EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of
October 1, 1999
between
RCN CORPORATION
and
VULCAN VENTURES INCORPORATED
relating to the purchase and sale
of
Series B 7% Senior Convertible Preferred Stock
of
RCN CORPORATION
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale...............................................8
SECTION 2.02. Closing.........................................................8
SECTION 2.03. Certificates for Shares.........................................8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
SECTION 3.01. Corporate Existence and Power...................................9
SECTION 3.02. Corporate Authorization........................................10
SECTION 3.03. Authorization..................................................10
SECTION 3.04. Non-contravention..............................................10
SECTION 3.05. Capitalization.................................................11
SECTION 3.06. Authorization of Preferred Shares..............................11
SECTION 3.07. Finders' Fees..................................................12
SECTION 3.08. SEC Reports....................................................12
SECTION 3.09. Proxy Materials................................................12
SECTION 3.10. Financial Statements...........................................12
SECTION 3.11. Absence of Certain Changes.....................................13
SECTION 3.12. Litigation.....................................................13
SECTION 3.13. Offering of Preferred Shares...................................13
SECTION 3.14. Governmental Authorizations....................................13
SECTION 3.15. State Takeover Statutes........................................14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. Corporate Existence and Power..................................14
SECTION 4.02. Corporate Authorization........................................14
SECTION 4.03. Authorization..................................................15
SECTION 4.04. Non-contravention..............................................15
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SECTION 4.05. Purchase for Investment........................................15
SECTION 4.06. Current Ownership..............................................15
SECTION 4.07. Voting Arrangements............................................15
SECTION 4.08. Litigation.....................................................16
SECTION 4.09. Finders' Fees..................................................16
SECTION 4.10. Proxy Materials................................................16
ARTICLE 5
COVENANTS OF THE CORPORATION
SECTION 5.01. Access to Information..........................................16
SECTION 5.02. Certificate of Designations....................................17
SECTION 5.03. Restrictions Pending the Closing...............................17
SECTION 5.04. Buyer Director.................................................17
SECTION 5.05. Reservation of Shares..........................................19
SECTION 5.06. Other Transfers of Restricted Securities.......................19
SECTION 5.07. Pro-rata Participation.........................................19
SECTION 5.08. Exchange of Class B Stock......................................21
SECTION 5.09. Change of Control..............................................22
SECTION 5.10. Cross Ownership................................................24
SECTION 5.11. Special Preferred Stock........................................24
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. Confidentiality................................................25
SECTION 6.02. Sale or Transfer of Restricted Securities......................26
SECTION 6.03. Acquisition of Voting Securities...............................27
SECTION 6.04. Standstill.....................................................28
SECTION 6.05. Voting Arrangements............................................32
SECTION 6.06. Voting of Preferred Stock......................................32
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts;
Further Assurances.............................................33
SECTION 7.02. Certain Filings................................................33
SECTION 7.03. Public Announcements...........................................34
SECTION 7.04. Registration Rights Agreement..................................34
SECTION 7.05. Shareholder Meeting............................................34
SECTION 7.06. Buyer's Option.................................................35
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ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Buyer and the Corporation.........37
SECTION 8.02. Conditions to Obligation of Buyer..............................37
SECTION 8.03. Conditions to Obligation of the Corporation....................38
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination........................................39
SECTION 9.02. Effect of Termination..........................................39
ARTICLE 10
SURVIVAL; INDEMNIFICATION
SECTION 10.01. Survival of Representation and Warranties.....................40
SECTION 10.02. Indemnification...............................................40
SECTION 10.03. Procedures....................................................41
SECTION 10.04. Inspections; No Other Representations ........................41
SECTION 10.05. Exclusivity...................................................42
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices.......................................................42
SECTION 11.02. Amendments and Waivers........................................43
SECTION 11.03. Expenses......................................................43
SECTION 11.04. Assignment....................................................43
SECTION 11.05. Governing Law.................................................44
SECTION 11.06. Jurisdiction..................................................44
SECTION 11.07. Counterparts; Third Party Beneficiaries.......................44
SECTION 11.08. Entire Agreement..............................................45
SECTION 11.09. Captions......................................................45
SECTION 11.10. Severability..................................................45
SECTION 11.11. Specific Performance..........................................45
SECTION 11.12. No Recourse...................................................45
Exhibit A Certificate of Designations, Preferences and Rights
of Series B 7% Senior Convertible Preferred Stock
iv
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Exhibit B Registration Rights
v
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of October 1, 1999 between RCN Corporation, a
Delaware corporation (the "Corporation"), and Vulcan Ventures Incorporated, a
Washington corporation ("Buyer").
WHEREAS, the Corporation desires to sell the Preferred Shares (as
defined herein) to Buyer, and Buyer desires to purchase the Preferred Shares
from the Corporation, upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, as a condition to Buyer's willingness to enter into this
Agreement, simultaneously with the execution of this Agreement Buyer is entering
into a Voting Agreement (the "Voting Agreement") with Xxxxx 0 Xxxxxxx Xxxxxxxx
Inc., a stockholder of the Corporation, and the Corporation.
WHEREAS, simultaneously with the execution of this Agreement, the
Corporation is entering into (i) the Channel Agreement and the Portal Agreement
(as defined herein) with Buyer and (ii) the LA Agreement (as defined herein)
with Charter Communications, Inc., a Delaware corporation ("Charter").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"10-Day Market Price" means the average of the daily Market Prices of
the Common Stock for the 10 consecutive trading days ending the day prior to the
date for which such value is to be computed.
"Affiliate" means, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "affiliated," "controlling," and "controlled" have meanings correlative to
the foregoing.
"Agreed Percentage" means 15%; provided that (i) if the Corporation
submits to the vote of the Corporation's stockholders any Takeover Proposal, the
Agreed Percentage shall be equal to the greater of 15% and the Voting Percentage
entitled to be cast by the Level 3 Holders (assuming that the Level 3 Holders
continued to hold any Voting Securities transferred by a Level 3 Holder to any
Person other than a Level 3 Holder after the date hereof) in such vote after
taking into account the conversion of Preferred Stock to Common Stock by Buyer
in order to increase its vote to the same Voting Percentage as the Level 3
Holders; and (ii) if (A) the Corporation shall issue to any Person, in one
transaction or a series of related transactions, Voting Securities (excluding
the shares of Common Stock issuable on conversion of the Series A Preferred
Stock and on exercise of employee options) or Convertible Voting Securities,
representing 5% or more of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such Person or
any Group of which such Person is a member), (B) as a result thereof the Voting
Percentage of such Person or any Group of which such Person is a member
increases by more than 1% of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such Person or
Group) and (C) immediately following such issuance, such Person or any Group of
which such Person is a member shall beneficially own 15% or more of the Total
Voting Power (assuming the conversion, exercise or exchange of all Convertible
Voting Securities held by such Person or Group), then the Agreed Percentage
shall be equal to the greater of 15% and the maximum Voting Percentage such
Person is allowed by the Corporation to cast; provided that if such issuance is
in connection with a bona fide public offering in which the Corporation uses
commercially reasonable efforts to avoid issuing, and does not knowingly issue,
Voting Securities to any Person (other than a Person in respect of which the
Corporation agrees that this proviso shall be disregarded) who immediately
following such issuance shall, together with the members of any Group of which
such Person is a member, beneficially own 15% or more of the Total Voting Power
(assuming the conversion, exercise or exchange of all Convertible Voting
Securities held by such Person or Group), this clause (ii) shall be disregarded
in connection with such issuance (other than with respect to a Person in respect
of which the Corporation agrees that this proviso shall be disregarded). In the
event that more than one of the events referred to in clause (i) or (ii) of the
proviso to the preceding sentence shall occur, the Agreed Percentage shall be
the greatest percentage provided for under clause (i) or (ii).
"beneficial owner" has the meaning set forth in Rule 13d-3 under the
Exchange Act, and derivative terms such as "beneficially own" shall be given
corresponding meanings.
2
"Board of Directors" means the Board of Directors of the Corporation.
"Change of Control" means the occurrence of any of the following
events: (a) any Person or Group is or becomes the beneficial owner (as defined
herein, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Securities of the Corporation;
or (b) the Corporation consolidates with, or merges with or into, another Person
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into the Corporation, in any such event pursuant to a
transaction in which the outstanding Voting Securities of the Corporation are
converted into or exchanged for cash, securities or other property, other than
any such transaction where (i) the outstanding Voting Securities of the
Corporation are converted into or exchanged for Voting Securities of the
surviving or transferee corporation or its parent corporation and/or cash,
securities or other property in an amount which could be paid by the Corporation
under the terms of the Corporation's credit and financing agreements and (ii)
immediately after such transaction no Person or Group is the beneficial owner
(as defined herein, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Securities of the
surviving or transferee corporation, as applicable; or (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
"Change of Control Premium Date" means three years from the earlier
of: (i) the Closing Date and (ii) February 15, 2000.
"Channel Agreement" means the letter agreement dated as of the date
hereof between the Corporation and Buyer regarding certain rights of access to
channel capacity.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Equity" means shares of Common Stock, shares of Class B Stock
and Convertible Securities (including the Preferred Stock).
3
"Controlled Affiliate" means, with respect to any Person, any
corporation or other entity of which 75% or more of the securities or other
ownership interests having ordinary voting power to elect directors to the Board
of Directors (or other governing body) of such corporation or other entity are
directly or indirectly owned by such Person.
"Convertible Securities" means any securities convertible into or
exchangeable or exercisable for Common Stock or Class B Stock.
"Convertible Voting Securities" means securities convertible into or
exchangeable or exercisable for Voting Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Group" means a group within the meaning of Section 13(d)(3) of the
Exchange Act.
"LA Agreement" means the term sheet dated as of the date hereof between
the Corporation and Charter regarding the provision of telephony services in the
Los Angeles metropolitan area.
"Level 3 Holders" means Xxxxx Xxxxxx Sons Inc., Level 3
Communications, Inc. and Xxxxx 0 Xxxxxxx Xxxxxxxx, Inc. and any of their
respective controlled Affiliates.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind.
"Market Price" means, with respect to the Common Stock, on any given
day, (i) the price of the last trade, as reported on the Nasdaq National Market,
not identified as having been reported late to such system, or (ii) if the
Common Stock is so quoted, but not so traded, the average of the last bid and
ask prices, as those prices are reported on the Nasdaq National Market, or (iii)
if the Common Stock is not listed or authorized for trading on the Nasdaq
National Market or any comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose; provided that, in connection with (i) or (ii), the Corporation may from
time to time specify in advance the time at which the trade price or bid and ask
prices, respectively, shall be determined for purposes of a particular
calculation under this Certificate of Designations. If the Common Stock is not
listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be the fair value per share of such security as
determined in good faith by the Board of Directors.
4
"Material Adverse Effect" means (i) with respect to the Corporation, a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of the Corporation and its Subsidiaries, taken
as whole, excluding any such effect resulting from or arising in connection with
(A) this Agreement, the transactions contemplated hereby or the announcement
thereof, (B) changes or conditions generally affecting the industries in which
the Corporation and its Subsidiaries operate or (C) changes in general economic,
regulatory or political conditions, (ii) with respect to Buyer, a material
adverse effect on the condition (financial or otherwise), business, assets or
results of operations of Buyer and its Subsidiaries, taken as a whole, excluding
any such effect resulting from or arising in connection with (A) this Agreement,
the transactions contemplated hereby or the announcement thereof, (B) changes or
conditions generally affecting the industries in which Buyer and its
Subsidiaries operate or (C) changes in general economic, regulatory or political
conditions, or (iii) with respect to Charter, a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
Charter and its Subsidiaries, taken as a whole, excluding any such effect
resulting from or arising in connection with (A) this Agreement, the
transactions contemplated hereby or the announcement thereof, (B) changes or
conditions generally affecting the industries in which Charter and its
Subsidiaries operate or (C) changes in general economic, regulatory or political
conditions.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust and any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Portal Agreement" means the Video Portal Agreement Term Sheet dated as
of the date hereof between the Corporation and Buyer.
"Preferred Shares" means 1,650,000 shares of Preferred Stock issued on
the Closing Date.
"Preferred Stock" means the Series B 7% Senior Convertible Preferred
Stock of the Corporation.
"Restricted Securities" means (i) Common Equity and (ii) any other
Voting Securities or Convertible Voting Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any corporation or other
entity (and any predecessor thereof) of which the securities or other ownership
interests having ordinary voting power to elect a majority of the Board of
5
Directors or other persons performing similar functions are directly or
indirectly owned by such Person.
"Takeover Proposal" means any solicited or unsolicited tender or
exchange offer (or a proposal therefor) or proposal for a merger, consolidation,
sale of assets or other business combination or transaction (including a sale or
issuance of equity securities or a proxy contest) that, in any such case, could
reasonably be expected to result in a Change of Control.
"Total Voting Power" means the aggregate number of votes which may be
cast by holders of Voting Securities in respect of Voting Securities.
"Voting Percentage" means, with respect to any Person, the percentage of
the Total Voting Power beneficially owned by such Person.
"Voting Securities" means securities of the Corporation ordinarily
having the power to vote for the election of directors of the Corporation other
than the Preferred Stock and the Special Preferred; provided that when the term
"Voting Securities" is used with respect to any other Person it means the
capital stock or other equity interests of any class or kind ordinarily having
the power to vote for the election of directors or other members of the
governing body of such Person.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Advance Pro Rata Notice 5.07
Approved Shares 7.06
Authorizations 3.14
Buyer Director 5.04
Buyer Proposal 6.04
Certificate of Designations 3.06
Change of Control Date 5.09
Change of Control Offer 5.09
Change of Control Payment Date 5.09
Class B Stock 3.05
Closing 2.02
Common Stock 3.05
Current Shares 4.06
Damages 10.02
Determination Period 6.04
DGCL 3.15
Election Notice 5.09
Fully Financed 6.04
6
Term Section
First Call Date 5.09
Gross Up Adjustment 10.02
HSR Act 3.03
Indemnified Party 10.03
Indemnifying Party 10.03
Initial Shares 7.06
Issuance 5.07
NASD 7.05
Negotiated Proposal 6.04
Negotiation Notice 6.04
Offer 6.04
Permitted Actions 6.04
Permitted Transferee 6.02
Pro-Rata Notice 5.07
Pro-Rata Securities 5.07
Proxy Statement 3.09
Purchase Price 2.01
Redemption Price 5.09
Regulatory Authorities 3.03
Representatives 6.01
Rights 5.07
Schedule 3.04 Consent 3.04
SEC Reports 3.05
Second Closing 7.06
Section 6.04(e) Event 6.04
Series A Preferred Stock 3.05
Special Preferred 5.11
Standstill Period 6.04
Stock Issuance Proposal 6.05
Stockholder Approval 7.06
Stockholder Meeting 7.05
Voting Agreement Recitals
(c) The following definitional provisions shall apply to this Agreement:
(i) 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.
(ii) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
7
(iii) The terms "Dollars" and "$" shall mean United States Dollars.
(iv) References herein to a specific Section, Subsection or
Schedule shall refer, respectively, to Sections, Subsections or
Schedules of this Agreement, unless the express context otherwise
requires.
(v) Wherever the word "include," "includes," or "including" is used
in this Agreement, it shall be deemed to be followed by the words
"without limitation."
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Corporation agrees to sell to Buyer, and Buyer
agrees to purchase from the Corporation, the Preferred Shares at the Closing.
The purchase price (the "Purchase Price") for the Preferred Shares is
$1,650,000,000 in cash. The Purchase Price shall be paid as provided in Section
2.02.
SECTION 2.02. Closing. The closing (the "Closing") of the purchase and
sale of the Preferred Shares hereunder shall take place at the offices of Xxxxx
Xxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as soon as possible,
and in no event later than five business days after satisfaction or waiver of
the conditions set forth in Article 8 (other than those conditions that by their
nature are to be satisfied at the Closing and will in fact be satisfied at the
Closing), or at such other time or place as Buyer and the Corporation may agree.
At the Closing:
(a) Buyer shall deliver to the Corporation the Purchase Price in
immediately available funds by wire transfer to an account of the Corporation
with a bank designated by the Corporation, by notice to Buyer, not later than
two business days prior to the Closing Date.
(b) The Corporation shall deliver to Buyer certificates for the
Preferred Shares.
SECTION 2.03. Certificates for Shares. (a) Each certificate for
Preferred Stock or Restricted Securities issued to Buyer shall bear the
following legend:
8
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be offered,
sold, transferred or otherwise disposed of except in compliance
with such Act and other applicable laws.
(b) Each certificate for Restricted Securities beneficially owned by
Buyer will bear the following legend:
"The securities represented hereby are subject to certain
restrictions under the terms of the Stock Purchase Agreement
dated October 1, 1999, as amended from time to time, between
Vulcan Ventures Incorporated and RCN Corporation and may not be
offered, sold, transferred or otherwise disposed of except in
accordance with the terms of that Agreement."
At the Closing, Buyer will deliver to the Corporation all certificates
representing Restricted Securities beneficially owned by Buyer so that the
Corporation may place such legend on such certificates.
(c) The Corporation agrees that, at the request of Buyer or any
Permitted Transferee, it will remove from the certificates representing any
Preferred Stock or Restricted Securities the legend contemplated by subsection
(a) regarding the restriction under the Securities Act in the event that outside
counsel for Buyer or such Permitted Transferee determines that the transfer of
such Restricted Securities is no longer restricted by the Securities Act and
outside counsel for the Corporation concurs in such determination (such
concurrence not to be unreasonably withheld). The Corporation agrees that, at
the request of Buyer, it will remove from the certificates representing
Restricted Securities the legend contemplated by subsection (b) regarding the
restrictions under this Agreement at the time after which such restrictions are
no longer applicable. If Buyer transfers any Restricted Securities in accordance
with Section 6.02, the Corporation will issue to such transferee a certificate
representing such transferred Restricted Securities without the legend
contemplated by subsection (b) regarding the restrictions under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date hereof
and as of the Closing that:
SECTION 3.01. Corporate Existence and Power. The Corporation is a
corporation duly incorporated, validly existing and in good standing under the
9
laws of the State of Delaware, and has all corporate powers required to carry on
its business as now conducted.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance of this Agreement by the Corporation is within the Corporation's
corporate powers and, except for any required approval of the Corporation's
stockholders, has been duly authorized by all necessary corporate action on the
part of the Corporation.
(b) This Agreement constitutes a legal and binding agreement of the
Corporation, enforceable against the Corporation in accordance with its terms,
except (i) as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and (ii)
for limitations imposed by general principles of equity.
SECTION 3.03. Authorization. The execution, delivery and performance of
this Agreement by the Corporation requires no action by or in respect of, or
filing with, any governmental or non-governmental body, agency, official or
authority other than (i) compliance with any applicable requirements of the
Exchange Act, (ii) with respect to the Corporation's obligations under Section
7.04, compliance with any applicable requirements of the Securities Act, (iii)
the filing of the Certificate of Designations in accordance with the laws of
Delaware, (iv) compliance with the applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (v) filings with, notifications to and consents from the Federal
Communications Commission, franchising authorities, state public utility
commissions and other similar governmental entities (collectively, "Regulatory
Authorities") and (vi) other filings, notifications and consents that are
immaterial to the consummation of the transactions contemplated hereby.
SECTION 3.04. Non-contravention. Assuming compliance with the matters
referred to in Section 3.03 and receipt of approval from the Corporation's
stockholders, if required, the execution, delivery and performance of this
Agreement by the Corporation do not and will not (i) violate the certificate of
incorporation or bylaws of the Corporation, (ii) violate any applicable law,
rule, regulation, judgment, injunction, order or decree binding upon the
Corporation, other than violations that would be immaterial to the Corporation
or Buyer, or (iii) except for the consent forth on Schedule 3.04 (the "Schedule
3.04 Consent") and except as to matters which would be immaterial to the
Corporation or Buyer, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Corporation or to a loss of any benefit to which the Corporation is entitled
under any provision of any agreement or other instrument binding upon the
Corporation or (iv) result in the creation or
10
imposition of any Lien on any asset of the Corporation except where such Lien
would not have a Material Adverse Effect on the Corporation.
SECTION 3.05. Capitalization. (a) As of the date hereof, the authorized
capital stock of the Corporation consists of: 200,000,000 shares of common stock
("Common Stock"), par value $1.00 per share; 400,000,000 shares of Class B
common stock ("Class B Stock"), par value $1.00 per share; and 25,000,000 shares
of preferred stock, par value $1.00 per share. As of September 24, 1999, there
were issued and outstanding the following shares of such stock: 76,319,126
shares of Common Stock, no shares of Class B Stock and 254,083 shares of Series
A 7% Senior Convertible Preferred Stock ("Series A Preferred Stock").
(b) All outstanding shares of Common Stock and all outstanding shares of
Series A Preferred Stock are duly authorized, validly issued and fully paid and
nonassessable. There are no preemptive or other similar rights available to the
existing holders of the capital stock of the Corporation. As of the date hereof
and other than (i) as set forth in the financial statements contained in the
forms, reports and documents filed with the Commission (the "SEC Reports"), (ii)
as set forth on Schedule 3.05(b) hereto, and (iii) in connection with the
transactions contemplated by this Agreement, there are no outstanding options,
warrants, rights, puts, calls, commitments, or other contracts, arrangements, or
understandings issued by or binding upon the Corporation requiring, and there
are no outstanding debt or equity securities of the Corporation which upon the
conversion, exchange or exercise thereof would require, the issuance, sale or
transfer by the Corporation of any new or additional equity interests in the
Corporation (or any other securities of the Corporation or any of its
Subsidiaries which, whether after notice, lapse of time or payment of monies,
are or would be convertible into or exercisable or exchangeable for equity
interests in the Corporation). Except as set forth in the SEC Reports and as
contemplated by this Agreement, there are no voting trusts or other agreements
or understandings to which the Corporation or any of its Subsidiaries is a party
with respect to the voting of capital stock of the Corporation.
SECTION 3.06. Authorization of Preferred Shares. The issuance, sale and
delivery of the Preferred Shares has been duly authorized by all requisite
corporate action of the Corporation, except for any required approval of the
Corporation's stockholders, and the Preferred Shares issued to Buyer in
accordance with the terms of the Certificate of Designations, Preferences and
Rights of Series B 7% Senior Convertible Preferred Stock (the "Certificate of
Designations") set forth on Exhibit A hereto, when issued and delivered in
accordance with the terms of this Agreement will be validly issued and
outstanding, fully paid and nonassessable, free and clear of any Liens and not
11
subject to preemptive or other similar rights of the stockholders of the
Corporation.
SECTION 3.07. Finders' Fees. Except for Chase Securities Inc. and Xxxxxx
Xxxxxxx & Co. Incorporated, whose fees and expenses will be paid by the
Corporation, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Corporation
who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
SECTION 3.08. SEC Reports. The Corporation has filed all required SEC
Reports when due in accordance with the Exchange Act and delivered or made
available to Buyer copies thereof. As of their respective dates (or, in the case
of any amended SEC Report, as of the date of the amendment), the SEC Reports
complied in all material respects with all applicable requirements of the
Exchange Act or the Securities Act, as the case may be. As of their respective
dates (or, in the case of any amended SEC Report, as of the date of the
amendment), none of the SEC Reports contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 3.09. Proxy Materials. If the Corporation seeks the approval of
the Corporation's stockholders in connection with the issuance of securities
contemplated hereby, the proxy or information statement of the Corporation to be
filed with the Commission in connection with the related shareholders meeting
(the "Proxy Statement") and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act. At the time the Proxy Statement or any
amendment or supplement thereto is first mailed to stockholders of the
Corporation, and at the time such stockholders vote on approval of the issuance
of securities hereunder, the Proxy Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this Section 3.09 will not apply
to statements or omissions included in the Proxy Statement based upon
information furnished in writing to the Corporation by Buyer specifically for
use therein.
SECTION 3.10. Financial Statements. The consolidated financial
statements of the Corporation contained in the SEC Reports (or, in the case of
any amended SEC Report, in the SEC Report as so amended) comply as to form in
all material respects with the published rules and regulations of the Commission
with
12
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present, in conformity with GAAP (except as may be indicated
in the notes thereto), the consolidated financial position of the Corporation
and its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements, which adjustments will not be material either
individually or in the aggregate).
SECTION 3.11. Absence of Certain Changes. Since June 30, 1999, there has
not been any event, occurrence or development of a state of circumstances or
facts that has had or would reasonably be expected to have a Material Adverse
Effect on the Corporation or an adverse effect on the ability of the Corporation
to perform its obligations under this Agreement.
SECTION 3.12. Litigation. Except as disclosed in the SEC Reports, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of the Corporation threatened against or affecting, the Corporation or
any Subsidiary before any court or arbitrator or any governmental body, agency
or official which (i) in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement or
(ii) if resolved adversely to the Corporation or a Subsidiary would reasonably
be likely to have, individually or in the aggregate, a Material Adverse Effect
on the Corporation.
SECTION 3.13. Offering of Preferred Shares. Neither the Corporation nor
any Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Corporation under
circumstances which would require, under the Securities Act, the integration of
such offering with the offering and sale of the Preferred Shares) which might
subject the offering, issuance or sale of the Preferred Shares to the
registration requirements of Section 5 of the Securities Act.
SECTION 3.14. Governmental Authorizations. The Corporation has all
necessary franchises, approvals, authorizations, permits, licenses,
registrations, qualifications and similar rights obtained from any Federal,
State or Local regulatory authority ("Authorizations") to conduct and operate
the businesses of the Corporation, except any such Authorizations which the
failure to have would not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Corporation. The
Authorizations are currently in full force and effect, are not in default, and
are valid under all applicable rules and regulations according to their terms,
except as would not, either individually or in
13
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Corporation. The Corporation is in compliance with the terms and conditions of
the Authorizations, including requirements for notifications, filing, reporting,
posting and maintenance of logs and records, except where any failure to so
comply would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Corporation.
SECTION 3.15. State Takeover Statutes. The Board of Directors of the
Corporation, at a meeting duly called (or for which notice was duly waived by
all directors of the Corporation) and held on September 28, 1999, has approved
the terms of this Agreement, the Certificate of Designations, the Voting
Agreement and the other documents contemplated by this Agreement, and the
consummation of the transactions contemplated hereby and thereby (including
without limitation the sale and issuance to Buyer of the Preferred Stock
pursuant to this Agreement, and Buyer's acquisition of shares of Common Stock or
Class B Common Stock upon conversion of the Preferred Stock), and such approval
constitutes approval of such transactions by the Board of Directors under the
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL"),
and constitutes all actions necessary to ensure that the restrictions contained
in Section 203 of the DGCL will not apply to Buyer in connection with or as a
result of such transactions. To its knowledge, no other state takeover statute
is applicable to the transactions contemplated by this Agreement and the other
documents contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date hereof
and as of the Closing that:
SECTION 4.01. Corporate Existence and Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance of this Agreement by Buyer are within Buyer's corporate powers and
have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement constitutes a legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, except (a) as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting
14
the enforcement of creditors' rights generally and (b) for limitations imposed
by general principles of equity.
SECTION 4.03. Authorization. The execution, delivery and performance of
this Agreement by Buyer requires no action by or in respect of, or filing with,
any governmental or non-governmental body, agency or official or any other
Person other than (i) compliance with any applicable requirements of the
Exchange Act, (ii) compliance with the applicable requirements of the HSR Act,
(iii) filings with, notifications to and consents from Regulatory Authorities
and (iv) other filings or notifications that are immaterial to the consummation
of the transactions contemplated hereby.
SECTION 4.04. Non-contravention. Assuming compliance with the matters
referred to in Section 4.03, the execution, delivery and performance of this
Agreement by Buyer does not and will not (i) violate the certificate of
incorporation or bylaws of Buyer, (ii) violate any applicable law, rule,
regulation, judgment, injunction, order or decree, except for any such
violations which would not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby or (iii) constitute a
default under any agreement or other instrument binding upon Buyer except as to
matters which would not be material to Buyer.
SECTION 4.05. Purchase for Investment. Buyer is an "accredited investor"
as defined in Rule 501 under the Securities Act. Buyer is purchasing the
Preferred Stock for investment for its own account and not with a view to, or
for sale in connection with, any distribution thereof or of any shares of Common
Stock or Class B Stock issued on conversion of the Preferred Stock in violation
of the Securities Act. Buyer (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Preferred
Stock and is capable of bearing the economic risks of such investment.
SECTION 4.06. Current Ownership. The Buyer is the record and beneficial
owner of 3,407,100 shares of Common Stock (the "Current Shares"). Except for the
Current Shares, neither Buyer nor any of its Affiliates beneficially owns any
Common Equity.
SECTION 4.07. Voting Arrangements. The Buyer has not:
(i) formed, joined or in any way participated in a Group with
respect to any Common Equity; or
15
(ii) granted any "proxies" (as defined under the Exchange Act) with
respect to any Common Equity to any Person or deposited any Common
Equity in a voting trust or entered into any other arrangement or
agreement with respect to the voting thereof except as set forth in
Section 6.05.
SECTION 4.08. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which has a reasonable likelihood of success and in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
SECTION 4.09. Finders' Fees. Except for Xxxxx & Company Incorporated,
whose fees and expenses shall be paid by Buyer, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Buyer who might be entitled to any fee or commission from
the Corporation or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.10. Proxy Materials. If the Corporation seeks the approval of
the Corporation's stockholders in connection with the issuance of securities
contemplated hereby, none of the information provided by Buyer in writing
specifically for inclusion in the Proxy Statement or any amendment or supplement
thereto, at the time the Proxy Statement or any amendment or supplement thereto
is first mailed to stockholders of the Corporation and at the time the
stockholders vote on approval of the issuance of securities hereunder, will
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE 5
COVENANTS OF THE CORPORATION
The Corporation agrees that:
SECTION 5.01. Access to Information. From the date hereof until the
Closing Date, the Corporation will (i) furnish to Buyer and its authorized
representatives such financial and operating data and other information relating
to the Corporation and its Subsidiaries as such Persons may reasonably request
and (ii) instruct its counsel, independent accountants and financial advisors to
16
cooperate with Buyer and its authorized representatives in its investigation of
the Corporation. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Corporation. In addition, during any time that Buyer has the right to
designate the Buyer Directors pursuant to Section 5.04, the Corporation will
provide Buyer with copies of all financial information, reports and
presentations delivered to the lenders under the Corporation's principal credit
facilities, subject to the confidentiality agreement set forth in Section 6.01.
SECTION 5.02. Certificate of Designations. Prior to the Closing, the
Corporation shall cause to be filed the Certificate of Designations set forth as
Exhibit A hereto as required pursuant to the law of Delaware.
SECTION 5.03. Restrictions Pending the Closing. After the date hereof
and prior to the Closing Date, except as expressly provided for in this
Agreement or as consented to in writing by Buyer, the Corporation will not:
(i) amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(ii) split, combine or reclassify any shares of the Corporation's
capital stock;
(iii) declare or pay any dividend or distribution (whether in cash,
stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any action, that
would, or that would reasonably be expected to, result in (A) any of the
representations and warranties of the Corporation set forth in Article 3
becoming untrue or (B) any of the conditions to the obligations of Buyer
set forth in Section 8.01 or 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any of the
foregoing.
SECTION 5.04. Buyer Director. Buyer shall be entitled to designate for
election to the Board of Directors (i) two persons (each a "Buyer Director"),
for so long as the aggregate number of shares of Common Stock and Class B Stock
(treating all shares of Preferred Stock as if they had been converted) owned by
Buyer is not less than 50% of the sum of the number of Current Shares plus the
number of shares of Common Stock and Class B Stock issued or issuable on
conversion of all shares of Preferred Stock issued to Buyer from time to time
(appropriately adjusted in the event of any reclassification, recapitalization,
stock
17
split, reverse stock split or combination, exchange or readjustment of shares or
any stock dividend thereon) and (ii) one Buyer Director for so long as the
aggregate number of shares of Common Stock and Class B Stock (treating all
shares of Preferred Stock as if they had been converted) owned by Buyer is not
less than 25% of the sum of the number of Current Shares plus the number of
shares of Common Stock and Class B Stock issued or issuable on conversion of all
shares of Preferred Stock issued to Buyer from time to time (appropriately
adjusted in the event of any reclassification, recapitalization, stock split,
reverse stock split or combination, exchange or readjustment of shares or any
stock dividend thereon); provided, however, that the right to designate one
Buyer Director under this Section shall be suspended at any time that the
holders of the Preferred Stock have the right to designate a person for election
to the Board of Directors under the terms of the Preferred Stock set forth in
the Certificate of Designations. In the event Buyer elects to designate one or
two Buyer Directors pursuant to this Section 5.04, it shall so notify the
Corporation in writing and the Corporation shall (a) increase the size of the
Board of Directors by one or two, as the case may be, and fill the vacancy
created thereby by electing the Buyer Director or Buyer Directors, as the case
may be, and (b) in connection with the meeting of shareholders of the
Corporation next following such election, nominate such Buyer Director or Buyer
Directors, as the case may be, for election as director(s) by the shareholders
and use its best efforts to cause the Buyer Director to be so elected and
re-elected at each subsequent stockholder meeting at which directors are elected
(and if such Buyer Director(s) are not elected, the Board of Directors shall
take all action permitted by law to appoint such Buyer Director(s) to the Board
of Directors). If a vacancy shall exist in the office of a Buyer Director, Buyer
shall be entitled to designate a successor and the Board of Directors shall
elect such successor and, in connection with the meeting of shareholders of the
Corporation next following such election, nominate such successor for election
as director by the shareholders and use its best efforts to cause the successor
to be so elected. At least one Buyer Director shall be entitled to serve on the
Executive Committee of the Board of Directors and any standing or special
committee of the Board of Directors established for purposes of considering or
which otherwise does consider any Takeover Proposal or any issuance of equity
securities of the Corporation (other than any such issuance pursuant to any
director or employee stock compensation plan). On the date upon which Buyer
ceases to beneficially own the minimum amount of securities that would entitle
Buyer to designate one or both of the Buyer Directors under this Section 5.04,
Buyer's right to designate such Buyer Director or Buyer Directors, as the case
may be, shall cease and, upon notice of termination from the Corporation to
Buyer, Buyer shall cause such Buyer Director or Buyer Directors, as the case may
be, to immediately resign, the terms of office of such Buyer Director or Buyer
Directors, as the case may be, shall forthwith terminate and the size of the
Board of Directors shall be reduced accordingly.
18
SECTION 5.05. Reservation of Shares. For so long as any of the Preferred
Stock is outstanding, the Corporation shall keep reserved for issuance a
sufficient number of shares of Common Stock and Class B Stock to satisfy its
conversion obligations under the Certificate of Designations.
SECTION 5.06. Other Transfers of Restricted Securities. The Corporation
shall take all actions reasonably necessary to enable holders of the Common
Stock or Class B Stock to sell such stock without registration under the
Securities Act pursuant to Rule 144 under the Securities Act or any successor
rule or regulation, subject in each case to the provisions of this Agreement
and, specifically, the filing on a timely basis of all reports required to be
filed under the Exchange Act.
SECTION 5.07. Pro-rata Participation. (a) If the Corporation shall issue
(such issuance, including any Common Equity issued to Buyer pursuant to this
Section 5.07, an "Issuance") any Common Equity (other than an issuance of Common
Equity (i) pursuant to the Corporation's existing or future stock option plans
or pursuant to any other existing or future director or employee compensation
plan approved by the Board of Directors, (ii) as consideration for the
acquisition of a business or of assets, (iii) to the Corporation's joint venture
partners in exchange for interests in the relevant joint venture, (iv) upon
conversion, exercise or exchange of Convertible Securities, (v) pursuant to
Section 5.08 hereof, (vi) which would cause an adjustment under paragraph
8(g)(iii) of the Certificate of Designations, (vii) pursuant to any
shareholders' rights plan or (viii) as dividends on any class of preferred stock
of the Corporation), Buyer shall have the right to purchase for cash an amount
of such Common Equity ("Pro-Rata Securities") on the same terms and at the same
price as the issue price of such Common Equity (such price to be agreed by the
Corporation and Buyer if such Common Equity is to be issued for consideration
other than cash, and if the parties cannot agree on such price, the price shall
be determined as provided in paragraph (c) of this Section 5.07) so that, after
the Issuance, Buyer would own the same proportional interest of Common Stock and
Class B Stock in the aggregate (assuming conversion, exercise or exchange of all
Convertible Securities) as is owned by it prior to the Issuance (assuming
conversion, exercise or exchange of all Convertible Securities). The Corporation
shall deliver written notice (a "Pro-Rata Notice") to Buyer with respect to any
Issuance subject to the provisions of this Section 5.07 either, at the
Corporation's option, (i) not less than 5 days before the anticipated date of
such Issuance (an "Advance Pro-Rata Notice"), or (ii) promptly after
consummation of such Issuance. Buyer's right to purchase Pro-Rata Securities
with respect to any Issuance of Common Equity shall terminate 5 business days
after delivery of the Pro-Rata Notice. If Buyer timely elects to exercise its
right to purchase Pro-Rata Securities, such election will constitute a binding
offer to purchase and may not be revoked by Buyer; provided, however, that
Buyer's obligation to acquire the
19
Pro-Rata Securities will be subject to terms and conditions at least as
favorable as those applicable to the Issuance giving rise to Buyer's rights
under this Section 5.07 and to receipt of any necessary governmental approvals
(and the parties agree to expeditiously seek and cooperate with respect to
obtaining such approvals). Notwithstanding anything in this Section 5.07 to the
contrary, (i) if Buyer exercises its right to purchase any Pro-Rata Securities
pursuant to an Advance Pro-Rata Notice, but the Corporation does not consummate
the issuance of Common Equity referred to in such notice (or reduces the size of
such issuance), Buyer will not have the right to purchase such Pro-Rata
Securities (or, in the event of a reduction in the size of the Issuance, have
its right to purchase reduced pro rata), (ii) if Buyer exercises its right to
purchase any Pro-Rata Securities, the Corporation and Buyer agree that the
Issuance giving Buyer such right shall not cause an adjustment under paragraph
8(g)(ii) of the Certificate of Designations, and (iii) if the Corporation issues
securities ("Rights") the issuance of which, except for this paragraph, would
cause an adjustment under paragraph 8(g)(iii) of the Certificate of
Designations, then (A) Buyer shall, in addition to any Rights it receives in
respect of any Common Stock and Class B Stock it owns, be entitled to receive
Rights in respect of all Preferred Stock (as if such Preferred Stock had been
converted into Common Stock immediately prior to the record date for the
Issuance of such Rights) owned by Buyer, and (B) the Corporation and Buyer agree
that the issuance of Rights shall not cause an adjustment under Section
8(g)(iii) or 8(g)(iv) of the Certificate of Designations. Buyer agrees that it
will not, directly or indirectly, sell, pledge, encumber or otherwise transfer
or agree to sell, pledge, encumber or otherwise transfer, any Rights it receives
pursuant to this Section 5.07 in respect of Preferred Stock. During the
Standstill Period, Buyer may exercise only that portion of the Rights it
receives as is equal to a fraction, the numerator which is the number of Rights
exercised by other Persons and the denominator of which is the number of Rights
distributed to other Persons. The agreements between the Corporation and Buyer
in this paragraph (c) not to make adjustments under paragraph 8(g) of the
Certificate of Designations under the circumstances set forth in this paragraph
(c) shall constitute agreements as referred to in, and for the purposes of,
paragraph 8(g)(vii) of the Certificate of Designations.
(b) The rights and agreements in paragraph (a) of this Section 5.07
shall terminate in their entirety if either (i) Buyer is no longer entitled to
designate one or both of the Buyer Directors pursuant to Section 5.04 (other
than as a result of the first proviso to the first sentence of such Section) or
(ii) all shares of Preferred Stock have been either redeemed by the Corporation
or converted into Common Stock or Class B Stock.
(c) If Buyer and the Corporation fail to agree on the price at which
Buyer may purchase securities under paragraph (a) of this Section 5.07 within 30
20
days following receipt by the Buyer of a Pro-Rata Notice, then the items in
dispute shall be referred to a nationally recognized investment banking firm
selected jointly by Buyer and the Corporation. The determination of such
investment banking firm shall be rendered within 30 days of such referral. The
Corporation and Buyer shall share equally in payment of all fees and expenses of
such investment banking firm. All determinations made pursuant to this paragraph
(c) shall be final and binding on the Buyer and the Corporation.
SECTION 5.08. Exchange of Class B Stock. (a) Subject to the provisions
of this Section 5.08, Buyer shall have the right, at any time, to exchange each
share of Class B Stock for one fully paid and non-assessable share of Common
Stock. Such right of exchange shall be exercised by giving written notice to the
Corporation that Buyer elects to exchange a stated number of shares of Class B
Stock for Common Stock and by surrender of a certificate or certificates for the
shares to be exchanged as provided in paragraph (b) below.
(b) Each certificate for shares of Class B Stock to be surrendered to
the Corporation in connection with an exchange shall be surrendered at the
principal office of the Corporation (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to Buyer) at
any time during its usual business hours. If the exchange is in connection with
a transfer permitted under Section 6.02, each share certificate surrendered
shall be accompanied by (i) a statement of the name or names of the transferee
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued, (ii) instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by Buyer's duly authorized
attorney and by transfer tax stamps or funds therefor, if required pursuant to
paragraph (e) of this Section 5.08 and (iii) evidence reasonably satisfactory to
the Corporation that the transfer is permitted under Section 6.02. If the
exchange is not in connection with a transfer permitted under Section 6.02, each
share certificate surrendered shall be duly endorsed or accompanied by stock
powers duly endorsed in blank.
(c) Promptly following the receipt by the Corporation of the certificate
for the share or shares of Class B Stock surrendered for exchange, together with
the other documents referred to in paragraph (b) of this Section 5.08, if
applicable, and the payment in cash of any amount required pursuant to
subparagraph (e) of this Section 5.08, the Corporation shall issue and deliver,
or cause to be issued and delivered, to Buyer (registered in the name or names
of the transferee in the case of an exchange in connection with a transfer), a
certificate or certificates for the number of shares of Common Stock issuable
upon exchange of such share or shares of Class B Stock. Such exchange shall be
deemed to have been effected immediately prior to the close of business on the
date on which the certificate or certificates for such share or shares, together
with the other documents referred to
21
in paragraph (b) of this Section 5.08, if applicable, shall have been
surrendered and any payment required pursuant to paragraph (e) of this Section
5.08 shall have been made.
(d) In the case of an exchange in connection with a transfer, if the
number of shares of Class B Stock represented by the certificate or certificates
surrendered for exchange exceeds the number of shares exchanged, the Corporation
shall, upon such exchange, execute and deliver to Buyer, at the expense of the
Corporation, a new certificate or certificates for the number of shares of Class
B Stock represented by the certificate or certificates surrendered which are not
to be exchanged.
(e) Buyer will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on exchange of the Class B Stock pursuant to this Section 5.08.
SECTION 5.09. Change of Control. (a) Subject to paragraphs (c) and (d)
below, upon the occurrence of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Corporation shall, to the extent funds
are legally available therefor, make an offer (the "Change of Control Offer") to
Buyer to repurchase (i) if such Change of Control Date is prior to the Change of
Control Premium Date, 100% of Buyer's shares of Preferred Stock, or (ii) if such
Change of Control Date is on or after the Change of Control Premium Date, 50% of
Buyer's shares of Preferred Stock, in either case, at a price per share in cash
equal to (A) if the Change of Control Payment Date is prior to the First Call
Date (as defined in the Certificate of Designations), 110% of the product of (i)
one plus the number (or fraction) of shares of Preferred Stock accrued and
unpaid as dividends on such share to the Change of Control Payment Date, times
(ii) the Conversion Ratio in effect immediately prior to the Change of Control,
times (iii) if the Change of Control is the result of a tender or exchange
offer, merger or other form of business combination, the price paid per share of
Common Stock in such tender or exchange offer, merger or other form of business
combination (with the fair market value of any non-cash consideration being
determined in good faith by the Board of Directors of the Corporation), or if
the Change of Control is not the result of a tender or exchange offer, merger or
other form of business combination, the 10-Day Market Price of the Common Stock
on the Change of Control Date and (B) if the Change of Control Payment Date is
on or after the First Call Date, the Redemption Price (as defined in the
Certificate of Designations); provided, that Buyer shall not be entitled to
tender any Preferred Stock under this provision until such time as the
Corporation has repurchased such debt securities as are required to be
repurchased by the Corporation upon such event pursuant to the Corporation's
credit and financing agreements. The
22
Corporation shall promptly take all actions required to make such repurchases of
debt securities.
(b) The Corporation shall make the Change of Control Offer not later
than 30 days following the Change of Control Date by giving notice to Buyer
specifying a date, not less than 20 days nor more than 30 days after the date of
such notice, on which the Corporation will purchase any shares of Preferred
Stock subject to such offer (the "Change of Control Payment Date"). Not less
than 2 business days prior to the Change of Control Payment Date, Buyer shall
notify the Corporation (an "Election Notice") as to the number of shares of
Preferred Stock in respect of which Buyer is accepting the Change of Control
Offer. If Buyer does not deliver the Election Notice by such date, its rights
under this Section 5.09 will terminate. If Buyer does deliver an Election Notice
by such date, then (i) such Election Notice will be a binding commitment of
Buyer to sell to the Corporation on the Change of Control Payment Date the
number of shares of Preferred Stock specified in such Election Notice, subject
to Section 5.09(a) and (ii) on the Change of Control Payment Date, (A) the
Corporation will deliver to Buyer an amount of cash equal to the purchase price
for the Preferred Stock to be purchased and (B) Buyer will deliver to the
Corporation free and clear of any Liens one or more certificates representing
the Preferred Stock to be sold duly endorsed or accompanied by stock powers duly
endorsed in blank, with any required transfer stamps affixed thereto.
(c) Notwithstanding the foregoing, the Corporation shall not be required
to make a Change of Control Offer following a Change of Control if a third party
makes the Change of Control Offer in the manner, at the price and at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Corporation and purchases all shares of Preferred
Stock validly tendered under such Change of Control Offer.
(d) The Corporation's obligations under this Section 5.09 are subject to
compliance with the DGCL. If the Corporation is limited by the DGCL from fully
complying with its obligations hereunder, the Corporation agrees that: (i) it
will comply with its obligations hereunder to the extent it is able to do so and
(ii) it will use its best efforts to remove any such legal impediment. If at any
time, the Corporation is obligated to make a Change of Control Offer hereunder
but is not able to fully perform its obligations hereunder because of a legal
impediment, Buyer may elect to have the Corporation defer such Change of Control
Offer until the Corporation is legally able to fully perform its obligations
hereunder. The Preferred Stock will continue to accrue dividends until
repurchased, redeemed or converted.
23
SECTION 5.10. Cross Ownership. For so long as Buyer holds equity
securities representing at least 5% of the total equity of the Corporation, the
Corporation and its Affiliates will use their reasonable best efforts not to
take any action which would cause or result in any violation by the Corporation
and its Affiliates or by the Buyer or any of its Affiliates of applicable
provisions of the cross-ownership provisions of the Communications Act of 1934,
as amended, or any comparable provisions of other applicable federal, state or
local statutes or regulations, such that Buyer or any of its Affiliates would,
as a result of Buyer's or its Affiliates' ownership, operation or management of
cable television systems owned, operated, managed or subject to a definitive
purchase agreement to be acquired by Buyer or its Affiliates as of the date of
this Agreement and its interest in the Corporation, be compelled to (i) divest
or restructure any interest in any such cable television system; (ii) divest or
restructure its interest in the Corporation (or be compelled to terminate or
restructure any of the agreements referred to in Section 8.02(d)); or (iii)
incur any penalty or other sanction as a result of such action. Buyer and the
Corporation will, and will cause their respective Affiliates to, cooperate with
each other to seek to obtain any consents or waivers necessary to avoid
violations of the type referred to in the previous sentence, provided that
neither Buyer nor any of its Affiliates shall be required to agree to any
divestiture or restructuring of any of its assets or business or the agreements
referred to in Section 8.02(d) in order to secure any such consent or waiver.
Should such required consents and waivers not be secured, the Corporation and
its Affiliates will use their reasonable best efforts to refrain from such
actions and will use their reasonable best efforts to take such actions as may
be necessary from time to time in order to remedy any situation that could
otherwise give rise to any such results as a result of such circumstances.
SECTION 5.11. Special Preferred Stock. After the Closing and for so long
as Buyer is entitled to appoint a Buyer Director under Section 5.04
(disregarding the proviso to the first sentence thereof), if the Corporation
proposes to take any action that would cause Buyer to cease to be an "interested
stockholder" for purposes of Section 203 of the DGCL under circumstances where
Buyer's subsequent attainment of such status would not, for any reason, have
been previously approved by the action of the Board of Directors taken on
September 28, 1999 (or at any time on Buyer's reasonable request), then prior to
taking such action the Corporation shall create and deliver to Buyer one share
of a new series of preferred stock (the "Special Preferred") of the Corporation,
such share of Special Preferred to (x) have no economic interest or right in the
Corporation or any of its assets and (y) have at all times a vote equal to the
difference between (a) 15% of the "outstanding voting stock" (as defined in
Section 203 of the DGCL and as calculated under Section 203 with respect to
Buyer) and (b) the percentage of the outstanding voting stock of the Corporation
that Buyer otherwise "owns" (as defined in Section 203 of the DGCL); provided,
however, that in no event will
24
such vote be less than zero. The Special Preferred will vote together with the
Common Stock generally in the election of directors and on no other matters
except as required by law. The Special Preferred will have no separate or class
voting rights, except as required by law. Buyer agrees to cause such share of
Special Preferred to be present at all votes of the Corporation's stockholders
on the election of directors in the same proportion as the Voting Securities are
present, and will vote (and abstain) such share of Special Preferred on the
election of directors in the same proportion as the Corporation's other
stockholders vote (and abstain) on such matters. At the time the Special
Preferred is issued, Buyer will grant to the Corporation an irrevocable proxy to
vote the share of Special Preferred at all meetings of the Corporation's
stockholders at which directors are elected, and in all actions by written
consent, in the manner set forth in the preceding sentence. Buyer also agrees to
enter into such other arrangements, but not including depositing the share of
Special Preferred in a voting trust, as the Corporation may request from time to
time, in order to ensure that the share of Special Preferred will be voted in
the manner set forth above. The parties acknowledge and agree that the purpose
and intent of the creation of the Special Preferred is to ensure that until
Buyer's rights under Section 5.04 terminate, Buyer's status as an "interested
stockholder" of the Corporation as a result of the exercise of any of Buyer's
rights under this Agreement or the Certificate of Designations be and has been
approved in advance by the Board of Directors of the Corporation for all
purposes of Section 203 of the DGCL without in any way providing to Buyer any
additional economic rights or benefits other than those otherwise provided for
in this Agreement or the Certificate of Designations.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. Confidentiality. (a) Buyer will hold, and will use its
best efforts to cause its officers, directors, shareholders, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law or national stock exchange, all confidential documents and
information concerning the Corporation or any of its Affiliates furnished to
Buyer, except to the extent that such information can be shown to have been (i)
previously known on a non- confidential basis by Buyer or such Representatives,
(ii) in the public domain through no fault of Buyer or its Representatives
(acting in their capacity as such or with respect to information received in
their capacity as such) or (iii) later
25
acquired by Buyer or such Representatives from sources other than the
Corporation or any of its Affiliates not known by Buyer or such Representatives,
as applicable, to be bound by any confidentiality obligation; provided that
Buyer may disclose such information to any of the Representatives in connection
with the transactions contemplated by this Agreement so long as such Persons are
informed by Buyer of the confidential nature of such information and are
directed by Buyer to treat such information confidentially. Buyer shall be
responsible for any failure to treat such information confidentially by such
Persons. The obligation of Buyer to hold and to cause the Representatives to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information. Buyer agrees that it shall not
and it shall cause the Representatives not to use any confidential documents or
information for any purpose other than monitoring and evaluating its investment
in the Corporation and in connection with the transactions contemplated by this
Agreement. If this Agreement is terminated, Buyer will, and will use its
reasonable best efforts to cause its Representatives to, destroy or deliver to
the Corporation, upon request, all documents and other materials, and all copies
thereof, obtained by Buyer or on its behalf from the Corporation, or any of the
Representatives, in connection with this Agreement that are subject to such
confidence.
(b) In the event Buyer or anyone to whom Buyer transmits confidential
information is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoenas, civil investigative demand or
similar process) to disclose any such information, Buyer will provide the
Corporation with prompt notice so that the Corporation may seek a protective
order or other appropriate remedy and/or waive Buyer's compliance with the
provisions of this Section. In the event that such protective order or other
remedy is not obtained sufficiently promptly so as not to adversely affect Buyer
or those of its officers, directors, employees, accountants, counsel,
consultants, advisors and agents as to whom the information has been requested
or required, or the Corporation waives Buyer's compliance with the provisions of
this Agreement, Buyer will furnish only that portion of such information that
Buyer is advised by counsel is legally required and will, at the Corporation's
expense and direction, exercise its reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information.
SECTION 6.02. Sale or Transfer of Restricted Securities. During the
Standstill Period, Buyer will not, and will not permit its Affiliates to,
directly or indirectly, sell, pledge, encumber or otherwise transfer, or agree
to sell, pledge, encumber or otherwise transfer, any Restricted Securities;
provided that Buyer and its Affiliates may sell, pledge, encumber or otherwise
transfer Preferred Stock, Common Stock or Class B Stock (a) in any transaction
in compliance with
26
Rule 144 under the Securities Act; provided that any such sale shall be subject
to the volume and manner of sale limitations set forth in such rule whether or
not legally required unless Buyer shall use commercially reasonable efforts not
to sell securities to a Person that would not be a Permitted Transferee (and in
the case of an arranged sale Buyer will not transfer securities to a Person that
would not be a Permitted Transferee), (b) in a bona fide firm commitment,
underwritten public offering registered under the Securities Act in which Buyer
and the underwriters use commercially reasonable efforts to prevent the sale of
such stock to any Person that would, after giving effect to such sale, not be a
Permitted Transferee, (c) to a commercial bank or other financial institution in
connection with a bona fide financing transaction by Buyer, provided that such
bank or other financial institution agrees to comply with the transfer and
voting restrictions set forth in this Agreement with respect to such stock, and
(d) to Permitted Transferees. Buyer shall not sell, pledge, encumber or
otherwise transfer any Preferred Stock unless the transferee agrees to
arrangements consistent with those described in Section 6.06 which are
acceptable to the Corporation in its reasonable discretion. A "Permitted
Transferee" is a Person who after giving effect to such sale, pledge,
encumbrance or transfer, would, together with its Affiliates and with any
members of a Group in which such Person or any of its Affiliates is a member,
beneficially own securities representing less than 5% of the Total Voting Power
and less than 15% of the aggregate number of outstanding shares of Common Stock
and Class B Stock (assuming, in each case, the conversion, exercise or exchange
of all Convertible Securities beneficially owned by such Person, its Affiliates
and such Group members).
SECTION 6.03. Acquisition of Voting Securities. (a) During the
Standstill Period, and notwithstanding anything in this Agreement to the
contrary, without the prior written consent of the Board of Directors,
specifically expressed in a resolution adopted by a majority of the directors of
the Corporation who are not Buyer Directors, Buyer will not, and will not permit
its Affiliates to, purchase or otherwise acquire, directly or indirectly, or
agree or offer to purchase or otherwise acquire any Voting Securities of the
Corporation if, as a result thereof, Buyer and its Affiliates, in the aggregate,
would beneficially own Voting Securities representing more than the Agreed
Percentage of the Total Voting Power.
(b) If, immediately prior to the record date for a meeting of the
Corporation's stockholders at which a Takeover Proposal or Stock Issuance
Proposal is to be considered, the conversion by Buyer of Preferred Stock into
Common Stock would violate any material legal impediment imposed by any
Regulatory Authority, Buyer shall, notwithstanding Section 6.06 or any other
provision of this Agreement, be permitted to vote Preferred Stock beneficially
owned by Buyer in respect of such Takeover Proposal or Stock Issuance Proposal
to the extent necessary to increase Buyer's vote to the Agreed Percentage. With
27
respect to such vote and the implementation of this Section 6.03 only, the
applicable amount of Preferred Stock will be deemed to have been converted to
Common Stock for purposes of the definition of the terms "Agreed Percentage" and
"Voting Securities" in Section 1.01. The parties will cooperate with each other
to remove any such legal impediments to the conversion of the Preferred Stock.
SECTION 6.04. Standstill. (a) Buyer agrees that from the date hereof
until the earlier of (i) the date of a Change of Control, (ii) the seventh
anniversary of the Closing Date, (iii) the date upon which the Level 3 Holders
sell to one Person, in one transaction or a series of related transactions,
Voting Securities or Convertible Voting Securities representing 5% or more of
the Total Voting Power (assuming the conversion, exercise or exchange of all
Convertible Voting Securities held by such Person and the members of any Group
of which such Person is a member) if following such sale such Person, or any
Group of which such Person is a member, would beneficially own Voting Securities
representing 15% or more of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such Person
and the members of any Group of which such Person is a member) and (iv) the
occurrence of a Section 6.04(e) Event (the "Standstill Period"), without the
prior written consent of the Board of Directors, specifically expressed in a
resolution adopted by a majority of the directors of the Corporation who are not
Buyer Directors, the Buyer will not and will not permit its Affiliates to:
(i) purchase or otherwise acquire, directly or indirectly, or agree
or offer to purchase or otherwise acquire (except, in any case, (A)
pursuant to the terms of this Agreement or the Certificate of
Designations or (B) by way of a stock dividend, stock split,
reclassification, recapitalization or other similar event by the
Corporation), any Restricted Securities; provided that if the
Corporation shall issue any Restricted Securities in respect of which
Buyer did not have the right to purchase its pro-rata share under
Section 5.07, Buyer shall be permitted to purchase in the open market or
pursuant to one or more private transactions, the number of shares of
such class of Restricted Securities as it would have been entitled to
purchase if it had been entitled to purchase its pro-rata share of such
issuance under Section 5.07;
(ii) "solicit", or become a "participant", directly or indirectly,
in any "solicitation" of proxies (as such terms are defined under the
Exchange Act) from any holder of Voting Securities or Convertible Voting
Securities in connection with any vote or other action on any matter or
agree or announce its intention to vote with any Person
28
undertaking a "solicitation" or seek to advise, encourage or influence
any Person with respect to the voting of any Voting Security;
(iii) seek, propose (in a manner that is intended to require, or
would reasonably be expected to require, public disclosure) or make any
statement with respect to, or otherwise participate in, any merger,
consolidation, business combination, tender or exchange offer, sale or
purchase of assets, sale or purchase of securities (except as and to the
extent specifically permitted by this Section 6.04), dissolution,
liquidation, restructuring, recapitalization or similar transactions of
or involving the Corporation or any of its Subsidiaries;
(iv) form, join or in any way participate in a Group with respect
to any Restricted Securities;
(v) grant any "proxies" (as defined under the Exchange Act) with
respect to any Voting Securities to any Person (except as recommended by
the Board of Directors of the Corporation) or deposit any Voting
Securities or Convertible Voting Securities in a voting trust or enter
into any other arrangement or agreement with respect to the voting
thereof except as set forth in Section 6.05 or pursuant to Section 5.11
or Section 6.06;
(vi) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board
of Directors or policies of the Corporation;
(vii) seek, alone or in concert with others, representation on the
Board of Directors except as specifically set forth in Section 5.04
hereof, or seek the removal of any member of the Board of Directors;
(viii) make any publicly disclosed proposal or enter into any
discussion regarding any of the foregoing;
(ix) make any proposal, statement or inquiry, or disclose any
intention, plan or arrangement (whether written or oral) inconsistent
with the foregoing, or make or disclose any request to amend, waive or
terminate any provision of this Section 6.04 or Section 6.02, 6.03, 6.05
or 6.06; or
(x) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral)
29
with, or advise, finance, assist or encourage, any other Person in
connection with any of the foregoing.
(b) Nothing contained in this Section 6.04 shall be deemed in any way to
prohibit or limit (i) the activities of the Buyer Directors acting in their
capacity as directors of the Corporation or (ii) any transactions in the
ordinary course of business between the Corporation and its Subsidiaries, on the
one hand, and Buyer and its Affiliates, on the other hand.
(c) The following shall apply during the Standstill Period:
Notwithstanding the provisions of Section 6.04(a), if the Corporation receives
an indication of interest for a Takeover Proposal that it intends to consider,
it will promptly notify Buyer of such fact. If thereafter or otherwise the
Corporation shall propose to enter into negotiations with any Person regarding a
possible Takeover Proposal (a "Negotiated Proposal"), then prior to entering
into such negotiations, the Corporation shall notify Buyer that it proposes to
enter into negotiations in respect of a Negotiated Proposal (a "Negotiation
Notice") and shall give Buyer a period of not less than four Business Days (the
"Determination Period") to determine whether Buyer wishes to enter into
negotiations with the Corporation regarding a possible Takeover Proposal (a
"Buyer Proposal"). The Negotiation Notice shall provide only the following
information: (i) if the Person making the Negotiated Proposal is proposing a
transaction involving the use by such Person of cash consideration, (A) whether
it will be Fully Financed (as defined below) at the time the Board may approve
the Negotiated Proposal or (B) if it will not be Fully Financed, the identity of
such Person and (ii) if the Person making the Negotiated Proposal is proposing a
transaction involving the use by such Person of non-cash consideration, the
identity of such Person and the form of consideration proposed to be used. If
after the delivery of the Negotiation Notice, the Person making the Negotiated
Proposal and the Corporation determine to change the form of consideration or
the Fully Financed status changes, the Corporation will provide Buyer with
another Negotiation Notice (which will commence a new Determination Period). The
cash consideration to be delivered under a Negotiated Proposal will be "Fully
Financed" for purposes hereof if either (i) the Person making the Negotiated
Proposal has committed financing for such Negotiated Proposal or (ii) such
Person is a publicly traded entity with an equity market capitalization of at
least 200% of the equity market capitalization of the Corporation.
(i) If within the Determination Period, Buyer notifies the
Corporation that it wishes to negotiate regarding a Buyer Proposal, it
shall be permitted to negotiate with the Corporation regarding a Buyer
Proposal and each of the Buyer Directors shall recuse themselves from
consideration of the Negotiated Proposal and the Buyer Proposal. If the
30
Board of Directors does not approve the Negotiated Proposal or the Buyer
Proposal, Buyer's rights to negotiate regarding a Buyer Proposal shall
terminate. If the Board of Directors determines to approve the
Negotiated Proposal, Buyer shall thereafter be permitted to (A) make a
Buyer Proposal by way of a tender or exchange offer or otherwise and (B)
take other actions in opposition to the Negotiated Proposal, and in
support of a Buyer Proposal, that would otherwise be prohibited by
Section 6.04(a) (other than clause (i) thereof, except pursuant to
Buyer's tender or exchange offer) (the actions referred to under clause
(A) and (B) of this sentence, the "Permitted Actions"). If the
Negotiated Proposal is rejected by the shareholders of the Corporation,
Buyer's rights to take Permitted Actions shall thereupon terminate;
provided that if at such time Buyer has proposed a Buyer Proposal to the
Corporation's shareholders and such Buyer Proposal is still pending,
Buyer's rights to take Permitted Actions shall continue until the
earlier of (1) the date upon which the Buyer Proposal is rejected by the
Corporation's shareholders and (2) 60 days after the date upon which the
Negotiated Proposal was rejected. Upon the termination of Buyer's rights
to take Permitted Actions hereunder, Buyer shall take any action
necessary to promptly terminate all proxies, agreements, Groups and
other arrangements entered into that would have been prohibited under
Section 6.04(a) but for the effect of this Section 6.04(c).
(ii) If within the Determination Period, Buyer does not notify the
Corporation that it intends to negotiate with the Corporation regarding
a Buyer Proposal, Buyer shall not be permitted to negotiate with the
Corporation regarding, or otherwise make, a Buyer Proposal and shall not
be released from the restrictions contained in Section 6.04(a) at any
time either before or after approval of the Negotiated Proposal by the
Board of Directors with respect to such Negotiated Proposal.
(d) If, during the Standstill Period, the Board of Directors shall
approve a process pursuant to which Takeover Proposals are to be solicited from
one or more Persons, then the provisions of Section 6.04(c) shall apply in
respect of such process except that (i) the Determination Period shall end no
earlier than the day prior to the last date by which such Persons are required
to submit Takeover Proposals (or in the event that the Corporation determines to
enter into its bona fide negotiation with one or more participants in such
process prior to such date, the date upon which such negotiations shall begin)
and (ii) the term "Negotiated Proposal" shall mean the Takeover Proposal(s) of
one or more of the participants in such process.
31
(e) If any Person shall commence and not withdraw a bona fide
unsolicited tender or exchange offer that if successful would result in a Change
of Control (an "Offer"), the Standstill Period shall terminate unless (i) within
10 business days of the announcement of such Offer, the Corporation shall have
publicly recommended that the Offer not be accepted and (ii) the Level 3 Holders
shall be subject to an agreement not to tender or otherwise sell Voting
Securities beneficially owned by the Level 3 Holders to the Person making the
Offer except to the extent the Voting Securities beneficially owned by the Level
3 Holders that are not subject to such an agreement shall be less than 5% of the
Total Voting Power. The termination of the Standstill Period pursuant to this
Section 6.04(e) is referred to herein as a "Section 6.04(e) Event."
SECTION 6.05. Voting Arrangements. During the Standstill Period, Buyer
shall vote and cause to be voted all Voting Securities owned by the Buyer (i)
for nominees to the Board of Directors of the Corporation who have been
recommended by the Corporation's Board of Directors and (ii) on all other
matters submitted to the holders of Voting Securities, either in accordance with
the recommendations of the Corporation's Board of Directors or in proportion to
the votes cast by the other holders of Voting Securities; provided that (A) with
respect to any Takeover Proposal submitted to the vote of the Corporation's
stockholders, Buyer shall be free to vote without restriction all Voting
Securities beneficially owned by it and (B) with respect to any proposal to
approve the issuance of equity securities by the Corporation (not including a
proposal to approve a stock option or other director or officer compensation
plan and not in connection with a Takeover Proposal) (a "Stock Issuance
Proposal") submitted to the vote of the Corporation's stockholders, Buyer shall
be free to vote without restriction Voting Securities beneficially owned by it
representing up to the Agreed Percentage (disregarding clause (i) of the proviso
in the definition of such term) of the Total Voting Power. Buyer shall cause all
Voting Securities owned by Buyer to be represented, in person or by proxy, at
all meetings of holders of Voting Securities of which Buyer has actual notice,
so that such Voting Securities may be counted for the purpose of determining the
presence of a quorum at such meetings. The Corporation agrees to give Buyer
reasonable advance notice of the record date of any meeting of stockholders (or
consent solicitation) to which a Takeover Proposal or a Stock Issuance Proposal
will be submitted for approval (or in respect of which consents will be sought)
so that Buyer may, subject to the other provisions of this Agreement, convert
shares of Preferred Stock into Common Stock prior to the applicable record date
and vote such shares of Common Stock at such meeting (or execute such consent)
as permitted hereby.
SECTION 6.06. Voting of Preferred Stock. At the Closing and subject to
Section 6.03(b), Buyer shall enter into any arrangement, agreement or proxy with
respect to the voting of the Preferred Stock (other than a voting trust) as
requested
32
by the Corporation, in its reasonable discretion, for purposes of ensuring that
such shares of Preferred Stock (together with any shares of Preferred Stock
issued as dividends) will be (i) represented, in person or by proxy at all
meetings of holders of Voting Securities of which Buyer has actual notice in
proportion to the representation of votes entitled to be cast by holders of
Voting Securities, so that such portion of such shares of Preferred Stock may be
counted for the purpose of determining the presence of a quorum at such meetings
and (ii) voted (and abstained) in proportion to the votes cast (and abstained)
by the holders of Voting Securities.
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts;
Further Assurances. Buyer and the Corporation acknowledge that certain
regulatory or governmental approvals may be required to lawfully consummate the
transactions contemplated by this Agreement. Subject to the terms and conditions
of this Agreement, Buyer and the Corporation will, and will cause their
Affiliates to, use their reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. The Corporation and Buyer agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this Agreement.
SECTION 7.02. Certain Filings. (a) The Corporation and Buyer will, and
will cause their Affiliates to, cooperate with one another (i) in connection
with the Proxy Statement, (ii) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement or the
conversion by Buyer of Preferred Stock and (ii) in taking such actions or making
any such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
Without limiting the generality of the foregoing, the Corporation and Buyer
shall promptly after the date of this Agreement, prepare and file the
notifications required under the HSR Act in connection with the transactions
contemplated by this Agreement. The Corporation and Buyer shall respond as
promptly as practicable to (i) any inquiries or requests received from the
Federal Trade Commission or the
33
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
governmental body in connection with antitrust or related matters. Each of the
Corporation and Buyer shall (A) give the other party prompt notice of the
commencement of any action, suit, litigation, arbitration, preceding or
investigation by or before any governmental body with respect to the
transactions contemplated by this Agreement, (B) keep the other party informed
as to the status of any such action, suit, litigation, arbitration, preceding or
investigation , and (C) promptly inform the other party of any communication to
or from the Federal Trade Commission, the Department of Justice or any other
governmental body regarding the transactions contemplated by this Agreement.
(b) The Corporation and Buyer will, and will cause their Affiliates to,
take such actions, make such payments or commitments, and agree to such
amendments to any of their respective franchises, licenses, contracts or other
agreements or authorizations, as shall be required in order to obtain a consent,
approval or waiver from any other Person in connection with the transactions
contemplated hereby and by the Certificate of Designations (including conversion
of the Preferred Stock), except if such actions, payments, commitments or
amendments, considered individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Corporation or Charter, as the
case may be. If the Corporation or Buyer, as the case may be, believes that such
actions, payments, commitments or amendments would have such a Material Adverse
Effect, the Corporation and Buyer shall cooperate in good faith to seek a
resolution to the circumstances which give rise to the requirement for such
action, payment, commitment or amendment or to determine an otherwise
appropriate resolution.
SECTION 7.03. Public Announcements. Prior to the Closing, the parties
agree to consult with each other before issuing any press release or making any
public statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange or quotation system, will not issue any
such press release or make any such public statement prior to such consultation.
Following the Closing, the parties agree to consult with each other before
issuing any press release or making any public filing that describes any terms
of this Agreement.
SECTION 7.04. Registration Rights Agreement. The terms set forth in
Exhibit B hereto are hereby incorporated by reference.
SECTION 7.05. Shareholder Meeting. (a) Promptly after the execution of
this Agreement, the Corporation will seek the concurrence of the National
34
Association of Securities Dealers, Inc. (the "NASD") with the Corporation's view
that the issuance of securities contemplated hereby does not require approval of
the Corporation's stockholders. If the NASD concurs with the Corporation's view
that stockholder approval is not required, then approval of the Corporation's
stockholders will not be sought. If the NASD does not concur in the
Corporation's view, then the Corporation shall cause a meeting of its
stockholders (the "Stockholder Meeting") to be duly called and held as soon as
reasonably practicable for the purpose of voting on the approval of the issuance
of securities, contemplated by this Agreement. In connection with such meeting,
the Corporation will (i) promptly prepare and file with the Commission, use its
best efforts to have cleared by the Commission and thereafter mail to its
stockholders as promptly as practicable the Proxy Statement and all other proxy
materials for such meeting, (ii) use its best efforts to obtain the necessary
approvals by its stockholders of the transactions contemplated hereby and (iii)
otherwise comply with all legal requirements applicable to such meeting. The
Board of Directors shall recommend approval of the issuance of securities
contemplated by this Agreement by the Corporation's stockholders.
SECTION 7.06. Buyer's Option. (a) In the event that approval of the
transactions contemplated by this Agreement by the Corporation's stockholders
("Stockholder Approval") is required and prior to the Stockholders Meeting all
closing conditions set forth in Article 8 hereof (other than Section 8.01(a))
are satisfied or waived (other than those conditions that by their nature are to
be satisfied at the Closing and will in fact be satisfied at the Closing), then
at any time within 10 business days of the first date upon which the Corporation
notifies Buyer that the closing conditions set forth in Sections 8.01 (other
than Section 8.01(a)) and 8.02 (other than conditions that by their nature are
to be satisfied at Closing and will in fact be satisfied at Closing) are
satisfied or waived, Buyer may elect to purchase from the Corporation at the
Closing (the date of which shall be determined as if the closing condition in
Section 8.01(a) were satisfied) the largest number of shares of Preferred Stock
that it may acquire under applicable NASD rules without Stockholder Approval
(rounded down to the nearest hundred shares) ("Initial Shares") and the Purchase
Price to be paid therefor shall be appropriately adjusted. In the event that
Buyer does so elect and purchases the Initial Shares, the closing of such
transaction shall be treated as the Closing for purposes hereof, and dividends
shall accrue on the Initial Shares from the Closing Date. Buyer may exercise its
rights under this Section 7.06(a) by delivering written notice within the 10
business day period referred to above. If the Initial Shares are purchased,
Buyer and the Corporation shall use their best efforts to obtain Stockholder
Approval and consummate the Second Closing (as defined below).
35
(b) In the event that, subsequent to the issuance of Initial Shares
pursuant to Section 7.06(a), Stockholder Approval is obtained at the Stockholder
Meeting, Buyer shall purchase from the Corporation a number of shares of
Preferred Stock equal to the Preferred Shares minus the Initial Shares (the
"Approved Shares") on the second business day following such Stockholder
Approval (the "Second Closing"); provided that the consummation of the Second
Closing would not contravene any applicable law or regulation that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on Buyer or the Corporation, or any judgment, injunction, order or
decree. At the Second Closing, Buyer shall pay the Corporation the Purchase
Price (appropriately adjusted to account for that portion of the Purchase Price
paid with respect to the Initial Shares) and an amount in cash equal to all
accrued and unpaid dividends on the Approved Shares to the date of the Second
Closing. Dividends shall accrue on the Approved Shares from the Closing Date but
shall not be payable until the first Dividend Payment Date after the date of the
Second Closing. In the event that subsequent to the issuance of Initial Shares
pursuant to Section 7.06(a), Stockholder Approval is not obtained at the
Shareholder Meeting, Buyer and the Corporation shall negotiate in good faith to
achieve a business objective similar to that contemplated by this Agreement
assuming Stockholder Approval had been obtained.
(c) In the event that (i) Stockholder Approval is required but is not
obtained at the Stockholder Meeting, (ii) all closing conditions set forth in
Article 8 hereof (other than Section 8.01(a)) are satisfied or waived (other
than those conditions that by their nature are to be satisfied at the Closing
and will in fact be satisfied at the Closing) and (iii) Buyer has not exercised
its option under Section 7.06(a), Buyer, at its option, may elect to purchase
Initial Shares from the Corporation at the Closing (as if the closing condition
in Section 8.01(a) were satisfied), and the Purchase Price to be paid therefor
shall be appropriately adjusted. Buyer may exercise its rights under this
Section 7.06(c) by written notice delivered to the Corporation within 10
business days after the failure to obtain Stockholder Approval. In the event
that Buyer exercises its option under this Section 7.06(c), Buyer and the
Corporation shall negotiate in good faith to achieve a business objective
similar to that contemplated by this Agreement assuming Stockholder Approval had
been obtained.
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ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Buyer and the Corporation.
The obligations of Buyer and the Corporation to consummate the Closing are
subject to the satisfaction of the following conditions:
(a) the transactions contemplated by this Agreement shall have been
approved by the stockholders of the Corporation, if required;
(b) (i) all filings with, notifications to and consents from Regulatory
Authorities required for the consummation of the Closing, with such exceptions
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Corporation or Buyer and (ii) the Schedule 3.04
Consent, shall in each case have been made or obtained, as applicable, in form
and substance reasonably satisfactory to the Corporation and Buyer; and
(c) no provision of any applicable law or regulation (with such
exceptions as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Corporation or Charter) and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
SECTION 8.02. Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) The Corporation shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing;
(b) The representations and warranties of the Corporation contained in
this Agreement shall in each case, if specifically qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing (except that, for the purposes of this Section
8.02(b), the representation and warranty in Section 3.12(i) shall only apply
with respect to any action, suit, investigation or proceeding instituted by a
governmental agency or authority), as if made at and as of such date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct, or true and correct in all material respects, as the case may be, on
and as of such earlier date);
(c) The Certificate of Designations shall have been filed in accordance
with the laws of Delaware;
37
(d) the Portal Agreement, the Channel Agreement and the LA Agreement
(or, in the case of any of the foregoing agreements, an agreement superseding
such first agreement executed by the parties to the first agreement) shall be in
full force and effect;
(e) The Corporation shall have delivered to Buyer (i) a copy of the
resolutions adopted by the Board of Directors, certified by the Secretary of the
Corporation, authorizing this Agreement and approving Buyer's attainment of the
status of an "interested stockholder" under Section 203 of the DGCL and (ii) a
certificate dated the Closing Date, signed by an officer of the Corporation,
certifying as to the fulfillment of the conditions set forth in Sections 8.02(a)
and (b);
(f) The Corporation shall have delivered to Buyer an opinion reasonably
acceptable to Buyer from the General Counsel of the Corporation, with respect to
the due incorporation, due authorization and capitalization of the Corporation;
and
(g) The Corporation shall have delivered to Buyer an opinion reasonably
acceptable to Buyer from Xxxxx Xxxx & Xxxxxxxx, special counsel to the
Corporation, with respect to the validity of the Preferred Shares and the valid
and binding nature and enforceability of this Agreement.
SECTION 8.03. Conditions to Obligation of the Corporation. The
obligation of the Corporation to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date;
(b) The representations and warranties of Buyer contained in this
Agreement shall in each case, if specifically qualified by materiality, be true
and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing, as if made at and as of such date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct, or true and correct in all material respects, as the case may be, on
and as of such earlier date);
(c) The Corporation shall have received a certificate dated the Closing
Date, signed by an appropriate officer of Buyer, certifying as to the
fulfillment of the conditions set forth in Sections 8.03(a) and 8.03(b); and
38
(d) Buyer shall have delivered to the Corporation an opinion reasonably
acceptable to the Corporation from Irell & Xxxxxxx LLP, special counsel to
Buyer, with respect to the due incorporation and due authorization of Buyer and
the valid and binding nature and enforceability of this Agreement.
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Corporation and Buyer;
(b) by either the Corporation or Buyer if the Closing shall not have
been consummated on or before June 30, 2000, unless extended by mutual agreement
or unless the failure to consummate the Closing is attributable to a failure on
the part of the party seeking to terminate this Agreement to perform any
obligation required to be performed by such party at or prior to the Closing
Date;
(c) by either the Corporation or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction; or
(d) if the approval of the Corporation's stockholders to the
consummation of the transactions contemplated by this Agreement, if required,
shall not have been obtained at the Stockholder Meeting duly convened and
finally adjourned; provided, however, that the Corporation may not terminate
this Agreement pursuant to this clause (d) unless Buyer does not exercise its
rights under Section 7.06(a) or 7.06(c) hereof.
The party desiring to terminate this Agreement pursuant to Section 9.01(b),
9.01(c) or 9.01(d) shall promptly give notice of such termination to the other
party.
SECTION 9.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of either
party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful (a) failure of either
party to fulfill a condition to the performance of the obligations of the other
party, (b) failure to perform a covenant of this Agreement or (c) breach by
either party hereto of any
39
representation or warranty or agreement contained herein, such party shall be
fully liable for any and all losses incurred or suffered by the other party as a
result of such failure or breach. The provisions of Sections 6.01, 11.01, 11.03,
11.05, 11.06, 11.07, 11.08, 11.09, 11.10, and 11.12 shall survive any
termination hereof pursuant to Section 9.01.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
SECTION 10.01. Survival of Representation and Warranties. All
representations and warranties contained in this Agreement and all claims with
respect thereto shall terminate upon the expiration of 18 months after the
Closing Date, except that the representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.06, 4.01, 4.02, and 4.03 shall survive
indefinitely. Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right of indemnity shall have been given in reasonable detail to the party
against whom such indemnity may be sought prior to such time.
SECTION 10.02. Indemnification. (a) The Corporation hereby indemnifies
Buyer against and agrees to hold Buyer harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Buyer arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by the Corporation pursuant to this Agreement; provided that
(i) the Corporation shall not be liable under this Section 10.02(a) unless the
aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(a) exceeds $33,000,000 in which event Buyer shall be entitled to
make a claim against the Corporation for the full amount of such Damages, and
(ii) the Corporation's maximum liability under this Section 10.02(a) shall not
exceed $1,320,000,000. In the event that such indemnity is payable by the
Corporation, the Corporation will advance or reimburse Buyer (in lieu of the
amount set forth in the preceding sentence) an amount equal to the product of
(x) such Damages, and (y) the Gross Up Adjustment. "Gross Up Adjustment" means a
fraction, the numerator of which is one and the denominator of which is the
difference between (A) one, and (B) Buyer's percentage ownership of the
outstanding Common Stock and Class B Stock (assuming the conversion, exercise or
exchange of all
40
Convertible Securities and expressed as a decimal) at the time of payment of
such Damages.
(b) Buyer hereby indemnifies the Corporation against and agrees to hold
the Corporation harmless from any and all Damages incurred or suffered by the
Corporation arising out of any misrepresentation or breach of warranty, covenant
or agreement made or to be performed by Buyer pursuant to this Agreement;
provided that (i) Buyer shall not be liable under this Section 10.02(b) unless
the aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(b) exceeds $33,000,000, in which event the Corporation shall be
entitled to make a claim against Buyer for the full amount of such Damages, and
(ii) Buyer's maximum liability under this Section 10.02(b) shall not exceed
$1,320,000,000.
SECTION 10.03. Procedures. The party seeking indemnification under
Section 10.02 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may at its election participate in and control the defense of any such
suit, action or proceeding at its own expense. The Indemnifying Party shall not
be liable under Section 10.02 for any settlement effected without its consent of
any claim, litigation or proceeding in respect of which indemnity may be sought
hereunder.
SECTION 10.04. Inspections; No Other Representations . Buyer is an
informed and sophisticated purchaser, and has undertaken such investigation and
has been provided with and has evaluated such documents and information as it
has deemed necessary to enable it to make an informed and intelligent decision
with respect to the execution, delivery and performance of this Agreement. Buyer
will undertake prior to the Closing such further investigation and request such
additional documents and information as it deems necessary. Buyer agrees to
accept the Preferred Shares based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to the Corporation, except as expressly set forth in this
Agreement. Without limiting the generality of the foregoing, Buyer acknowledges
that the Corporation makes no representation or warranty with respect to (i) any
projections, estimates or budgets delivered to or made available to Buyer of
future revenues, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof) of the
Corporation and the Subsidiaries or the future business and operations of the
Corporation and the Subsidiaries or (ii) any other information or documents made
available to Buyer or its counsel, accountants or advisors with respect to the
Corporation or the
41
Subsidiaries or their respective businesses or operations, except as expressly
set forth in this Agreement.
SECTION 10.05. Exclusivity. Except as specifically set forth in this
Agreement and except in the case of fraud, effective as of the Closing Buyer
waives any rights and claims Buyer may have against the Corporation, whether in
law or in equity, relating to the Corporation or the Preferred Shares or the
transactions contemplated hereby. The rights and claims waived by Buyer include,
without limitation, claims for breach of contract, breach of representation or
warranty, negligent misrepresentation and all other claims for breach of duty.
After the Closing, Section 10.02 will provide the exclusive remedy for any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby,
except in the case of fraud.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent if sent by
telecopier or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally to
the intended recipient, and (iv) one Business Day later, if sent by overnight
delivery via a national courier service, and in each case, addressed,
if to Buyer, to:
Vulcan Ventures Incorporated
000 000xx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Irell & Xxxxxxx LLP
1800 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
42
Attention: Xxxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
if to the Corporation, to:
RCN Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Any party may change the address to which notices or other communications
hereunder are to be delivered by giving the other party notice in the manner
herein set forth.
SECTION 11.02. Amendments and Waivers. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative.
SECTION 11.03. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 11.04. Assignment. The rights and obligations of the parties
hereunder cannot be assigned or delegated except that (i) Buyer may assign all
of its rights and obligations under this Agreement to a single Controlled
Affiliate (provided that (A) any such Controlled Affiliate continues to be a
Controlled Affiliate of Buyer and (B) Buyer shall be responsible for any breach
by such Controlled Affiliate), (ii) Buyer may assign its rights and obligations
under Section
43
7.04 and Exhibit B of this Agreement to any one or more Permitted Transferees
(if the related transfer is not a sale made under Rule 144 under the Exchange
Act), and (iii) if Buyer pledges any Preferred Stock to any commercial bank(s)
or other financial institution(s) in connection with a bona fide financing
transaction by Buyer then Buyer may assign to such commercial bank(s) or
financial institution(s) its rights and obligations under Section 5.09 of this
Agreement to the extent relating to the Preferred Shares so pledged, provided
that the rights of any such commercial bank(s) or financial institution(s) under
Section 5.09 will terminate immediately upon default by Buyer in connection with
such financing transaction, and provided further that if Buyer and such
commercial bank(s) or financial institution(s) shall each own shares of
Preferred Stock in respect of which a Change of Control Offer is made under
Section 5.09 when the Change of Control Date is on or after the Change of
Control Premium Date, each of Buyer and such commercial bank(s) or financial
institution(s) shall be entitled to accept the Change of Control Offer in
respect of 50% of the shares of Preferred Stock owned by such Person and subject
to such offer.
SECTION 11.05. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such state.
SECTION 11.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may only
be brought in the United States District Court for the Southern District of New
York or any New York State court sitting in New York City, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.01 shall be deemed
effective service of process on such party.
SECTION 11.07. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision
44
of this Agreement is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder, except for rights provided to Permitted
Transferees under Section 7.04.
SECTION 11.08. Entire Agreement. This Agreement (including the Exhibits
hereto) and the Certificate of Designations constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement (except
for the provisions of the letter agreement dated July 29, 1999 that relate to
the solicitation and employment of employees of the Corporation, which remain in
effect).
SECTION 11.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 11.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 11.11. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to any court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
SECTION 11.12. No Recourse. Notwithstanding any of the terms or
provisions of this Agreement, (i) the Corporation agrees that neither it nor any
Person acting on its behalf may assert any claims or cause of action against any
officer, director, partner, member or stockholder of the Buyer or any of its
45
Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby and (ii) the Buyer agrees that neither it nor
any Person acting on its behalf may assert any claims or cause of action against
any officer, director, partner, member or stockholder of the Corporation or any
of its Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby.
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
RCN CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer
VULCAN VENTURES
INCORPORATED
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
SCHEDULE 3.04
Waiver in connection with the transactions contemplated by this
Agreement of clause (n) of Article VII of the Credit Agreement dated as of June
3, 1999 among the Corporation, the borrowers and lenders named therein and Chase
Manhattan Bank.
48
SCHEDULE 3.05(b)
1. 6,514,949 shares of Common Stock issuable on conversion of the Series A
Preferred Stock.
2. 9,388,195 outstanding employee options.
3. An indeterminate number of shares of Common Stock issuable pursuant to
the Exchange Agreement dated as of July 17, 1999 between BecoCom, Inc.
and the Corporation.
4. Common Stock is convertible into Class B Stock under the Corporation's
Certificate of Incorporation.
49
