Document/Exhibit Description Pages Size
1: 8-K Current Report on Form 8-K 4 17K
2: EX-2 Agreement and Plan of Merger 45± 225K
4: EX-99 Agreement With Susan Solomon 2± 8K
5: EX-99 Consulting Agreement 4± 16K
3: EX-99 Voting Agreement 4± 18K
6: EX-99 Waiver With Cecily Truett 1 8K
7: EX-99 Waiver With Laurence A. Lancit 1 8K
AGREEMENT AND PLAN OF MERGER
Dated as of February 27, 1998
between
RCN CORPORATION,
LME ACQUISITION CORPORATION
and
LANCIT MEDIA ENTERTAINMENT, LTD.
TABLE OF CONTENTS
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PAGE
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ARTICLE 1
THE MERGER
SECTION 1.01. The Merger......................................................2
SECTION 1.02. Effect of the Merger............................................2
SECTION 1.03. Certificate of Incorporation and By-laws of Surviving
Corporation...................................................2
SECTION 1.04. Merger Subsidiary Common Stock..................................3
SECTION 1.05. Conversion of Lancit Shares.....................................3
SECTION 1.06. Exchange of Certificates; Fractional Shares.....................4
SECTION 1.07. Stock Transfer Books............................................7
SECTION 1.08. Treatment of Lancit Common Stock Options........................7
SECTION 1.09. Closing.........................................................7
SECTION 1.10. Dissenting Shares...............................................8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF LANCIT
SECTION 2.01. Due Incorporation and Qualification of Lancit...................8
SECTION 2.02. Capitalization..................................................9
SECTION 2.03. Subsidiaries....................................................9
SECTION 2.04. Authority, Due Authorization; Valid Obligation; Fairness
Opinion......................................................10
SECTION 2.05. No Conflicts or Defaults.......................................11
SECTION 2.06. Copies of Charter Documents and Stock Records..................12
SECTION 2.07. Authorizations.................................................12
SECTION 2.08. SEC Filings; Financial Statements..............................12
SECTION 2.09. Compliance with Law and Court Orders...........................14
SECTION 2.10. Taxes..........................................................14
SECTION 2.11. Employee Benefits..............................................15
SECTION 2.12. Litigation.....................................................19
SECTION 2.13. Agreements and Commitments.....................................19
SECTION 2.14. Intellectual Property..........................................21
SECTION 2.15. Lancit Brokers; Transaction Expenses...........................23
SECTION 2.16. Miscellaneous..................................................23
SECTION 2.17. Disclosure Documents...........................................24
SECTION 2.18. Absence of Certain Changes.....................................24
SECTION 2.19. Environmental Matters..........................................26
SECTION 2.20. Properties.....................................................28
SECTION 2.21. Insurance Coverage.............................................28
SECTION 2.22. Licenses and Permits...........................................29
SECTION 2.23. Employees......................................................29
SECTION 2.24. Labor Matters..................................................30
SECTION 2.25. Books and Records..............................................30
SECTION 2.26. Interested Party Transactions..................................30
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Due Incorporation and Qualification............................30
SECTION 3.02. Authority; Due Authorization; Valid Obligation.................31
SECTION 3.03. No Conflicts or Defaults.......................................31
SECTION 3.04. Authorizations.................................................31
SECTION 3.05. Litigation.....................................................32
SECTION 3.06. SEC Documents..................................................32
SECTION 3.07. Company Brokers................................................33
SECTION 3.08. No Material Adverse Change.....................................33
SECTION 3.09. Disclosure Documents...........................................33
SECTION 3.10. Company Common Stock...........................................33
SECTION 3.11. Miscellaneous..................................................34
ARTICLE 4
CERTAIN AGREEMENTS
SECTION 4.01. Conduct of Lancit's Business...................................34
SECTION 4.02. Preserve Accuracy of Representations and Warranties;
Updates......................................................36
SECTION 4.03. Further Investigation and Information..........................36
SECTION 4.04. Consents, Waivers and Filings..................................37
SECTION 4.05. Subsequent Filings.............................................37
SECTION 4.06. Preparation of Registration Statement and Proxy................37
SECTION 4.07. Accountants' Letters...........................................38
SECTION 4.08. Shareholders Meeting...........................................38
SECTION 4.09. No Solicitation................................................38
SECTION 4.10. Directors and Officers Insurance...............................41
SECTION 4.11. Notices of Certain Events......................................41
SECTION 4.12. Certain Rights.................................................41
SECTION 4.13. Interim Financing..............................................41
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND MERGER SUBSIDIARY
SECTION 5.01. Due Performance: Accuracy of Representations and
Warranties..................................................42
SECTION 5.02. Corporate Action; Documents...................................42
SECTION 5.03. Legal Opinions................................................43
SECTION 5.04. Registration Statement; Listing...............................43
SECTION 5.05. No Prohibition................................................43
SECTION 5.06. Consents; Approvals...........................................43
SECTION 5.07. Governmental Action...........................................44
SECTION 5.08. Appraisal Rights..............................................44
SECTION 5.09. Rule 145(c)...................................................44
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF LANCIT
SECTION 6.01. Due Performance; Accuracy of Representations and
Warranties..................................................45
SECTION 6.02. Corporate Action..............................................45
SECTION 6.03. Legal Opinions................................................45
SECTION 6.04. Registration Statement; Listing...............................46
SECTION 6.05. Governmental Action; No Prohibition...........................46
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.01. Termination...................................................46
SECTION 7.02. Effect of Termination; Representations and Warranties.........48
SECTION 7.03. Amendment; Extension; Waiver..................................48
ARTICLE 8
FURTHER ASSURANCES
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Entire Agreement..............................................49
SECTION 9.02. Communications................................................49
SECTION 9.03. No Assignment; Successors and Assigns; No Third Party
Beneficiaries...............................................50
SECTION 9.04. Public Announcements..........................................51
SECTION 9.05. Survival of Representations, Warranties and Agreements........51
SECTION 9.06. Expenses......................................................51
SECTION 9.07. Governing Law; Consent to Jurisdiction........................51
SECTION 9.08. WAIVER OF JURY TRIAL..........................................52
SECTION 9.09. Savings Clause................................................52
SECTION 9.10. Counterparts..................................................52
SECTION 9.11. Construction..................................................52
SECTION 9.12. Schedules.....................................................52
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 27, 1998, between
RCN CORPORATION, a Delaware corporation (the "Company"), LME ACQUISITION
CORPORATION, a New York corporation (the "Merger Subsidiary"), and LANCIT MEDIA
ENTERTAINMENT, LTD., a New York corporation ("Lancit").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the Company, Merger
Subsidiary and Lancit have approved this Agreement and the merger of Merger
Subsidiary with and into Lancit pursuant to the terms and conditions of this
Agreement; and
WHEREAS, the parties intend that the Merger (as such term is defined in
Section 1.01) qualify as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Company is unwilling to enter into this Agreement unless,
contemporaneously with the execution and delivery of this Agreement, certain
beneficial and record shareholders of Lancit enter into a Voting Agreement
providing for certain actions relating to certain of the shares of common stock
of Lancit owned by them; and
WHEREAS, the Company is unwilling to enter into this Agreement unless,
contemporaneously with the execution and delivery of this Agreement, Laurence A.
Lancit executes a Waiver to an Employment Agreement dated as of October 1, 1995
between Lancit and Laurence A. Lancit, waiving his right thereunder to terminate
his employment upon a change of control of Lancit resulting from the Merger or
any other actions or transactions contemplated by this Agreement; and
WHEREAS, the Company is unwilling to enter into this Agreement unless,
contemporaneously with the execution and delivery of this Agreement, Cecily
Truett executes a Waiver to an Employment Agreement dated as of October 1, 1995
between Lancit and Cecily Truett, waiving her right thereunder to terminate her
employment upon a change of control of Lancit resulting from the Merger or any
other actions or transactions contemplated by this Agreement; and
WHEREAS, the Company is unwilling to enter into this Agreement unless,
contemporaneously with the execution and delivery of this Agreement, Susan L.
Solomon enters into an agreement regarding certain matters under the Employment
Agreement dated as of March 31, 1997, as amended, between Susan L. Solomon and
Lancit; and
WHEREAS, Lancit is engaged in the business of developing, producing and
marketing children's, family and other television programs and movies and
related merchandising and licensing activities (the "Business");
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger. On the Closing Date (as such term is defined in
Section 1.09), and subject to the terms and conditions of this Agreement, the
parties shall file a certificate of merger substantially in the form of Exhibit
A (the "Certificate of Merger") with the Secretary of State of the State of New
York under the Business Corporation Law of the State of New York, as amended
(the "BCL"), and make all other filings or recordings required by BCL in
connection with the Merger (as defined below). Effective as of the filing of the
Certificate of Merger or at such other time as is set forth therein (the
"Effective Time"), Merger Subsidiary shall be merged with and into Lancit (the
"Merger"). Upon and following the Merger, the separate existence of Merger
Subsidiary shall cease and Lancit shall continue as the surviving corporation
(the "Surviving Corporation").
SECTION 1.02. Effect of the Merger. The separate corporate existence of
Lancit, as the Surviving Corporation, with all its purposes, objects, rights,
privileges, powers, certificates and franchises, shall continue unimpaired by
the Merger. The Surviving Corporation shall succeed, insofar as permitted by
law, to all rights, assets, liabilities and obligations of Merger Subsidiary in
accordance with the BCL.
SECTION 1.03. Certificate of Incorporation and By-laws of Surviving
Corporation. (a) From and after the Effective Time until further amended in
accordance with the BCL, the certificate of incorporation of Merger Subsidiary,
as in effect at the Effective Time, shall be the certificate of incorporation of
the Surviving Corporation.
(b) From and after the Effective Time until further amended in accordance
with the BCL, the By-laws of Merger Subsidiary, as in effect at the Effective
Time, shall be the By-laws of the Surviving Corporation until altered, amended
or repealed in accordance with law.
(c) From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, the directors and
officers of Merger Subsidiary as of the Effective Time shall be the directors
and officers, respectively, of the Surviving Corporation.
SECTION 1.04. Merger Subsidiary Common Stock. At the Effective Time, each
issued and outstanding share of common stock, par value $.01 per share, of
Merger Subsidiary ("Merger Subsidiary Common Stock") shall remain outstanding as
one validly issued, fully paid and non-assessable share of common stock, par
value $.01 per share, of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 1.05. Conversion of Lancit Shares. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
(i) each share of common stock, par value $.001 per share, of Lancit
(each, a "Lancit Share" and, collectively, the "Lancit Shares") held
by Lancit as treasury stock or owned by the Company or any subsidiary
of the Company immediately prior to the Effective Time shall be
canceled and no payment shall be made with respect thereto; and
(ii) each Lancit Share issued and outstanding immediately prior to the
Effective Time shall, except as otherwise provided in clause
1.05(a)(i) above or as provided in Section 1.10 with respect to Lancit
Shares as to which appraisal rights have been exercised, be converted
into the right to receive a fraction of a share of the Company's
common stock (the "Company Common Stock"), par value $1.00 per share,
equal to the Stock Exchange Ratio (as defined below) (including any
cash paid in lieu of fractional shares in accordance with Section
1.05(c), the "Merger Consideration").
As used herein, the term "Stock Exchange Ratio" means a fraction, the numerator
of which is 1.20 (the "Transaction Value") and the denominator of which is the
average closing price (last sale) (the "ACP") of the Company Common Stock on The
Nasdaq Stock Market, Inc. ("NASDAQ") for the 5 trading day period ending one
trading day prior to the Effective Time; provided that if the ACP is greater
than $58.00, the Stock Exchange Ratio will be calculated as if the ACP were
$58.00, and if the ACP is less than $48.00, the Stock Exchange Ratio will be
calculated as if the ACP were $48.00. If the Lancit Transaction Expenses (as
defined below) exceed $602,000, then for purposes of calculating the Stock
Exchange Ratio, the Transaction Value shall be reduced by an amount equal to
such excess divided by the number of outstanding Lancit Shares immediately prior
to the Effective Time.
(b) As of the Effective Time, and except as set forth in Section 1.10 with
respect to Lancit shares as to which dissenters rights have been validly
exercised, each holder of a certificate representing any Lancit Shares shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration (and cash in lieu of any fractional share) upon surrender
of such certificate in accordance with Section 1.06.
(c) No certificates or scrip representing fractional shares of Company
Common Stock shall be issued upon the surrender for exchange of certificates
representing Lancit Shares, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of the Surviving
Corporation. Notwithstanding any other provision of this Agreement, each holder
of Shares exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Company Common Stock (after taking
into account all Lancit Shares delivered by such holder) shall receive, in lieu
thereof, a cash payment (without interest) equal to such fraction multiplied by
the ACP of Company Common Stock on the NASDAQ for each of the five trading days
immediately prior to the Effective Time.
(d) If, between the date of this Agreement and the Effective Time, the
outstanding Lancit Shares or shares of Company Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, distribution or a stock dividend thereon shall be declared with a
record date within said period, such that the amount of the Merger Consideration
as calculated in accordance with Section 1.05(a) would be affected thereby, the
Merger Consideration shall be correspondingly adjusted.
SECTION 1.06. Exchange of Certificates; Fractional Shares. (a) After the
Effective Time, each holder of a certificate(s) formerly evidencing Lancit
Shares which have been converted into the right to receive the Merger
Consideration pursuant to Section 1.05(a), upon surrender of the same to First
Union National Bank or another exchange agent appointed by the Company (the
"Exchange Agent") as provided in Section 1.06(d), shall be entitled to receive
the Merger Consideration payable in respect of such Lancit Shares.
(b) Until surrendered to the Exchange Agent pursuant to Section 1.06(a),
each certificate formerly evidencing Lancit Shares which have been converted
pursuant to Section 1.05(a) will be deemed for all corporate purposes of the
Company to evidence ownership of the number of whole shares of Company Common
Stock into which Lancit Shares formerly evidenced by such certificate were
converted and the right to receive cash for fractional shares, as provided in
Section 1.05; provided, however, that until such certificate is so surrendered,
no dividend payable to holders of record of Company Common Stock as of any date
subsequent to the Effective Time shall be paid to the holder of such certificate
in respect of the shares of Company Common Stock evidenced thereby and such
holder shall not be entitled to vote such shares of Company Common Stock. Upon
surrender of a certificate formerly evidencing Lancit Shares which have been so
converted, there shall be paid to the record holder of any certificates of
Company Common Stock issued in exchange therefor, without interest thereon, any
dividends and other distributions which between the Effective Time and the time
of such surrender shall have become payable with respect to the number of whole
shares of Company Common Stock represented thereby.
(c) The Company shall deposit with the Exchange Agent, as promptly as
practicable and in no event later than three business days following the
Effective Time, the number of shares of Company Common Stock (and, as and when
requested by the Exchange Agent, the cash (in immediately available funds) to be
paid in lieu of fractional shares) to which holders of Lancit Shares shall be
entitled at the Effective Time pursuant to Section 1.05. Any interest on the
amount so deposited shall be payable to the Company.
(d) Promptly after the Effective Time, the Exchange Agent shall send a
notice and a transmittal form (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the certificates formerly representing Lancit Shares to the Exchange Agent
(subject to Section 1.06(f))) to each holder of certificates formerly evidencing
Lancit Shares (other than certificates formerly evidencing Lancit Shares to be
canceled pursuant to Section 1.05(a)(i)) advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent such certificates for exchange into the Merger Consideration as
contemplated by Section 1.05(a). The notice and transmittal form provided for in
this Section 1.06(d) shall be sent by the Exchange Agent to the address for each
holder of Lancit Shares contained in the stock record books of Lancit promptly
after the Effective Time. Each holder of certificates formerly evidencing Lancit
Shares, upon proper surrender thereof to the Exchange Agent together and in
accordance with such transmittal form, shall be entitled to receive in exchange
therefor the Merger Consideration payable in respect of such Lancit Shares.
Notwithstanding the foregoing, neither the Exchange Agent nor any party shall be
liable to a holder of certificates formerly evidencing Lancit Shares for any
amount which may be required to be paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) If any portion of the Merger Consideration is to be delivered to a
Person other than the Person in whose name the certificates surrendered in
exchange therefor are registered, it shall be a condition to such payment that
the certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the Person requesting such transfer shall
pay to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such taxes
have been paid or are not required to be paid. For purposes of this Agreement,
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(f) In the event any certificate theretofore representing Lancit Shares
shall have been lost, stolen or destroyed, upon the making of an appropriate
affidavit of that fact by the Lancit shareholder claiming such certificate to be
lost, stolen or destroyed, such Lancit shareholder shall be paid the Merger
Consideration in respect of such Lancit Shares; provided that when the Merger
Consideration is paid to such Lancit shareholder, the Board of Directors of the
Company may, in its discretion and as a condition precedent to the issuance
thereof, require the claiming Person to give the Company a bond or
indemnification in such form and sum as the Company may reasonably direct as
indemnity against any claim that may be made against the Company with respect to
the certificate alleged to have been lost, stolen or destroyed.
(g) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.06(c) that remains unclaimed by the holders of
Lancit Shares entitled thereto six months after the Effective Time shall be
returned to the Company and any such holder who has not exchanged his Lancit
Shares for the Merger Consideration in accordance with this Section 1.06 prior
to that time shall thereafter look only to the Company for payment of the Merger
Consideration in respect of his Lancit Shares. Notwithstanding the foregoing,
the Company shall not be liable to any holder of Lancit Shares for any amount
paid to a public official pursuant to applicable abandoned property, escheat or
similar laws. Any amounts remaining unclaimed by holders of Lancit Shares two
years after the Effective Time (or such earlier date immediately prior to such
time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of the Company free and clear of any claims or interest of any
Person previously entitled thereto.
(h) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.06(c) to pay for Lancit Shares for which appraisal
rights have been perfected shall be returned to the Company, upon demand.
SECTION 1.07. Stock Transfer Books. There shall be no further registration
or transfers of Lancit Shares on the stock transfer books of Lancit after the
Effective Time. If, after the Effective Time, certificates representing Lancit
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 1.
SECTION 1.08. Treatment of Lancit Common Stock Options.
(a) Except for the Lancit Warrants (as defined below), each option to
purchase shares of Lancit common stock outstanding under any option plan of
Lancit or any Subsidiary or any employment contract or other arrangement
granting such options, whether or not vested, shall be canceled as of the
Effective Time.
(b) Prior to the Effective Time, Lancit shall give any required notices to
(and, if necessary, obtain any required consents from) affected optionees and,
if necessary, shall revise such stock option plans or arrangements to give
effect to the cancellation of such options as provided in Section 1.08(a).
(c) The warrants held be Discovery Communications, Inc. ("DCI"), Robinson
Lerer Montgomery, LLC and Allen & Company Incorporated to purchase 660,209
Lancit Shares in the aggregate (collectively, the "Lancit Warrants") shall be
converted into warrants to purchase Company Common Stock in accordance with
their respective terms, as set forth on Schedule 1.08(c) hereto.
SECTION 1.09. Closing. Subject to Section 7.01, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
10:00 a.m. on a date to be specified by the parties (the "Closing Date"), which
shall be not more than five business days after all of the conditions precedent
set forth in Articles 5 and 6 to be satisfied prior to the Closing have been
satisfied or waived, at the offices of Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York, or such other date, time and place as is agreed to
by the parties (including any postponement or adjournment of a previously
scheduled date). At the Closing, Lancit shall execute and deliver the
certificates, documents and instruments contemplated to be delivered by Lancit
pursuant to Article 5, and the Company shall execute and deliver the
certificates, documents and instruments contemplated to be delivered by it
pursuant to Article 6. The Certificate of Merger shall be filed with the
Secretary of State of the State of New York on the Closing Date.
SECTION 1.10. Dissenting Shares. Notwithstanding Section 1.05, if the
Lancit Shares are not designated as a National Market System security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. on the record date for the Lancit Shareholders Meeting (as such term is
defined in Section 4.08), Lancit Shares outstanding immediately prior to the
Effective Time 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 Lancit
Shares in accordance with BCL shall not be converted into a right to receive the
Merger Consideration, unless such holder fails to perfect or withdraws or
otherwise loses his right to appraisal. If after the Effective Time such holder
fails to perfect or withdraws or loses his right to appraisal, such Lancit
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration. Lancit shall give the Company
prompt notice of any demands received by Lancit for appraisal of Lancit Shares,
and the Company shall have the right to participate in all negotiations and
proceedings with respect to such demands. Lancit shall not, except with the
prior written consent of the Company, make any payment with respect to, or
settle or offer to settle, any such demands.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF LANCIT
Lancit represents and warrants to the Company as of the date hereof and,
except as to representations made as of a specific date, immediately prior to
the Effective Time that:
SECTION 2.01. Due Incorporation and Qualification of Lancit. (a) Lancit is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York, with full corporate power and authority required
to own, lease and operate its properties and to carry on its business in the
place and in the manner as currently conducted.
(b) Set forth in Item 2.01(b) of the Disclosure Schedule attached hereto
and made a part hereof (the "Disclosure Schedule") is a list of all
jurisdictions in which Lancit is qualified to do business and is in good
standing as a foreign corporation, which are the only jurisdictions where the
character of the property owned or leased by Lancit or the nature of Lancit's
activities makes such qualification necessary, except for jurisdictions where
the failure to so qualify could not, individually or in the aggregate, have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of Lancit and its consolidated Subsidiaries
(as such term is defined in Section 2.03(a)), considered as a whole (such a
material adverse effect with respect to Lancit and its Subsidiaries being
hereinafter referred to as a "Material Adverse Effect").
SECTION 2.02. Capitalization. The authorized capital stock of Lancit
consists of 15,000,000 shares of Common Stock, $.001 per value. As of the date
hereof, there are outstanding (i) 6,634,750 Lancit Shares, (ii) stock options
issued to present and former employees, directors and consultants to purchase an
aggregate of 1,235,250 Lancit Shares ("Lancit Options") with an average exercise
price of $4.081 per Lancit Share, as detailed in Item 2.02 of the Disclosure
Schedule, (iii) warrants to purchase an aggregate of 660,209 Lancit Shares with
the respective exercise prices shown on Schedule 1.08(c) (defined above as the
"Lancit Warrants"). All outstanding Lancit Shares have been duly authorized and
validly issued and are fully paid and nonassessable, and were not issued in
violation of any preemptive rights. Except as set forth in this Section 2.02 or
in Item 2.02 of the Disclosure Schedule, there are outstanding (i) no shares of
capital stock or other securities of Lancit, (ii) no securities of Lancit or any
Subsidiary convertible into or exchangeable for shares of capital stock or
voting securities of Lancit, and (iii) no options, warrants or other rights to
acquire from Lancit or any Subsidiary, and no obligation of Lancit or any
Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Lancit (collectively, "Lancit Securities"). There are no outstanding obligations
of Lancit or any Subsidiary to repurchase, redeem or otherwise acquire any
Lancit Securities.
SECTION 2.03. Subsidiaries. (a) Set forth in Item 2.03(a) of the Disclosure
Schedule is a list of all direct and indirect subsidiaries of Lancit and any
other entities which Lancit otherwise controls or in which it has an investment
or ownership interest (collectively, the "Subsidiaries"), showing the date and
jurisdiction of incorporation of each thereof and Lancit's percentage beneficial
interest therein (and, if less than 100%, the holders of the remaining
interests). Each of the Subsidiaries is a corporation, or other entity as
reflected in Item 2.03(a) of the Disclosure Schedule, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, with full corporate or other power and authority required to own,
lease and operate its properties and to carry on its business in the places and
in the manner as currently conducted. Except as set forth in Item 2.03(a) of the
Disclosure Schedule, each Subsidiary is duly qualified to do business as a
foreign corporation in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities make such qualification
necessary, except for those jurisdictions where failure to be so qualified could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth in Item 2.03(a), all of the outstanding capital
stock of, or other ownership interests in, each Subsidiary, is validly issued,
fully paid and nonassessable, and is owned by Lancit, directly or indirectly,
free and clear of any Lien (as defined below) and free of any other limitation
or restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests). There are
no outstanding (i) securities of Lancit or any Subsidiary convertible into or
exchangeable for capital stock or other ownership interests in any Subsidiary,
(ii) options, warrants or other rights to acquire from Lancit or any Subsidiary,
and no other obligation of Lancit or any Subsidiary to issue, any capital stock
of or other ownership interests in, or any securities convertible into or
exchangeable for any capital stock of or ownership interests in, any Subsidiary,
or (iii) securities of any Subsidiary other than capital stock of such
Subsidiary owned by Lancit (collectively, "Subsidiary Securities"). There are no
outstanding obligations of Lancit or any Subsidiary to repurchase, redeem or
otherwise acquire any outstanding Subsidiary Securities.
SECTION 2.04. Authority, Due Authorization; Valid Obligation; Fairness
Opinion. (a) Lancit has all requisite corporate power and authority to execute,
deliver and perform this Agreement and the further agreements contemplated by
this agreement (the "Additional Agreements") to be executed and delivered by it
and to consummate the transactions contemplated hereby and thereby. The Board of
Directors of Lancit has unanimously approved the Merger and this Agreement. At a
meeting duly called and held, the Board of Directors of Lancit has (i)
unanimously determined that this Agreement and the Additional Agreements and the
transactions contemplated hereby and thereby, including the Merger, are fair to
and in the best interest of Lancit's shareholders, (ii) unanimously approved
this Agreement and the Additional Agreements and the transactions contemplated
hereby and thereby, including the Merger, which approval satisfies in full the
requirements of the BCL regarding approval by a board of directors, and (iii)
unanimously resolved to recommend approval and adoption of this Agreement and
the Merger by the Lancit shareholders. The execution, delivery and performance
by Lancit of this Agreement and the Additional Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action, except for any required approval by Lancit's
shareholders in connection with the consummation of the Merger (by a two-thirds
majority of the shares entitled to vote thereon). In addition, the Board of
Directors has taken all requisite action such that the freezeout, special
shareholder voting and other requirements imposed by Section 912 of the BCL are
not applicable to the Merger.
(b) This Agreement constitutes a valid and binding agreement of Lancit,
enforceable against Lancit in accordance with its terms. When executed and
delivered by Lancit, the Additional Agreements to which it is a party will
constitute valid and binding agreements of Lancit, enforceable against Lancit in
accordance with their respective terms.
(c) The Board of Directors of Lancit has received an opinion dated February
27, 1998 of its financial advisor, Schroder & Co. Inc., that, as of such date,
the consideration to be received by the holders of Lancit Shares in the Merger
was fair to such holders from a financial point of view (copies of which have
been delivered to the Company), and such opinion has not been withdrawn, revoked
or modified in any material respect.
SECTION 2.05. No Conflicts or Defaults. The execution, delivery and
performance of this Agreement and the Additional Agreements and the consummation
of the transactions contemplated hereby and thereby do not and will not as of
the Effective Time (a) contravene the Certificate of Incorporation or By-laws
(or other organizational or governing documents), of Lancit or any Subsidiary;
(b) assuming compliance with the matters referred to in Section 2.07, violate
any applicable law, rule, regulation, judgment, order or decree binding upon
Lancit or any Subsidiary or (c) except as set forth in Item 2.05 of the
Disclosure Schedule, (i) require notice, violate or conflict with, result in a
breach of, or a default under, or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Lancit or any
Subsidiary or to a loss of any material benefit to which Lancit or any
Subsidiary is entitled under, (x) any provision of any agreement, mortgage,
indenture, lease, instrument, permit, license or other instrument to which
Lancit or any Subsidiary is a party or by which it or any of its assets is bound
which is required to be disclosed pursuant to Section 2.13, 2.14 or 2.22 (or, to
the knowledge of Lancit, any provision of any other agreement, mortgage,
indenture, lease, instrument, permit, license or other instrument), (y) any
judgment, order or decree, to which it or any of its assets is subject, or (z)
any license, franchise, permit or other similar authorization held by Lancit or
any Subsidiary, or (ii) result in the creation or imposition of, or give any
party the right to create or impose, any liens, mortgages, pledges, charges,
security interests, equities, restrictions, adverse interests, claims or
encumbrances of any kind (collectively, "Liens") upon Lancit, any Subsidiary or
any of their respective assets, except any such violation, conflict, breach,
default, lien, termination or failure of performance referred to in this clause
2.05(c)(ii) as could not, individually or in the aggregate, (x) have a Material
Adverse Effect or (y) materially adversely affect the consummation of the
transactions contemplated by this Agreement.
SECTION 2.06. Copies of Charter Documents and Stock Records. Correct and
complete copies of the Certificate of Incorporation and By-laws and other
organizational or governing instruments of Lancit and each Subsidiary as
currently in effect and all documents filed with any state authority with
respect to any merger, or consolidation or reincorporation in which Lancit or
any Subsidiary has been a participant, have been delivered to the Company by
Lancit. Lancit has made available to the Company correct and complete copies of
the minute books and stock ledgers of Lancit and each Subsidiary.
SECTION 2.07. Authorizations. No authorization, approval, order, license,
permit, consent or other action of, or filing or registration with, any federal,
state, foreign, provincial or local court or governmental body, agency, official
or authority, or consent of any other party, is required in connection with the
execution, delivery and performance by Lancit of this Agreement, the Additional
Agreements and/or the Merger, except (a) as set forth in Item 2.07 of the
Disclosure Schedule, (b) the filing of the Certificate of Merger with the
Secretary of State of the State of New York, (c) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"); (d) compliance with
the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"); (e) compliance with any applicable foreign or state
securities or Blue Sky laws and (f) approval and adoption of this Agreement and
the Merger by Lancit's shareholders.
SECTION 2.08. SEC Filings; Financial Statements. (a) Lancit has furnished
to the Company true and complete copies of (i) its annual reports on Form 10-K,
as amended, for each of the three fiscal years ended June 30, 1995, 1996 and
1997 as filed with the Securities and Exchange Commission (the "SEC") and annual
reports to shareholders for each of the two fiscal years ended June 30, 1995 and
1996, (ii) its quarterly reports on Form 10-Q for the fiscal quarters ended
September 30, 1997 and December 31, 1997, as filed with the SEC, (iii) its proxy
or information statements relating to the meetings of, or actions taken without
a meeting by, Lancit's shareholders held since December 6, 1995 and (iv) all of
its other reports, statements, schedules and registration statements (in the
form in which it became effective) filed with the SEC since July 1, 1994 (as
amended, collectively, the "Lancit SEC Documents"). Lancit has made all required
filings since July 1, 1994 with the SEC when due in accordance with the rules
and regulations promulgated under the Exchange Act and the Securities Act. As of
their respective dates, all of the Lancit SEC Documents complied in all material
respects with the Exchange Act or the Securities Act, as applicable, and the
applicable rules and regulations of the SEC thereunder. As of its filing date,
each such report or statement filed pursuant to the Exchange Act did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each such registration
statement, as amended or supplemented, if applicable, filed pursuant to the
Securities Act of 1933 as of the date such statement or amendment became
effective did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. All material agreements, contracts and other
documents required to be filed as exhibits to any of the Lancit SEC Documents
have been so filed.
(b) The audited consolidated financial statements and unaudited interim
financial statements of Lancit included in the Lancit SEC Documents or otherwise
delivered to the Company by Lancit (collectively, the "Financial Statements")
were prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis, are reconcilable to the books and
records of Lancit and present fairly the consolidated financial position of
Lancit and its Subsidiaries as of the dates thereof and their consolidated
results of operations, cash flows and changes in financial position for the
periods then ended, except, in the case of such unaudited financial statements,
for the omission of footnote information and for normal year end audit
adjustments which are not, singly or in the aggregate, material. For the
purposes of this Agreement, "Interim Balance Sheet" means the unaudited
consolidated balance sheet of Lancit and the Subsidiaries as of December 31,
1997 included in Lancit's quarterly report on Form 10-Q for the quarter ended on
such date and the notes thereto and "Interim Balance Sheet Date" means December
31, 1997.
(c) Neither Lancit nor any Subsidiary has any liabilities of any nature,
whether accrued, absolute, contingent (to the extent known), determined,
determinable or otherwise, and whether due or to become due ("Liabilities"),
other than (i) liabilities disclosed or provided for in the Interim Balance
Sheet, (ii) liabilities incurred in the ordinary course of business consistent
with past practice since the Interim Balance Sheet Date which individually or in
the aggregate are not material to Lancit and the Subsidiaries, taken as a whole,
(iii) liabilities disclosed or arising pursuant to agreements disclosed in any
Item of the Disclosure Schedule, (iv) the Lancit Transaction Expenses (as
defined below), (v) other liabilities that could not reasonably be expected to
exceed $50,000 in the aggregate and (vi) liabilities incurred with the express
written consent of the Company. All such Liabilities since the Interim Balance
Sheet Date required by GAAP to be reflected on a month-end balance sheet are
fully reflected or reserved on the books and records of Lancit or the applicable
Subsidiaries, as the case may be.
(d) Since December 31, 1996, except as set forth in Item 2.08(d) of the
Disclosure Schedule, neither Lancit nor any of the Subsidiaries has entered into
any off balance sheet financial arrangements, including any transaction
involving a hedge or derivative financial instrument.
SECTION 2.09. Compliance with Law and Court Orders. Neither Lancit nor any
Subsidiary nor the Business is in material violation of, or has materially
violated, or, to the knowledge of Lancit, is under investigation with respect to
or has been threatened to be charged with or given notice of any material
violation of, any applicable law, rule, regulation, judgment, injunction, order
or decree.
SECTION 2.10. Taxes. All federal, state, county, local, foreign, income,
property, transfer, excise, sales, use, recording, payroll, withholding and
other taxes and assessments of any kind, including interest and penalties
(collectively, "Taxes"), which are due and payable by Lancit have been paid or
adequate provision has been made for the payment thereof. There are no Liens on
Lancit or any Subsidiary or any of their respective assets in respect of Taxes,
other than any Permitted Liens (as such term is defined in Section 2.20). The
liabilities for Taxes reflected on the Interim Balance Sheet represent adequate
provision, in accordance with GAAP, for the payment of all accrued and unpaid
Taxes for all periods ended on or prior to the Interim Balance Sheet Date,
whether or not disputed and whether or not asserted prior to the date hereof.
All returns and reports of any nature for Taxes ("Tax Returns") required to be
filed prior to the date hereof by Lancit have been duly filed. All Taxes shown
on such Tax Returns and on assessments received have been paid to the extent
that such Taxes have become due. The Company has been furnished with access to
true and complete copies of all Tax Returns required to be filed by Lancit for
each of the three taxable years ending on or before June 30, 1996. Except as set
forth in Item 2.10 of the Disclosure Schedule, no claims have been asserted
against Lancit which are currently unresolved for Taxes, including interest or
penalties. The federal income tax returns of Lancit have been closed by
applicable statute for all taxable years prior to and including the taxable year
ended June 30, 1994. Except as set forth in Item 2.10 of the Disclosure
Schedule, none of the Tax Returns of Lancit has ever been audited, there has
been no extension of any applicable statute of limitations and, to the knowledge
of Lancit, none of the Tax Returns of Lancit is currently under examination.
Lancit has not waived any statute of limitations relating to the assessment or
collection of Taxes with respect to any taxable year for any audits or years
that are not closed. All Taxes or other assessments with respect to Taxes which
Lancit is required by law to withhold or collect have been duly withheld and
collected and have been paid over to the proper governmental authorities or are
properly held by Lancit for such payment. Neither Lancit nor any Subsidiary has
made or has any obligations to make a payment that is or will not be deductible
under Section 280G of the Code. Neither Lancit nor any Subsidiary has filed a
consent under Section 341(f) of the Code concerning collapsible corporations.
Neither Lancit nor any Subsidiary has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Neither
Lancit nor any Subsidiary has (A) been a member of an affiliated group as
defined under Section 1504 of the Code (other than an affiliated group of which
the common parent was Lancit) and (B) any liability for Taxes of another Person
(other than Lancit or another Subsidiary) under Treas. Reg. Section 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
SECTION 2.11. Employee Benefits. (a) The Lancit Media Entertainment, Ltd. &
Affiliates Retirement Plan, as amended (the "401(k) Plan") is the only "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) currently maintained by
Lancit or any Subsidiary or to which Lancit or any Subsidiary has any liability
or obligation. For purposes of this Section 2.11, "Subsidiary" means any entity
that with Lancit is a member of a controlled group of corporations, within the
meaning of section 414(b) of the Code, or is a trade or business under common
control within the meaning of section 414(c) of the Code, or is a member of the
same affiliated service group, within the meaning of section 414(m) of the Code.
Lancit (formerly Lancit Media Productions, Ltd.) previously maintained the
Lancit Media Productions, Ltd. Defined Benefit Pension Plan (the "Defined Plan")
and the Lancit Media Profit Sharing Plan (together, the "Prior Plans"). Neither
Lancit nor any Subsidiary has any liability or obligation remaining under the
Prior Plans.
The 401(k) Plan, the Prior Plans, and each bonus, pension, retirement,
profit sharing, deferred compensation, stock ownership, stock bonus, stock
option, phantom stock, retirement, vacation, disability, death benefit,
unemployment, hospitalization, medical, severance, or other plan, or agreement,
including individual employment agreements, providing benefits to any current or
former employees, officers or directors of Lancit or any Subsidiary or to which
Lancit or any Subsidiary has or had any liability or obligation (collectively,
the "Lancit Benefit Plans"), and any related trust, complies currently, and has
complied at all times in the past with respect to the 401(k) Plan and the Prior
Plans and since July 1, 1994, with respect to all other Lancit Benefit Plans,
both as to form and operation, in all material respects with the terms of such
Lancit Benefit Plan and with the applicable provisions of ERISA, the Code and
other applicable United States laws. All Lancit Benefit Plans are set forth in
Item 2.11(a) of the Disclosure Schedule, as well as the Employee Policy and
Procedures Manual and any other employment policies. Lancit has provided the
Company copies of all such documents set forth in Item 2.11(a).
(b) Collectively Bargained Agreements and Plans. (i) Item 2.11(b) of the
Disclosure Schedule sets forth all union retirement, pension or welfare plans to
which Lancit or any Subsidiary is obligated to contribute, including each
multiemployer pension benefit plan (as defined in section 3(37) of ERISA) to
which Lancit or any Subsidiary contributes or is required to contribute, and,
with respect to each such plan for the plan year in which the Effective Time
occurs, (A) the amount of any payment made and the approximate amount of any
payment to be made; (B) the number of contribution base units (as defined in
section 4001(a)(11) of ERISA) for which Lancit or any Subsidiary has an
obligation to contribute to such plan; and any conditions to such contribution.
(ii) Neither Lancit nor any Subsidiary has any unfulfilled current or past due
obligation to contribute to any multiemployer plan (as defined in section 3(37)
of ERISA) or collectively-bargained welfare plan listed on Item 2.11(b). (iii)
Neither Lancit nor any Subsidiary would have incurred any withdrawal liability
pursuant to Title IV of ERISA if it had withdrawn from the AFTRA Retirement Fund
as of November 30, 1996 or from any other multiemployer pension benefit plan to
which it is obligated to contribute as of December 31, 1996, and neither Lancit
nor any Subsidiary knows or has any reason to know of any change since said
November 30, 1996 or December 31, 1996 dates such that it would incur withdrawal
liability upon a complete withdrawal from any of said multiemployer pension
benefit plans effective as of the date of this Agreement. (iv) Neither Lancit
nor any Subsidiary is a party to any collective bargaining agreement, except as
disclosed on Item 2.11(b) of the Disclosure Schedule.
(c) COBRA. Item 2.11(c) lists each employee or former employee of Lancit or
any Subsidiary eligible for continuation coverage under Title X of the
Consolidated Omnibus Reconciliation Act of 1986, as amended ("COBRA"), the date
on which they were given the notice of their COBRA eligibility, whether they
elected COBRA coverage, and the last date on which a premium was received from
the employee or former employee for COBRA coverage.
(d) Leaves of Absence. Item 2.11(d) of the Disclosure Schedule lists all
employees for whom Lancit or any Subsidiary has approved any type of leave of
absence (paid or unpaid) extending until or after the Effective Time and a
description of the terms of the leave.
(e) Claims. Item 2.11(e) of the Disclosure Schedule lists for each Lancit
Benefit Plan any pending or threatened litigation, claims, lawsuits,
administrative proceedings, or pending appeals for benefits that have been
denied, and any similar action or claim that may result in liability to Lancit
or any Subsidiary.
(f) Prohibited Transactions. To Lancit's knowledge, no fiduciary, party in
interest, or disqualified person of any plan set forth in Items 2.11 (a) or (b)
has engaged in any transaction described in section 406(a) or (b) of ERISA or in
any transaction described in section 4975 of the Code.
(g) Tax Qualification. With respect to each Lancit Benefit Plan that is an
employee pension benefit plan under section 3(2) of ERISA, including any such
plan that is frozen, terminated or partially terminated: (i) there is no
accumulated funding deficiency, as defined in section 302(a)(2) of ERISA or
section 412 of the Code; (ii) there has not been issued a waiver of the minimum
funding standard under section 412 of the Code; (iii) there is no liability for
tax imposed by section 4971 of the Code; (iv) the contribution and benefit
limitations of section 415 of the Code have not been exceeded; (v) there is no
unfulfilled obligation to contribute; (vi) there has been issued a favorable
determination by the Internal Revenue Service with respect to the qualified
status of the Plan under section 401(a) of the Code as amended to the Effective
Time except as set forth on Item 2.11(g) of the Disclosure Schedule; (vii) the
Internal Revenue Service has not revoked a prior favorable determination of the
Plan's qualified status or issued technical advice regarding the Plan's
qualified status; and (viii) to Lancit's knowledge, no event has occurred in the
operation or administration of the Plan which could form a basis for revocation
of the Plan's qualified status by the Internal Revenue Service.
(h) Defined Benefit Plans. Except with respect to the Defined Plan, neither
Lancit nor any Subsidiary sponsor or have sponsored, maintained or contributed
to a defined benefit pension plan that is or was subject to Title IV of ERISA.
Neither Lancit nor any Subsidiary is liable to the Pension Benefit Guaranty
Corporation with respect to the Lancit Media Productions, Ltd. Defined Benefit
Pension Plan or any plan sponsored or maintained by any other party, including
any predecessor of Lancit or any Subsidiary, former employer of employees of
Lancit or any Subsidiary, or any party which, with Lancit and any Subsidiary,
forms a controlled group of corporations, a group of trades or businesses under
common control, or an affiliated service group, all within the meaning of
section 414 of the Code. There does not exist any lien under section 412(n) of
the Code upon any property belonging to Lancit or any Subsidiary or any entity
which is a member of a controlled group (within the meaning of section
412(n)(6)) of which Lancit or any Subsidiary is a member.
(i) Reporting and Disclosure. To Lancit's knowledge, (i) Each party in
interest described in section 3(14)(A) and (B) of ERISA has complied with, and
neither Lancit nor any Subsidiary will knowingly permit at any time through the
Effective Time any such party in interest to fail to comply with, all material
requirements of ERISA and (ii) Lancit and each Subsidiary have caused to be
filed on a timely basis each and every return, report and notice required to be
furnished to any governmental agency with respect to each employee benefit plan
sponsored or maintained by Lancit or any Subsidiary and have furnished to plan
participants and beneficiaries the information required to be furnished to them.
Lancit shall deliver to Company at the Effective Time all records as are
requested by Company.
(j) General ERISA Compliance. To Lancit's knowledge, (i) each party in
interest described in section 3(14)(A) and (B) of ERISA has complied, and
neither Lancit or any Subsidiary will knowingly permit at any time through the
Effective Time any such party in interest to fail to comply, with all material
requirements of ERISA and (ii) each Lancit Benefit Plan which otherwise provides
benefits or compensation for services to any employee, his dependents or
beneficiaries has been maintained and administered at all times in full
compliance with applicable state and federal law, including without limitation
the Age Discrimination in Employment Act, as amended, Title VII of the Civil
Rights Act of 1964, as amended, and Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended and the Health Insurance Portability and
Accountability Act of 1996.
(k) Severance. Except as specifically provided in written contracts with
employees or Lancit Benefit Plans listed in Item 2.11(a), or as otherwise
reflected in Item 2.11(k) of the Disclosure Schedule, no employee of Lancit or
any Subsidiary is entitled to severance pay for a voluntary or an involuntary
termination of employment with Lancit or any Subsidiary.
(l) Post-retirement Welfare Benefits. No employee is receiving or entitled
to any postretirement compensation or benefits other than benefits to which he
or she is entitled under the Lancit Benefit Plans listed in Items 2.11(a) or
2.11(b).
(m) Non-conforming Group Health Plans. To Lancit's knowledge, neither
Lancit nor any Subsidiary has contributed to a non-conforming group health plan
(as that term is defined in Code section 5000(c)) or incurred any tax liability
under Code section 5000(a).
(n) Leased Employees. To Lancit's knowledge, any leased employees, as
defined in section 414(n) of the Code, of Lancit or any Subsidiary have been
covered under the terms of the applicable Lancit Benefit Plans, or, if excluded,
all applicable coverage requirements have been satisfied with such leased
employees taken into consideration. No individual who has provided services to
Lancit or any Subsidiary and who has not been treated by Lancit or any
Subsidiary as an employee of Lancit or any Subsidiary has any right to benefits
under any Lancit Benefit Plan.
SECTION 2.12. Litigation. Except as described in Item 2.12 of the
Disclosure Schedule, as of the date of this Agreement, there is no claim,
action, suit, proceeding, investigation or criminal proceeding, at law or in
equity, pending against, or to the knowledge of Lancit, threatened against or
affecting, Lancit or any Subsidiary or any of their respective properties before
any national, state or provincial, local or other governmental authority,
agency, court, official, arbitration tribunal or other forum, (collectively,
"Proceedings"), (i) which, if adversely determined, could reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect or (ii)
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the Merger. Except as described in Item 2.12 of the Disclosure Schedule,
there is no Proceeding pending (or to Lancit's knowledge, threatened) against
Lancit or any Subsidiary or any of their respective properties, (i) which has a
significant possibility of success on the merits and could reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect or
(ii) which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Merger and has a significant possibility of success on the
merits in respect of such challenge or such relief. There is no material
outstanding and unsatisfied judgment, order, writ, ruling, injunction,
stipulation or decree of any court, arbitrator or governmental authority against
or relating to Lancit, any Subsidiary or any of its or their respective assets.
SECTION 2.13. Agreements and Commitments. (a) Except as disclosed in Item
2.13(a) of the Disclosure Schedule, neither Lancit nor any Subsidiary is a party
to or bound by, and none of the assets of Lancit or any Subsidiary is covered by
or subject to, any of the following (whether oral or written):
(i) any lease (a) for real property or (b) for personal property
providing for annual rentals for such personal property lease of
$5,000 or more or aggregate payments (per lease) for such
personal property lease of $10,000 or more;
(ii) any agreement for the purchase of materials, software, supplies,
goods, services, equipment or other assets providing for either
(A) annual payments by Lancit and the Subsidiaries of $5,000 or
more or (B) aggregate payments (per agreement) by Lancit and the
Subsidiaries of $10,000 or more;
(iii)any funding, agency, licensing, development, production,
co-production, output, air commitment, distribution, rights
sharing or back-end agreement or any agreement similar to any of
the foregoing;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or
otherwise);
(vi) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii) any option, license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing,
merchandising, licensing or other similar agreement;
(ix) any agreement that limits the freedom of Lancit or any Subsidiary
to compete in any line of business or with any Person or in any
area or which would so limit the freedom of the Surviving
Corporation or any Subsidiary after the Effective Time;
(x) any agreement pursuant to which Lancit or any Subsidiary has
hired or retained a consultant;
(xi) any agreement pursuant to which Lancit or any Subsidiary is
subject to confidentiality or non-disclosure obligations;
(xii)any union or collective bargaining contracts with respect to any
employees of Lancit or any Subsidiary;
(xiii) any employment or talent agreement; or
(xiv)any other agreement, commitment, arrangement or plan that is
material.
In lieu of a list, certain types of agreements and other instruments which are
not individually material to Lancit are identified in Item 2.13(a) by category,
together with a representative sample. Documents in each such category do not
differ from the representative sample in any material respect.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in the Disclosure Schedule or required to be disclosed in the
Disclosure Schedule is a valid and binding agreement of Lancit or a Subsidiary,
as the case may be, and is in full force and effect, and none of Lancit, any
Subsidiary or, to the knowledge of Lancit, any other party thereto is in default
or breach in any material respect under the terms of any such agreement,
contract, plan, lease, arrangement or commitment, and, to the knowledge of
Lancit, no event or circumstance has occurred that, with notice or lapse of time
or both, would constitute an event of default thereunder, other than any
breaches or defaults which, singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. True and complete copies of each
such agreement, contract, plan, lease, arrangement or commitment have been
delivered or made available to the Company.
(c) A complete list (except as to the categories referred to in the last
two sentences of Section 2.13(a)) of all funding, agency, licensing, production,
employee, talent, distribution and other contracts or other arrangements between
the Company or any Subsidiary and any third party in connection with the
development, preparation, production and distribution of new episodes of Reading
Rainbow, Outward Bound and The Puzzle Place for the 1998 season in effect as of
the date hereof is set forth in Item 2.13(c) of the Disclosure Schedule. Such
contracts and arrangements are all of the contracts and arrangements that will
be necessary for the development preparation, production and distribution of
such episodes, other than contracts and agreements to be entered into in the
ordinary course of production consistent with past practice, and Lancit has no
reason to believe that there will be any difficulties encountered in connection
with entering into such ordinary course contracts and arrangements.
(d) Except as set forth in Item 2.13(d) of the Disclosure Schedule, to
Lancit's knowledge, its relationships with the parties to the contracts required
to be disclosed under Sections 2.13(a) (i), (ii), (iii), (iv), (vii), (viii),
(x) and (xiii) are good and no such party has threatened to terminate or fail to
renew any such contract, agreement or relationship, which termination or failure
would, singly or in the aggregate, have a Material Adverse Effect.
SECTION 2.14. Intellectual Property. Lancit or one of its Subsidiaries owns
or has valid and enforceable rights with respect to all trademarks, trade names,
service marks and copyrights (whether or not registered) and any registrations
or applications for the registration of any thereof, all trade secrets, and all
rights of similar or equivalent effect however or wherever arising (together,
the "Intellectual Property") which are necessary and sufficient in all material
respects to conduct the Business as currently conducted or proposed to be
conducted, and all such Intellectual Property which is not owned is licensed to
Lancit or one of its Subsidiaries pursuant to license agreements listed in Item
2.14 of the Disclosure Schedule. Item 2.14 identifies all Intellectual Property
owned by or licensed to Subsidiaries that are not wholly owned by Lancit.
Neither Lancit nor any of the Subsidiaries nor, to the knowledge of Lancit, any
other party is in breach of or default under any such license agreement and each
such license or other agreement is valid and in full force and effect. Lancit
and its Subsidiaries hold the Intellectual Property owned by them free of any
Liens or contractual or other restrictions other than the rights of licensees
pursuant to the license agreements set forth in Item 2.14 of the Disclosure
Schedule. Except as set forth in Item 2.14 of the Disclosure Schedule, Lancit
has not received any claims, and Lancit does not believe, that it or its
Subsidiaries or its or their Intellectual Property has infringed, diluted or
otherwise violated any third party's marks, copyrights, trade secrets, patents,
right of publicity, right of privacy, moral rights, or other proprietary rights,
libeled any third party, or engaged in false advertising or unfair competition.
Except as set forth in Item 2.14 of the Disclosure Schedule, since January 1,
1996, neither Lancit nor any of its Subsidiaries has made any claims that a
third party has infringed, diluted, or otherwise violated any of its or their
Intellectual Property or engaged in false advertising or unfair competition. No
order, holding, decision or judgment has been rendered by any governmental
authority, and except as set forth in Item 2.14 no agreement, consent or
stipulation exists, which would limit Lancit's or its Subsidiaries' use of any
Intellectual Property or any advertising or promotional claim or campaign. Item
2.14 of the Disclosure Schedule contains a complete and accurate list of all
U.S. and foreign trademark and copyright registrations and applications for
registration held or filed by Lancit or any of its Subsidiaries. All such
registrations are in full force, are held of record in Lancit's or Lancit
Copyright Corporation's name (either alone or jointly with Community Television
of Southern California or KCET Music Publishing), and are not the subject of any
cancellation proceeding, and all such applications are pending in Lancit's or
Lancit Copyright Corporation's name alone or in Lancit's name together with
Community Television of Southern California or KCET Music Publishing, and are
not the subject of any final refusal to register or any opposition proceeding.
Registrations have been issued for, or applications are pending to register, all
trademarks and service marks in all jurisdictions where the failure to obtain
such a registration could have a Material Adverse Effect or could result in a
breach of Lancit's obligations under any material license or distribution
agreement. Except as set forth in Item 2.14, each individual who would be
considered an author or co-author under U.S. copyright law of any episode of The
Puzzle Place or Backyard Safari has either (1) made his or her contribution to
that episode as a work for hire under U.S. copyright law for Lancit or, in the
case of The Puzzle Place, for Lancit and Community Television of Southern
California, or (2) executed a written assignment and transfer of his or her
copyright interest in the episode to Lancit or, in the case of The Puzzle Place,
to Lancit and Community Television of Southern California. To Lancit's
knowledge, none of Lancit's or its Subsidiaries' trade secrets, know-how or
other confidential or proprietary information, the unauthorized use of which
could reasonably be expected to have a Material Adverse Effect, has been
disclosed to any person unless such disclosure was made pursuant to an
appropriate confidentiality agreement. Except as reflected in Item 2.14 of the
Disclosure Schedule, to Lancit's knowledge, its relationships with the parties
to the licenses identified in Item 2.14 of the Disclosure Schedule, the loss or
absence of which could reasonably be expected to have a Material Adverse Effect,
are good and no such party has threatened to terminate or fail to renew any such
license or relationship. Except for software which is "off-the-shelf," all
software that is material to the operations of Lancit or its Subsidiaries is
year 2000 compliant.
SECTION 2.15. Lancit Brokers; Transaction Expenses. (a) Except as set forth
in Item 2.15(a) of the Disclosure Schedule, no broker, investment banker,
financial advisor or other intermediary which has been retained by, or is
authorized to act on behalf of, Lancit or any Subsidiary who might be entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission upon consummation of the transactions contemplated by this Agreement.
(b) Set forth in Item 2.15(b) is Lancit's estimate of the maximum aggregate
amount of the fees and expenses (including printing costs, filing fees and the
fees and expenses of brokers, investment bankers, financial advisors, other
intermediaries, attorneys and accountants) that Lancit expects to incur in
connection with the transactions contemplated hereby ("Lancit Transaction
Expenses").
SECTION 2.16. Miscellaneous. To Lancit's knowledge, and subject to the last
sentence of this Section 2.16, none of the documents or information delivered or
provided by Lancit to the Company in connection with the transactions
contemplated by this Agreement (as updated by any more recent versions thereof
delivered prior to the date hereof) contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
contained therein not misleading. There is no fact or information relating to
Lancit or its Subsidiaries, other than publicly available information, that is
known to Lancit, that could reasonably be expected to be material to Lancit and
its Subsidiaries taken as a whole and that has not been disclosed to the
Company. The cash flow projections for the six months ending June 30, 1998
relating to Lancit and the Subsidiaries delivered to the Company constitute
Lancit's reasonable estimate of the amounts of the sources and uses of its funds
for such period and the timing thereof (except in the case of the timing as to
the items previously identified by Lancit). Except as set forth in the preceding
sentence, Lancit makes no representation or warranty as to any projections or
estimates that it may have furnished to the Company.
SECTION 2.17. Disclosure Documents. (a) Each document required to be filed
by Lancit with the SEC in connection with the transactions contemplated by this
Agreement (the "Lancit Disclosure Documents"), including, without limitation,
the proxy or information statement of Lancit (the "Lancit Proxy Statement"), if
any, to be filed with the SEC in connection with the Merger, and any amendments
or supplements thereto will, when filed, comply as to form in all material
respects with the applicable requirements of the Exchange Act.
(b) At the time Lancit Proxy Statement or any amendment or supplement
thereto is first mailed to shareholders of Lancit, at the time such shareholders
vote on adoption of this Agreement and at the Effective Time, the Lancit Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. At the time of the filing of any
Lancit Disclosure Document other than Lancit Proxy Statement and at the time of
any distribution thereof, such Lancit Disclosure Document will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 2.17 will not apply to statements or omissions in
Lancit Disclosure Documents based upon information furnished by the Company
specifically for use therein.
(c) The information with respect to Lancit or any Subsidiary that Lancit
furnishes specifically for use in (or incorporation by reference in) the Company
Disclosure Documents (as defined in Section 3.09) will not, at the time of the
filing thereof, at the time of any distribution thereof and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 2.18. Absence of Certain Changes. Except as disclosed in Item 2.18
of the Disclosure Schedule, since the Interim Balance Sheet Date, Lancit and the
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and, except as disclosed in Item 2.18 of the Disclosure
Schedule, there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Lancit or any
Subsidiary, or, any repurchase, redemption or other acquisition by Lancit or any
Subsidiary of any outstanding shares of capital stock or other securities of, or
other ownership interests in, Lancit or any Subsidiary;
(c) any amendment of any material term of any outstanding security of
Lancit or any Subsidiary;
(d) any incurrence, assumption or guarantee by Lancit or any Subsidiary of
any indebtedness for borrowed money;
(e) any creation or assumption by Lancit or any Subsidiary of any Lien
(other than Permitted Liens) on any asset;
(f) any making of any loan or capital contributions to or investment in any
Person other than loans or capital contributions to or investments in wholly
owned Subsidiaries made in the ordinary course of business consistent with past
practices;
(g) any condemnation, seizure, damage, destruction or other casualty loss
(whether or not covered by insurance) materially affecting the business or
assets of Lancit or any Subsidiary;
(h) any transaction or commitment made, or any contract or agreement
entered into, amended or terminated by Lancit or any Subsidiary or any
relinquishment by Lancit or any Subsidiary of any contract or other right, in
either case, material to Lancit and its consolidated Subsidiaries taken as a
whole, other than those contemplated by this Agreement;
(i) any change in any method of accounting or accounting practice by Lancit
or any Subsidiary, except for any such change required by reason of a concurrent
change in generally accepted accounting principles;
(j) any (i) grant of any severance or termination pay to any director,
officer or employee of Lancit or any Subsidiary except pursuant to agreements or
Lancit's standard employment policies in effect on the Interim Balance Sheet
Date, (ii) entering into or renewal of any employment, deferred compensation,
severance, retirement or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of Lancit or any
Subsidiary, (iii) increase in benefits payable under any existing severance or
termination pay policies or employment agreements or (iv) increase in
compensation, bonus or other benefits payable to directors, officers or
employees of Lancit or any Subsidiary other than standard annual merit increases
not in excess of $50,000 in the aggregate on a annual basis;
(k) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of Lancit or any Subsidiary, or any lockouts, strikes, slowdowns,
work stoppages or threats thereof by or with respect to such employees;
(l) any capital expenditure, or commitment for a capital expenditure, for
additions or improvements to property, plant and equipment in excess of $25,000,
individually or in the aggregate; or
(m) except for capital expenditures and commitments referred to in
subsection 2.18(l) above, any acquisition or disposition of any assets or
Intellectual Property in one or more transactions, or any commitment in respect
thereof, that, individually or in the aggregate, involved or involve payments of
$10,000 or more.
SECTION 2.19. Environmental Matters. (a) Except as disclosed in Item
2.19(a) of the Disclosure Schedule,
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been received by, or,
to the knowledge of Lancit or any Subsidiary, is pending or
threatened by any Person against, Lancit or any Subsidiary, nor
has any material penalty been assessed against Lancit or any
Subsidiary, with respect to any alleged violation of any
Environmental Law or liability thereunder, alleged failure to
have any Environmental Permits, generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance
or discharge, emission or release of any Hazardous Substance;
(ii) to Lancit's knowledge, no Hazardous Substance has been
discharged, emitted, released or is present at any property now
or previously owned, leased or operated by Lancit or any
Subsidiary, which circumstance, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse
Effect; and
(iii)there are no Environmental Liabilities that have had or may,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which Lancit has knowledge in relation to
the current or prior business of Lancit or any Subsidiary or any property or
facility now or previously owned or leased by Lancit or any Subsidiary which has
not been delivered to the Company at least five days prior to the date hereof.
(c) Except as set forth in Item 2.19(c) of the Disclosure Schedule, neither
Lancit nor any Subsidiary owns or leases or has owned or leased any real
property, or conducts or has conducted any operations, in New Jersey or
Connecticut that trigger filing or other obligations under environmental
transfer acts in those states in connection with the transactions contemplated
hereby.
(d) For purposes of this Section 2.19, the following terms shall have the
meanings set forth below:
(i) "Lancit" and "Subsidiary" shall include any entity which is, in
whole or in part, a predecessor of Lancit or any Subsidiary;
(ii) "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions, relating to human
health, the environment or to emissions, discharges or releases
of pollutants, contaminants or other hazardous substances or
wastes into the environment, including without limitation ambient
air, surface water, ground water or land, or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants,
contaminants or other hazardous substances or wastes or the
clean-up or other remediation thereof;
(iii)"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of
governmental authorities relating to or required by Environmental
Laws and affecting, or relating in any way to, the business of
Lancit or any Subsidiary as currently conducted;
(iv) "Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive,
reactive or otherwise hazardous substance, waste or material, or
any substance, waste or material having any constituent elements
displaying any of the foregoing characteristics, including,
without limitation, petroleum, its derivatives, by-products and
other hydrocarbons, and any substance, waste or material
regulated under any Environmental Law.
SECTION 2.20. Properties. (a) Lancit and the Subsidiaries have good and
marketable, indefeasible, fee simple title to, or in the case of leased property
and assets have valid leasehold interests in, all material property and assets
(whether real, personal, tangible or intangible) reflected on the Interim
Balance Sheet or acquired after the Interim Balance Sheet Date or otherwise
necessary for the operation of the business of Lancit and the Subsidiaries,
except for properties and assets sold since the Interim Balance Sheet Date in
the ordinary course of business consistent with past practice. None of such
property or assets is subject to any Lien, except:
(i) Liens disclosed on the Interim Balance Sheet or Item 2.20(a)
of the Disclosure Schedule;
(ii) Liens for Taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been
established on the Interim Balance Sheet);
(iii)Liens which do not materially detract from the value or
materially interfere with any present or intended use of
such property or assets (Liens referred to in clauses
(i)-(iii) of this Section 2.20(a) are, collectively, the
"Permitted Liens").
(b) Since December 31, 1997, there are no developments affecting any such
material property or assets pending or, to the knowledge of Lancit threatened,
which might materially detract from the value, materially interfere with any
present or intended use or materially adversely affect the marketability of any
such property or assets except for normal wear and tear on such property or
assets.
(c) Neither Lancit nor any Subsidiary owns any real property. The equipment
owned or used by Lancit or any Subsidiary is adequate and suitable for its
present and intended uses.
(d) The property and equipment owned or leased by Lancit or any Subsidiary
constitute all of the property and equipment used or held for use in connection
with the business of Lancit and its Subsidiaries and all of the property and
equipment necessary to conduct such business as currently conducted by Lancit.
SECTION 2.21. Insurance Coverage. Set forth in Item 2.21 of the Disclosure
Schedule is a list of all insurance policies and fidelity bonds relating to the
assets, business, operations, employees, officers or directors of Lancit and the
Subsidiaries (the "Lancit Policies"), and Lancit has provided the Company with
or with access to true and complete copies of all such policies and bonds to the
extent available to Lancit; otherwise, Lancit has provided the Company with
access to true and complete copies of all binders or equivalent documents.
Except as disclosed in Item 2.21 of the Disclosure Schedule, there is no claim
by Lancit or any Subsidiary pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds or in respect of which such underwriters have reserved
their rights. All premiums payable under all such policies and bonds have been
timely paid and Lancit and the Subsidiaries have otherwise complied in all
material respects with the terms and conditions of all such policies and bonds.
Item 2.21 indicates the dates since which such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance coverage)
have been in effect. To Lancit's knowledge, such policies and bonds are of the
type and in amounts customarily carried by Persons conducting businesses similar
to those of Lancit and the Subsidiaries. Except as set forth in Item 2.21 of the
Disclosure Schedule, Lancit does not know of any threatened termination of,
material premium increase with respect to, or material alteration of coverage
under, any of such policies or bonds. The Surviving Corporation and the
Subsidiaries shall after the Effective Time continue to have coverage under such
policies and bonds with respect to events occurring prior to the Effective Time.
Set forth in Item 2.21 is the amount of the premium payable for the current year
for Lancit's directors and officers insurance policy.
SECTION 2.22. Licenses and Permits. Lancit and the Subsidiaries have all
material governmental licenses, authorizations, consents and approvals required
to carry on the business of Lancit and its Subsidiaries as now conducted. Item
2.22 of the Disclosure Schedule correctly sets forth a list of each material
license, franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Lancit and its
Subsidiaries (collectively, the "Permits"), and each pending application for any
Permit, together with the name of the government agency or entity issuing such
Permit or with which such application is pending. Except as set forth in Item
2.22, (i) the Permits are valid and in full force and effect, (ii) neither
Lancit nor any Subsidiary is in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under, the Permits
and (iii) none of the Permits will be terminated or impaired or become
terminable, in whole or in part, as a result of the transactions contemplated
hereby.
SECTION 2.23. Employees. Item 2.23(a) of the Disclosure Schedule sets forth
a true and complete list of the names, titles, annual salaries and other
compensation of all officers of Lancit and its Subsidiaries and of all other
employees of Lancit and its Subsidiaries and the wage rates for non-salaried
employees of Lancit and the Subsidiaries (by classification). To the knowledge
of Lancit as of the date of this Agreement and except as reflected in Item 2.02
or Item 2.23 of the Disclosure Schedule, (i) none of the employees identified in
Item 2.23(b) has notified Lancit that he or she intends to resign or retire as a
result of the transactions contemplated by this Agreement or otherwise within
one year after the Effective Time and (ii) no Person (other than as set forth in
Items 2.02 or 2.23(a)) is entitled to any employee benefits from Lancit. The
foregoing shall not be deemed a waiver of, or to impair or derogate from, the
obligations of the Company to certain employees upon the occurrence of a change
in control pursuant to employment agreements listed in Item 2.05 of the
Disclosure Schedule.
SECTION 2.24. Labor Matters. Lancit and the Subsidiaries are in compliance
in all material respects with all currently applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and are not engaged in any unfair labor practice, failure to
comply with which or engagement in which, as the case may be, could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There is no unfair labor practice complaint pending or, to
Lancit's knowledge, threatened against Lancit or any Subsidiary before the
National Labor Relations Board.
SECTION 2.25. Books and Records. Since July 1, 1994, Lancit has maintained
adequate business records with respect to the operation of its business, and
Lancit is not aware of any material deficiencies in such business records.
SECTION 2.26. Interested Party Transactions. Except as set forth in Item
2.26 of the Disclosure Schedule or in the Lancit SEC Documents, since June 30,
1997, no event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Lancit as of the date hereof and
immediately prior to the Effective Time that:
SECTION 3.01. Due Incorporation and Qualification. Each of the Company and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
corporate powers required to carry on its business as now conducted.
SECTION 3.02. Authority; Due Authorization; Valid Obligation. Each of the
Company and Merger Subsidiary has all requisite corporate power and authority to
execute, deliver and perform this Agreement and the Additional Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by the Company and Merger
Subsidiary of this Agreement and such Additional Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action. This Agreement constitutes, and such Additional
Agreements, when executed and delivered, will constitute, the valid and binding
obligations of each of the Company and Merger Subsidiary.
SECTION 3.03. No Conflicts or Defaults. The execution, delivery and
performance by the Company and Merger Subsidiary of this Agreement and the
Additional Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not as of the
Effective Time (a) violate the Certificate of Incorporation or By-Laws of the
Company or Merger Subsidiary; (b) assuming compliance with the matters referred
to in Sections 3.04, violate any applicable law, rule, regulation, judgment,
order or decree binding upon the Company or Merger Subsidiary; or (c) with such
exceptions as could not, individually or in the aggregate, reasonably be
expected to materially adversely affect the transactions contemplated hereby or
have a Company MAE (as defined below), require notice, violate or conflict with,
result in a breach of, or a default under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or to a loss of any benefit to which the Company is entitled under any
agreement, contract or other instrument binding upon the Company. For purposes
of this Agreement, the term the "Company MAE" means a material adverse effect on
the condition (financial or otherwise), business, assets or results of
operations of the Company and its subsidiaries taken as a whole.
SECTION 3.04. Authorizations. No authorization, approval, order, license,
permit or consent of, or filing or registration with, any federal, state,
foreign, provincial or local court or governmental authority, or consent of any
other party, is required in connection with the execution, delivery and
performance by the Company and Merger Subsidiary of this Agreement and the
Additional Agreements to which it is a party, except for (a) the filing of the
Certificate of Merger with the Secretary of State of the State of New York, (b)
compliance with any applicable requirements of the Exchange Act; (c) compliance
with the applicable requirements of the Securities Act; (d) compliance with any
applicable foreign or state securities or Blue Sky laws and (e) approval and
adoption of this Agreement and the Merger by Lancit's shareholders.
SECTION 3.05. Litigation. Except as set forth in Schedule 3.05, as of the
date hereof, there are no Proceedings pending against the Company or Merger
Subsidiary, and the Company has not received notice of any threatened
Proceedings against it or Merger Subsidiary which, if adversely determined,
would, individually or in the aggregate, have a Company MAE, or which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated hereby. Except as set forth
in Item 3.05 of the Disclosure Schedule, there are no Proceedings pending
against the Company or Merger Subsidiary, and the Company has not received
notice of any threatened Proceedings against it or Merger Subsidiary which (i)
has a significant possibility of success on the merits and could reasonably be
expected to, individually or in the aggregate, have a Company MAE, or (ii) in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger and has a significant possibility of success on the merits of such
challenge or such relief.
SECTION 3.06. SEC Documents. The Company has furnished to Lancit true and
complete copies of each report, registration statement (in the form in which it
became effective) and definitive proxy statement filed by the Company with the
SEC since September 1, 1997 (the "Company SEC Documents"), which are all of the
documents that the Company was required to file with the SEC since such date. As
of their respective dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the applicable rules and regulations of the SEC thereunder. As
of its filing date, each such report or statement filed pursuant to the Exchange
Act did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each such
registration statement, as amended or supplemented, if applicable, filed
pursuant to the Securities Act as of the date such statement or amendment became
effective did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. All material agreements, contracts and other
documents required to be filed as exhibits to any of the Company SEC documents
have been so filed. The consolidated financial statements of the Company
contained in the Company SEC Documents were prepared in accordance with GAAP
applied on a consistent basis during the periods involved and fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as at the dates indicated and the consolidated results of operations and
consolidated cash flows of the Company and its consolidated subsidiaries for the
periods then ended, except as indicated in the notes thereto, and except, in the
case of unaudited interim financial statements, for the omission of footnote
information and normal year-end audit adjustments which are not, singly or in
the aggregate, material.
SECTION 3.07. Company Brokers. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
described in this Agreement based upon arrangements made by or on behalf of the
Company.
SECTION 3.08. No Material Adverse Change. To the Company's knowledge, from
September 30, 1997 through the date of this Agreement, there has not been any
Company MAE.
SECTION 3.09. Disclosure Documents. (a) Each document required to be filed
by the Company with the SEC in connection with the transactions contemplated by
this Agreement (the "Company Disclosure Documents"), including, without
limitation, the registration statement on Form S-4 to register the shares of
Company Common Stock to be delivered in the Merger (the "Registration
Statement"), and any supplements or amendments thereto, will, when filed, comply
as to form in all material respects with the applicable requirements of the
Exchange Act.
(b) At the time the Registration Statement or any amendment or supplement
thereto becomes effective and at the Effective Time, the Registration Statement,
as amended or supplemented, if applicable, shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not misleading. The foregoing representations and warranties will not apply to
statements or omissions included in the Registration Statement or any amendment
or supplement thereto based upon information furnished to the Company or Merger
Subsidiary by Lancit for use therein.
(c) The information with respect to the Company or any subsidiary of the
Company that the Company furnishes to Lancit for use in the Lancit Disclosure
Documents will not, at the time of the filing thereof, at the time of any
distribution thereof and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.10. Company Common Stock. The Company Common Stock to be issued
pursuant to the Merger has been duly authorized and upon issuance in accordance
with this Agreement will be duly authorized and validly issued, will be fully
paid and non-assessable and will not be issued in violation of any preemptive
rights.
SECTION 3.11. Miscellaneous. To the Company's knowledge, none of the
documents or information delivered by the Company to Lancit in connection with
the transactions contemplated by this Agreement contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements contained therein not misleading. There is no fact or information
relating to the Company or its subsidiaries, other than publicly available
information, that is known to the Company, that could reasonably be expected to
be material to the Company and its subsidiaries taken as a whole and that has
not been disclosed to Lancit.
ARTICLE 4
CERTAIN AGREEMENTS
SECTION 4.01. Conduct of Lancit's Business. Between the date of this
Agreement and the Effective Time (or the termination of this Agreement pursuant
to Section 7.01, if earlier), Lancit and the Subsidiaries shall, except for
actions to be taken pursuant to this Agreement and except as set forth in
Schedule 4.01 of the Disclosure Schedule, use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees and conduct their business only in the ordinary course consistent with
past practice. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time, except in accordance with this Agreement,
Lancit shall not, and shall not permit any Subsidiary to, without the prior
written consent of the Company in each instance,
(a) except pursuant to Lancit Options or Lancit Warrants in effect on the
date hereof, issue, sell, purchase, repurchase, redeem or otherwise acquire any
Lancit Securities or Subsidiary Securities;
(b) declare, set aside, or pay any dividend or make any distribution with
respect to any Lancit Shares or other capital stock of Lancit or any
Subsidiaries, except from any Subsidiary to Lancit;
(c) directly or indirectly redeem, purchase or otherwise acquire or commit
to acquire any capital stock or ownership interest of any Person;
(d) effect a split or reclassification of its capital stock, or a
recapitalization;
(e) amend its certificate of incorporation or by-laws;
(f) except as required by law, (A) grant or make any change in control,
severance or termination payments to any officer or employee except pursuant to
plans or agreements in existence on the date hereof, (B) enter into any option,
employment, deferred compensation or other similar agreement (or enter into any
amendment to any such existing agreement) with any officer, director, employee
or consultant, (C) increase benefits payable under any existing severance or
termination pay policies or agreements, or (D) except as contemplated by Section
2.18(j)(iv), grant or provide for any increase in (or commit, orally or in
writing, to increase) the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of compensation payable to or to
become payable to, or any bonus, insurance, pension or other employee benefit
plan benefitting any director, officer, employee or consultant;
(g) merge or consolidate with any other Person or acquire a material amount
of assets of any other Person;
(h) enter into any material transaction, contract or commitment;
(i) assume or guarantee any debt for borrowed money;
(j) sell, lease, license, encumber or otherwise dispose of any material
properties or assets;
(k) make any reevaluation of the assets of Lancit or any of its
Subsidiaries;
(l) except as required by GAAP, change any of its accounting methods,
principles or practices;
(m) make any Tax election that would have an adverse effect on Lancit or
any of the Subsidiaries;
(n) agree or commit to do any of the foregoing; or
(o) (i) intentionally take or agree or commit to take any action that would
make any representation and warranty of Lancit hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time or (ii)
intentionally omit or agree or commit to omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any
material respect at any such time.
Lancit shall (i) use its reasonable best efforts to maintain in full force and
effect insurance policies providing coverage and amounts of coverage comparable
to the coverage and amounts of coverage provided under the policies of insurance
now in effect for Lancit, (ii) timely file all tax returns due on or before the
Effective Time and pay (or reserve for) all Taxes due and payable with respect
to periods ending on or before or including the Effective Time and (iii) notify
the Company promptly of the occurrence of any matter, event or change in
circumstances known to it after the date hereof that would have been required to
be disclosed by it hereunder if it had occurred on or prior to the date hereof
or which constitutes a breach of any of the representations, warranties or
covenants or agreements hereunder by Lancit.
SECTION 4.02. Preserve Accuracy of Representations and Warranties; Updates.
Between the date of this Agreement and the Effective Time, the Company shall
refrain from taking, without the prior written consent in each instance of
Lancit, any action which would render any of the representations and warranties
set forth in Article 3, inaccurate in any material respect as of the Effective
Time, and shall notify Lancit promptly of the occurrence of any matter, event or
change in circumstances known to it after the date hereof that would have been
required to be disclosed by it hereunder if it had occurred on or prior to the
date hereof or which constitutes a breach of any of the representations,
warranties or covenants or agreements hereunder by the Company or Merger
Subsidiary.
SECTION 4.03. Further Investigation and Information. Between the date of
this Agreement and the Effective Time, Lancit shall give the Company and its
representatives full access during normal business hours, on reasonable prior
notice, to the premises, properties, files, books, records and employees of
Lancit and the Subsidiaries and shall cause their officers, employees and
representatives to furnish or make available to the Company and its
representatives such financial, operating and other data and information as such
Persons may from time to time reasonably request and will instruct Lancit's
employees, counsel and financial advisors to cooperate with the Company in its
investigation of the business of Lancit and the Subsidiaries; provided that no
investigation pursuant to this Section or other information received by the
Company shall operate as a waiver or otherwise affect any representation,
warranty or agreement given by Lancit to the Company hereunder; provided,
further, that any such inquiry shall be conducted in such manner as not to
interfere unreasonably with the operation of Lancit's business. Any information
obtained in the course of such inquiry shall be subject to the confidentiality
agreements entered into or to be entered into between Lancit and the Company.
SECTION 4.04. Consents, Waivers and Filings. Upon the terms and subject to
the conditions set forth in this Agreement, Lancit and the Company shall use
their respective best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things, reasonably necessary or desirable to consummate in an
expeditious manner the Merger and the other transactions contemplated by this
Agreement. Without limiting the foregoing, the parties shall cooperate to obtain
from all relevant third parties and governmental authorities, including any
trade unions, all consents and waivers to, and permits, authorizations and
licenses for, the transactions contemplated by this Agreement that may be
required under any agreement, lease, financing arrangement, license, permit or
other instrument or under any applicable law, rule or regulation, and to attempt
to remove or vacate any legal prohibition or impediment to the consummation of
the transactions contemplated hereby. Nothing herein shall require the
expenditure or payment of any monies (other than in respect of normal and usual
filing fees) or the giving of any other consideration by the Company or Lancit
in order to obtain any of such consents and Lancit shall not make any such
payment or expenditure without the consent of the Company. The Company shall not
be required to agree to any consent decree or order in connection with any
objections of the Department of Justice or the Federal Trade Commission to the
transactions contemplated by this Agreement.
SECTION 4.05. Subsequent Filings. Prior to the Effective Time, Lancit shall
timely and properly file with the SEC all Lancit SEC Documents, and the Company
shall timely and properly file with the SEC all Company SEC Documents, required
to be filed by it under the Exchange Act and the rules and regulations
promulgated thereunder and will promptly deliver to the other copies of each
such report filed with the SEC.
SECTION 4.06. Preparation of Registration Statement and Proxy. The Company
and Lancit shall promptly prepare and file with the SEC the Registration
Statement (which shall include the Proxy Statement as a part thereof) and shall
use all reasonable efforts to have the Registration Statement declared effective
under the Securities Act and the Proxy Statement cleared under the Exchange Act
promptly after filing. Each of the Company and Lancit shall also take any action
(other than (A) qualifying to do business in any jurisdiction in which it is not
now so qualified, (B) consenting to general service of process in any such
jurisdiction or (C) subjecting itself to taxation in any such jurisdiction)
required to be taken under any applicable state and foreign securities laws in
connection with the issuance of Company Common Stock in the Merger. The Company
and Lancit shall (i) cooperate with each other in the preparation of, and
furnish such information as may be required to be included in, the Registration
Statement (including the Proxy Statement included therein) and (ii) take such
actions as may be reasonably necessary in connection with the filing of the
Registration Statement and any related state or foreign security law and in
causing the same to become effective. The parties hereto shall execute such
customary letters of representation as shall be necessary for tax counsel to
Lancit to provide the tax opinion required to be filed as an exhibit to the
Registration Statement.
SECTION 4.07. Accountants' Letters. At the Company's request upon
reasonable notice, Lancit shall use its reasonable efforts to have its
independent auditors deliver to the Company a letter, addressed to the Company
and dated a date within two business days prior to the date that the
Registration Statement becomes effective, in form and substance reasonably
acceptable to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements such as the Registration Statement.
SECTION 4.08. Shareholders Meeting. Lancit shall cause a meeting of the
shareholders of Lancit (the "Lancit Shareholders Meeting") to be duly called and
held as soon as reasonably practicable for the purpose of voting upon the
approval and adoption of this Agreement and the Merger. The Board of Directors
of Lancit shall, subject to its fiduciary duties following consultation with
counsel, recommend approval and adoption by Lancit's shareholders of this
Agreement and the Merger. In connection with such meeting, Lancit will (i)
promptly after the Proxy Statement is cleared by the SEC furnish to its
shareholders as promptly as practicable the Proxy Statement and all other proxy
materials for such meeting in accordance with the proxy rules under the Exchange
Act, (ii) use its reasonable best efforts to cause the shareholders to approve
and adopt the Merger, this Agreement and the transactions contemplated hereby as
required under Section 903 of the BCL and (iii) otherwise comply with all legal
requirements applicable to such meeting.
SECTION 4.09. No Solicitation. (a) Following the date of this Agreement and
prior to the Effective Time (or, if earlier, termination of this Agreement
pursuant to Section 7.01), neither Lancit nor any of its Subsidiaries shall
(whether directly or indirectly through advisors, agents or other
intermediaries), nor shall Lancit or any of its Subsidiaries authorize or permit
any of its or their officers, directors, agents, representatives, advisors or
Subsidiaries to (i) solicit, initiate or take any action knowingly to facilitate
the submission of inquiries, proposals or offers from any Third Party (as
defined below) (other than the Company or Merger Subsidiary) relating to (A) any
acquisition or purchase of 20% or more of the consolidated assets of Lancit and
its Subsidiaries or of over 20% of any class of equity securities of Lancit or
any of its Subsidiaries, (B) any tender offer (including a self tender offer) or
exchange offer that if consummated would result in any Third Party beneficially
owning 20% or more of any class of equity securities of Lancit or any of its
Subsidiaries, (C) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving Lancit or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute more than 20% of the consolidated
assets of Lancit other than the transactions contemplated by this Agreement, or
(D) any other transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay the Merger or
which would or could reasonably be expected to materially dilute the benefits to
the Company of the transactions contemplated hereby (collectively, "Acquisition
Proposals"), or agree to or endorse any Acquisition Proposal, (ii) enter into or
participate in any discussions or negotiations regarding any of the foregoing,
or furnish to any Third Party any information with respect to its business,
properties or assets or any of the foregoing, or otherwise cooperate in any way
with, or knowingly assist or participate in, facilitate or encourage, any effort
or attempt by any Third Party (other than the Company) to do or seek any of the
foregoing, or (iii) grant any waiver or release under any standstill or similar
agreement with respect to any class of equity securities of Lancit or any of its
Subsidiaries; provided, however, that the foregoing shall not prohibit Lancit
(either directly or indirectly through advisors, agents or other intermediaries)
from (i) furnishing information pursuant to an appropriate confidentiality
letter (which letter shall not be less favorable to Lancit in any material
respect than the Confidentiality Agreement dated as of December 10, 1997 between
the Company and Lancit, and a copy of which shall be provided for informational
purposes only to the Company) concerning Lancit and its businesses, properties
or assets to a Third Party who has made a bona fide Acquisition Proposal, (ii)
engaging in discussions or negotiations with such a Third Party who has made a
bona fide Acquisition Proposal, (iii) following receipt of a bona fide
Acquisition Proposal, taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) under the Exchange Act or otherwise making
disclosure to its shareholders, (iv) following receipt of a bona fide
Acquisition Proposal, failing to make or withdrawing or modifying its
recommendation referred to in Section 4.08 and/or (v) taking any non-appealable,
final action ordered to be taken by Lancit by any court of competent
jurisdiction, but in each case referred to in the foregoing clauses (i) through
(iv) only to the extent that the Board of Directors of Lancit shall have
concluded, following consultation with outside counsel, that failure to take
such action would result in a breach of the Board of Directors' fiduciary duties
to the shareholders of Lancit; provided, further, that the Board of Directors of
Lancit shall promptly notify the Company of the taking of any of the foregoing
actions referred to in clauses (i) through (iv) and, in addition, if the Board
of Directors of Lancit receives an Acquisition Proposal, then Lancit shall
promptly notify and inform Merger Subsidiary of the material terms and
conditions of such proposal and the identity of the person making it and
thereafter promptly advise the Company of any material change in the status or
terms and conditions thereof. Lancit will immediately cease and cause its
advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and shall request that any such parties in
possession of confidential information about Lancit that was furnished by or on
behalf of Lancit return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of any such party. As
used in this Agreement, the term "Third Party" means any Person or "group," as
defined in Section 13(d) of the Exchange Act, other than the Company or any of
its affiliates.
(b) If a Payment Event (as hereinafter defined) occurs, Lancit shall pay to
Merger Subsidiary, within two business days following such Payment Event, a fee
of $500,000.
(c) "Payment Event" means (w) the termination of this Agreement pursuant to
Section 7.01(e); (x) the termination of this Agreement pursuant to Section
7.01(f) in contemplation of a merger agreement or a tender or exchange offer or
any transaction of the type listed in clause (z) below; (y) the termination of
this Agreement by the Company pursuant to Section 7.01(c) if the breach referred
to in Section 7.01(c) is willful; or (z) the occurrence of any of the following
events within 12 months of the termination of this Agreement pursuant to Section
7.01(g) whereby shareholders of Lancit receive, pursuant to such event, cash,
securities or other consideration having an aggregate value, when taken together
with the value of any securities of Lancit or its Subsidiaries otherwise held by
the shareholders of Lancit after such event, in excess of $1.20 per Lancit
Share: Lancit is acquired by merger or otherwise by a Third Party; a Third Party
acquires more than 50% of the total assets of Lancit and its Subsidiaries, taken
as a whole; a Third Party acquires more than 50% of the outstanding Shares or
Lancit adopts and implements a plan of liquidation, recapitalization or share
repurchase relating to more than 50% of the outstanding Lancit Shares or an
extraordinary dividend relating to more than 50% of the outstanding Lancit
Shares or 50% of the assets of Lancit and its Subsidiaries, taken as a whole.
(d) Lancit acknowledges that the agreements contained in this Section 4.09
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the Company would not enter into this Agreement;
accordingly, if Lancit fails to promptly pay any amount due pursuant to this
Section 4.09, and, in order to obtain such payment, the Company commences a suit
which results in a judgment against Lancit for the fee set forth in this Section
4.09, Lancit shall also pay to the Company its costs and expenses incurred in
connection with such litigation.
(e) This Section 4.09 shall survive any termination of this Agreement
however caused other than termination pursuant to any of Sections 7.01(a),
7.01(b) or 7.01(d) or by Lancit pursuant to Section 7.01(c).
SECTION 4.10. Directors and Officers Insurance. For a period of 6 years
after the Effective Time, the Company shall cause the Surviving Corporation to
use its best efforts to provide directors' and officers' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering each
Lancit officer or director currently covered by Lancit's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less advantageous to such officers and directors (including, without
limitation, not less than the same policy limits) than those of such policy in
effect on the date hereof; provided that in satisfying its obligation under this
Section, the Company shall not be obligated to cause the Surviving Corporation
to pay an aggregate premium in excess of 300% of the amount per annum Lancit
paid for its current year of coverage (i.e., May 1, 1997 to April 30, 1998),
("Coverage Amount") which amount is set forth in Item 2.21 of the Disclosure
Schedule; provided that if the aggregate premium would exceed 300% of the
Coverage Amount, the Surviving Corporation shall use its best efforts to
purchase equivalent coverage for the longest period (up to 6 years) that may be
obtained for 300% of such amount. This Section 4.10 is for the benefit of such
officers and directors only. Any officer or director who wishes to obtain the
benefits of this Section shall provide such reasonable cooperation as the
Company may request in connection with any matter in respect of which a claim is
made under the foregoing insurance.
SECTION 4.11. Notices of Certain Events. Lancit shall promptly notify the
Company of the following, which notice shall provide reasonable detail regarding
the relevant event and if applicable a copy of any related correspondence:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement; and
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement.
SECTION 4.12. Certain Rights. Lancit shall use its reasonable best efforts
to obtain for the Company the right to show re-runs of episodes of The Puzzle
Place and Reading Rainbow on terms satisfactory to the Company.
SECTION 4.13. Interim Financing. The Company agrees that it will cooperate
with Lancit in connection with Lancit obtaining interim financing or otherwise
maintaining adequate available cash for the period between the date hereof and
June 30, 1998 (or the Effective Time if sooner). Lancit agrees that it will take
such reasonable actions as the Company may request following consultation with
Lancit in order to obtain such financing or otherwise maintain adequate
available cash and that any such financing or other arrangements will be on
terms reasonably satisfactory to the Company. The Company agrees that such
actions or terms shall not include the non-payment or deferral of, or render
Lancit unable to timely pay, its obligations to its officers, employees,
advisors, consultants and attorneys, in view of the importance of their
continuing services to Lancit, provided that such payments for any given month
do not in the aggregate exceed the aggregate amount thereof for such month set
forth in the cash flow projections referred to in Section 2.16.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND MERGER SUBSIDIARY
The obligations of the Company and Merger Subsidiary to consummate the
Merger are subject to the satisfaction, at or prior to the Effective Time, of
the following conditions:
SECTION 5.01. Due Performance: Accuracy of Representations and Warranties.
Lancit shall have performed in all material respects all of its obligations
required by this Agreement to be performed by it at or prior to the Effective
Time. All representations and warranties of Lancit set forth in this Agreement
and in any certificate or other writing delivered by Lancit pursuant hereto
shall be true and correct at and as of the Effective Time (provided that
representations made as of a specific date shall be required to be true as of
such date only) as if made at and as of such time, except to the extent that any
such incorrect representations or warranties relate to matters which, singly or
in the aggregate, did not have and could not reasonably be expected to have a
Material Adverse Effect (disregarding for purposes of such determination any
exceptions for materiality or Material Adverse Effect contained therein so as
not to "double-count"). The Company and Merger Subsidiary shall have received a
certificate executed on behalf of Lancit by the Chief Executive Officer of
Lancit, to the foregoing effect.
SECTION 5.02. Corporate Action; Documents. The Merger and this Agreement
shall have been approved and adopted by the vote required by Section 903 of the
BCL. The Company shall have received copies, certified by the secretary of
Lancit, of the resolutions of (i) the Board of Directors of Lancit authorizing
and approving the Merger and the execution and delivery of this Agreement and
the Additional Agreements and the consummation of the transactions contemplated
hereby and thereby and (ii) holders of the requisite two-thirds majority, under
applicable law, of the Lancit Shares approving and adopting this Agreement. The
Company shall have received all other documents it may reasonably request
relating to the existence of Lancit and the Subsidiaries and the authority of
Lancit for this Agreement, all in form and substance satisfactory to the
Company.
SECTION 5.03. Legal Opinions. The Company shall have received an opinion of
Christy & Viener, counsel for Lancit, dated the Effective Time, reasonably
satisfactory in form and substance to counsel for the Company and covering the
matters set forth in Sections 2.01, 2.02, 2.03, 2.04, 2.05 and 2.07. It is
understood that in-house counsel may render the opinion with respect to the
matters referred to in Section 2.05 insofar as it applies to contracts and
agreements that Lancit and the Company reasonably agree are not material.
SECTION 5.04. Registration Statement; Listing. (a) The Registration
Statement shall have become effective under the Securities Act and shall not be
the subject of any stop order or proceedings seeking a stop order.
(b) The shares of Company Common Stock issuable to Lancit shareholders
pursuant to the Merger shall have been approved for listing on the NASDAQ,
subject to official notice of issuance.
SECTION 5.05. No Prohibition. No provision of any applicable law,
regulation, judgment, order, decree or injunction shall prohibit or restrain the
consummation of the Merger.
SECTION 5.06. Consents; Approvals. All actions by or in respect of or
filings with and all consents, approvals and licenses of any governmental or
other regulatory body and all consents from third parties, in each case required
(i) in connection with the execution, delivery and performance of this
Agreement, (ii) for the consummation of the Merger, or (iii) for the Surviving
Corporation and the Subsidiaries to conduct the Business in substantially the
manner now conducted (but in the case of this clause (iii), such actions,
filings, consents, approvals and licenses shall, with respect to third parties,
only include those arising under or in connection with any agreement or
contract), including, without limitation, those consents set forth in Schedule
5.06, shall have been obtained in form and substance reasonably satisfactory to
the Company and no such consent, authorization or approval shall have been
revoked.
SECTION 5.07. Governmental Action. There shall not be instituted or pending
any action or proceeding by (a) any government or governmental authority or
agency, or (b) any other Person (which, in the case of any action or proceeding
by any other Person, has a significant possibility of success on the merits),
before any court or governmental authority or agency, (i) challenging or seeking
to make illegal, to delay materially or otherwise directly or indirectly to
restrain or prohibit the consummation of the Merger or seeking to obtain damages
which, individually or in the aggregate, would have a Material Adverse Effect or
a Company MAE or, in the case of an action or proceeding by any government or
governmental authority or agency, otherwise directly or indirectly relating to
the transactions contemplated by this Agreement, (ii) seeking to restrain or
prohibit the Company's (including its subsidiaries and affiliates) ownership or
operation of all or any material portion of the business or assets of Lancit and
its Subsidiaries, taken as a whole, or to compel the Company or any of its
subsidiaries or affiliates to dispose of or hold separate all or any material
portion of the business or assets of Lancit and its Subsidiaries, taken as a
whole, (iii) seeking to impose or confirm material limitations on the ability of
the Company or any of its subsidiaries or affiliates to effectively control the
business or operations of Lancit and its Subsidiaries, taken as a whole, or
effectively to exercise full rights of ownership of the Surviving Corporation,
or (iv) seeking to require divestiture by the Company or any of its subsidiaries
or affiliates of any shares of stock of the Surviving Corporation, and no court,
arbitrator or governmental body, agency or official shall have issued any
judgment, order, decree or injunction, and there shall not be any statute, rule
or regulation, that, in the reasonable judgment of the Company is likely,
directly or indirectly, to result in any of the consequences referred to in the
preceding clauses (i) through (iv).
SECTION 5.08. Appraisal Rights. If the holders of the Lancit Shares are
entitled to appraisal rights under the BCL, the holders of not more than 5% of
the outstanding Lancit Shares shall have properly filed demands for appraisal of
their Lancit Shares in accordance with the BCL.
SECTION 5.09. Rule 145(c). The Company shall have received undertakings in
writing from each person, if any, who might reasonably be considered
"affiliates" of the Company within the meaning of Rule 145(c) of the SEC
pursuant to the Securities Act (each, an "Affiliate"), in each case in form and
substance satisfactory to counsel for the Company providing (i) such Affiliate
will agree to procedures to place an appropriate legend on the shares of Company
Common Stock to be received by such Affiliate in the Merger, (ii) such Affiliate
will notify the Company in writing before offering for sale or selling or
otherwise disposing of any shares of Company Common Stock owned by such
Affiliate and (iii) no such sale or other disposition shall be made unless and
until the Affiliate has supplied to the Company an opinion of counsel for the
Affiliate (which opinion and counsel shall be reasonably satisfactory to the
Company) to the effect that such transfer is not in violation of the Securities
Act.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF LANCIT
The obligations of Lancit to consummate the Merger are subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
SECTION 6.01. Due Performance; Accuracy of Representations and Warranties.
The Company shall have performed in all material respects all obligations
required by this Agreement to be performed by it at or prior to the Effective
Time. All representations and warranties of the Company set forth in this
Agreement and in any certificate or other writing delivered by the Company
pursuant hereto shall be true and correct at and as of the Effective Time
(provided that representations made as of a specific date shall be required to
be true as of such date only) as if made at and as of such time except to the
extent that any such incorrect representations or warranties relate to that
which, singly or in the aggregate, did not have and could not reasonably be
expected to have a Company MAE (disregarding for purposes of such determination
any exceptions for materiality or Company MAE contained therein so as not to
"double-count"). Lancit shall have received a certificate executed on behalf of
the Company by a duly authorized officer of the Company to the foregoing effect.
SECTION 6.02. Corporate Action. The Merger and this Agreement shall have
been approved and adopted by the vote required by Section 903 of the BCL. Lancit
shall have received copies of the resolutions, certified by the Secretary of the
Company and Merger Subsidiary, respectively, of the Boards of Directors or
Executive Committee of the Company and Merger Subsidiary, authorizing and
approving the execution and delivery of this Agreement and the Additional
Agreements and the consummation of the transactions contemplated hereby and
thereby.
SECTION 6.03. Legal Opinions. Lancit shall have received an opinion of
counsel for the Company, dated the Effective Time, reasonably satisfactory in
form and substance to counsel for Lancit and covering the matters set forth in
Sections 3.01, 3.02, 3.03, 3.04 and 3.10.
SECTION 6.04. Registration Statement; Listing. (a) The Registration
Statement shall have become effective under the Securities Act and shall not be
the subject of any stop order or proceedings seeking a stop order.
(b) The shares of Company Common Stock issuable to Lancit shareholders
pursuant to the Merger shall have been approved for listing on the NASDAQ,
subject to official notice of issuance.
SECTION 6.05. Governmental Action; No Prohibition. No provision of any
applicable law, regulation, judgment, order, decree or injunction shall prohibit
or restrain the consummation of the Merger.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (except in the case of
Section 7.01(f), notwithstanding any approval of this Agreement by the
shareholders of Lancit):
(a) by mutual written consent of Lancit on the one hand and the Company on
the other hand;
(b) by either Lancit or the Company, if the Merger has not been consummated
by June 30, 1998, provided that (i) the party seeking to exercise such right is
not then in breach in any material respect of any of its obligations under this
Agreement and (ii) if the Merger has not been consummated by June 30, 1998
because of a delay caused by the Company (even if such delay does not constitute
a material breach by the Company of its obligations under this Agreement), the
Company shall not be permitted to terminate this Agreement under this Section
7.01(b) prior to August 1, 1998;
(c) by either Lancit or the Company, if the Company (in the case of
termination by Lancit), or Lancit (in the case of termination by the Company)
shall have breached in any material respect any of its obligations under this
Agreement or any representation and warranty of the Company (in the case of
termination by Lancit) or Lancit (in the case of termination by the Company)
shall have been incorrect in any material respect when made or, except as to
representations made as of a specific date, at any time prior to the Closing,
except to the extent that any such incorrect representations or warranties
relate to matters which, singly or in the aggregate (disregarding for purposes
of such determination any exceptions for materiality, Material Adverse Effect or
Company MAE contained therein so as not to "double-count"), did not have and
could not reasonably be expected to have a Company MAE or Material Adverse
Effect, as the case may be; provided, that prior to exercising any termination
right pursuant to this Section 7.01(c), the party seeking to terminate shall
give written notice of its intention to terminate to the other party, and the
other party shall have 15 business days to cure the breach or failure of
compliance giving rise to such right to terminate;
(d) by either Lancit or the Company, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining the Company or Lancit
from consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(e) by the Company if the Board of Directors of Lancit shall have withdrawn
or modified or amended, in a manner adverse to the Company, its approval or
recommendation of this Agreement and the Merger or its recommendation that the
shareholders of Lancit adopt and approve this Agreement and the Merger, or
approved, recommended or endorsed any Acquisition Proposal for a transaction
other than the Merger (including a tender or exchange offer for Lancit Shares)
or if Lancit has failed promptly to call Lancit Shareholders Meeting or failed
as promptly as practicable after the Registration Statement is declared
effective to mail the Proxy Statement to its shareholders or failed to include
in such statement the recommendation referred to above;
(f) prior to approval of the Merger by Lancit shareholders, by Lancit on 48
hours prior notice if prior to the Effective Time, and based on a good faith
determination (following consultation with outside counsel) that failure to take
such action would result in a breach of the Board of Directors' fiduciary
duties, the Board of Directors of Lancit shall have withdrawn or modified or
amended, in a manner adverse to the Company, its approval or recommendation of
this Agreement and the Merger or its recommendation that shareholders of Lancit
adopt and approve this Agreement and the Merger in order to permit Lancit to
execute a definitive agreement providing for the acquisition of Lancit or in
order to approve a tender or exchange offer for any or all of the Shares, in
either case, that is determined by the Board of Directors of Lancit to be on
financial terms more favorable to Lancit's shareholders than the Merger;
provided that Lancit shall be in compliance with Section 4.09; and
(g) by either Lancit or the Company if, at a duly held shareholders meeting
of Lancit or any adjournment thereof at which this Agreement and the Merger is
voted upon, the requisite shareholder adoption and approval shall not have been
obtained.
The party desiring to terminate this Agreement pursuant to Sections
7.01(b)-7.01(g) shall give written notice of such termination to the other party
in accordance with Section 9.02.
SECTION 7.02. Effect of Termination; Representations and Warranties. In the
event of termination of this Agreement in accordance with Section 7.01, no party
or parties hereto shall have any liability or further obligation to the other
party or parties to this Agreement and Plan of Merger, except as provided in
Sections 4.09 and 9.06, and except that the foregoing shall not relieve any
party of liability for damages in the event of the breach by such party of its
obligations under this Agreement.
SECTION 7.03. Amendment; Extension; Waiver. This Agreement (including the
Exhibits hereto) may be amended by the parties at any time before or after any
required approval of matters presented in connection with the Merger by Lancit's
shareholders, except as precluded by the BCL. Any such amendment shall be in
writing signed on behalf of each of the parties. At any time prior to the
Effective Time, either Lancit or the Company may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (iii) waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
any instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE 8
FURTHER ASSURANCES
At and after the Effective Time, the officers and directors of the
Surviving Corporation will be authorized to execute and deliver, in the name and
on behalf of Lancit or Merger Subsidiary, any deeds, bills of sale, assignments
or assurances and to take and do, in the name and on behalf of Lancit or Merger
Subsidiary, any other actions and things to vest, perfect or confirm of record
or otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets of Lancit acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Entire Agreement. This Agreement, together with the schedules
hereto, the Disclosure Schedule and the exhibits thereto, sets forth the entire
understanding of the parties with respect to its subject matter, merges and
supersedes all prior and contemporaneous understandings of the parties hereto
with respect to its subject matter, except any confidentiality agreements
executed by Lancit and the Company. Failure of any party to enforce any
provision of this Agreement shall not be construed as a waiver of its rights
under such or any other provision.
SECTION 9.02. Communications. All notices, consents and other
communications given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered by hand or by Federal Express
or a similar overnight courier to, (b) five days after being deposited in any
United States post office enclosed in a postage prepaid registered or certified
envelope addressed to, or (c) when successfully transmitted by telecopier (with
a confirming copy of such communication to be sent as provided in (a) or (b)
above) to, the party for whom intended, at the address or telecopier number for
such party set forth below, or to such other address or telecopier number as may
be furnished by such party by notice in the manner provided herein; provided,
however, that any notice of change of address or telecopier number shall be
effective only upon receipt.
If to the Company or Merger Subsidiary:
RCN Corporation
105 Carnegie Center
Princeton, New Jersey 08540
Attention: General Counsel
Facsimile No.: (609) 734-3830
With a copy to:
Davis Polk & Wardwell
450 Lexington Ave.
New York, NY 10017
Attention: William L. Taylor
Facsimile No.: (212) 450-4800
If to Lancit:
Lancit Media Entertainment, Ltd.
601 West 50th Street
New York, New York 10019
Attention: Susan L. Solomon
Facsimile No.: (212) 977-9164
and (212) 245-2541
With a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Anthony J. Carroll
Facsimile No.: (212) 632-5555
SECTION 9.03. No Assignment; Successors and Assigns; No Third Party
Beneficiaries. This Agreement shall be binding on, enforceable against and inure
to the benefit of the parties hereto and their respective successors and
assigns, and nothing herein is intended to confer any right, remedy or benefit
upon any other Person. Neither Lancit nor the Company may assign its rights or
delegate its obligations under this Agreement without the express written
consent of the other. Except as set forth in Section 4.10, no provision of this
Agreement is intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
SECTION 9.04. Public Announcements. Each party will consult with the others
before issuing any press release or making any public statement or disclosure
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable Law or any listing agreement with
NASDAQ, will not issue any such press release or make any such public statement
prior to such consultation. Following the execution hereof, the Company and
Lancit shall issue press releases in the forms previously agreed upon.
SECTION 9.05. Survival of Representations, Warranties and Agreements. None
of the representations and warranties made by Lancit or the Company in this
Agreement, the Disclosure Schedule, the schedules to this Agreement or any
document or certificate delivered pursuant hereto shall survive the Effective
Time. This Section 9.05 shall not limit any covenant or agreement which by its
terms contemplates performance after the Effective Time.
SECTION 9.06. Expenses. All printing and filing fees shall be paid one-half
by Lancit and one-half by the Company. In the event the Merger occurs, the
Company shall bear and pay all costs, expenses and fees incurred by Lancit in
respect of the transactions contemplated herein. Except as otherwise provided in
this Section 9.06 and in Section 4.09, each party hereto shall bear its own
costs and expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 9.07. Governing Law; Consent to Jurisdiction. This Agreement shall
in all respects be governed by and construed in accordance with the laws of the
State of New York. Except as otherwise expressly provided in this Agreement, the
parties hereto agree that any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby shall be brought in the United
States District Court, Southern District of New York or any competent court of
the State of New York sitting in Manhattan, New York and each of the parties
hereby consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Each party hereby waives the right to any other jurisdiction or venue to which
any of them may be entitled by reason of its present or future domicile. The
parties agree that service of process may be made by U.S. registered mail,
return receipt requested, to a party at its address set forth in Section 9.02
shall be deemed effective.
SECTION 9.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 9.09. Savings Clause. If any provision of this Agreement is held to
be invalid or unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected thereby, and such
provision shall be carried out as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
SECTION 9.10. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 9.11. Construction. Headings contained in this Agreement are for
convenience only and shall not be used in the interpretation of this Agreement.
References herein to the Agreement shall be deemed to include all Schedules
(including the Disclosure Schedule) and Exhibits hereto, and references herein
to Sections, Schedules and Exhibits are to the sections, schedules and exhibits
of this Agreement. As used herein, the singular includes the plural, and the
masculine, feminine and neuter gender each includes the others where the context
so indicates.
SECTION 9.12. Schedules. Any matter disclosed on any Item of the Disclosure
Schedule shall be deemed to be disclosed in all other Items of the Disclosure
Schedule to the extent it would reasonably be expected to relate thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
LANCIT MEDIA ENTERTAINMENT, LTD.
By: /s/ SUSAN L. SOLOMON
---------------------------------------------
Susan L. Solomon
Chairman of the Board and Chief
Executive Officer
RCN CORPORATION
By: /s/ PAUL SIGMUND
---------------------------------------------
Name: Paul Sigmund
Title: Executive Vice President
LME ACQUISITION CORPORATION
By: /s/ PAUL SIGMUND
---------------------------------------------
Name: Paul Sigmund
Title: Executive Vice President
Dates Referenced Herein and Documents Incorporated by Reference
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