EXHIBIT 10.14
OPTION AGREEMENT
BETWEEN
RESNET COMMUNICATIONS, INC.
AND
TCI SATELLITE ENTERTAINMENT, INC.
Dated as of October 21, 1996
EXECUTION COPY
OPTION AGREEMENT
----------------
This OPTION AGREEMENT (this "Agreement") is entered into as of October
21, 1996, by and between ResNet Communications, Inc., a Delaware corporation
("ResNet"), and TCI Satellite Entertainment, Inc., a Delaware corporation ("TCI-
Satellite") (each of TCI-Satellite and ResNet being referred to herein
individually as a "Party" and together as the "Parties").
RECITALS
--------
A. Simultaneously with the execution of this Agreement, the Parties
are entering into a Subscription Agreement (the "Subscription Agreement")
pursuant to which TCI-Satellite is purchasing from ResNet, and ResNet is issuing
to TCI-Satellite, 52,520 shares of the common stock of ResNet, which shares
represent, immediately after such issuance, 4.99% of the issued and outstanding
common stock of ResNet (the "Initial Stock").
B. Simultaneously with the execution of this Agreement, the Parties
are entering into a Subordinated Convertible Term Loan Agreement (the "Loan
Agreement") between TCI-Satellite, as lender, and ResNet, as borrower, the loans
under which are convertible under certain circumstances into common stock of
ResNet (the "Conversion Stock").
C. ResNet wishes to grant to TCI-Satellite an option to acquire
260,200 additional shares of common stock of ResNet, as such number of shares
may be adjusted in accordance with the terms of this Agreement, that when
combined with the Initial Stock, the Conversion Stock, and certain additional
stock that will be issued to TCI-Satellite under the terms of the Loan Agreement
or the Conversion Warrant upon exercise of the option granted hereunder (the
"Reconciliation Stock") will give TCI-Satellite the right to acquire shares of
common stock of ResNet representing, immediately after issuance of all such
shares, assuming no issuance of any additional equity in ResNet other than the
Initial Stock, the Conversion Stock, the Reconciliation Stock, and the Option
Stock, 50% of the issued and outstanding common stock of ResNet on a fully
diluted basis, and TCI-Satellite wishes to obtain such an option, all on the
terms and conditions set forth herein.
AGREEMENT
---------
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:
1. Definitions.
-----------
For purposes of this Agreement, the following terms shall have the following
meanings:
"Affiliate" of any Person at any time shall mean any other Person
---------
directly or indirectly controlling, controlled by or under common control with
such Person at such time; with "control" for such purposes meaning ownership of
securities representing at least 75% of the economic interests in and 75% of the
voting power of a Person.
"Agreement" shall mean this Option Agreement, including any exhibits
---------
and attachments hereto, as amended from time to time.
"Certificate" shall have the meaning specified in Section 2(d).
-----------
"Conversion Stock" shall have the meaning specified in Recital B.
----------------
"Conversion Warrant" shall have the meaning specified in Section 2(e).
------------------
"Final ResNet Fair Market Value" shall have the meaning specified in
------------------------------
Section 2.1(b)(i).
"Governmental Authority" shall mean any federal, state, municipal or
----------------------
local governmental authority or political subdivision thereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
-------
of 1976, as amended, and the rules and regulations thereunder, as in effect from
time to time.
"Initial Stock" shall have the meaning specified in Recital A.
-------------
"Investment Company Act" shall mean the Investment Company Act of
----------------------
1940, as amended, and the rules and regulations thereunder as in effect from
time to time.
"Legal Requirement" shall mean the requirements of any law, ordinance,
-----------------
statute, rule, regulation, code, order, judgment, decree, injunction, franchise,
determination, approval, permit, license, authorization or other requirement of
any Governmental Authority.
"Lien" shall mean any mortgage, lien, pledge, charge, claim, security
----
interest or encumbrance of any kind.
"Loan Agreement" shall have the meaning specified in Recital B.
--------------
"LodgeNet" shall mean LodgeNet Entertainment Corporation, a Delaware
--------
corporation, including any successor corporation.
"1933 Act" shall mean the Securities Act of 1933, as amended, and the
--------
rules and regulations thereunder as in effect from time to time.
"Option" shall have the meaning specified in Recital C.
------
-2-
"Option Notice" shall have the meaning specified in Section 2(c).
-------------
"Option Stock" shall have the meaning specified in Section 2(a).
------------
"Option Warrant" shall have the meaning specified in Section 2(e).
--------------
"Other Property" shall have the meaning specified in Section 2(g)(ii).
--------------
"Parties" and "Party" shall have the meanings specified in the
------- -----
Preamble.
"Person" shall mean and include an individual, a corporation, a
------
partnership (general, limited or limited liability), a joint venture, a limited
liability company, an association, a trust or any other organization or entity,
including a Governmental Authority.
"Preliminary ResNet Fair Market Value" shall have the meaning
------------------------------------
specified in Section 2.1(b)(i).
"Purchase Price" shall have the meaning specified in Section 2(b).
--------------
"Reconciliation Stock" shall have the meaning specified in Recital C.
--------------------
"Regulatory Restrictions" shall have the meaning specified in
-----------------------
Section 2(f).
"ResNet" shall have the meaning specified in the Preamble.
------
"Subscription Agreement" shall have the meaning specified in
----------------------
Recital A.
"TCI-Satellite" shall have the meaning specified in the Preamble.
-------------
"Transaction Documents" shall have the meaning specified in
---------------------
Section 8(j).
2. Option to Purchase Stock.
------------------------
(a) Grant of Option. Upon the terms and subject to the conditions set
---------------
forth in this Agreement, ResNet hereby grants to TCI-Satellite an irrevocable
option (the "Option") to purchase the Option Stock. In no event shall TCI-
Satellite have the right to acquire in excess of 50% of the issued and
outstanding common stock of ResNet, taking into account the Initial Stock, the
Conversion Stock, the Reconciliation Stock, and the Option Stock on a combined
basis.
(b) The purchase price for the Option Stock (the "Purchase Price")
shall be determined in accordance with the following procedures:
(i) TCI-Satellite and ResNet each shall select a nationally recognized
investment banker who shall determine, within 30 days after selection, the net
fair market value of ResNet on a
-3-
going concern basis, as of the date of exercise of the Option, taking into
account all indebtedness of ResNet (including any guarantees of indebtedness for
borrowed money) and the current assets and current liabilities of ResNet, based
upon a transaction negotiated on an arms'-length basis between a willing buyer
and willing seller, with neither having any compulsion to buy or sell and with
each party having full knowledge of all of the facts and circumstances of
ResNet's business and properties (the "Preliminary ResNet Fair Market Value").
If the Preliminary ResNet Fair Market Value determinations of the two investment
bankers vary by more than 10%, such investment bankers shall select a third
nationally recognized investment banker who shall make an independent
determination of the Preliminary ResNet Fair Market Value within 30 days after
being selected. The final determination of the net fair market value of ResNet
(the "Final ResNet Fair Market Value") will be the average of the Preliminary
ResNet Fair Market Value determination of such third investment banker and the
Preliminary ResNet Fair Market Value determination of the one of the first two
investment bankers that is closest to the Preliminary ResNet Fair Market Value
determination of such third investment banker.
(ii) The Purchase Price shall be determined by the two investment
bankers whose valuations determined the Final ResNet Fair Market Value by
multiplying (A) the sum of (1) the Final ResNet Fair Market Value, and (2) the
Purchase Price, by (B) a fraction the numerator of which is the number of shares
of Option Stock to be issued to TCI-Satellite pursuant to exercise of the Option
and the denominator of which is the total number of shares of issued and
outstanding common stock of ResNet (including the number of shares of Option
Stock to be issued to TCI-Satellite pursuant to exercise of the Option and
assuming prior issuance of the maximum number of shares of Conversion Stock and
Reconciliation Stock), and adjusting the resulting product as such investment
bankers determine to be appropriate to reflect any control premium or discount
for lack of marketability associated with the issuance of the Option Stock to
TCI-Satellite pursuant to exercise of the Option, provided that if such
investment bankers do not agree on the appropriate amount of any control premium
or discount for lack of marketability associated with the issuance of the Option
Stock to TCI-Satellite pursuant to exercise of the Option, then any such premium
or discount shall be determined by averaging the determinations of such
investment bankers.
(iii) ResNet shall pay the fees and expenses of the investment banker
selected by it, TCI-Satellite shall pay the fees and expenses of the investment
banker selected by it, and ResNet and TCI-Satellite each shall pay one-half of
the fees and expenses of any third investment banker selected by the first two
investment bankers; provided, however, that if TCI-Satellite elects not to
purchase the Option Stock after the determination of the Purchase Price, TCI-
Satellite shall pay all fees and expenses of both or all three of the investment
bankers, as applicable, and TCI-Satellite shall have no other obligation or
liability with respect to its decision not to purchase the Option Stock.
(c) Manner of Exercise. TCI-Satellite shall exercise the Option by
------------------
delivering a written notice of exercise (the "Option Notice") to ResNet;
provided, however, that TCI-Satellite may rescind its notice of exercise by
delivering to ResNet a written notice of rescission within 30 days after the
determination of the Purchase Price in accordance with Section 2(b), subject to
the provisions of Section 2(b)(iii).
-4-
(d) Payment of Purchase Price; Issuance of Shares. The Purchase Price
---------------------------------------------
shall be payable on the date selected by TCI-Satellite that is within 30 days
after the date of the Option Notice, subject to obtaining any required approval
from a Governmental Authority, including compliance with the HSR Act, by wire
transfer of immediately available funds to an account that has been designated
by written notice by ResNet to TCI-Satellite. Notwithstanding the preceding
sentence, in ResNet's sole discretion, the Purchase Price may be paid in whole
or in part in property or services mutually acceptable to ResNet and TCI-
Satellite in lieu of cash. Upon receipt of the Purchase Price, ResNet shall
issue and deliver a certificate (the "Certificate") in the name of TCI-Satellite
for the shares of the Option Stock to be issued pursuant to exercise of the
Option, and the Parties will execute and deliver a cross-receipt for the
Purchase Price and the Option Stock.
(e) Time for Exercise and Lapse of Option. The Option may be
-------------------------------------
exercised at any time for all of the Option Stock on or after 60 days after the
third anniversary of the date first above written. The Option shall lapse if not
previously exercised upon the Maturity Date (including any Extension thereof)
under and as defined in the Loan Agreement; provided, however, that if on such
Maturity Date under the Loan Agreement, ResNet issues to TCI-Satellite a warrant
to acquire the number of shares of common stock of ResNet equal to the
unconverted portion of the Conversion Stock (the "Conversion Warrant"), then
ResNet, also shall issue to TCI-Satellite, on the same date as issuance of the
Conversion Warrant, a warrant to acquire the number of shares of common stock of
ResNet equal to the unexercised portion of the Option Stock (the "Option
Warrant"). The Option Warrant shall be in the form of Exhibit A to this
Agreement and shall provide that (i) TCI-Satellite may acquire the Option Stock
not previously acquired by TCI-Satellite by exercise of the Option hereunder if
TCI-Satellite was prevented from acquiring such Option Stock due to the
Regulatory Restrictions for consideration equal to the Purchase Price for such
Option Stock hereunder assuming an exercise of the Option on the date of
issuance of the Option Warrant for a period of nine months thereafter and for
consideration equal to the Purchase Price determined at the time of exercise of
the Option Warrant for an additional two-year period, (ii) TCI-Satellite may
transfer the Option Warrant together with, but not separately from, the
Conversion Warrant, subject to a right of first refusal by LodgeNet, and (iii)
the Option Warrant either must be exercised to acquire the Option Stock
simultaneously with exercise of the Conversion Warrant or the Option Warrant
will be terminated upon exercise of the Conversion Warrant without a
simultaneous exercise of the Option Warrant and in any event the Option Warrant
will expire two years and nine months after the date of issuance if not
previously exercised.
(f) Limitation on Exercise of Option. TCI-Satellite will not exercise
--------------------------------
the Option to the extent that such exercise would cause ResNet or TCI-Satellite
to violate any Legal Requirement, including, without limitation, a violation of
47 U.S.C. (S) 533(a)(2) or any regulations of the FCC promulgated thereunder if
any SMATV service offered by ResNet continued to be offered after such exercise
of the Option separate and apart from any applicable franchised cable service
(the "Regulatory Restrictions"), and any purported exercise of the Option that
would result in a violation of the Regulatory Restrictions shall be deemed null
and void. TCI-Satellite shall have the right, but shall have no obligation, to
exercise the Option at any time permitted under Section 2(e) that such exercise
would not violate the Regulatory Restrictions.
-5-
(g) Adjustment. The number of shares of Option Stock issuable upon
----------
exercise of the Option under this Agreement shall be subject to adjustment from
time to time as follows:
(i) Stock Dividends, Subdivisions and Combinations. If at
any time ResNet shall:
(A) take a record of the holders of its common stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of common stock,
(B) subdivide its outstanding shares of common stock
into a larger number of shares of common stock, or
(C) combine its outstanding shares of common stock into
a smaller number of shares of common stock,
then the number of shares of Option Stock issuable upon exercise of the Option
immediately after the happening of any such event shall be adjusted to consist
of the number of shares of common stock which a record holder of the number of
shares of Option Stock issuable upon exercise of the Option immediately prior to
the happening of such event would own or be entitled to receive after the
happening of such event.
(ii) Reorganization, Reclassification, Merger, Consolidation
-------------------------------------------------------
or Disposition of Assets. If at any time ResNet shall reorganize its capital,
------------------------
reclassify its capital stock, consolidate with or merge into another corporation
(where ResNet is not the surviving corporation), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of common stock of ResNet, then TCI-Satellite
shall have the right thereafter to receive, upon exercise of the Option, the
number of shares of common stock of the successor or acquiring corporation and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Option Stock issuable upon exercise of the Option
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation shall expressly assume the due and punctual observance
and performance of each and every covenant and condition of this Agreement to be
performed and observed by ResNet and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of ResNet) in order to
provide for adjustments to the number of shares of Option Stock issuable upon
exercise of the Option which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 2(g). For purposes of this subsection
2(g)(ii), "common stock of the successor or acquiring corporation" shall include
stock of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock
-6-
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock.
(iii) Certain Events. If any event occurs as to which in the
--------------
reasonable opinion of ResNet, in good faith, the other provisions of this
Section 2(g) are not strictly applicable but the lack of any adjustment would
not in the opinion of ResNet fairly protect the purchase rights of TCI-Satellite
in accordance with the basic intent and principles of such provisions, or if
strictly applicable would not fairly protect the purchase rights of TCI-
Satellite in accordance with the basic intent and principles of such provisions,
then ResNet shall appoint a firm of independent certified public accountants
(which may be the regular auditors of ResNet) of recognized national standing,
which shall give their opinion upon the adjustment, if any, on a basis
consistent with the basic intent and principles established in the other
provisions of this Section 2(g), necessary to preserve, without dilution, the
exercise rights of TCI-Satellite with respect to the Option. Upon receipt of
such opinion, ResNet shall forthwith make the adjustments described therein.
(iv) Successive Adjustments. Any adjustments required by this
----------------------
Section2(g) shall be made, to the extent applicable, successively whenever any
event described in this Section 2(g) shall occur.
3. Representations and Warranties of TCI-Satellite.
-----------------------------------------------
TCI-Satellite represents and warrants to ResNet that:
(a) It (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, (ii) is authorized to
transact business and is in good standing in each state in which its ownership
of assets or conduct of business requires such qualification, and (iii) has all
corporate powers required to carry on its business as conducted on the date
hereof, with such exceptions to clauses (ii) and (iii) as would not have a
material adverse effect on the ability of TCI-Satellite to perform its
obligations under this Agreement or under the Transaction Documents.
(b) The execution, delivery and performance by it of this Agreement
and the Transaction Documents are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. Each Person executing
this Agreement and the Transaction Documents on behalf of TCI-Satellite is fully
authorized to execute and deliver the same.
(c) The execution, delivery and performance by it of this Agreement
and the Transaction Documents require no material action by or in respect of, or
filing with, any Governmental Authority other than those that have been obtained
or made and are in full force and effect.
(d) No consent by any Person under any contract to which it is a party
or to which its assets are subject is required or necessary for the execution,
delivery and performance by it of this
-7-
Agreement and the Transaction Documents, with such exceptions as would not have
a material adverse effect on the ability of TCI-Satellite to perform its
obligations under this Agreement or under the Transaction Documents.
(e) The execution, delivery and performance by it of this Agreement
and the Transaction Documents do not and will not (x) contravene its certificate
of incorporation or bylaws or (y) result in or constitute a breach or default
(including any event that, with the passage of time or giving of notice, or
both, would become a breach or default) under any applicable Legal Requirement
or any judgment, order, decree, contract, license, lease, indenture, mortgage,
loan agreement, note, security agreement or other agreement or instrument to
which it is a party or by which any of its properties may be bound, the effect
of which would be to cause a material adverse effect on the ability of TCI-
Satellite to perform its obligations under this Agreement or under the
Transaction Documents.
(f) This Agreement has been duly executed and delivered by it and
constitutes its valid and binding obligation, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies.
(g) There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
TCI-Satellite or any of its Affiliates who might be entitled to any fee or
commission from ResNet or any of its Affiliates in connection with the
execution, delivery and performance of this Agreement or the Transaction
Documents.
(h) TCI-Satellite is acquiring the Option Stock for its own account,
not as a nominee or agent, for investment purposes only and not with a view to
or for the resale, distribution or fractionalization thereof, in whole or in
part.
(i) TCI-Satellite acknowledges that the offer and sale of the Option
Stock to it has not been accomplished by any form of general solicitation or
general advertising, including, but not limited to, any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media, or broadcast over television or radio and any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(j) TCI-Satellite acknowledges its understanding that the offering and
sale of the Option Stock is intended to be exempt from registration under the
1993 Act by virtue of section 4(2) of the 1933 Act and the provisions of Rule
506 of Regulation D promulgated thereunder. In furtherance thereof, TCI-
Satellite acknowledges that:
(i) It has the financial ability to bear the economic risk of its
investment in the Option Stock (including its possible loss), has adequate
means for providing for its current needs and contingencies and has no need
for liquidity with respect to its investment in the Option Stock;
-8-
(ii) It has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment
in the Option Stock and protecting its own interests in connection with the
investment and has obtained, in its judgment, sufficient information from
ResNet to evaluate the merits and risks of an investment in the Option
Stock, and it has not utilized any Person as its purchaser representative in
connection with evaluating such merits and risks; and
(iii) It is an "accredited investor" within the meaning of Regulation
D promulgated under the 1933 Act.
(k) TCI-Satellite acknowledges that:
(i) It has been furnished any documents it has requested, has
carefully read any such documents and understands and has evaluated the
risks of a purchase of the Option Stock, and has relied solely (except as
indicated in subsections (ii) and (iii) below) on the information contained
in any such documents;
(ii) It has been provided an opportunity to obtain any additional
information concerning the Option Stock and ResNet;
(iii) It has been given the opportunity to ask questions of, and
receive answers from, representatives of ResNet concerning the terms and
conditions of the Option and other matters pertaining to this investment,
and has been given the opportunity to obtain such additional information
necessary to verify the accuracy of the information which was provided in
order for it to evaluate the merits and risks of an investment in the Option
Stock to the extent ResNet possesses such information or can acquire it
without unreasonable effort or expense, and has not been furnished any other
offering literature or prospectus except as mentioned herein; and
(iv) It has determined that the Option Stock is a suitable investment
for it and that at this time it could bear a complete loss of its
investment.
(l) TCI-Satellite agrees that it will not sell or otherwise transfer
the Option Stock without registration under the 1993 Act or an exemption
therefrom, and fully understands and agrees that it must bear the economic risk
of its investment for an indefinite period of time because, among other reasons,
the Option Stock will not be registered under the 1993 Act or under the
securities laws of certain states and, therefore, cannot be resold, pledged,
assigned or otherwise disposed of unless the Option Stock is subsequently
registered under the 1933 Act and under the applicable securities laws of such
states or an exemption from such registration is available. TCI-Satellite
understands that ResNet is under no obligation to register the Option Stock on
its behalf or to assist it in complying with any exemption from registration
under the 1933 Act or any applicable state securities laws. TCI-Satellite also
understands that sales or transfers of the Options Stock are further restricted
by the provisions of the Stockholders' Agreement included in the Transaction
Documents.
-9-
(m) There are no suits, claims, grievances, actions, proceedings, or
governmental investigations pending or, to the best knowledge of TCI-Satellite,
threatened against or affecting TCI-Satellite which (i) seek to restrain or
enjoin the consummation of the transactions contemplated by this Agreement or
the Transaction Documents or (ii) might have a material adverse effect on the
ability of TCI-Satellite to perform its obligations under this Agreement or
under the Transaction Documents. TCI-Satellite is not in violation of any term
of any judgment, decree, injunction, or order to which it is subject, which
violation could have a material adverse effect on the ability of TCI-Satellite
to perform its obligations under this Agreement or under the Transaction
Documents.
4. Representations and Warranties of ResNet.
----------------------------------------
ResNet represents and warrants to TCI-Satellite that:
(a) It (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, (ii) is authorized to
transact business and is in good standing in each state in which its ownership
of assets or conduct of business requires such qualification, and (iii) has all
corporate powers required to carry on its business as conducted on the date
hereof and as proposed to be conducted, with such exceptions to clauses (ii) and
(iii) as would not have a Material Adverse Effect on ResNet or a material
adverse effect on the ability of ResNet to perform its obligations under this
Agreement or under the Transaction Documents.
(b) The execution, delivery, and performance by it of this Agreement
and the Transaction Documents are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. Each Person executing
this Agreement and the Transaction Documents on behalf of ResNet is fully
authorized to execute and deliver the same.
(c) The execution, delivery and performance by it of this Agreement
and the Transaction Documents require no material action by or in respect of, or
material filing with, any Governmental Authority other than those that have been
obtained or made and are in full force and effect.
(d) No consent by any Person under any contract to which it or
LodgeNet is a party or to which their respective assets are subject is required
or necessary for the execution, delivery and performance by it of this Agreement
and the Transaction Documents, except those set forth on Schedule 4(d) all of
which have been obtained and are in full force and effect.
(e) The execution, delivery and performance by it of this Agreement
and the Transaction Documents do not and will not (x) contravene its certificate
of incorporation or bylaws or (y) result in or constitute a breach or default
(including any event that, with the passage of time or giving of notice, or
both, would become a breach or default) under any applicable Legal Requirement
or any judgment, injunction, order, decree, contract, license, lease, indenture,
mortgage, loan agreement, note or other agreement or instrument to which it is a
party or by which any of its properties may be bound, the effect of which would
be to cause a Material Adverse Effect on ResNet or a material
-10-
adverse effect on the ability of ResNet to perform its obligations under this
Agreement or under the Transaction Documents.
(f) This Agreement has been duly executed and delivered by it
constitutes its valid and binding obligation, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by the principles governing the availability of
equitable remedies.
(g) LodgeNet and ResNet are being represented in connection with the
transactions contemplated by the Transaction Documents by Xxxxx Xxxxxx, Inc.,
and LodgeNet will be responsible for payment of all fees and expenses in
connection with such representation. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of ResNet or any of its Affiliates who might be entitled to any fee or
commission from TCI-Satellite or any of its Affiliates in connection with the
execution, delivery and performance of this Agreement or the Transaction
Documents.
(h) The Option Stock, when paid for by and issued to TCI-Satellite in
accordance with the terms of this Agreement, will be duly and validly issued,
fully paid and nonassessable. Upon issuance of the Option Stock, ResNet will
deliver to TCI-Satellite good and valid title to the Option Stock, free and
clear of any Liens. The Option Stock is not subject to any preemptive rights or
other similar rights. Assuming that the representations and warranties of TCI-
Satellite contained in Sections 3(h), (i), (j), (k), and (l) are true and
correct, when issued to TCI-Satellite in accordance with the provisions hereof,
the Option Stock will have been issued in accordance with the registration or
qualification provisions of the 1933 Act and any relevant state securities laws
or pursuant to valid exemptions therefrom.
(i) The authorized capital stock of ResNet consists of 10,000,000
shares of common stock, par value $.01 per share, of which 1,000,000 shares are
issued and outstanding, and 5,000,000 shares of preferred stock of which no
shares are issued and outstanding. Immediately prior to issuance of the Initial
Stock to TCI-Satellite under the Subscription Agreement, all of the shares of
issued and outstanding capital stock of ResNet are owned beneficially and of
record by LodgeNet. There are no outstanding or authorized (i) securities of
ResNet convertible into or exchangeable or exercisable for any shares of its
capital stock, or (ii) subscriptions, options, warrants, calls, rights,
commitments, or other agreements or obligations of any kind obligating ResNet to
issue any additional shares of its capital stock or any other securities
convertible into or evidencing the right to acquire or subscribe for any shares
of its capital stock. ResNet does not directly or indirectly own (beneficially
or of record) any stock or other ownership in or control any other entity.
(j) ResNet is not an "investment company" or a company "controlled" by
an investment company within the meaning of the Investment Company Act, and
ResNet has not relied on rule 3a-2 under the Investment Company Act as a means
of excluding it from the definition of an "investment company" under the
Investment Company Act at any time within the three year period preceding the
date of issuance of the Initial Stock to TCI-Satellite under the Subscription
Agreement.
-11-
(k) There are no suits, claims, grievances, actions, proceedings, or
governmental investigations pending or, to the best knowledge of ResNet or
LodgeNet, threatened against or affecting ResNet which (i) seek to restrain or
enjoin the consummation of the transactions contemplated by this Agreement or
(ii) might have a Material Adverse Effect on ResNet or a material adverse effect
on the ability of ResNet to perform its obligations under this Agreement or
under the Transaction Documents. ResNet is not in violation of any term of any
judgment, decree, injunction, or order to which it is subject, which violation
could have a Material Adverse Effect on ResNet or a material adverse effect on
the ability of ResNet to perform its obligations under this Agreement or under
the Transaction Documents.
5. Further Assurances. From time to time after the date hereof and without
------------------
further consideration, the Parties will execute and deliver, or arrange for the
execution and delivery of such other instruments of conveyance and transfer or
other instruments or documents and take or arrange for such other actions as may
reasonably be requested to complete more effectively the transactions
contemplated by this Agreement or the Transaction Documents.
6. Conditions to the Obligations of TCI-Satellite.
----------------------------------------------
The obligation of TCI-Satellite to pay the Purchase Price for the
Option Stock is subject to the prior satisfaction of each of the following
conditions:
(a) Any applicable waiting period (and any extension thereof) under
the HSR Act will have expired or been terminated without the commencement or
threat of any litigation by a Governmental Authority of competent jurisdiction
to restrain the issuance of the Option Stock to TCI-Satellite.
(b) All consents required to be obtained by ResNet in connection with
the issuance of the Option Stock to TCI-Satellite shall have been obtained and
remain in full force and effect.
(c) No order, stay, judgment or decree shall have been issued by any
court and be in effect restraining or prohibiting the issuance of the Option
Stock to TCI-Satellite.
(d) ResNet shall simultaneously deliver to TCI-Satellite the
Certificate.
7. Conditions to the Obligations of ResNet.
---------------------------------------
The obligations of ResNet to be performed by ResNet in connection with
issuance of the Option Stock to TCI-Satellite upon an exercise of the Option are
subject to the satisfaction of each of the following conditions:
(a) Any applicable waiting period under the HSR Act (and any extension
thereof) shall have expired or been terminated without the commencement or
threat of any litigation by a
-12-
Governmental Authority of competent jurisdiction to restrain the issuance of the
Option Stock to TCI-Satellite.
(b) All consents required to be obtained by TCI-Satellite in connection with
the issuance of the Option Stock to TCI-Satellite shall have been obtained and
remain in full force and effect.
(c) No order, stay, judgment or decree will have been issued by any court
and be in effect restraining or prohibiting the issuance of the Option Stock to
TCI-Satellite.
(d) TCI-Satellite shall have paid the Purchase Price to ResNet in the manner
specified in Section 2(d).
(e) The Conversion Stock shall have been issued or shall be issued
simultaneously with issuance of the Option Stock.
8. Miscellaneous.
-------------
(a) The Certificate representing shares of Option Stock shall bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SAID ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ALSO ARE
SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN A STOCKHOLDERS'
AGREEMENT DATED AS OF OCTOBER 21, 1996, A COPY OF WHICH IS ON FILE AND
AVAILABLE FOR INSPECTION DURING NORMAL BUSINESS HOURS AT THE PRINCIPAL
OFFICE OF THE CORPORATION, AND ANY ATTEMPTED TRANSFER IN VIOLATION OF
THE TERMS OF SUCH STOCKHOLDERS' AGREEMENT IS VOID.
(b) Except as expressly set forth herein, the fees and expenses (including
the fees of any lawyers, accountants, investment bankers or others engaged by
such party) in connection with this Agreement and the transactions contemplated
hereby whether or not the transactions contemplated hereby are consummated will
be paid by the Party incurring the same.
(c) All documentation, notices, reports and correspondence under this
Agreement shall be submitted and maintained in the English language. As used
herein, the singular shall include the plural and the plural may refer to only
the singular. The use of any gender shall be applicable to all genders. The
captions contained herein are for purpose of convenience only and are not part
of the Agreement. Unless otherwise specified, all references to Sections and
Exhibits in this Agreement are references to Sections of, and Exhibits to, this
Agreement.
-13-
(d) If any portion or portions of this Agreement shall be deemed, for any
reason, invalid or unenforceable, the remaining portion or portions shall
nevertheless be valid, enforceable, and in effect, unless such remaining portion
or portions are not reasonably adequate to accomplish the basic purposes and
intent of the Parties. The Parties will negotiate in good faith to replace any
invalid or unenforceable provision of this Agreement with an enforceable
provision that accomplishes the original intent of the Parties to the extent
reasonably practicable.
(e) This Agreement cannot be amended except by a written instrument signed
by both Parties hereto.
(f) Either Party's failure to enforce any provision of this Agreement shall
not in any way be construed as a waiver of any such provision as to any future
violations thereof, or prevent that Party thereafter from enforcing each and
every other provision of this Agreement. No waiver of any right or remedy
hereunder shall be effective unless contained in a writing signed by the waiving
Party. The rights granted to the Parties herein are cumulative and the waiver by
a Party of any single remedy shall not constitute a waiver of such Party's right
to assert all other legal remedies available to it under the circumstances.
(g) Termination or expiration of this Agreement for any reason shall not
release either Party from any liabilities or obligations set forth in this
Agreement which the Parties have expressly agreed shall survive any termination
or expiration, or remain to be performed or by their nature would be intended to
be applicable following any such termination or expiration.
(h) This Agreement shall be governed and interpreted by the laws of the
State of Delaware, without regard to its conflict of law rules. The Parties
agree that all litigation relating to this Agreement shall be brought in the
state and federal courts of appropriate subject matter jurisdiction in Delaware
and each Party hereby submits itself to the non-exclusive in personam
jurisdiction of such courts for purposes of any such litigation. Neither Party
shall object to venue in such courts on the grounds of an inconvenient forum or
otherwise. In the event of any litigation between the Parties relating to this
Agreement, the prevailing Party shall be entitled to recover, in addition to any
other relief awarded by the court, its reasonable attorneys fees and all other
costs of preparing for and participating in the litigation, including all
appeals.
(i) Neither Party will be in default or otherwise liable for any delay in
or failure of its performance under this Agreement where such delay or failure
arises by reason of any act of God, acts of the common enemy, the elements,
earthquake, floods, fires, epidemics, quarantine restrictions, riots, strikes,
failure or delay in transportation, freight embargoes or other causes beyond its
control.
(j) This Agreement, together with any exhibits, schedules, appendices, and
other attachments, expresses the understanding of the Parties hereto and
supersedes all prior agreements, whether oral or written, relating to the
subject matters specifically expressed herein; provided, however, that the
Parties acknowledge that simultaneously with the execution of this Agreement
they are entering into the Loan Agreement, the Subscription Agreement, an
Equipment Sale Agreement,
-14-
a Signal Availability Agreement, a Stockholders' Agreement, and a Standstill
Agreement, which documents are related to this Agreement in that they
collectively document a transaction between the Parties of which this Agreement
is a part (collectively, the "Transaction Documents").
(k) Neither Party may assign any of its rights or delegate any of its
duties hereunder without the prior written consent of the other Party; provided
that either Party may assign this entire Agreement to an Affiliate of such Party
or to a Person that acquires all or substantially all of the assets or business
of such Party if such Party gives prior written notice to the other Party and
delivers an assumption agreement of such assignee in form and substance
reasonably satisfactory to the other Party pursuant to which such assignee
assumes the obligations of the assigning Party under this Agreement. Each Party
agrees that it will cause any acquiror of all or substantially all of the assets
or business of such Party to assume this Agreement. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of the
Parties, their respective successors and permitted assigns. For purposes of
this paragraph, "assign" shall mean to directly or indirectly sell, assign,
convey, lease, sublease or permit the use of, in any manner, any rights or
obligations under this Agreement.
(l) All notices, demands, requests, or other communications which may be or
are required to be given, served, or sent by one Party to the other Party
pursuant to this Agreement (except as otherwise specifically provided in this
Agreement) shall be in writing and shall be delivered personally, by overnight
messenger, or mailed by first-class certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to ResNet: 000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
Attn: Chief Operating Officer
Telephone: (000) 000-0000
With a copy similarly addressed to the attention of
Xxxx X. Xxxxxxxx, Vice President and General Counsel
With a copy to: Pillsbury Madison & Sutro L.L.P.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
-15-
If to TCI-Satellite: 0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx XxXxxxx
Telephone: (000) 000-0000
With a copy similarly addressed to the
attention of Corporate Counsel
Telephone: (000) 000-0000
With a copy to: Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Either Party may designate by notice in writing a new address or addressee
to which any notice, demand, request, or communication may thereafter be so
given, served or sent. Each notice, demand, request, or communication shall be
deemed sufficiently given, served, sent or received for all purposes at such
time as it is delivered to the addressee named above as to each Party, with the
signed messenger receipt, return receipt, or the delivery receipt being deemed
conclusive evidence of such delivery, or at such time as delivery is refused by
the addressee upon presentation.
(m) This Agreement may be executed in any number of counterparts each of
which shall be an original with the same effect as if the signatures thereof and
hereto were upon the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RESNET COMMUNICATIONS, INC. TCI SATELLITE ENTERTAINMENT,
INC.
By: By:
----------------------------- ----------------------------------
Name: Name:
--------------------------- --------------------------------
Title: Title:
-------------------------- -------------------------------
-16-
