election of, a majority of the directors or other governing body of such person.
Section 3.2 Capitalization. The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $.01 per share, of
which 800,000 shares were designated as Series A Junior Participating Preferred Stock (“Series A
Stock”). As of the date hereof, (a) 35,728,998 shares of Common Stock were issued and 34,772,342 were
issued and outstanding, all of which were validly issued, fully paid and nonassessable; (ii) no shares of
Series A Stock were issued and outstanding; (iii) 3,841,504 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding stock options (the “Company Stock Options”) granted
pursuant to the Company's stock option plans (the “Company Stock Option Plans”); (iv) 1,430,000 shares
of Common Stock were reserved for issuance upon exercise of options available for grant under the
Company Stock Option Plan; (v) 35,728,998 preferred stock purchase rights (the “Purchase Rights”)
were issued and 34,772,342 Purchase Rights were issued and outstanding, and the rights agreement
pursuant to which the Purchase Rights have been issued has been amended to exclude the Merge r and the
other Transactions as triggering events thereunder; and (vi) 956,656 shares of Company Common Stock
were held as treasury shares. All of the Company Stock Options have been duly and validly a uthorized
and issued in compliance with all federal and state securities laws and regula tions. Except as set forth
above or in Schedule 3.2, no shares of capital stock or other voting securities of the Company we re
issued. reserved for issuance or outstanding. Except as set forth above or in Schedule 3.2, there are no
options or agreements relating to the issued or unissued capital stock of the Company or any Company
Subsidiary, or obligating the Company or any Company Subsidiary to issue, transfer, grant or sell any
shares of capital stock of, or other equity interests in, or securities convertible into or exchangeable for
any capital stock or other equity interests in, the Company or any Company Subsidiary. Exce pt for
required repurchases of options or stock upon termination of employment to the extent required by
agreements in effect on the date hereof, there are no outstanding contractual obligat ions of the Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common
Stock or any other shares of capital stock of the Company or any Company Subsidiary.
Section 3.3 Authority Relative to This Agreement.
The Company has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and, subject to adoption of this Agreement by a majority
of the issued and outstanding shares of Company Common Stock (the “Company Stockholder
Approval”), to consummate the Transactions. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the Transactions have been duly and vali dly
authorized by all necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Transactions ot her than
Company Stockholder Approval. This Agreement has been duly and validly executed and delivere d by
the Company and, assuming the due authorization, execution and delivery thereof by News Corp. a nd
Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and by equit able principles to
which the remedies of specific performance and injunctive and similar forms of relief are subject and
except that rights to indemnity hereunder may be subject to federal or state securit ies laws or the policies
MERGERS AND ACQUISITIONS§12.109
January 199912-1055
underlying such laws.
Section 3.4 No Conflict; Required Filings and Consents; Certain Contracts.
(a) Except as set forth in Schedule 3.4 and subject to obtaining Company Stockholder Approval , the
execution and delivery of this Agreement by the Company do not, and the performance of its obli gations
under this Agreement and the consummation of the Transactions by the Company will not, (i ) conflict
with or violate the certificate of incorporation or by-laws or equivalent organizational documents of the
Company or any Company Subsidiary, (ii) subject to the making of the filings and obtaining the
approvals identified in Section 3.4(b), conflict with or violate any law, rule, regulation, orde r, judgment
or decree (collectively, “Laws”) applicable to the Company or any Company Subsidiary or by which any
property or asset of the Company or any Company Subsidiary is bound or affected, except in such
instances which would not have a Company Material Adverse Effect; or (iii) subject to the making of the
filings and obtaining the approvals identified in Section 3.4(b), conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both would become a default)
under, result in the loss (by the Company, any such Company Subsidiary or the Surviving Corporation)
or modification in a manner materially adverse to the Company and the Company Subsidia ries of any
material right or benefit under, or give to others any right of termination, amendment, acceleration,
repurchase or repayment, increased payments or cancellation of, or result in the creati on of any security
interests, liens, claims, pledges, options, rights of first refusal, agreements, limitati ons on voting rights,
charges and other encumbrances of any nature whatsoever (collectively, “Liens”) on any property or
asset of the Company or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other instrument or obligati on (collectively,
“Contracts”), to which the Company or any Company Subsidiary is a party or by which the Company or
any Company Subsidiary or any property or asset of the Company or any Company Subsidiary is bound
or affected, except in such instances which would not result in a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not, and the performance of its
obligations under this Agreement and the consummation of the Transactions by the Company wi ll not,
require any consent, approval, authorization or permit of, or filing with or notification to, any federal,
state or local governmental or regulatory agency, authority, commission or instrumentality, whether
domestic or foreign (each a “Governmental Entity”), except for (A) applicable requireme nts of the
Exchange Act, the Securities Act of 1933, as amended (the “Securities Act”), and state securities or “blue
sky” laws (the “Blue Sky Laws”), (B) the pre-merger notification requirements of the Hart-Sc ott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the “HSR
Act”), (C) approval of the transactions contemplated by the Transfer Agreement (as define d in Section
6.2(b) hereof) by the Federal Communications Commission (the “FCC”) under the Communicat ions Act
of 1934, as amended (the “Communications Act”), and the rules and regulations of the FCC promulgated
thereunder (the “FCC Rules”), (D) the Merger Filing and (E) such instances in which t he failure to obtain
such consents, approvals, authorizations or permits or to make such filings or provide such notice wil l
not have a material adverse effect on the business, assets, financial or other condit ion, or results of
operations of the Company or any of the Company's broadcasting, Actmedia or DIMAC business units (a
“Business Unit Material Adverse Effect”).
(c) Except as set forth in Section 3.4(b) or in Schedule 3.4(c), there are no consents, authoriz ations
or other approvals from any Person (including, without limitation, any Person that has entered
into any contract, agreement, arrangement or understanding with the Company) required to
permit the consummation of the Transactions, except for such instances in which the fai lure to
obtain such consent, authorization or other approval will not result in a Business Unit Materi al
Adverse Effect.
Section 3.5 SEC Reports and Financial Statements.
Each form, report, schedule, registration statement and definitive proxy statement file d by the
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
Company with the Securities and Exchange Commission (the “SEC”) since December 31, 1994 and prior
to the date hereof, including, without limitation, the Company's Annual Report on Form 10-K for t he
year ended December 31, 1996 (as such documents have been amended prior to the date here of,
collectively, the “Company SEC Reports”), as of their respective dates, compli ed in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and t he rules and
regulations thereunder. None of the Company SEC Reports, as of their respective dates, conta ined any
untrue statement of a material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made,
not misleading, except for such statements, if any, as have been modified or superseded by subse quent
filings prior to the date hereof. The consolidated financial statements of the C ompany and the Company
Subsidiaries included in such reports comply as to form in all material respects wit h applicable
accounting requirements and with the published rules and regulations of the SEC with respec t thereto,
have been prepared in accordance with United States generally accepted accounting pri nciples applied on
a consistent basis throughout the periods involved (except as may be indicated in the not es thereto or, in
the case of the unaudited interim financial statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of the unaudited interim financial statements, to normal, year-end audit
adjustments) the consolidated financial position of the Company and the Company Subsidiarie s as at the
dates thereof and the consolidated results of their operations and cash flows for the peri ods then ended.
Except as set forth in Schedule 3.5, since December 31, 1996, neither the Company nor any of the
Company Subsidiaries has incurred any liabilities or obligations (whether absolute, accrue d, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become due) of any na ture,
except liabilities, obligations or contingencies (a) which are reflected on the audited balance sheet of the
Company and the Company Subsidiaries as at December 31, 1996, (including the notes thereto) (the
“Company Balance Sheet”), (b) which (i) were incurred in the ordinary course of business after
December 31, 1996 and consistent with past practices, (ii) are disclosed in the Company SE C Reports
filed after December 31, 1996 or (iii) would not, individually or in the aggregate, have a C ompany
Material Adverse Effect. Since December 31, 1996, there has been no change in any of the si gnificant
accounting (including tax accounting) policies, practices or procedures of the Company or a ny Company
Subsidiary.
Section 3.6 Absence of Certain Changes or Events. Except (a) as set forth in Schedule 3.6, (b) as
contemplated by this Agreement, (c) as disclosed in any Company SEC Report, since Dece mber 31,
1996, or (d) due to general economic changes after the date hereof or changes in the Company's business
after the date hereof attributable solely to action taken by News Corp., (i) the C ompany and the Company
Subsidiaries have conducted their respective businesses in the ordinary course, consistent wi th past
practice, and have not taken any of the actions set forth in Section 5.1 hereof and (ii ) there has not
occurred or arisen any event that, individually or in the aggregate, has had or, insofar as re asonably can
be foreseen, is likely in the future to have, a Company Material Adverse Effect ot her than events or
developments generally affecting the industry in which the Company and the Company Subsidi aries
operate.
Section 3.7 Properties. Schedule 3.7 lists and describes briefly (i) all real property that the Company
and the Company Subsidiaries own and (ii) all real property leased to the Company or any of the
Company Subsidiaries, the location, the rent and the expiration dates, if any, under such leases. The
Company has good and marketable title to, or a valid leasehold or license int erest in, all tangible
properties and assets (real, personal and mixed) reflected on the Company Balance Shee t or acquired
after the date thereof (except for properties and assets sold or otherwise disposed of in the ordinary
course of business since the date of the Company Balance Sheet) necessary for the present or proposed
conduct of its business, free and clear of any and all Liens, subject only to (i) stat utory Liens arising or
incurred in the ordinary course of business with respect to which the underlying obligations are not
delinquent, (ii) Liens reflected on the Company Balance Sheet or notes theret o, (iii) Liens for taxes,
assessments or other governmental charges or levies which are not yet due and payable or whic h are
MERGERS AND ACQUISITIONS§12.109
January 199912-1057
being contested in good faith in appropriate proceedings and as to which adequate reserves have been set
aside, and (iv) Liens which are not substantial in character, amount, or extent, and whi ch do not
materially detract from the value, or interfere with the present use, of the property subj ect thereto or
affect thereby. The Company and each Company Subsidiary has a valid leasehold interest under each
such lease, subject to applicable bankruptcy, insolvency, reorganization, moratorium and sim ilar laws
affecting creditors' rights and remedies generally and subject, as to enforceability, t o general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in equity), a nd there is no
default under any such lease or, to the Company's Knowledge (as defined in Section 3.17 hereof), by any
other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder, except for defaults that are not likely to resul t in a Business Unit
Material Adverse Effect. The Company has heretofore delivered or agreed to make avail able to News
Corp. copies of all of the material written leases and licenses described on Schedul e 3.7, together with all
amendments thereto. Schedule 3.7 also sets forth those leases or licenses for which third-pa rty consents
as a result of the Transactions are required.
Section 3.8 Intellectual Property. The Company and the Company Subsidiaries own or have valid,
binding and enforceable rights to use in North America all material patents, tradem arks, trade names,
service marks, service names, copyrights, applications therefor and licenses or other rights i n respect
thereof (“Intellectual Property”) used or held for use in connection with the business of the Company or
the Company Subsidiaries, without any known conflict with the rights of others, except for such confl icts
as do not have a Company Material Adverse Effect. Schedule 3.8 or the Company SEC Report s set forth
(i) each material patent or registration which has been issued to the Company or any of the Company
Subsidiaries with respect to any of their Intellectual Property, (ii) each materi al pending patent
application or application for registration which the Company or any of the Company Subsidia ries has
made with respect to any of their Intellectual Property, (iii) each material license, agreement or other
permission which the Company or any of the Company Subsidiaries has granted to any third party with
respect to any of its Intellectual Property and (iv) each material item of Int ellectual Property that any
third party owns and that the Company or any of the Company Subsidiaries uses pursuant to license ,
sublicense, agreement or permission. Neither the Company nor any of the Company Subsidiaries has
received any notice from any other person pertaining to or challenging the right of the Com pany or any
of the Company subsidiaries to use any material Intellectual Property or any mate rial trade secrets,
proprietary information, inventions, know-how, processes and procedures owned or used or licensed to
the Company or the Company Subsidiaries.
Section 3.9 Material Contracts. The Company has furnished or agreed to make available to News
Corp. accurate and complete copies of the Material Contracts (as defined below) of the Company and the
Company Subsidiaries, all of which are listed on Schedule 3.9. There is not under any of the Material
Contracts any existing breach, default or event of default by the Company or any of the Com pany
Subsidiaries, nor event that with notice or lapse of time or both would constitute a breac h, default or
event of default by the Company or any of the Company Subsidiaries other than breaches, defaul ts or
events of default which would not have a Business Unit Material Adverse Effect; nor does the Company
have Knowledge of, and the Company has not received notice of, or made a claim with respect to, any
breach or default by any other party thereto. As used herein, the term “Material Contrac ts” shall mean (i)
all contracts and agreements filed, or required to be filed, as exhibits to the Com pany's Annual Report on
Form 10-K for the year ended December 31, 1996; (ii) all contracts and agreements entered into since
December 31, 1996 which would be required to be filed as an exhibit to the Company's Quarte rly Report
on Form 10-Q for the quarter ending March 31, 1997 or to any Current Report on Form 8-K; (iii) any
debt instrument, including, without limitation, any loan agreement, promissory note, securit y agreement
or other evidence of indebtedness, where the Company or any Company Subsidiary is a lender or
borrower; (iv) any contract or commitment restricting the Company or any Company Subsidiary from
engagement in any line of business; (v) any in-store agreement with a retailer; (vi) a ny agreement with a
manufacturer with a term in excess of twelve months; (vii) any material joi nt venture agreement; (viii)
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
any agreement providing for contingent consideration; and (ix) any agreement, option, commitment or
rights with, to or in any third party to acquire or to sell a material business division or unit after the date
hereof.
Section 3.10 Insurance. Schedule 3.10 contains a description of all policies or binders of insurance
held by or on behalf of the Company or any Company Subsidiary or insuring any of its employees,
properties or assets (specifying the insurer, the amount of the coverage, the type of insurance, t he risks
insured, the expiration date, the policy number, the premium and any agent or broker). All suc h policies
are in full force and effect and neither the Company nor any Company Subsidiary is in default of any
provision thereof, except in such instances which would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect.
Section 3.11 Litigation. Except as set forth in Schedule 3.11, as of the date hereof: (i) there are no
actions, suits, arbitrations, legal or administrative proceedings or investigations (“Legal Proceedings”)
pending or, to the Company's Knowledge, threatened against the Company or any of the Company
Subsidiaries; and (ii) neither the Company's nor the Company Subsidiaries' assets, properties or busi ness
are subject to any judgment, writ, injunction or decree of any court, governmental age ncy or arbitration
tribunal.
Section 3.12 Compliance with Laws. The Company and each Company Subsidiary are in material
compliance with all federal, state local or foreign law (including common law), st atute, code, ordinance,
rule regulation or other requirement applicable to the Company and its Subsidiaries or to the conduct of
the business or operations of the Company and its Subsidiaries or the use of their respective properties
(including any leased properties) and assets, except in such instances which would not, i ndividually or in
the aggregate, be reasonably likely to have a Company Material Adverse Effect. The C ompany and each
Company Subsidiary has all material governmental permits and approvals from state, fede ral or local
authorities which are required for the Company to operate its business, except in such i nstances which
would not, individually or in the aggregate, be reasonably likely to have a Company Mat erial Adverse
Effect.
Section 3.13 Tax Matters.
(a) For purposes of this Agreement, the following terms shall have the following meanings: (i) “Tax” means any federal, state, local or foreign income, gross receipts, license , payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock, franchise, profit s,
withholding, social security (or similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative, or add-on minimum, estimate d or other tax
of any kind whatsoever, however denominated, including any interest, penalty, or addition thereto,
whether disputed or not.
(ii) “Tax Return” means any return, declaration, report, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto, a nd including any
amendment thereof.
(b) Except as set forth in the Company Balance Sheet (including the notes thereto): Each of the
Company and the Company Subsidiaries has filed all Tax Returns required to be filed by it or requests
for extensions to file such Tax Returns have been timely filed, granted and have not e xpired, except to
the extent that such failures to file or to have extensions granted that remain i n effect individually or in
the aggregate would not have a Company Material Adverse Effect. All Tax Returns filed by the
Company and each Company Subsidiary are complete and accurate except to the exte nt that such failure
to be complete and accurate would not have a Company Material Adverse Effect. The Company and each
Company Subsidiary have paid (or the Company has paid on the Subsidiary's behalf) all Taxes shown a s
due on such Tax Returns, and the Company Balance Sheet reflects an adequate reserve , in accordance
MERGERS AND ACQUISITIONS§12.109
January 199912-1059
with generally accepted accounting principles, consistently applied, for all Taxes payable by the
Company and the Company Subsidiaries for all taxable periods and portions thereof accrued t hrough the
date of the Company Balance Sheet.
(c) Except as set forth in the Company Balance Sheet (including the notes there to), no deficiencies
for any Taxes have been proposed, asserted or assessed against the Company or any Company Subsidiary
that are not adequately reserved for, except for deficiencies that individually or in the aggregate would
not have a Company Material Adverse Effect, and no requests for waivers of the time to asse ss any such
Taxes have been granted or are pending.
(d) The Company and each Company Subsidiary have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee, independe nt
contractor, creditor, stockholder, or other third party, except for such Taxes that individuall y or in the
aggregate would not have a Company Material Adverse Effect, and complied with all inform ation
reporting and backup withholding requirements, except to the extent that failure to comply with such
requirements would not have a Company Material Adverse Effect.
(e) Schedule 3.13(e) lists all federal, state, local, and foreign income Tax Returns fi led with respect
to the Company and each Company Subsidiary for taxable periods ended on or after December 31, 1993,
indicates those Tax Returns that have been audited and indicates those Tax Ret urns that currently are the
subject of audit.
(f) None of the Company or any Company Subsidiary has made any payments or is obligated to
make any payments or is a party to any agreement (including this Agreement) that coul d obligate it to
make any payments that will not be deductible under Section 280G of the Code, except to the extent that
the nondeductibility of such payment would not have a Company Material Adverse Effect.
(g) Except as set forth in Schedule 3.13(g), none of the Company or any Company Subsidiary (i) has
been a member of any group of entities (other than a group of which the Company is the com mon parent)
filing a consolidated federal income Tax Return or similar combined state, l ocal or foreign Tax Return or
(ii) has any liability for the Taxes of any person (other than the Company or any Compa ny Subsidiary)
under Treas. Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transfere e or
successor, by contract, or otherwise, except for liabilities that individually or in the aggregate would not
have a Company Material Adverse Effect.
Section 3.14 Employee Benefit Plans.
(a) Each employee benefit plan, as such term is defined in Section 3(3) of the E mployee Retirement
Income Security Act of 1974, as amended (“ERISA”), to which the Company or the Company
Subsidiaries contribute or had contributed to or which the Company or the Company Subsidiaries
maintain or have maintained (collectively, the “Employee Plans”) complies in all material respects with
all applicable requirements of ERISA, the Code and other applicable laws and have been administered in
accordance with their terms. Except as set forth on Schedule 3.14, none of the Employee Plans is an
employee pension benefit plan or a multiemployer plan, as such terms are defined in ERISA, and other
than the Saint Louis Lithographers Pension Fund, none of the Employee Plans are defined benefit pl ans.
None of the Company, any Company Subsidiary or any of their respective directors, officers, employee s
or agents has, with respect to any Employee Plan, engaged in any “prohibited transaction,” as such term
is defined in the Code or ERISA, nor has any Employee Plan engaged in such prohibited transa ction
which could result in any taxes or penalties or other prohibited transactions, which in t he aggregate could
have a Company Material Adverse Effect.
(b) Schedule 3.14 contains a list of (i) all material employee benefit plans, as such term is defined in
Section 3(3) of ERISA, (ii) all other material employment, severance or other simil ar contracts,
arrangements or policies and (iii) each other plan or arrangement (written or oral) provi ding for insurance
coverage (including self-insured arrangements), workers' compensation, disability benefits, supplementa l
§12.109 PROXY STATEMENTS: STRATEGY & FORMS
.
unemployment benefits, vacation benefits or for deferred compensation, profit sharing, bonuses, forms of
incentive compensation or post-retirement insurance, compensation or benefits which is not an employee
benefit plan (as heretofore defined) which the Company has maintained, contributed to, or in connection
with which it has or has had any liability, regardless of whether such employee benefit plan, fund or
program (x) is or is intended to be covered or qualified under the Code, ERISA or any other appl icable
law, (y) is or is intended to be funded or unfunded, or (z) covers any current or former employee of or
independent contractor to the Company or the Company Subsidiaries (“Benefit Plans”).
(c) There is no action, audit, suit or claim pending or threatened in writing relati ng to any Benefit
Plan, fiduciary of any such Plan or assets of any such Plan, before any court, tribunal or government
agency, except for any action, audit, suit or claim which, individually or in the aggrega te, would not
result in a Company Material Adverse Effect.
(d) In the case of any policies or binders of insurance that constitute or are otherwise mai ntained in
connection with a Benefit Plan, to the Company's Knowledge (i) such policies and binders are valid and
enforceable in accordance with their terms in all material respects, and are in full force and effect; (ii)
neither the Company nor any Company Subsidiary is in default in any material respect with respect to
any material provisions contained in any such policy or binder and has not materially fa iled to give any
notice or present any claim under any such policy or binder in a due and timely fa shion; and (iii) neither
the Company nor any Company Subsidiary has received any notice of cancellation or non-rene wal of any
such policy or binder which could have in the aggregate a Company Material Adverse Effect.
Section 3.15 Employee Matters. Schedule 3.15 sets forth a list, by employee, of the severance
obligations of the Company and the Company Subsidiaries. Other than those set forth on Schedule 3.15
and the severance plans for Actmedia, Inc. and DIMAC Corporation, neither the Company nor any of the
Company Subsidiaries has any severance obligations (other than immaterial severance obl igations).
Except as set forth on Schedule 3.15, the Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied, contract, commit ment, or
arrangement with any labor union, and no labor union has requested to the Company or, to the
Knowledge of the Company, has sought to represent any of the employees of the Company. There is no
strike or other labor dispute involving the Company or any Company Subsidiary pending, or, to the
Knowledge of the Company, threatened, which could have an adverse effect on the assets, properti es,
financial condition, operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of any labor organiza tion
activity involving its employees. Except as set forth on Schedule 3.15, there is no arbit ration, grievance
or administrative proceeding relating to labor-management relations and/or employee re lations that is
pending against the Company or any Company Subsidiary or, to the Knowledge of the Company,
threatened, which is reasonably likely to result in a Company Material Adverse Effect.
Section 3.16 Environmental Laws.
(a) Each of the Company and the Company Subsidiaries (and, to the Company's Knowledge, any of
their respective predecessors) has complied with all laws (including rules and regulations thereunder) of
federal, state, local and foreign governments (and all agencies thereof) concerning the environment,
public health and safety, and employee health and safety, and no charge, complaint, a ction, suit,
proceeding, hearing, investigation, claim, demand or notice has been filed or commenced against any of
them alleging any failure to comply with any such law or regulation, except whe re the failure to comply
would not, in the aggregate, result in a Company Material Adverse Effect.
(b) The Company and each Company Subsidiary have obtained all permits, licenses and other
authorizations which are required with respect to the operation of its business under Federal, state, local
and foreign laws relating to (i) public health and safety or worker health and safety (“He alth and Safety
Laws”) or (ii) pollution or protection of the environment, including laws relating to emissi ons,
discharges, releases or threatened releases of pollutants, contaminants, chemicals, or i ndustrial, toxic or
MERGERS AND ACQUISITIONS§12.109
January 199912-1061
hazardous substances or wastes into the environment (including, without limitation, ambient air, surface
water, ground water, la
