STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of ________, 1999, among TIME WARNER TELECOM INC.,
a Delaware corporation (the "Company"), TIME WARNER COMPANIES, INC., a Delaware
corporation ("TWX"), AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION, a
Delaware corporation ("ATC"), WARNER COMMUNICATIONS INC., a Delaware corporation
("WCI"), TW/TAE, INC., a Delaware corporation ("TW/TAE"), FIBRCOM HOLDINGS,
L.P., a Delaware limited partnership that is owned by TW/KBLCOM INC., a Delaware
corporation ("TW/KBLCOM"), PARAGON COMMUNICATIONS, a Colorado general
partnership ("Paragon" and, together with TWX, ATC, WCI, TWI/TAE and TW/KBLCOM,
the "TW Stockholders"), MEDIAONE GROUP, INC. (formerly U S WEST Multimedia
Communications, Inc.), a Colorado corporation (the "MediaOne Stockholder"), and
ADVANCE/XXXXXXXX PARTNERSHIP, a New York general partnership ("A/N").
W I T N E S S E T H:
WHEREAS, the TW Stockholders, the MediaOne Stockholder and A/N own all
of the issued and outstanding shares of Class B Common Stock of the Company; and
WHEREAS, the parties hereto desire to set forth herein their agreement
concerning the composition of the Board of Directors of the Company, the
ownership and transfer of the Common Stock of the Company and such other matters
as are set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person and shall include, with respect to A/N, any Xxxxxxxx Family
Member.
For purposes of this Agreement, neither the Company, nor any Person controlled
by the Company, shall be deemed to be an Affiliate of a Principal Stockholder.
"Agreement" shall mean this Stockholders' Agreement, as it may be
amended, restated, modified or supplemented from time to time in accordance with
its terms.
"beneficially own" (and beneficial ownership, owned beneficially and
other correlative terms) is defined in Rule 13d-3 promulgated under the Exchange
Act; provided, however, that a party shall not be deemed to beneficially own
securities merely as a result of the voting agreements set forth in this
Agreement.
"A/N Stockholder Group" shall mean A/N and any other Affiliates of A/N
that become parties to this Agreement pursuant to Section 3.3.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day (other than a day which is a
Saturday or Sunday) on which banks are permitted to be open for business in the
City of New York.
"CEO" shall mean the officer elected by the Board as the chief
executive officer of the Company.
"Certificate of Incorporation" shall mean, as of any date, the
Restated Certificate of Incorporation of the Company as in effect on such date.
"Class A Common Stock" shall mean the Class A Common Stock, par value
$0.01 per share, of the Company.
"Class B Common Stock" shall mean the Class B Common Stock, par value
$0.01 per share, of the Company.
"Common Stock" shall mean the Class A Common Stock and the Class
B Common Stock.
"control" shall mean possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person
whether
2
through the ownership of equity securities or voting securities, by contract or
otherwise.
"Controlled Affiliate" shall mean, with respect to any Person as of
any relevant date, shall mean the Parent of such Person and each Subsidiary of
such Parent.
"Distribution" shall mean the distribution by a Parent to its
stockholders (whether by divided, redemption, exchange, merger or otherwise) of
the capital stock of a Subsidiary of such Parent the assets of which include all
of the shares of Common Stock beneficially owned by such Parent.
"Equity Securities" shall have the meaning ascribed to such term in
Rule 405 promulgated under the Securities Act, and in any event includes any
security having the attendant right to vote for directors or similar
representatives.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Independent Director" shall mean a director who is neither employed
by nor affiliated with the Company or any Principal Stockholder.
"Indirect Transfer" shall mean a Transfer of common stock or other
equity interests of a Principal Stockholder or of a Person (other than the
Parent of such Principal Stockholder) of which such Principal Stockholder is a
direct or indirect Subsidiary to any Person after giving effect to which such
Principal Stockholder is no longer a Subsidiary of the Person that was its
Parent prior to such Transfer; provided, however, that a Distribution shall not
constitute an "Indirect Transfer."
"MediaOne" shall mean MediaOne Group, Inc. (formerly U S WEST,
Inc.), a Delaware corporation.
"MediaOne Stockholder Group" shall mean the MediaOne Stockholder and
any other Affiliates of MediaOne that become parties to this Agreement pursuant
to Section 3.3.
"Monetizing Securities" shall mean any security which is convertible
into or exchangeable for Class A Common Stock. As used herein, "Monetizing
3
Securities" offered by an Eligible Holder or its Parent shall include securities
offered by an independent trust established at the request of such Eligible
Holder or its Parent.
"NASD" shall mean the National Association of Securities Dealers.
"Xxxxxxxx Family Member" shall mean any Person who is a lineal
descendant (including adoptees) of Xxxxx and Xxxx Xxxxxxxx, or any Person which
is wholly-owned directly or indirectly by one or more of such lineal
descendants, or the trustee of any trust, or a custodian under the Uniform Gift
to Minors Act or similar fiduciary, the primary beneficiaries of which (or the
primary income beneficiaries of which, in the case of a charitable remainder or
similar trust) include only one or more of such lineal descendants (provided
that such trust may grant a general or special power of appointment to any such
Person and may permit trust assets to be used to pay taxes, legacies and other
obligations of the trust or the estate of any such Person, payable by reason of
the death of such Person, as applicable) or the executor, administrator,
guardian or personal representative of the estate of any such lineal descendant.
"Nominating Committee" shall mean (i) so long as the Principal
Stockholder Groups have the right to designate a total of at least three Agreed
Nominees pursuant to Section 2.1(c), a committee of the Board comprised of all
of the members of the Board other than the CEO and the Independent Directors and
(ii) if the Principal Stockholder Groups have the right to designate a total of
less than three Agreed Nominees pursuant to Section 2.1(c), a committee of three
members of the Board comprised of all Agreed Nominees designated by the
Principal Stockholder Groups and such other director or directors as shall be
determined by majority vote of the Board.
"Ownership Percentage" shall mean, with respect to any Principal
Stockholder Group as of any date, the percentage determined by multiplying 100
by a fraction (x) the numerator of which is the number of shares of Common Stock
beneficially owned by the members of such Principal Stockholder Group as of such
date and (y) the denominator of which is the aggregate issued and outstanding
shares of Common Stock as of such date (rounded to the nearest one-hundredth (or
if there shall not be a nearest one-hundredth, to the next highest
one-hundredth).
"Parent" shall mean, with respect to any Person as of any relevant
date, such Person (i) if it is its own ultimate parent entity (within the
meaning of the HartScott-Xxxxxx Antitrust Improvements Act of 1976, as amended,
and the rules and
4
regulations promulgated thereunder, as in effect on the date hereof) or (ii) if
it has no ultimate parent entity that is a corporation or partnership;
otherwise, "Parent" shall mean such ultimate (corporate or partnership) parent
entity of such Person as so defined.
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust or unincorporated organization or a government or
any agency or political subdivision thereof.
"Principal Stockholder" shall mean each of the TW Stockholders, the
MediaOne Stockholder, A/N and any other Person that becomes a party to this
Agreement pursuant to Section 3.3, Section 3.4 or Section 3.5.
"Principal Stockholder Group" shall mean (i) the TW Stockholder Group,
(ii) the MediaOne Stockholder Group, (iii) the A/N Stockholder Group or (iv) any
other Principal Stockholder that becomes a party to this Agreement pursuant to
Section 3.4 or 3.5, together with any transferees of such Principal Stockholder
that become parties to this Agreement pursuant to Section 3.3.
"Public Offering" shall mean an offering of Class A Common Stock in
compliance with Section 5 of the Securities Act pursuant to a registration
statement on a form applicable to the sale of securities to the general public.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SEC" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Subsidiary" of any Parent shall mean a Person (a)(i) more than fifty
percent of the voting power of the outstanding shares or securities of which
(representing the right to vote for the election of directors or other managing
authority) are owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Parent or (ii) which does not have outstanding shares or
securities, but more than fifty percent of the ownership interests of which
representing the right to make the decisions for such Person are owned or
controlled, directly or indirectly through one or more Subsidiaries, by such
Parent and (b) that in either case is controlled by such Parent; provided,
however, that in each case, such Person shall be deemed to be a
5
Subsidiary of such Parent only for so long as the foregoing requirements remain
satisfied.
"Transfer" shall mean to directly offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option, or other arrangement or understanding (other than this
Agreement) with respect to or consent to the direct offer for sale, sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of.
Without limiting the foregoing, any redemption, purchase or other acquisition in
any manner (whether or not for consideration) by the Company of any Common Stock
shall be deemed to be a Transfer of such security. The terms "Transferred,"
"Transferee" and similar variations shall have correlative meanings.
"TWE" shall mean Time Warner Entertainment Company, L.P., a Delaware
limited partnership.
"TWE-A/N" shall mean Time Warner Entertainment-Advance/Xxxxxxxx
Partnership, a New York general partnership.
"TW Stockholder Group" shall mean the TW Stockholders and any other
Affiliates of TWX that become parties to this Agreement pursuant to Section 3.3.
1.2 Terms Defined Elsewhere in the Agreement. For purposes of this
Agreement, the following terms shall have the meanings set forth in the sections
indicated:
Term Section
---- -------
A/N............................................recitals
Agreed Nominee...................................2.1(b)
Company Notice...................................4.1(a)
Demand Notice....................................4.1(a)
Demand Registrations.............................4.1(a)
Eligible Holder................................. 4.1(a)
First Refusal Electing Stockholder...............3.4(b)
First Refusal Notice of Sale.....................3.4(a)
First Refusal Rejection Date.....................3.4(d)
First Refusal Shares.............................3.4(a)
6
First Refusal Stockholders.......................3.4(a)
First Refusal Termination Date...................3.4(f)
Incidental Registration .........................4.2(a)
Indemnified Party................................4.6(c)
Indemnifying Party...............................4.6(c)
Inspectors.......................................4.4(g)
Maximum Amount...................................4.1(e)
MediaOne Stockholder...........................recitals
Minimum Condition................................4.1(a)
Qualifying First Offer Amount....................3.4(a)
Records..........................................4.4(g)
Reorganization Agreement.......................recitals
Selling Stockholders.............................3.4(a)
Tag Notice of Sale...............................3.5(e)
Tag Offer........................................3.5(a)
Tag Offeror......................................3.5(a)
Tag Shares.......................................3.5(a)
Tag Stockholders.................................3.5(a)
Third Party Offer................................3.4(a)
Third Party Offeror..............................3.4(a)
TW Selling Stockholders..........................3.5(a)
TW Stockholders................................recitals
TW Shares........................................3.5(a)
1.2. Other Definitional Provisions. (a) The words "hereof", "herein",
and "hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
7
ARTICLE II
BOARD OF DIRECTORS AND STOCKHOLDERS
2.1. Composition of the Board. (a) The Board shall initially consist
of 10 directors. In the event the right of any Principal Stockholder Group to
designate one or more Agreed Nominees pursuant to Section 2.1(c)(i) terminates,
the size of the Board shall be reduced by a number of directors equal to the
number of Agreed Nominees as to which such right to nominate has terminated;
provided, however, that in no circumstances shall the Board consist of less than
six directors. Individuals to serve on the Board shall be nominated in
accordance with this Agreement and nomination procedures established by the
Board, the Company's By-Laws and the rules and regulations of the SEC and the
principal stock exchange or association, if any, on which the Common Stock is
listed. Directors shall be elected in accordance with the Certificate of
Incorporation, the Company's By-Laws and the General Corporation Law of
Delaware.
(b) For purposes of this Agreement, an individual designated as a
director in accordance with Section 2.1(c) or Section 2.3 is referred to as an
"Agreed Nominee." No Principal Stockholder shall nominate any individual to
serve as a director of the Company except an individual designated as an Agreed
Nominee pursuant to the provisions of Section 2.1(c) or Section 2.3. A Principal
Stockholder may nominate for election as a director any individual designated by
its Principal Stockholder Group as an Agreed Nominee pursuant to Section
2.1(c)(i) or Section 2.3 or any individual designated as Agreed Nominee pursuant
to Section 2.1(c)(ii) if, in any such case, such individual was not duly
nominated in connection with such election by the Board or a nominating
committee of the Board pursuant to the Company's nomination procedures. Each
Principal Stockholder hereby agrees to vote (x) all shares of Common Stock held
of record or owned beneficially by such Principal Stockholder at the time of
such vote or action by written consent and (y) all shares of Common Stock as to
which such Principal Stockholder at the time of such vote or action by written
consent has voting control, in each case (A) in favor of the election to the
Board of the Agreed Nominees designated in accordance with Section 2.1(c) and
Section 2.3 and (B) against any other individual nominated to serve as a
director of the Company.
8
(c) The Agreed Nominees shall be designated as follows:
(i) (A) So long as the TW Stockholder Group has an Ownership
Percentage which is greater than or equal to 18.88% (as adjusted from time to
time pursuant to Section 2.5), the TW Stockholder Group shall have the right to
designate three Agreed Nominees. If the TW Stockholder Group has an Ownership
Percentage which is less than 18.88% (as adjusted from time to time pursuant to
Section 2.5), the TW Stockholder Group shall have the right to designate a
number of Agreed Nominees determined in accordance with the following table
(with the percentages set forth in such table being adjusted from time to time
pursuant to Section 2.5).
TW Stockholder Group Number of
Ownership Percentage Agreed Nominees
-------------------- ---------------
14.16% to 18.87% 2
9.44% to 14.15% 1
less than 9.44% 0
(B) So long as the TW Stockholder Group has an Ownership Percentage
which is greater than or equal to 18.88% (as adjusted from time to time pursuant
to Section 2.5), the MediaOne Stockholder Group shall have the right to
designate a number of Agreed Nominees determined in accordance with the
following table (with the percentages set forth in such table being adjusted
from time to time pursuant to Section 2.5).
MediaOne
Stockholder Group Number of
Ownership Percentage Agreed Nominees
-------------------- ---------------
9.44% or greater 3
less than 9.44% 0
If the TW Stockholder Group has an Ownership Percentage which is less than
18.88% (as adjusted from time to time pursuant to Section 2.5), the MediaOne
Stockholder Group shall have the right to designate a number of Agreed Nominees
determined in accordance with the following table (with the percentages set
forth in such table being adjusted from time to time pursuant to Section 2.5).
9
MediaOne
Stockholder Group Number of
Ownership Percentage Agreed Nominees
-------------------- ---------------
18.88% or greater 3
14.16% to 18.87% 2
9.44% to 14.15% 1
less than 9.44% 0
(C) So long as the A/N Stockholder Group has an Ownership Percentage
which is greater than or equal to 9.44% (as adjusted from time to time pursuant
to Section 2.5), the A/N Stockholder Group shall have the right to designate one
Agreed Nominee. If the A/N Stockholder Group has an Ownership Percentage of less
than 9.44% (as adjusted from time to time pursuant to Section 2.5), the A/N
Stockholder Group shall not have the right to designate any Agreed Nominees.
(D) Except as set forth below, the members of a Principal Stockholder
Group shall not have the right to Transfer or effect an Indirect Transfer of the
rights of such Principal Stockholder Group to designate Agreed Nominees (and any
Indirect Transfer shall result in the termination of the rights of such
Principal Stockholder Group to designate Agreed Nominees). The members of a
Principal Stockholder Group shall have the right to Transfer (or effect an
Indirect Transfer of) all, but not less than all, of the rights of such
Principal Stockholder Group to designate Agreed Nominees pursuant to this
Section 2.1(c)(i) in connection with the Transfer (or Indirect Transfer) by such
Principal Stockholders of all of the shares of Class B Common Stock owned by
them pursuant to the provisions of Section 3.4 or 3.5. In such event, the
acquiring Principal Stockholder Group (and any future Principal Stockholder
Group to which such Principal Stockholder Group transfers its shares of Class B
Common Stock in accordance with the provisions of Section 3.4 or 3.5) shall have
the right to designate Agreed Nominees in the same circumstances as the
transferring Principal Stockholder Group had the right to designate Agreed
Nominees as set forth in Section 2.1(c)(i). It is acknowledged and agreed that
the Transfer of all or a portion of the capital stock of a Parent of a Principal
Stockholder Group (or the consummation of any other indirect transaction which
does not constitute an Indirect Transfer) shall not result in the termination of
the rights of such Principal Stockholder Group to designate Agreed Nominees.
(ii) The CEO shall be an Agreed Nominee.
10
(iii) Two individuals nominated by the Nominating Committee shall be
Agreed Nominees if such individuals would be Independent Directors at the time
of their election and are approved by a majority of the members of the
Nominating Committee.
(iv) If the Principal Stockholder Groups do not have the right to
designate at least three Agreed Nominees pursuant to this Section 2.1(c), the
Nominating Committee shall have the right to designate a number of Agreed
Nominees equal to the difference between (x) three and (y) the number of Agreed
Nominees which the Principal Stockholder Groups have the right to designate at
such time (such Agreed Nominees being "Other Directors").
(d) The Principal Stockholder Groups agree that the initial Board
shall consist of the Agreed Nominees listed on Annex A hereto and shall cause
such Agreed Nominees to be elected as directors promptly following the date
hereof to serve until the next annual meeting of the stockholders of the
Company. Thereafter, Agreed Nominees shall be designated as described in this
Section 2.1 prior to each annual meeting of the stockholders of the Company in a
manner that is consistent with the rules and regulations of the SEC and the
principal stock exchange or association, if any, on which the Common Stock is
listed.
2.2. Removal of Directors. (a) Each Principal Stockholder hereby
agrees to vote or act by written consent with respect to (or cause to be voted
or acted upon by written consent) all shares of Common Stock held of record or
beneficially owned by it at the time of such vote or action by written consent
or as to which such Principal Stockholder has voting control at the time of such
vote or action by written consent to remove or cause the removal from office of
any director who was an Agreed Nominee designated by a Principal Stockholder
Group pursuant to Section 2.1(c)(i) or Section 2.3(c) if the Principal
Stockholder Group that so designated such Agreed Nominee requests such removal
by notice to the other Principal Stockholders.
(b) In the event the right of any Principal Stockholder Group to
designate one or more Agreed Nominees pursuant to Section 2.1(c)(i) terminates
or if the number of Agreed Nominees such Principal Stockholder Group has the
right to designate pursuant to Section 2.1(c)(i) decreases, the members of such
Principal Stockholder Group shall use their reasonable best efforts to cause
specified individual(s) comprising a corresponding number of Agreed Nominees
previously designated by such Principal Stockholder Group to resign from the
Board. In the event that such Principal Stockholder Group is unable to cause
such Agreed Nominees
11
to promptly resign, each Principal Stockholder hereby agrees to vote or act by
written consent with respect to (or cause to be voted or acted upon by written
consent) all shares of Common Stock held of record or beneficially owned by it
at the time of such vote or action by written consent or as to which such
Principal Stockholder has voting control at the time of such vote or action by
written consent for the removal of such Agreed Nominees.
(c) Each Principal Stockholder hereby agrees to vote or act by written
consent with respect to (or cause to be voted or acted upon by written consent)
all shares of Common Stock held of record or beneficially owned by it at the
time of such vote or action by written consent or as to which such Principal
Stockholder has voting control at the time of such vote or action by written
consent for the removal of an individual designated as an Agreed Nominee
pursuant to Section 2.1(c)(ii) and thereafter elected as a director if such
individual ceases to serve as CEO for any reason. An Independent Director and
any Other Director may be removed in accordance with the Certificate of
Incorporation and the Company's By-laws.
2.3. Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without cause) or otherwise there shall exist or
occur any vacancies on the Board, individuals to fill such vacancies shall be
nominated and elected in the manner provided in this Agreement and in the
Certificate of Incorporation and the Company's By-laws including at a special
meeting of the stockholders called by any one director. Agreed Nominees with
respect to an election to fill any such vacancies shall be designated as
follows:
(a) In the case of the CEO, the successor CEO shall be an Agreed
Nominee.
(b) In the case of an Independent Director, an individual nominated in
the manner described in Section 2.1(c)(iii) shall be an Agreed Nominee.
(c) In the case of an Other Director, an individual nominated in the
manner described in Section 2.1(c)(iv) shall be an Agreed Nominee.
(d) In all other cases, the Principal Stockholder Group or Principal
Stockholder Groups that, under Section 2.1(c), are then entitled to designate a
greater number of Agreed Nominees than the number of directors currently sitting
on the Board who are Agreed Nominees designated by such Principal Stockholder
Group or Principal Stockholder Groups shall designate Agreed Nominees for such
vacancies
12
(with each such Principal Stockholder Group designating the number of additional
Agreed Nominees that each such Principal Stockholder Group is so entitled to
designate).
(e) In the event that such vacancies are not promptly filled by the
Board of Directors in the manner provided herein, each Principal Stockholder
hereby agrees to vote or act by written consent with respect to (or cause to be
voted or acted by written consent) all shares of Common Stock held of record or
beneficially owned by it at the time of such vote or action by written consent
or as to which such Principal Stockholder has voting control at the time of such
vote or action by written consent for the election of such Agreed Nominees
designated in accordance with the above provisions and for the removal of any
directors whose election is inconsistent with such provisions.
2.4. Conflicting Charter or By-law Provisions. Each Principal
Stockholder shall vote its shares of Common Stock, and shall take all other
actions necessary, to ensure that the Certificate of Incorporation and the
Company's By-laws facilitate and do not at any time conflict with the provisions
of this Agreement.
2.5. Certain Adjustments. In the event the Company from time to time
takes any action which affects the number of issued and outstanding shares of
Common Stock, including, without limitation, (i) primary issuances of shares of
Common Stock (including pursuant to the initial Public Offering of the Company),
(ii) repurchases or redemptions of shares of Common Stock and (iii) stock
splits, reverse stock splits, stock dividends of Common Stock (or any other
class or series of common stock) or similar subdivisions, reclassifications or
recapitalizations, then the percentages used in Section 2.1(c) immediately prior
to such action shall be appropriately adjusted to reflect the percentages that
would have been in effect on the date of this Agreement had such action been
taken on the date of this Agreement prior to the computation of such
percentages.
ARTICLE III
TRANSFERS AND CONVERSIONS
3.1. Transfers; Conversion. (a) Except as permitted by Section 3.3,
3.4 or 3.5, prior to any Transfer or Indirect Transfer by a Principal
Stockholder of shares of Class B Common Stock, such Principal Stockholder shall
be required to
13
convert such shares of Class B Common Stock into shares of Class A Common Stock
in accordance with the procedures set forth in the Certificate of Incorporation.
There shall be no restrictions on the ability of a Principal Stockholder to (i)
convert shares of Class B Common Stock into shares of Class A Common Stock or
(ii) transfer shares of Class A Common Stock (including shares of Class A Common
Stock received upon conversion of shares of Class B Common Stock). Nothing set
forth in this Agreement shall prevent the transfer of all or a portion of the
capital stock of a Parent of a Principal Stockholder (or any other indirect
transaction which does not constitute an Indirect Transfer) or require the
conversion of the Class B Common Stock of such Principal Stockholder into Class
A Common Stock in connection therewith.
(b) Except as expressly permitted or required by this Agreement, (i)
each Principal Stockholder shall be the record and beneficial owner of such
shares of Class B Common Stock indicated in the Company's records as being owned
by such Principal Stockholder and (ii) no Principal Stockholder shall enter into
any agreement or arrangement, grant any proxies or powers of attorney or deposit
into a voting trust with or otherwise directly or indirectly transfer voting
power, with respect to the exercise of its rights to designate Agreed Nominees
or to request the removal of a director pursuant to this Agreement (other than
an agreement or arrangement solely among Principal Stockholders that are
included in the same Principal Stockholder Group); provided, however, that the
foregoing shall not be construed to limit the ability of a Principal Stockholder
to enter into agreements with respect to the voting of its shares of Common
Stock pending a sale of such stock permitted by Section 3.1(a).
(c) The Company agrees not to record any transfer of Class B Common
Stock by any Principal Stockholder in the stock transfer books of the Company
unless the transfer complies with the provisions of this Article III.
3.2. Legend. Each certificate evidencing outstanding shares of Class B
Common Stock held by a Principal Stockholder shall bear the following legends:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO, AND
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT, DATED AS OF _____________, 1998, AMONG TIME
WARNER TELECOM INC. AND CERTAIN STOCKHOLDERS THEREOF. A COPY OF THIS
AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF TIME WARNER
TELECOM INC. AT 5700
00
X. XXXXXX XXXXXX, XXXXXXXXX XXXXXXX, XXXXXXXX 00000.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND ACCORDINGLY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
THE REQUIREMENTS OF THE SECURITIES ACT OR AN EXEMPTION THEREFROM.
All certificates evidencing shares of Class B Common Stock hereafter issued by
the Company to a Principal Stockholder shall bear the legends set forth above.
Upon termination of this Agreement and surrender to the Company for such purpose
of any certificates bearing the first legend set forth above, the Company shall
reissue such certificates to the owner thereof without such legend. The Company
shall reissue certificates without the second legend set forth above upon the
delivery to the Company of an opinion of counsel to the effect that such legend
is no longer required.
3.3. Transfers to Affiliates. Subject to applicable law, (i) any
Principal Stockholder other than A/N shall have the right to Transfer shares of
Class B Common Stock to its Parent or to any direct or indirect Subsidiary of
its Parent if the transferee assumes the obligations of the transferor under
this Agreement with respect to such shares and becomes a party to this Agreement
and (ii) A/N (and any member of the A/N Stockholder Group which is a transferee
of shares of Class B Common Stock pursuant to this Section 3.3(ii)) shall have
the right to Transfer shares of Class B Common Stock to a Xxxxxxxx Family Member
or to an Affiliate of A/N so long as at least 80% of the equity of such
Affiliate is owned directly or indirectly by one or more Xxxxxxxx Family Members
and the transferee assumes the obligations of the transferor under this
Agreement with respect to such shares and becomes a party to this Agreement. A
Principal Stockholder shall be permitted to Transfer shares of Class B Common
Stock pursuant to this Section 3.3 without converting such shares into Class A
Common Stock. Notwithstanding any Transfer permitted by this Section 3.3, the
transferor shall remain liable for the performance by any transferee of its
obligations hereunder if the transferee owns no material assets other than the
shares of Common Stock transferred.
3.4. Right of First Refusal. (a) If, other than pursuant to Section
3.3, all of the members of a Principal Stockholder Group (the "Selling
Stockholders") shall propose to sell to an unaffiliated third party (the "Third
Party Offeror") all but
15
not less than all of the shares of Class B Common Stock beneficially owned by
the Selling Stockholders at such time (the "First Refusal Shares") or to effect
an Indirect Transfer of such shares (in which case the "First Refusal Shares"
shall be the shares of Class B Common Stock beneficially owned by the Selling
Stockholders) (such proposal being the "Third Party Offer"), the Selling
Stockholders shall deliver to each other Principal Stockholder (the "First
Refusal Stockholders") a notice (a "First Refusal Notice of Sale") containing a
copy of the Third Party Offer, the identity of the Third Party Offeror and an
offer to sell all but not less than all of the First Refusal Shares to the First
Refusal Stockholders on the following terms: (i) if the Third Party Offer
contemplates a purchase of the First Refusal Shares by the Third Party Offeror
for consideration consisting solely of cash, then the Selling Stockholders'
offer shall be to sell the First Refusal Shares for cash in an amount equal to
the purchase price specified in, and otherwise on the terms and conditions
contained in, the Third Party Offer, and (ii) if the Third Party Offer
contemplates an acquisition of the First Refusal Shares by the Third Party
Offeror for consideration any portion of which is not cash or if the Third Party
Offer contemplates an Indirect Transfer, then the Selling Stockholder's offer
shall be to sell the First Refusal Shares for cash in an amount equal to the
cash consideration plus the fair market value of the non-cash consideration (as
determined pursuant to Section 3.6) and otherwise on the terms and conditions
contained in the Third Party Offer. The First Refusal Notice of Sale shall
specify the price at which the First Refusal Shares are offered, as provided in
the preceding sentence, as well as other material terms of the Third Party
Offer. The First Refusal Stockholders shall enter into an appropriate
confidentiality agreement relating to the Third Party Offer on customary terms
if reasonably requested by the Selling Stockholders with respect to the Third
Party Offer.
(b) If a First Refusal Stockholder desires to accept all or any
portion of the offer set forth in a First Refusal Notice of Sale as to any part
of the First Refusal Shares, such First Refusal Stockholder (a "First Refusal
Electing Stockholder") shall, within 45 days of receipt of such First Refusal
Notice of Sale, notify the Selling Stockholders of its intention to acquire
First Refusal Shares and the number of such shares it desires to acquire, and
deliver a copy of such notice to each other First Refusal Stockholder.
(c) If the First Refusal Electing Stockholders desire to acquire, in
the aggregate, all of the First Refusal Shares, then the First Refusal Electing
Stockholders shall have the right to acquire all of the First Refusal Shares,
allocated among them as follows (or in such other manner as the First Refusal
Electing Stockholders may agree):
16
(i) The First Refusal Shares shall be allocated among the First
Refusal Electing Stockholders pro rata (based on the number of shares of Class B
Common Stock owned by each of them) until all of the First Refusal Shares have
been allocated or any First Refusal Electing Stockholder has been allocated the
number of First Refusal Shares that it desires to acquire, as specified in its
notice to the Selling Stockholders, as it may have been amended pursuant to
Section 3.4(d).
(ii) If all First Refusal Shares are not allocated pursuant to
paragraph (i) or any prior application of this paragraph (ii), any First Refusal
Shares that were not allocated pursuant to paragraph (i) or any prior
application of this paragraph (ii) shall be allocated among the First Refusal
Electing Stockholders (other than any First Refusal Electing Stockholder that
has been allocated the number of First Refusal Shares that it desires to
acquire), as specified in its notice to the Selling Stockholders, as it may have
been amended pursuant to Section 3.4(d), pro rata (based on the number of shares
of Class B Common Stock owned by each of them). If all First Refusal Shares are
not allocated pursuant to paragraph (i) and any prior application of this
paragraph (ii), any First Refusal Shares that were not allocated pursuant to
paragraph (i) and any prior application of this paragraph (ii) shall be
allocated by continuing to apply this paragraph (ii) as required.
(d) If the First Refusal Electing Stockholders desire to acquire, in
the aggregate, less than all of the First Refusal Shares, then the Selling
Stockholders shall so notify the First Refusal Electing Stockholders. Each First
Refusal Electing Stockholder shall have the right, by written notice sent to the
Selling Stockholder (with a copy of such notice to each other Principal
Stockholder) within 10 days after its receipt of the notice from the Selling
Stockholders pursuant to this Section 3.4(d) to amend its notice to increase the
number of First Refusal Shares that it desires to purchase. If, after giving
effect to any amendment to any First Refusal Electing Stockholder's notice
pursuant to this Section 3.4(d), the First Refusal Electing Stockholders desire
to acquire, in the aggregate, all of the First Refusal Shares, then the First
Refusal Electing Stockholders shall have the right to acquire all the First
Refusal Shares, allocated among them in accordance with Section 3.4(c). If,
after giving effect to any amendment to any First Refusal Electing Stockholder's
notice pursuant to this Section 3.4(d), the First Refusal Electing Stockholders
desire to acquire, in the aggregate, less than all of the First Refusal Shares,
then the Selling Stockholders' offer of the First Refusal Shares shall be deemed
rejected as of the last day for a First Refusal Electing Stockholder to amend
its notice pursuant to this Section 3.4(d) (the "First Refusal Rejection Date").
17
(e) Any purchase of First Refusal Shares by the First Refusal Electing
Stockholders pursuant to this Section 3.4 shall be subject to the following
terms and conditions:
(i) The Selling Stockholders shall represent and warrant that the
First Refusal Electing Stockholders will receive good and valid title to the
First Refusal Shares to be purchased by them, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, limitations
on voting rights, charges and other encumbrances of any nature whatsoever except
as set forth in this Agreement and except for governmental, regulatory and other
third party consents and approvals required for transfers of shares of Common
Stock generally.
(ii) The closing of the purchase of First Refusal Shares by the
First Refusal Electing Stockholders shall be subject to the satisfaction of
following conditions:
(A) All applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder, shall have expired or been terminated.
(B) All governmental approvals and other third party consents
expressly required with respect to the transactions to be consummated at such
closing shall have been obtained, to the extent the failure to obtain such
approvals or consents would prevent the Selling Stockholders from performing any
of their material obligations under the transaction documents or would result in
any materially adverse change in, or materially adverse effect on, the business,
assets, results of operations, financial condition or prospects of the Company
and the Persons controlled by the Company taken as a whole.
(C) There shall be no preliminary or permanent injunction or other
order by any court of competent jurisdiction restricting, preventing or
prohibiting the consummation of the transactions to be consummated at such
closing.
(D) The representation and warranty of the Selling Stockholders
contemplated by clause (i) of this sentence shall be true and correct at the
closing of such sale with the same force and effect as if then made.
(iii) The closing of any purchase of First Refusal Shares by the First
Refusal Electing Stockholders pursuant to this Section 3.4 shall take place on
the date
18
and at the place and time determined by the Selling Stockholders and
communicated to the First Refusal Electing Stockholders in writing, at least
seven days prior to such closing, but in any event within sixty days after the
acceptance by the First Refusal Electing Stockholders of the offer, subject to
extension for a maximum of one hundred eighty additional days to the extent
required to obtain all required governmental, regulatory and other third party
consents and approvals.
(f) If (i) the Selling Stockholders' offer of the First Refusal Shares
is rejected as provided in Section 3.4(d) or (ii) the purchase by the First
Refusal Stockholders of the First Refusal Shares is not consummated within the
period set forth in Section 3.4(e)(iii) for any reason other than an action by
the Selling Stockholders, then the Selling Stockholders shall have the right, at
any time during the 90-day period beginning on the First Refusal Rejection Date
or the day following the last day of the period set forth in Section 3.4(e)(iii)
(the "First Refusal Termination Date"), as applicable, to enter into a binding
agreement to sell all of the First Refusal Shares to the Third Party Offeror, or
to effect the Indirect Transfer contemplated by the Third Party Offer, as
applicable, in either case on terms and conditions no less favorable in the
aggregate to the Selling Stockholders (and, in the case of an Indirect Transfer,
the Person receiving the consideration) than those set forth in the Third Party
Offer, and thereafter to sell all of the First Refusal Shares to the Third Party
Offeror or effect the Indirect Transfer, as applicable, pursuant to such
agreement. If the Selling Stockholders do not enter into such an agreement
during such 90-day period, or do not close the sale thereunder within sixty days
after the execution of such agreement (subject to extension for a maximum of one
hundred eighty additional days to the extent required to obtain all required
governmental, regulatory and other third party consents and approvals), the
procedure set forth above with respect to the First Refusal Notice of Sale shall
be repeated with respect to the Third Party Offer or any subsequent proposed
transfer of Class B Common Stock by the Selling Stockholders which is subject to
the provisions of this Section 3.4.
(g) In connection with a sale or Indirect Transfer of shares of Class
B Common Stock to a Third Party Offeror permitted by Section 3.4(f), (i) the
Selling Stockholders shall have the right to sell to the Third Party Offeror
all, but not less than all, of their shares of Class B Common Stock or permit
the Indirect Transfer, as applicable, without converting such shares to Class A
Common Stock, (ii) the Selling Stockholders shall have the right to transfer to
the Third Party Offeror all, but not less than all, of their rights to designate
Agreed Nominees pursuant to Section 2.1(c)(i) and (iii) (A) in the case of a
sale of the First Refusal Shares, the Third Party Offeror shall
19
be required to assume the obligations of the Selling Stockholders under this
Agreement with respect to such shares and become a party to this Agreement and
(B) in the case of an Indirect Transfer, the Third Party Offeror, upon taking
control of the Selling Stockholders, shall be required to cause the Selling
Stockholders to confirm in writing the continuing validity and effectiveness of
their obligations under this Agreement.
(h) In furtherance of the rights set forth in this Section 3.4, the
Company agrees that, on reasonable notice following the delivery of a First
Refusal Notice of Sale, at reasonable times and without interfering with the
business or operations of the Company, it will assist the Selling Stockholders
in obtaining all necessary consents to any disposition of the shares to be sold.
3.5. Tag-Along Rights. (a) If the members of the TW Stockholder Group
(the "TW Selling Stockholders") propose to sell to an unaffiliated third party
(the "Tag Offeror") (i) all but not less than all of the shares of Class B
Common Stock and (ii) shares of Class A Common Stock beneficially owned by them
which collectively represent greater than 33% of the issued and outstanding
shares of Common Stock (the "TW Shares) or to effect an Indirect Transfer of
such shares (in which case the "TW Shares" shall be all the shares of Common
Stock owned by the TW Selling Stockholders) (such proposed sale being a "Tag
Offer"), then, as a condition to effecting such sale or Indirect Transfer, the
TW Selling Stockholders shall cause proper provisions to be made so that each
other Principal Stockholder (each, a "Tag Stockholder") shall have the right to
participate in such Tag Offer and sell to the Tag Offeror a number of shares of
Common Stock owned by it equal to the product of (x) the number of shares of
Common Stock owned by such Tag Stockholder multiplied by (y) a fraction, the
numerator of which is the number of TW Shares and the denominator of which is
the number of issued and outstanding shares of Common Stock owned by the TW
Stockholder Group (collectively, with respect to all Tag Stockholders, the "Tag
Shares"); provided, however, that if a Tag Stockholder owns both shares of Class
B Common Stock and Class A Common Stock, the shares of Class B Common Stock
owned by such Tag Stockholder shall be included in the Tag Shares prior to the
inclusion of any shares of Class A Common Stock owned by such Tag Stockholder.
In connection with a Tag Offer, the TW Selling Stockholders shall cause the Tag
Offeror to deliver to each Tag Stockholder a notice (a "Tag Notice of Sale")
containing a copy of the Tag Offer, the identity of the Tag Offeror and an offer
to purchase all of the Tag Shares owned by such Tag Stockholder on the same
terms and conditions (including as to price and form of consideration) as the
terms and conditions contained in the Tag Offer. The Tag Notice of Sale shall
specify the price at which the Tag Shares are to be purchased, as provided in
the preceding sentence. If
20
the Tag Offer also constitutes a Third Party Offer pursuant to Section 3.4, the
TW Selling Stockholders shall deliver the Tag Notice of Sale at the same time
that the First Refusal Notice of Sale is delivered. The Tag Stockholders shall
enter into an appropriate confidentiality agreement relating to the Tag Offer on
customary terms if reasonably requested by the TW Selling Stockholders with
respect to the Tag Offer. If the Tag Offer contemplates an Indirect Transfer,
the Tag Offeror shall offer the Tag Stockholders the option of selling the Tag
Shares pursuant to an Indirect Transfer.
(b) If a Tag Stockholder desires to accept the offer set forth in a
Tag Notice of Sale as to all of the Tag Shares beneficially owned by such Tag
Stockholder, such Tag Stockholder shall, within 45 days of receipt of such Tag
Notice of Sale, notify the Tag Offeror and the TW Selling Stockholders of its
intention to sell all but not less than all of its Tag Shares to the Tag
Offeror, and deliver a copy of such notice to each other Tag Stockholder. If a
Tag Stockholder desires to sell its Tag Shares, then the Tag Offeror shall
purchase all of such Tag Shares together with the TW Shares pursuant to Section
3.5(c).
(c) The TW Selling Stockholders shall have the right, at any time
during the 90-day period beginning on the day following the end of the 45-day
period referred to in Section 3.5(b), to enter into a binding agreement to sell
all but not less than all of the TW Shares to the Tag Offeror, or to effect the
Indirect Transfer contemplated by the Tag Offer, as applicable, in either case
on terms and conditions no less favorable in the aggregate to the TW Selling
Stockholders (and, in the case of an Indirect Transfer, the Person receiving the
consideration) than those set forth in the Tag Offer. The Tag Stockholders
electing to sell their Tag Shares pursuant to Section 3.5(b) shall become party
to such agreement and agree to sell all but not less than all of their Tag
Shares to the Tag Offeror (or to effect an Indirect Transfer, as applicable)
pursuant thereto on the terms and conditions set forth therein. In connection
with such agreement, each Tag Stockholder which is a member of a Principal
Stockholder Group which has the right to designate Agreed Nominees pursuant to
Section 2.1(c) at such time shall be required to make the same representations,
warranties and agreements, including as to indemnification, as the TW Selling
Stockholders and each Tag Stockholder which is a member of a Principal
Stockholder Group which does not have the right to designate Agreed Nominees
pursuant to Section 2.1(c) at such time shall not be required to make any
representations or warranties and agreements, including as to indemnification,
other than representations and warranties (and related indemnification) as to
title to the Tag Shares to be transferred and as to organization and due
execution and delivery and enforceability of the transfer agreements (and, in
the case of an Indirect Transfer, such other representations and warranties
regarding
21
the entity the equity of which is being sold as are comparable to the foregoing
representations). The TW Stockholders and Tag Stockholders shall thereafter have
the right to sell such TW Shares and Tag Shares to the Tag Offeror and/or effect
the Indirect Transfers, as applicable, pursuant to such agreement. If the TW
Selling Stockholders do not enter into such an agreement during such 90-day
period, or do not close the sale thereunder within sixty days after the
execution of such agreement (subject to extension for delays caused by actions
by the Tag Stockholders and to extension for a maximum of one hundred eighty
additional days to the extent required to obtain all required governmental,
regulatory and other third party consents and approvals), the procedure set
forth above with respect to the Tag Notice of Sale shall be repeated with
respect to the Tag Offer or any subsequent proposed transfer of Common Stock by
the TW Selling Stockholders which is subject to the provisions of this Section
3.5.
(d) In connection with a sale or Indirect Transfers of shares of Class
B Common Stock to a Tag Offeror pursuant to Section 3.5(d), (i) the TW Selling
Stockholders and the Tag Stockholders shall have the right to sell to the Tag
Offeror all but not less than all of their shares of Class B Common Stock or
permit the Indirect Transfers, as applicable, without converting such shares to
Class A Common Stock, (ii) (A) when the TW Selling Stockholders sell all of the
shares of Class B Common Stock owned by them to the Tag Offeror, the TW Selling
Stockholders shall have the right to transfer to the Tag Offeror their rights to
designate Agreed Nominees pursuant to Section 2.1(c)(i) and (B) when all of the
members of any Principal Stockholder Group other than the TW Stockholder Group
sell all of the shares of Class B Common Stock owned by them to the Tag Offeror,
such Tag Stockholders shall have the right to transfer to the Tag Offeror their
rights to designate Agreed Nominees pursuant to Section 2.1(c)(i) and (iii) (A)
in the case of a sale of the TW Shares or Tag Shares, the Third Party Offeror
shall be required to assume the obligations of the TW Selling Stockholders and
the Tag Stockholders under this Agreement with respect to such shares and become
a party to this Agreement and (B) in the case of an Indirect Transfer, the Tag
Offeror, upon taking control of the TW Selling Stockholders or Tag Stockholders,
as applicable, shall be required to cause the TW Selling Stockholders or Tag
Stockholders to confirm in writing the continuing validity and effectiveness of
their obligations under this Agreement.
(e) In furtherance of the rights set forth in this Section 3.5, the
Company agrees that, on reasonable notice following the delivery of a Tag Notice
of Sale, at reasonable times and without interfering with the business or
operations of the Company, it will assist the TW Selling Stockholders and the
Tag Stockholders in
22
obtaining all necessary consents to any disposition of the shares to be sold. In
the event the TW Selling Stockholders transfer the TW Shares to the Tag Offeror,
the provisions of this Section 3.5 shall apply to any subsequent transfer by the
Tag Offeror and/or any of its future transferees of shares of Class B Common
Stock which represent greater than 33% of the voting power of the outstanding
Common Stock as if any such transferors were TW Selling Stockholders.
3.6. Valuation of Consideration. Before submitting a First Refusal
Notice of Sale pursuant to Section 3.4(a) in response to a Third Party Offer
that contemplates (i) an acquisition of the First Refusal Shares by the Third
Party Offeror for consideration any portion of which is not cash or (ii) an
Indirect Transfer, the Selling Stockholders and the other Principal Stockholders
shall cause the fair market value of the non-cash consideration to be determined
by an investment banking firm in the following manner. The Selling Stockholders
shall deliver to each other Principal Stockholder a notice stating that the
Selling Stockholders intend to deliver a First Refusal Notice of Sale. The
Selling Stockholders and the Principal Stockholder (other than the Selling
Stockholders) that, together with its Controlled Affiliates, owns the greatest
number of shares of Class B Common Stock, shall each select an investment
banking firm and shall instruct the investment banking firms so selected to
select a third investment banking firm within 30 days following the delivery of
such notice by the Selling Stockholders. The investment banking firm selected in
accordance with the foregoing procedure shall submit a written report setting
forth its determination of its appraisal of the First Refusal Shares no later
than 45 days after the date of its selection. The fees, costs and expenses of
the investment banking firms so selected shall be borne by the Selling
Stockholders. In determining the fair market value of the non-cash
consideration, if applicable, the investment banking firm retained pursuant to
this Section 3.6 shall: (A) assume that the fair market value of the applicable
non-cash consideration asset is the price at which such asset would change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell and each having reasonable knowledge of all relevant facts; (B)
assume that the applicable non-cash consideration asset would be sold for cash;
(C) take into account any applicable control premium relating to the shares to
be sold; and (D) use valuation techniques then prevailing in the relevant
industry. If the Third Party Offer contemplates a sale of First Refusal Shares
or an Indirect Transfer in exchange for tax-deferred consideration, the fair
market value of the First Refusal Shares shall not be grossed-up to the extent
of any taxes which shall be payable by the Selling Stockholders as a result of a
sale of the First Refusal Shares to the First Refusal Electing Stockholders;
provided, however, that the parties agree to negotiate in good faith to
structure any such transaction in a tax-efficient manner.
23
3.7. Transferee Principal Stockholders; Other Parties to Agreement.
(a) A Principal Stockholder shall remain a Principal Stockholder for so long as
it owns any Class B Common Stock regardless of the percentage of Class B Common
Stock it may own from time to time. Any transferee of a Principal Stockholder
required to become a party to this Agreement pursuant to Section 3.3, Section
3.4(g) or Section 3.5(d) shall become a Principal Stockholder by delivering to
the Company (which shall promptly send notice thereof to the Principal
Stockholders) a counterpart signature page to this Agreement. No further action
by the Company or the Principal Stockholders shall be required for such person
to become a party to this Agreement. Following any Indirect Transfer permitted
by this Agreement, the Principal Stockholder with respect to which such Indirect
Transfer has occurred shall confirm to the other Principal Stockholders in
writing the continuing validity and effectiveness of its obligations under this
Agreement.
(b) If any Principal Stockholder Group transfers to any Person shares
of Class A Common Stock which represent at least 5% of the shares of Common
Stock then outstanding, such Person shall have the right to become a party to
this Agreement with respect to the registration rights granted under Article IV
only.
3.8. Cooperation. (a) The Company shall use commercially reasonable
efforts to cooperate with any transferring Principal Stockholder in connection
with its efforts to Transfer any interest in its Common Stock in accordance with
the provisions of this Article III, including making qualified personnel
available for attending hearings and meetings respecting any consents, approvals
and authorizations required for such Transfer and, at the request of the
transferring Principal Stockholder, making all filings with, and giving all
notices to, third parties and governmental authorities that may be necessary or
reasonably required to be made or given by the Company in order to effect the
contemplated Transfers. Each Principal Stockholder also agrees to use
commercially reasonable efforts to cooperate with any transferring Principal
Stockholder by making any filings with, and giving notices to, third parties and
governmental authorities that may be necessary or reasonably required to be made
or given by such Principal Stockholder in connection with such contemplated
Transfer. Subject to the other provisions of this Section, no Principal
Stockholder or the Company shall take any action to delay, impair or impede the
receipt of any required consents, approvals or authorizations. "Commercially
reasonable efforts" as used in this Section shall not require any party to
undertake extraordinary or unreasonable measures to obtain any consents,
approvals or other authorizations, including requiring such party to make any
material expenditures (other than normal filing fees or the like)
24
or to accept any material changes in the terms of the contract, license or other
instrument for which a consent, approval or authorization is sought.
(b) Without limiting the foregoing and notwithstanding anything to the
contrary in this Agreement, no party to this Agreement shall be required to
agree to any prohibition, limitation or other requirements, including but not
limited to (i) any prohibition or limitation on the ownership or operation by
such party or any of its Subsidiaries or Affiliates of any portion of the
business or assets of such party or any of its Subsidiaries or Affiliates, or
any prohibition or limitation that would compel such party or any of its
Subsidiaries or Affiliates to dispose of or hold separate any portion of the
business or assets of such party or any of its Subsidiaries or Affiliates, (ii)
any prohibition or limitation on the rights of such party to acquire, own or
enter into any businesses or lines of businesses, (iii) any prohibition or
limitation on the ability of such party to acquire or hold, or exercise full
rights of ownership of, any shares of capital stock of the Company, including
the right to vote the capital stock of the Company acquired by it on all matters
properly presented to the stockholders of the Company, (iv) any prohibition or
limitation on such party or any of its Subsidiaries or Affiliates from
effectively controlling in any material respect the business or operations of
such party or any of its Subsidiaries or Affiliates or (v) any change in any
respect the governance of the Company from that set forth in the Certificate of
Incorporation, the Company's By-Laws and this Agreement, any change in such
party's rights under this Agreement or any limitations on the ability of such
party to exercise any such rights.
ARTICLE IV
REGISTRATION RIGHTS
4.1. Demand Registration. (a) At any time after the date which is 180
days after the closing of the Company's initial Public Offering, any stockholder
of the Company which is a party to this Agreement (an "Eligible Holder") may
request that the Company effect the registration under the Securities Act of all
or part of its shares of Class A Common Stock (including shares of Class A
Common Stock issuable upon conversion of shares of Class B Common Stock held by
it) for sale in the manner specified in such request. A stockholder that
previously owned shares of Class B Common Stock but ceased to be a Principal
Stockholder upon the conversion of its shares of Class B Common Stock to shares
of Class A Common Stock shall continue to be a party to this Agreement so long
as it owns any shares of Class A Common
25
Stock and therefore shall be an Eligible Holder. Such request shall be made by
furnishing written notice thereof (a "Demand Notice") to the Company, setting
forth the number of shares of Class A Common Stock requested to be registered
and such Eligible Holder's intended method of distribution. Within ten days
after receipt of any Demand Notice, the Company shall give written notice of
such Demand Notice to all other Eligible Holders. Following receipt of such
notice from the Company (the "Company Notice"), each such other Eligible Holder
shall have the right to give the Company a written request to register any or
all of such Eligible Holder's Class A Common Stock (including shares of Class A
Common Stock issuable upon conversion of shares of Class B Common Stock held by
it) in the registration described in the Company Notice, provided that such
written request is given within fifteen days after the date on which the Company
Notice is given (with such request stating (i) the number of shares of Class A
Common Stock to be so included, (ii) such other Eligible Holder's intended
method of distribution of such shares and (iii) any other information that the
Company Notice reasonably requests be included in such notice from such Eligible
Holder). All registrations requested pursuant to this Section 4.1(a) are
referred to herein as "Demand Registrations." The Company shall not be required
to effect a Demand Registration unless the aggregate number of shares of Class A
Common Stock demanded to be so registered is at least one percent of the number
of shares of Class A Common Stock then outstanding (the "Minimum Condition"). If
the Minimum Condition is met, then, subject to Sections 4.1(c), 4.1(e) and
4.1(f) below, the Company shall, as soon as practicable, file with the SEC and
use its best efforts to cause to become effective as promptly as practicable, a
Registration Statement which shall cover the shares of Class A Common Stock
requested to be registered pursuant to such Demand Notice and Company Notices.
(b) Once a Demand Registration has been effected, the Company shall
not be obligated to register Class A Common Stock pursuant to another Demand
Registration prior to the expiration of 180 days from the date on which the
previous Demand Registration was declared effective; provided, however, that a
registration will not count as a Demand Registration unless it has become
effective, and such effectiveness has been maintained under the Securities Act
(and not subject to any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason) for the period
specified in Section 4.4(a).
(c) The Company may postpone for a reasonable period (not to exceed
two months) after its receipt of a Demand Notice the filing of a Registration
Statement for a Demand Registration if the Board reasonably believes that such
Demand Registration would have a material adverse effect on any proposal or plan
by
26
the Company or any of its Subsidiaries to engage in any financing, acquisition
of assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other significant transaction and notifies the
Eligible Holders in writing of such postponement; provided however, that the
Company shall have the right to so postpone a filing only one time during any
period of twelve consecutive months.
(d) In the event that the Demand Notice and the notices in response to
the Company Notices for a Demand Registration contemplate more than one intended
method of distribution by the Eligible Holders, then the Company will use its
best efforts to include in the Registration Statement for such Demand
Registration multiple prospectuses and/or plans of distributions covering each
intended method of distribution. The Company acknowledges and agrees that an
intended method of distribution of an Eligible Holder may include the
registration of shares of Class A Common Stock in connection with an
underwritten offering of Monetizing Securities of such Eligible Holder or its
Parent. If, in the event of such an underwritten offering of Monetizing
Securities, the other Eligible Holders desire to offer their own Monetizing
Securities or to sell shares of Class A Common Stock for cash as part of such
underwritten offering, the Eligible Holders will negotiate in good faith, in
consultation with the managing underwriter for the offering, to include such
securities to the extent practicable.
(e) If a Demand Registration involves an underwriting of shares of
Class A Common Stock for cash (or, to the extent permitted by Section 4.1(d), an
underwriting of Monetizing Securities of one or more Eligible Holders or their
Parents or shares of Class A Common Stock for cash and Monetizing Securities of
one or more Eligible Holders or their Parents) and the managing underwriter
advises the Company and the Eligible Holders in writing that marketing factors
require a limitation of the number of shares of Class A Common Stock (and/or
Monetizing Securities) to be underwritten, then the managing underwriter may
exclude shares (and/or Monetizing Securities) requested to be included in such
Demand Registration from such underwriting. If the managing underwriter imposes
a limit on the number of shares of Class A Common Stock (and/or Monetizing
Securities) to be included in such underwriting, then each Eligible Holder shall
have the right to include in such underwriting up to its pro rata share (based
on the ratio that the number of shares of Class A Common Stock (and/or
Monetizing Securities) proposed to be sold by each Eligible Holder bears to the
total numbers of shares of Class A Common Stock (and/or Monetizing Securities)
proposed to be sold by all Eligible Holders who have elected to participate in
the Demand Registration) of the maximum number of shares (and/or
27
Monetizing Securities) permitted by the managing underwriter to be included in
the Demand Registration (the "Maximum Amount").
(f) If, in connection with an underwriting involving the offering of
shares of Class A Common Stock for cash, the managing underwriter has not
limited the number of shares of Class A Common Stock (and/or Monetizing
Securities) to be underwritten or if the number of shares (and/or Monetizing
Securities) which the Eligible Holders have requested to be registered is less
than the Maximum Amount, then the Company may include shares of Class A Common
Stock for its own account or for the account of others in such underwriting if
the managing underwriter so agrees and if the number of shares of Class A Common
Stock (and/or Monetizing Securities) which would otherwise have been included in
such underwriting by Eligible Holders will not thereby be limited. The inclusion
of such shares shall be on the same terms as the offering for cash of shares of
Class A Common Stock by the Eligible Holders. In the event that the managing
underwriter excludes some of the securities to be registered, the securities to
be sold for the account of the Company and any other holders shall be excluded
in their entirety prior to the exclusion of any shares of Class A Common Stock
(and/or Monetizing Securities) of the Eligible Holders.
4.2. Incidental Registration. (a) If the Company proposes to register
any shares of Class A Common Stock under the Securities Act (other than a
registration (i) on Form S-8 or S-4 or any successor or similar forms, (ii)
relating to shares of Common Stock issuable upon exercise of employee share
options or in connection with any employee benefit or similar plan of the
Company or (iii) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145 (or
any successor provision) under the Securities Act applies), whether or not for
sale for its own account, it will each such time, subject to the provisions of
Section 4.2(b) hereof, give prompt written notice at least 20 days prior to the
anticipated filing date of the Registration Statement relating to such
registration to each Eligible Holder, which notice shall set forth such Eligible
Holder's rights under this Section 4.2 and shall offer all Eligible Holders the
opportunity to include in such Registration Statement such number of shares of
Class A Common Stock as each such Eligible Holder may request (an "Incidental
Registration"); provided, however, that the provisions of Section 4.1 hereof and
not this Section 4.2 shall apply to the ability of any Eligible Holder to
participate in any registration being effected pursuant to a Demand Registration
contemplated by Section 4.1 hereof. Upon the written request of any such
Eligible Holder made within ten days after the receipt of notice from the
Company (which request shall specify the number of shares of Class A Common
Stock intended to be disposed of by such
28
Eligible Holder), the Company will use its best efforts to effect the
registration under the Securities Act of all of the Class A Common Stock that
the Company has been so requested to register by such Eligible Holders;
provided, however, that (A) if such registration involves an underwriting, all
such Eligible Holders requesting to be included in the Company's registration
must sell their shares of Class A Common Stock to the underwriters selected as
provided in Section 4.4(f) hereof on the same terms and conditions as apply to
the Company and (B) if, at any time after giving written notice of its intention
to register any shares pursuant to this Section 4.2(a) and prior to the
effective date of the Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to register such
shares, the Company shall give written notice to all such Eligible Holders and,
thereupon, shall be relieved of its obligation to register any shares of Class A
Common Stock owned by the Eligible Holders (without prejudice, however, to
rights of any of the Eligible Holders under Section 4.1 hereof). No registration
effected under this Section 4.2 shall relieve the Company of its obligations to
effect a Demand Registration to the extent required by Section 4.1 hereof.
(b) If an Incidental Registration pursuant to this Section 4.2
involves an underwriting and the managing underwriter thereof advises the
Company and the Eligible Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter may exclude shares requested to be included in such Incidental
Registration from such underwriting. If the managing underwriter imposes a limit
on the number of shares of Common Stock to be included in such underwriting,
then there shall be included in the offering, (i) first, all shares of Common
Stock proposed by the Company to be sold for its account or the account of any
other party not covered by this Agreement that triggers registration rights and
(ii) second, that number of shares of Class A Common Stock requested to be
included in such underwriting by the Eligible Holders, on a pro rata basis
(based on the ratio that the number of shares of Class A Common Stock proposed
to be sold by each Eligible Holder bears to the total numbers of shares of Class
A Common Stock proposed to be sold by all Eligible Holders who have elected to
participate in the Incidental Registration).
4.3. Lockup Agreements. In the event of an underwritten offering
pursuant to Section 4.1 or Section 4.2, each Eligible Holder agrees not to
effect any public sale or other distribution of Class A Common Stock during the
seven days prior to the effective date of such registration or during the
ninety-day period (or such lesser period as is agreed upon in connection with
such underwritten offering) beginning on such effective date (except in either
case as part of such underwriting), unless the
29
managing underwriter otherwise agrees. The Company agrees not to effect any
public sale or other distribution of Class A Common Stock during the seven days
prior to the effective date of any registration or during the ninety-day period
beginning on such effective date (except in either case as part of such
underwriting or pursuant to registrations on Form S-8 or any successor form),
unless the managing underwriter otherwise agrees.
4.4. Registration Procedures. Whenever Eligible Holders request that
any shares of Class A Common Stock be registered pursuant to Section 4.1 or 4.2
hereof, the Company will, subject to the provisions of such Sections, use its
best efforts to effect the registration and the sale of such shares in
accordance with the intended method of distribution thereof and the applicable
provisions of Section 4.1 or 4.2, as appropriate, as promptly as practicable,
and in connection with any such request:
(a) The Company will as expeditiously as possible prepare and file
with the SEC a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the distribution of the shares of Class A Common Stock to
be registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 120 days. In the event
that an Eligible Holder is to effect an offering of Monetizing Securities which
requires an effective Registration Statement to cover shares of Class A Common
Stock which may be transferred by such Eligible Holder or its Parent to holders
of such Monetizing Securities upon the exchange or conversion of such Monetizing
Securities during the term of such Monetizing Securities, then the Company shall
use its best efforts to cause the Registration Statement filed in connection
with such offering to remain effective until the maturity of such Monetizing
Securities; provided, however, that the Company shall have the right to suspend
the effectiveness of such Registration Statement for a reasonable period (not to
exceed two months) during such period if the Board reasonably believes that the
continued effectiveness of such Registration Statement would have a material
adverse effect on any proposal or plan by the Company or any of its Subsidiaries
to engage in any merger, consolidation, tender offer or other significant
transaction (other than in the ordinary course of business) and notifies the
Eligible Holders in writing of such suspension (provided that the Company shall
have the right to so suspend such effectiveness only one time during any period
of twelve consecutive months).
30
(b) The Company will, if requested, prior to filing a Registration
Statement or prospectus or any amendment or supplement thereto, furnish to each
Eligible Holder and each underwriter, if any, of the shares of Class A Common
Stock covered by such Registration Statement copies of such Registration
Statement as proposed to be filed, and thereafter the Company will furnish to
such Eligible Holder and underwriter, if any, such number of copies of such
Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as such Eligible Holder or
underwriter may reasonably request in order to facilitate the disposition of the
Class A Common Stock owned by such Eligible Holder.
(c) After the filing of the Registration Statement, the Company will
promptly notify each Eligible Holder holding Class A Common Stock covered by
such Registration Statement of any stop order, injunction or other order or
requirement of the SEC and take all reasonable actions required to prevent the
entry of such stop order, injunction or other order or requirement or to remove
or revoke it if entered.
(d) The Company will use its best efforts to (i) register or qualify
the Class A Common Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
Eligible Holder holding such Class A Common Stock reasonably (in light of such
Eligible Holders's intended method of distribution) requests and (ii) cause such
shares of Class A Common Stock to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Eligible Holder to
consummate the disposition of the Class A Common Stock owned by such Eligible
Holder; provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(e) The Company will immediately notify each Eligible Holder holding
such shares of Class A Common Stock, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the occurrence
of an event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such Class A
Common Stock, such
31
prospectus will contain full, true and plain disclosure of all material facts
relating to the securities covered thereby and will not contain an 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 in
light of the circumstances in which they were made and promptly prepare and make
available to each such Eligible Holder any such supplement or amendment.
(f) In connection with any underwritten offering pursuant to a Demand
Registration, (i) the Principal Stockholder Group holding the largest number of
the shares of Class A Common Stock to be included in such offering by all
Principal Stockholder Groups shall have the right to select the lead managing
underwriter for such offering, so long as such lead managing underwriter shall
be reasonably satisfactory to the Company, (ii) the Principal Stockholder Group
holding the second largest number of the shares of Class A Common Stock to be
included in such offering by all Principal Stockholder Groups shall have the
right to select the colead managing underwriter for such offering, so long as
such co-lead managing underwriter shall be reasonably satisfactory to the
Company, (iii) each other Principal Stockholder Group participating in the
offering shall have the right to select one comanaging underwriter for such
offering, so long as each such co-managing underwriter shall be reasonably
satisfactory to the Company and (iv) the Company shall have the right to select
one co-managing underwriter for such offering, so long as such comanaging
underwriter shall be reasonably satisfactory to Eligible Holders holding a
majority of the shares of Class A Common Stock to be included in such offering
by Eligible Holders. In connection with any underwritten offering pursuant to an
Incidental Registration, (i) the Company shall have the right to select the lead
managing underwriter for such offering, so long as such managing underwriter
shall be reasonably satisfactory to Eligible Holders holding a majority of the
shares of Class A Common Stock to be included in such offering by Eligible
Holders and (ii) each Principal Stockholder Group participating in such offering
shall have the right to select one co-managing underwriter for such offering, so
long as each such co-managing underwriter shall be reasonably satisfactory to
the Company. The Company will enter into customary agreements (including an
underwriting agreement or indemnity agreement in customary form) and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of shares in any such underwriting.
(g) Upon the execution of confidentiality agreements in form and
substance satisfactory to the Company, the Company will make available for
inspection by any Eligible Holder and any underwriter participating in any
disposition pursuant to a Registration Statement being filed by the Company
pursuant to this Article IV and
32
any attorney, accountant or other professional retained by any such Eligible
Holder or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
Inspectors in connection with such Registration Statement. Records that the
Company determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such Registration Statement or (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Eligible Holder agrees that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company
unless and until such is made generally available to the public. Each Eligible
Holder further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its own expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to each such Eligible Holder and to each
such underwriter, if any, a signed counterpart, addressed to such underwriter,
of (i) an opinion or opinions of counsel to the Company and (ii) a comfort
letter or comfort letters from the Company's independent public or chartered
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Eligible Holders or the managing underwriter, if any, reasonably request.
(i) The Company shall use its best efforts to cause all the Class A
Common Stock to be included in any registration under this Article IV to be
listed on the principal securities exchange or included in the over-the-counter
market on which similar securities issued by the Company are then listed or
quoted, as the case may be, or eligible for listing or quotation, or on The
Nasdaq National Market or such other national securities exchange as the Board
may designate.
(j) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC including, without limitation,
making available to its security holders, as soon as reasonably practicable, an
earnings statement covering a period of 12 months, beginning within three months
after the
33
effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(k) The Company shall make available its executive officers for a
reasonable period of time to participate in road show or other investor
presentations in connection with any underwritten offering of Class A Common
Stock or Monetizing Securities by Eligible Holders.
(l) The Company may require, as a condition to including any Eligible
Holder's Class A Common Stock in any registration under this Article IV, each
such Eligible Holder to promptly furnish in writing to the Company such
information regarding such Eligible Holder, the distribution of the Class A
Common Stock and such other information as the Company may from time to time
reasonably request in connection with such registration in order to comply with
applicable disclosure requirements. The Company shall permit any Eligible
Holder, which holder, in its sole judgment, exercised in good faith, and upon
advice of counsel, might be deemed to be an underwriter or a controlling person
of the Company, to participate in the preparation of such Registration Statement
and to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such holder and its counsel should
be included.
(m) Each such Eligible Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
4.4(e), such Eligible Holder will forthwith discontinue disposition of shares of
Class A Common Stock pursuant to the registration statement covering such Class
A Common Stock until such Eligible Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4.4(e) (provided that
such discontinuance shall not be required for a period in excess of two months
and may not occur more than once in any 365 day period), and, if so directed by
the Company, such Eligible Holder will deliver to the Company all copies, other
than any permanent file copies then in such Eligible Holder's possession, of the
most recent prospectus covering such Class A Common Stock at the time of receipt
of such notice. In the event that the Company shall give such notice, the
Company shall extend the period during which such Registration Statement shall
be maintained effective (including the period referred to in Section 4.4(a)) by
the number of days during the period from and including the date of the giving
of notice pursuant to Section 4.4(e) to the date when the Company shall make
available to such Eligible Holder a prospectus supplemented or amended to
conform with the requirements of Section 4.4(e).
34
4.5. Expenses. Each Eligible Holder that participates in a Demand
Registration or an Incidental Registration shall pay all underwriting discounts
and commissions and any transfer taxes attributable to the sale of such Eligible
Holder's shares, the fees and expenses of counsel for such Eligible Holder
(other than the fees and expenses for one counsel for the Eligible Holders as
set forth below) and any other out-of-pocket expenses of such Eligible Holder
incurred in connection with its participation in such Demand Registration or
Incidental Registration. The Company shall pay any and all other expenses in
connection with a Demand Registration or an Incidental Registration, including,
without limitation, (i) all SEC, NASD and securities exchange registration and
filing fees, (ii) all fees and expenses of complying with state securities or
blue sky laws (including fees and disbursements of counsel for any underwriters
in connection with blue sky qualifications), (iii) all processing, printing,
copying, messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the shares being sold on any securities exchange,
(v) the fees and disbursements of counsel for the Company and of its independent
public accountants and (vi) the reasonable fees and expenses of any special
experts retained in connection with the requested registration and one counsel
representing Eligible Holders and acting as Inspector.
4.6. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Eligible Holder holding shares of Class A Common Stock covered by
a Registration Statement, its officers, directors and agents, and each Person,
if any, who controls such Eligible Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities (including those resulting from any
order made or any inquiry, investigation or proceeding commenced or threatened
by any securities regulatory authority, stock exchange or by any other competent
authority) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or prospectus relating to
the shares of Class A Common Stock (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to the Company by such Eligible Holder or
on such Eligible Holder's behalf expressly for use therein; provided however,
that the Company shall not be liable for any untrue statement or omission
contained in a preliminary prospectus, which untrue statement or omission was
corrected in a final
35
prospectus or supplement that was furnished to such Eligible Holder. The Company
also agrees to indemnify any underwriters of the Eligible Holders, their
officers, directors, employees and agents, and each Person, if any, who controls
such underwriters (other than in respect of loss of profit or information
relating solely to the underwriters) on substantially the same basis as that of
the indemnification of the Eligible Holders provided in this Section 4.6(a).
(b) Each Eligible Holder holding shares of Class A Common Stock
included in any Registration Statement agrees, severally but not jointly, to
indemnify and hold harmless the Company, its officers, directors and agents and
each Person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Eligible Holder, but
only with respect to information furnished in writing by such Eligible Holder or
on such Eligible Holder's behalf expressly for use in any Registration Statement
or prospectus relating to the Class A Common Stock, or any amendment or
supplement thereto, or any preliminary prospectus, and only up to an amount
equal to the aggregate purchase price received by such Eligible Holder from the
sale of such Eligible Holder's Class A Common Stock in such registration or from
Monetizing Securities in connection with such registration. As a condition to
including shares of Class A Common Stock in any Registration Statement filed in
accordance with Article IV hereof, the Company may require that it shall have
received an undertaking reasonably satisfactory to it from any underwriter to
indemnify and hold it harmless to the extent customarily provided by
underwriters with respect to similar securities.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any Person in respect of which indemnity may be
sought pursuant to this Section 4.6, such Person (an "Indemnified Party") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses;
provided, however, that the failure of any Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of his or its
obligations hereunder except to the extent that the Indemnifying Party is
materially prejudiced by such failure to notify. In any such proceeding, any
Indemnified Party shall have the right to retain his or its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such counsel, (ii) the Indemnifying Party
shall
36
have failed to assume the defense and employ counsel or (iii) in the reasonable
judgment of such Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them or differing legal defenses available to them. It is understood
that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for all such Indemnified Parties, and that all such
fees and expenses shall be reimbursed as they are incurred. In the case of any
such separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without his or its written consent
(not to be unreasonably withheld), but if settled with such consent, or if there
be a final judgment for the plaintiff, the Indemnifying Party shall indemnify
and hold harmless such Indemnified Parties from and against any loss or
liability (to the extent stated above) by reason of such settlement or judgment;
provided, however, that, if any case where the fees and expenses of counsel are
at the expense of the Indemnifying Party in accordance with this Section 4.6 and
an Indemnified Party shall have requested the Indemnifying Party to reimburse
the Indemnified Party for such fees and expenses of counsel as incurred, such
Indemnifying Party agrees that it shall be liable for any settlement of any
action effected without its written consent if (i) such settlement is entered
into more than ten (10) Business Days after the receipt by such Indemnifying
Party of the aforesaid request and (ii) such Indemnifying Party shall have
failed to reimburse the Indemnified Party in accordance with such request for
reimbursement prior to the date of such settlement. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party (not to be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such proceeding.
(d) If the indemnification provided for in this Section 4.6 is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Company and the Eligible Holder holding shares of
Class A Common Stock covered by a registration statement on the one hand and the
underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company
37
and such Eligible Holders on the one hand and the underwriters on the other,
from the offering of the Class A Common Stock or Monetizing Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and such Eligible Holders on the one hand and of such
underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Company on the one
hand and each such Eligible Holder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each such
Eligible Holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and such Eligible Holders on the one hand and such underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering of the Class A Common Stock or Monetizing Securities (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and such Eligible Holders bear to the total underwriting
discounts and commissions received by such underwriters, in each case as set
forth in the table on the cover page of the applicable prospectus. The relative
fault of the Company and such Eligible Holders on the one hand and of such
underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and such Eligible Holders or by such underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The relative fault of the
Company on the one hand and of each such Eligible Holder on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied in writing by such party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company and the Eligible Holders agree that it would not be just
and equitable if contribution pursuant to this Section 4.6(d) were determined by
pro rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or
38
defending any such action or claim. Notwithstanding the provisions of this
Section 4.6(d), no underwriter shall be required to contribute any amount in
excess of the amount of the total fees, discounts and commissions received by
it, and no Eligible Holder shall be required to contribute any amount in excess
of the amount of the proceeds received by such Eligible Holder in respect of a
sale of its shares of Class A Common Stock or Monetizing Securities. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Each such Eligible Holder's
obligation to contribute pursuant to this Section 4.6(d) is several in the
proportion that the proceeds of the offering received by such Eligible Holder
bears to the total proceeds of the offering received by all such Eligible
Holders and not joint.
4.7. Unregistered Offerings. In connection with any offering by an
Eligible Holder of Monetizing Securities which do not require the registration
by the Company of the shares of Class A Common Stock issuable upon the
conversion or exchange thereof, the Company shall (i) at the request of such
Eligible Holder, provide reasonable cooperation to such Eligible Holder and its
advisors in connection with such offering, (ii) to the extent relevant, comply
with the other covenants specified in Section 4.4 and provide the Indemnity
specified in Section 4.6 with respect to any unregistered offering and (iii) at
the request of such Eligible Holder, make available its executive officers for a
reasonable period of time to participate in road show or other investor
presentations in connection with such offering.
4.8. Rule 144. The Company agrees that it shall timely file the
reports required to be filed by it under the Securities Act or the Exchange Act
(including, without limitation, the reports under sections 13 and 15 (d) of the
Exchange Act referred to in paragraph (c)(1) of Rule 144 under the Securities
Act), and shall take such further actions as any Eligible Holder may reasonably
request, all to the extent required to enable Eligible Holders to sell Class A
Common Stock, from time to time, pursuant to the resale limitations of (a) Rule
144 under the Securities Act, as such rule may be hereafter amended, or (b) any
similar rules or regulations hereafter adopted by the SEC. Upon the written
request of any Eligible Holder, the Company shall deliver to such Eligible
Holder a written statement verifying that it has complied with such
requirements.
39
ARTICLE V
OTHER AGREEMENTS
5.1. Confidentiality. Each Principal Stockholder agrees that it will
not, directly or indirectly, without the prior written consent of the Company,
use or disclose to any person, firm or corporation, any information, trade
secrets, confidential customer information, technical data or know-how relating
to the products, processes, methods, equipment or business practices of the
Company or any of its Subsidiaries, except (a) to the extent any of the
foregoing is or becomes available to the public other than as a result of
disclosure by such Principal Stockholder or any of its Affiliates or the
directors, officers, employees, agents, advisors and controlling persons of it
or any of its Affiliates, (b) as necessary to effect a transaction under and in
compliance with Article III or IV, (c) as may be required by law and (d) as a
Principal Stockholder may disclose to its lenders, rating agencies and business,
legal and financial advisors. In the event any Principal Stockholder is required
by applicable law or regulation or by legal process to disclose any of the
foregoing, it will provide the Company and other Principal Stockholders with
prompt notice thereof to enable them to seek an appropriate protective order.
The covenants made by a Principal Stockholder in this Section 5.1 shall continue
to apply for a period of two years after such Principal Stockholder ceases to be
a Principal Stockholder.
5.2. Issuance of Additional Class B Common Stock. Without the consent
of each Principal Stockholder which has the right to designate Agreed Nominees
pursuant to Article II, the Company shall not issue any additional shares of
Class B Common Stock other than shares of Class B Common Stock issued: (a) in
connection with a stock split; or (b) as a stock dividend with respect to issued
and outstanding shares of Class B Common Stock (in which event any dividend to a
holder of Class B Common Stock shall only be in shares of Class B Common Stock).
5.3. Voting; Written Consent. (a) Any agreement by a Principal
Stockholder herein to vote its shares of Common Stock in a certain manner shall
be deemed, in each instance, to include an agreement by that Principal
Stockholder to use its best efforts to take all actions necessary to call, or
cause the Company and the appropriate officers and directors of the Company to
call, as promptly as practicable, a special meeting of stockholders or to act by
written consent.
(b) When any action is required to be taken by a Principal Stockholder
pursuant to this Agreement, such Principal Stockholder shall take all steps
40
necessary to implement such action, including executing or causing to be
executed, as promptly as practicable, a consent in writing in lieu of an annual
or special meeting of the stockholders pursuant to Section 228 of the General
Corporation Law of Delaware or any successor statute thereto to effect such
stockholder action.
ARTICLE VI
GENERAL PROVISIONS
6.1. Expiration and Termination. This Agreement (other than any
provision for which a different term is specified) shall terminate (i) with
respect to the applicability of any voting agreements outlined in Article II to
a particular Principal Stockholder, if and when such Principal Stockholder no
longer holds a number of shares of Class B Common Stock equal to at least two
percent of the number of shares of Common Stock then issued and outstanding;
(ii) with respect to the applicability of any transfer restrictions outlined in
Article III to a particular Principal Stockholder, if and when such Principal
Stockholder no longer holds any shares of Class B Common Stock; and (iii) with
respect to the applicability of any registration rights outlined in Article IV
to a particular Eligible Holder, if and when such Eligible Holder no longer
holds a number of shares of Common Stock equal to at least one percent of the
number of shares of Class A Common Stock then issued and outstanding.
6.2. Amendment and Waiver. Subject to Section 3.7, this Agreement may
not be amended or modified in any respect except by an instrument in writing
signed by all of the parties hereto; provided, however, that the Company need
only be a party to such modifications or amendments the result of which is a
change in the Company's obligations hereunder. Any failure of any party hereto
to comply with any obligation, covenant, agreement or condition contained herein
may be waived by the party or parties entitled to the benefits thereof, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
6.3. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York without reference to choice
of law principles, including all matters of construction, validity and
performance except to the extent the laws of Delaware are mandatorily
applicable.
41
6.4. Notices. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
mailed by United States mail (registered, return receipt requested) or reputable
overnight courier service, properly addressed and postage prepaid, or delivered
by telecopy:
If to the Company, to:
TIME WARNER TELECOM INC.
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Telephone: (303)
Telecopy: (303)
Attention: General Counsel
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Xx.
and to each of the Principal Stockholders at the address provided
below or to such other address provided in accordance with this
Section 6.4.
If to the TW Stockholders, to:
TIME WARNER COMPANIES, INC.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: General Counsel
42
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Xx.
If to the MediaOne Stockholder, to:
MEDIAONE GROUP, INC.
000 Xxxxxxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Vice President-Law
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx, Esq.
If to A/N, to:
ADVANCE/XXXXXXXX PARTNERSHIP
0000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
43
with a copy to:
Xxxxx, Xxxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
Such names and addresses may be changed by notice given in accordance with this
Section 6.4.
6.5. Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto, all of which are a part hereof) contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and supersedes and cancels all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
respecting such subject matter.
6.6. Headings; References. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Articles", "Sections," or "Exhibits" shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto unless otherwise indicated.
6.7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement.
6.8. Parties in Interest; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors or assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any Person not a party to this Agreement any rights or
remedies under or by reason of this Agreement. Except as permitted herein, no
party to this Agreement may assign or delegate all or any portion of its rights,
obligations or liabilities under this Agreement without the prior written
consent of the other parties to this Agreement.
44
6.9. Severability; Enforcement. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions hereof.
If any term or other provision of this Agreement is invalid, illegal or
incapable or being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the greatest extent possible.
6.10. Specific Performance. Without intending to limit the remedies
available to any of the parties hereto, each of the parties hereto acknowledges
and agrees that a violation by such party of any term of this Agreement will
cause the other parties hereto irreparable injury for which an adequate remedy
at law is not available. Therefore, the parties hereto agree that each such
party shall be entitled to an injunction, restraining order or other form of
equitable relief from any court of competent jurisdiction restraining any other
party hereto from committing any breach or threatened breach of, or otherwise
specifically to enforce, any provision of this Agreement.
6.11. Arbitration. Any controversy arising under, out of, in connection
with, or relating to, this Agreement, and any amendment hereof, or the breach
hereof or thereof, shall be determined and settled by arbitration in New York,
New York, by a person or persons mutually agreed upon, or in the event of a
disagreement as to the selection of the arbitrator or arbitrators, in accordance
with the rules of the American Arbitration Association. Any award rendered
therein shall specify the findings of fact of the arbitrator or arbitrators and
the reasons of such award, with the reference to and reliance on relevant law.
Any such award shall be final and binding on each and all of the paries thereto
and their personal representatives, and judgment may be entered thereon in any
court having jurisdiction thereof.
45
IN WITNESS WHEREOF, the parties have executed this Stockholders'
Agreement as of the date and year first above written.
TIME WARNER TELECOM INC.
By:
---------------------------------------
Name:
Title:
TIME WARNER COMPANIES, INC.
By:
---------------------------------------
Name:
Title:
AMERICAN TELEVISION AND
COMMUNICATIONS CORPORATION
By:
---------------------------------------
Name:
Title:
WARNER COMMUNICATIONS INC.
By:
---------------------------------------
Name:
Title:
TW/TAE, INC.
By:
---------------------------------------
Name:
Title:
FIBRCOM HOLDINGS, L.P.
By:
---------------------------------------
Name:
Title:
PARAGON COMMUNICATIONS
By:
---------------------------------------
Name:
Title:
MEDIAONE GROUP, INC.
(a Colorado corporation)
By:
---------------------------------------
Name:
Title:
ADVANCE/XXXXXXXX PARTNERSHIP
By: ADVANCE COMMUNICATION CORP.,
General Partner
By:
----------------------------------
Name:
Title:
