<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
TELIGENT, INC.
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(Name of Issuer)
Class B Common Stock -- Series 2
par value $0.01 per share
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(Title of Class of Securities)
87959Y 10 3
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(CUSIP Number)
Dr. Rajendra Singh
Telcom Ventures, L.L.C.
211 N. Union Street
Alexandria, Virginia 22314
703-706-3800
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
With a copy to:
Hal B. Perkins, Esq.
General Counsel
Telcom Ventures, L.L.C.
211 N. Union Street
Alexandria, Virginia 22314
703-706-3800
and to:
William J. Phillips, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
212-259-8000
November 26, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with this statement / /.
<PAGE> 2
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CUSIP NO. 87959Y 10 3
(CLASS A COMMON STOCK)
- ----------------------------------------------------
- -----------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Cherrywood Holdings, Inc.
54-1314785
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (See Item 3)
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) / /
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Kansas
- -----------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER (See Item 5)
SHARES
BENEFICIALLY
OWNED BY
EACH 7
REPORTING
PERSON
WITH
-----------------------------------------------------------
SHARED VOTING POWER (See Item 5)
8
17,206,210
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SOLE DISPOSITIVE POWER (See item 5)
9
-----------------------------------------------------------
SHARED DISPOSITIVE POWER (See Item 5)
10
17,206,210
- -----------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5)
11
17,206,210
- -----------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
(See Item 5) /X/
- -----------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
65.7% (32.2% assuming conversion of all Class B Common Stock
- See Item 5)
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
HC
- -----------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
- ----------------------------
CUSIP NO. 87959Y 10 3
(Class A Common Stock)
- ----------------------------
- -----------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Telcom Ventures, L.L.C.
54-1695113
- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (See Item 3)
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER (See Item 5)
SHARES
BENEFICIALLY 17,206,210
OWNED BY
EACH 7
REPORTING
PERSON
WITH
-----------------------------------------------------------
SHARED VOTING POWER (See Item 5)
8
-----------------------------------------------------------
SOLE DISPOSITIVE POWER (See item 5)
9
-----------------------------------------------------------
SHARED DISPOSITIVE POWER (See Item 5)
10
17,206,210
- -----------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5)
11
17,206,210
- -----------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
(See Item 5) /X/
- -----------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
65.7% (32.2% assuming conversion of all Class B Common Stock
- See Item 5)
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
HC
- -----------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
- ----------------------------
CUSIP NO. 879594 10 3
(Class A Common Stock)
- ----------------------------
- -----------------------------------------------------------------------------
NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Telcom-DTS Investors, L.L.C.
54-1782321
- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO (See Item 3)
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) / /
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF SOLE VOTING POWER (See Item 5)
SHARES
BENEFICIALLY
OWNED BY
EACH 7
REPORTING
PERSON
WITH
-----------------------------------------------------------
SHARED VOTING POWER (See Item 5)
8
17,206,210
-----------------------------------------------------------
SOLE DISPOSITIVE POWER (See item 5)
9
-----------------------------------------------------------
SHARED DISPOSITIVE POWER (See Item 5)
10
17,206,210
- -----------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(See Item 5)
11
17,206,210
- -----------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES*
(See Item 5) /X/
- -----------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
65.7% (32.2% assuming conversion of all Class B Common Stock
- See Item 5)
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- -----------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
Item 1. Security and Issuer.
The title of the class of equity securities to which this Statement
relates is the Class B Common Stock- -Series 2, par value $.01 per share (the
"Series B-2 Common Stock"), of Teligent, Inc., a Delaware corporation (the
"Company"). Under the Company's Certificate of Incorporation (the "Certificate
of Incorporation"), shares of the Company's Class B Common Stock, par value $.01
per share (the "Class B Common Stock"), including the Series B-2 Common Stock,
are convertible at the option of the holder at any time on a share-for-share
basis into Class A Common Stock, par value .01 per share (the "Class A Common
Stock," and, together with the Class B Common Stock, the "Common Stock") and
convert automatically upon a transfer to any person other than a Permitted
Transferee (as defined in the Certificate of Incorporation).
The principal executive offices of the Company are located at 8065
Leesburg Pike, Vienna, Virginia 22182.
<PAGE> 6
Item 2. Identity and Background.
The Reporting Persons. This Statement is being filed by
Cherrywood Holdings, Inc., a Kansas corporation ("Cherrywood"), Telcom Ventures,
L.L.C., a Delaware limited liability company ("Telcom Ventures"), and Telcom-DTS
Investors L.L.C., a Delaware limited liability company ("Telcom DTS")(each, a
"Reporting Person"). Cherrywood holds a 75% membership interest in Telcom
Ventures. Telcom Ventures holds a 98.1% membership interest in Telcom-DTS. The
address of the principal businesses and the principal offices of each of the
Reporting Persons is 211 N. Union Street, Suite 300, Alexandria, Virginia 22314.
During the last five years, none of the Reporting Persons has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which that
Reporting Person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Directors and Executive Officers of the Reporting Persons. The
name, business address, present principal occupation or employment and
citizenship of each director and executive officer of Cherrywood, and each
member of the Members Committee (each, a "director") and each executive officer
of Telcom Ventures and Telcom-DTS, are set forth in Schedules I, II and III
hereto, respectively.
To the best knowledge of each Reporting Person, during the
last five years, none of its directors or executive officers has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction resulting in his or her being subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
<PAGE> 7
Item 3. Source and Amount of Funds or Other Consideration.
Telcom-DTS acquired 17,206,210 shares of Series B-2 Common
Stock pursuant to the merger on November 26, 1997 of Teligent, L.L.C., a
Delaware limited liability company and, prior to such merger, the owner of all
of the outstanding capital stock of the Company ("Teligent, L.L.C."), with and
into the Company (the "Reorganization Merger"), upon the terms of the Agreement
and Plan of Merger, dated as of October 6, 1997, by and between the Company and
Teligent, L.L.C.
Immediately prior to the Reorganization Merger, Digital
Services Corporation ("DSC"), an affiliate of Cherrywood and a member of
Teligent, L.L.C., assigned its membership interest in Teligent, L.L.C. to
Telcom-DTS. As a result of the Reorganization Merger, all of Teligent, L.L.C.'s
membership interests were converted into and became shares of Common Stock of
the Company, as follows: (i) the interest of Microwave Services, Inc., a
Delaware corporation ("MSI"), was converted into 21,436,689 shares of Class B
Common Stock - Series 1 ("Series B-1 Common Stock"); (ii) the interest of
Telcom- DTS was converted into 17,206,210 shares of Series B-2 Common Stock;
(iii) the interest of NTTA&T Investment Inc., a Delaware corporation and an
indirect wholly owned subsidiary of Nippon Telegraph and Telephone Corporation
("NTTA&T"), was converted into 5,783,400 shares of Class B Common Stock - Series
3 ("Series B-3 Common Stock"), including 3,470,040 shares acquired by purchase
from the Company immediately after the Reorganization Merger; and (iv) the
interest of Lynn Forester ("Forester") was converted into 1,831,410 shares of
Class A Common Stock.
<PAGE> 8
Item 4. Purpose of Transaction.
Reference is made to the discussion in Item 3 hereof, which is
incorporated herein by reference, for a description of the Reorganization
Merger. The Reorganization Merger was effected in connection with and
immediately prior to the consummation on November 26, 1997 of the Company's
initial public offering of its Class A Common Stock (the "IPO").
The Reporting Persons have no plan, as of the date hereof, to
dispose of shares of Common Stock. However, subject to their obligations under
the agreements described under Item 6 below, they may in the future dispose of
shares of Common Stock in the market, in privately negotiated transactions, in
underwritten offerings or otherwise. In addition, while they have, as of the
date hereof, no plan to do so, the Reporting Persons reserve the right to
acquire additional shares of Common Stock, through market purchases, in
privately negotiated transactions or otherwise, including pursuant to the
exercise of their rights under the agreements described under Item 6 below.
Under the Certificate of Incorporation, (a) MSI, as the record
holder of all outstanding shares of Series B-1 Common Stock, is entitled to
elect a majority of the Company's Board of Directors, which is currently
comprised of seven directors, and (b) Telcom-DTS is entitled to elect one
director.
<PAGE> 9
Item 5. Interest in Securities of the Issuer.
(a) As of the close of business on December 5, 1997, by virtue
of their beneficial ownership of 17,206,210 shares of Series B-2 Common Stock,
the Reporting Persons beneficially owned 17,206,210 shares of Class A Common
Stock. Based on information set forth in the Company's Registration Statement on
Form S-1 with respect to the IPO which was declared effective on November 21,
1997 (the "Registration Statement"), such 17,206,210 shares of Series B-2 Common
Stock (assuming the conversion of all such 17,206,210 shares of Series B-2
Common Stock into Class A Common Stock) represented approximately 65.7% of the
total number of shares of Class A Common Stock outstanding on November 26, 1997
immediately after consummation of the IPO (plus the 17,206,210 shares of Class A
Common Stock which would be outstanding and beneficially owned by the Reporting
Persons upon such conversion and assuming that no other shares of Class B Common
Stock have been converted to Class A Common Stock). Assuming conversion of all
shares of Class B Common Stock outstanding as of the date hereof, the Reporting
Persons would beneficially own approximately 32.2% of the shares of Class A
Common Stock outstanding upon such conversion.
Each of Dr. Rajendra Singh and Neera Singh owns approximately
40% of the outstanding capital stock of Cherrywood and Neera Singh is a trustee
for trusts holding in the aggregate approximately 20% of such stock. In
addition, each of them holds certain positions with the Reporting Persons, as
described in Schedules I, II and III. Dr. and Mrs. Singh expressly disclaim
beneficial ownership of the shares of Common Stock beneficially owned by the
Reporting Persons.
Dr. Rajendra Singh is also a director of the Company and
holds options to purchase 404,440 shares of Class A Common Stock, which vest in
five equal annual installments, beginning November 26, 1997. Of such shares,
80,888 are deemed to be beneficially owned by Dr. Singh as of the date hereof.
These options were granted under the Company's 1997 Stock Incentive Plan and
are held by Dr. Singh as a result of the conversion, in connection with the
Reorganization Merger and the IPO, of Appreciation Units with respect to
Teligent, L.L.C. into stock options.
<PAGE> 10
Pursuant to Rule 13(d)(5)(b)(1) of the General Rules and
Regulations of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Reporting Persons may, by virtue of certain provisions of certain of the
agreements described under Item 6, be deemed to comprise a "group" with some or
all of the parties to such agreements. Based on information set forth in the
Registration Statement, on November 26, 1997, immediately after consummation of
the IPO, (i) the Reporting Persons, MSI and certain other parties to the Members
Agreement (as defined under Item 6 below), if deemed to constitute a "group" by
reason of certain provisions of the Members Agreement, would be deemed, pursuant
to Rule 13(d)(5)(b)(1) under the Exchange Act, to beneficially own an aggregate
of 38,642,899 shares of Class B Common Stock (and thus of the same number of
shares of Class A Common Stock into which such shares of Class B Common Stock
are convertible), representing approximately 82.6% of the total number of shares
of Class A Common Stock outstanding as of such time (plus the 38,642,899 shares
of Class A Common Stock which would be outstanding and deemed to be beneficially
owned by such group upon such conversion and assuming that no other shares of
Class B Common Stock have been converted into Class A Common Stock) and (ii) the
Reporting Persons, MSI and NTTA&T, if deemed to constitute a group by reason of
certain provisions of the Stockholders Agreement (as defined under Item 6
below), would be deemed, pursuant to Rule 13(d)(5)(b)(1) under the Exchange Act,
to beneficially own an aggregate of 44,426,299 shares of Class B Common Stock
(and thus of the same number of shares of Class A Common Stock into which such
shares of Class B Common Stock are convertible), representing approximately
84.5% of the total number of shares of Class A Common Stock outstanding as of
such time (plus the 44,426,299 shares of Class A Common Stock which would be
outstanding and deemed to be beneficially owned by such group upon such
conversion). Neither the filing of this Statement nor any of its contents shall
be deemed to constitute an admission that any of the Reporting Persons is, for
purposes of Section 13(d) of the Exchange Act or any other purpose, the
beneficial owner of shares of Common Stock beneficially owned or deemed to be
beneficially owned by any person or entity who or which may be deemed to
constitute a group with the Reporting Persons or by any such group, and each of
the Reporting Persons
<PAGE> 11
expressly disclaims such beneficial ownership and disclaims membership in a
"group" with such other persons.
(b) By virtue of Cherrywood's 75% memberships interest in
Telcom Ventures, and Telcom Ventures' 98.1% membership interest in Telcom DTS,
each of Cherrywood and Telcom Ventures has the power to cause Telcom DTS to
vote, and to dispose or direct the disposition of, such shares of Series B-2
Common Stock (and thus of the shares of Class A Common Stock into which such
shares of Series B-2 Common Stock are convertible) at the times and in the
manner determined by Cherrywood or Telcom Ventures.
(c) Except as described above under Item 3 and in this Item 5,
neither of the Reporting Persons, nor, to the best knowledge of each Reporting
Person, any of its directors or executive officers, has effected any transaction
in shares of Common Stock during the past 60 days.
(d) None.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
MEMBERS AGREEMENT
In connection with the IPO, the Company, MSI, Associated, DSC,
Telcom-DTS, and the owners of Telcom-DTS entered into an agreement (the "Members
Agreement") whereby the Company granted to DSC certain demand and "piggyback"
registration rights with respect to Common Stock held by DSC at the time of
consummation of the IPO. In addition, in the Members Agreement, Associated and
MSI agreed with DSC that upon a "Change in Control" (as defined in the Members
Agreement) of Associated or MSI, (i) Associated will immediately convert, and
cause its controlled affiliates to immediately convert, all of the Series B-1
Common Stock owned by them into Class A Common Stock such that, under the
Certificate of Incorporation as then in effect, Associated, alone or together
with its controlled affiliates, will no longer have the right to elect a
majority of the Company's Board of Directors, (ii) MSI will cause its designees
on the Company's Board of
<PAGE> 12
Directors to cause the Company's Board of Directors to convene a meeting of the
Company's stockholders and (iii) promptly after taking the action described in
(ii) immediately above, MSI will cause such number of its designees on the
Company's Board of Directors to resign so that such designees no longer
constitute a majority thereof. Under the Members Agreement, in order for a
"Change in Control" of Associated or MSI to occur, in addition to certain
changes in equity ownership or board composition of Associated or MSI as set
forth in the Members Agreement, Telcom-DTS and its affiliates must own shares of
Series B-2 Common Stock representing at least 10% of all then outstanding shares
of Common Stock and must continue to be controlled by Rajendra Singh, Neera
Singh, any estates or trusts of which such persons are executors, trustees or
beneficiaries and any entities controlled by such persons. In the Members
Agreement, each of Associated and MSI also agreed with DSC that it will not
transfer control of any entity which holds Class B Common Stock to any third
party (other than an affiliate of Associated, provided such affiliate agrees to
be bound by the provisions of the Members Agreement applicable to MSI) without
the consent of DSC unless, concurrently with or prior to such transfer,
Associated and MSI take the actions described in clauses (i) through (iii)
above. In addition, in the Members Agreement, MSI and Telcom-DTS have each
granted to the other rights of first refusal and co-sale rights with respect to
any sale or transfer by the other (other than to an affiliate or pursuant to a
pledge arrangement, and excluding any public sale or distribution whether
pursuant to a registration statement, Rule 144 or otherwise) of shares of Common
Stock (other than Common Stock acquired in public market transactions). Pursuant
to the Members Agreement, Associated and the owners of Telcom-DTS have also each
granted to the other rights of first refusal and co-sale rights, with the same
exceptions, with respect to any sale or transfer by the other of shares of MSI,
or member or other equity interests of Telcom-DTS, but only if shares of Common
Stock constitute all or substantially all of the assets of MSI or Telcom-DTS,
respectively. Pursuant to the Members Agreement, Telcom-DTS has succeeded to the
rights and obligations of DSC thereunder. A copy of the Members Agreement is
filed as Exhibit 1 to this Statement, and the foregoing description of the
Members Agreement is
<PAGE> 13
qualified in its entirety by reference to such Exhibit, which is hereby
incorporated herein by reference.
STOCKHOLDERS AGREEMENT
Immediately prior to consummation of the IPO, MSI, Telcom-DTS,
NTTA&T (collectively, the "Stockholder Parties") and the Company entered into a
Stockholders Agreement (the "Stockholders Agreement"). Pursuant to the
Stockholders Agreement, NTTA&T and Telcom-DTS have certain rights and
obligations with respect to their ownership interest in, and the governance of,
the Company, including, so long as Telcom-DTS and NTTA&T, respectively, have the
right to elect a member of the Company's Board, the right of such respective
directors to approve, among other matters, any amendment to the Certificate of
Incorporation which materially and adversely affects the rights of NTTA&T or
Telcom-DTS, respectively, in a discriminatory manner vis-a-vis one or more of
the other Stockholder Parties. The Stockholders Agreement also provides that so
long as Telcom-DTS and NTTA&T, respectively, have the right to elect a member of
the Company's Board of Directors, the Company will afford to representatives of
Telcom-DTS and NTTA&T, respectively, certain business consultation rights,
including with respect to any action (each a "Consultation Event") which (i)
materially changes the fundamental character of the Company's business, (ii)
replaces the Company's Chief Executive Officer or Chief Operating Officer, (iii)
involves the sale or pledge by the Company of a substantial portion of its
assets or any acquisition, divestiture or merger of the Company with another
entity or any joint venture outside the ordinary course of the Company's
business or (iv) involves the issuance by the Company of shares of Common Stock
or preferred stock to any telecommunications carrier. With respect to any
Consultation Event, the Company will be required to provide reasonable advance
notice to NTTA&T and Telcom-DTS and, in the case of the Consultation Event
referred to in clause (iv) of the immediately preceding sentence, to give due
consideration to their objections. In the Stockholders Agreement each of the
parties thereto has agreed to vote, or act by written consent with respect to,
all of their respective shares of Common Stock in favor of the election of the
Company's Chief Executive Officer as a member of the Company's Board of
Directors.
<PAGE> 14
The Stockholders Agreement also provides, in effect, that
until November 13, 1999, each Stockholder Party will hold at least one-half of
the shares of Common Stock held by such Stockholder Party as of November 26,
1997 (after giving effect to the Reorganization Merger as described under Item 3
above), except that such requirement will lapse and be without further effect
automatically as to NTTA&T and Telcom-DTS, respectively, if a Consultation Event
occurs even though NTTA&T or Telcom-DTS, respectively, has objected thereto.
Under the Stockholders Agreement, if such requirement so lapses with respect to
the Telcom-DTS and, at the time of such lapsing, MSI is not entitled, pursuant
to the Certificate of Incorporation, to elect a majority of the members of the
Company's Board, then such requirement shall also lapse and be without further
effect with respect to MSI. In addition, in the Stockholders Agreement, MSI and
Telcom-DTS have each granted to NTTA&T co-sale rights with respect to any sale
or transfer by either of them (other than to an affiliate or pursuant to a
pledge arrangement, and excluding any public sale or distribution whether
pursuant to a registration statement, Rule 144 or otherwise) of shares of Common
Stock (other than Common Stock acquired in public market transactions).
Under the Stockholders Agreement, if the Company is required
by a change in law or other circumstance to reduce the level of foreign
ownership of the Company and the Company is unable to obtain a waiver of such
requirement, the Company will have the right, and will be required, at NTTA&T's
election, to refuse to sell stock in the Company to any Foreign Owner (as
defined in the Stockholders Agreement) if such a transaction would adversely
impact NTTA&T's ability to hold its then existing share ownership in the
Company, and, in addition, the Company will have the right, and will be
required, at the election of any Stockholder Party, to repurchase for cash (to
the extent permitted by applicable Delaware corporation law) shares first from
all other Foreign Owners other than the Stockholder Parties, if applicable, and
thereafter from each of the Stockholder Parties, on a pro rata basis (based on
the percentage of foreign ownership attributable to each Stockholder Party) at
the fair market value thereof based on the Company's then public trading value.
<PAGE> 15
A copy of the Stockholders Agreement is filed as Exhibit 2 to
this Statement, and the foregoing description of the Stockholders Agreement is
qualified in its entirety by reference to such Exhibit, which is hereby
incorporated herein by reference.
FIRSTMARK AGREEMENT
Pursuant to a Stock Contribution Agreement dated as of March
10, 1997 (the "FirstMark Agreement") by and between Associated Communications,
L.L.C. (the predecessor to Teligent, L.L.C.), FirstMark Communications, Inc.
("FirstMark"), Forester, and, for certain limited purposes MSI and DSC, Forester
was granted certain limited "piggyback" and demand registration rights with
respect to the shares of Class A Common Stock into which Forester's member
interest in Teligent L.L.C. was converted pursuant to the Reorganization Merger
("Forester Registrable Securities"). In addition, in the FirstMark Agreement,
Forester granted to MSI and DSC a right of first refusal with respect to any
sale or other disposition by her of any equity interest in the Company, other
than any sale by her in the public market of Forester Registrable Securities
registered under the Securities Act of 1933, as amended (the "Securities Act")
or pursuant to Rule 144 under the Securities Act. A copy of the FirstMark
Agreement is filed as Exhibit 3 to this Statement, and the foregoing description
of the FirstMark Agreement is qualified in its entirety by reference to such
Exhibit, which is hereby incorporated herein by reference.
MANDL EMPLOYMENT AGREEMENT
Under the Company's Employment Agreement with Alex J. Mandl,
the Company's Chairman and Chief Executive Officer, which took effect on
September 1, 1996 (the "Mandl Employment Agreement") and to which MSI and DSC
are parties for certain limited purposes, the Company has granted Mr. Mandl
certain limited "piggyback" and demand registration rights with respect to the
shares of Class A Common Stock which are subject to stock options under the 1997
Plan as a result of the conversion, in connection with the Reorganization Merger
and the IPO, of the Company Appreciation Rights ("CARs") with respect to
Teligent, L.L.C. granted pursuant to the Mandl Employment Agreement
<PAGE> 16
into stock options. The Mandl Employment Agreement also provides that if either
MSI or DSC sells any of their respective interests in the Company to a third
party, such seller shall be obligated to require the purchaser of such interest
to purchase, and may require Mr. Mandl to sell to such third party, a
proportionate percentage of the vested equity interest represented by Mr.
Mandl's CARs (which have been converted into stock options as described above)
valued as of the date of such purchase, at the same price paid by the third
party for the interest of such seller. The Mandl Employment Agreement also
provides for a right of first refusal on the part of MSI and DSC with respect to
the disposition by Mr. Mandl of an equity interest in the Company. A copy of the
Mandl Employment Agreement is filed as Exhibit 4 to this Statement, and the
foregoing description of the Mandl Employment Agreement is qualified in its
entirety by reference to such Exhibit, which is hereby incorporated herein by
reference.
UNDERWRITER LOCK-UP AGREEMENTS
In connection with the IPO, each of Telcom Ventures,
Telcom-DTS and Dr. Rajendra Singh entered into a lock-up agreement (each a
"Lock-Up Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith, Incorporated ("Merrill Lynch") and the other underwriters for the IPO,
whereby each agreed not to, without the prior written consent of Merrill Lynch,
directly or indirectly offer, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer any shares
of Common Stock or securities of the Company convertible into or exchangeable or
exercisable for Common Stock, or file any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing, before
the expiration of the 180-day period commencing on November 20, 1997, subject to
certain exceptions. The form of Lock-Up Agreement is filed as Exhibit 5 to this
Statement, and the foregoing description of the Lock-Up Agreement is qualified
in its entirety by reference to such Exhibit, which is hereby incorporated
herein by reference.
<PAGE> 17
One or more of the Reporting Persons may enter into loan
agreements which provide for the pledging or escrowing of some or all of the
shares of Series B-2 Common Stock beneficially owned by the Reporting Persons.
Except as described in this Statement, none of the Reporting
Persons nor, to the best knowledge of any Reporting Person, any of its directors
or executive officers has any contracts, arrangements, understandings or
relationships with respect to any securities of the Company.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Agreement dated September 29, 1997, among
Teligent, L.L.C., Digital Services Corporation,
Telcom-DTS Investors, L.L.C., Microwave Services,
Inc., The Associated Group, Inc. and certain other
parties
Exhibit 2: Stockholders Agreement dated as of November 26,
1997 by and among Teligent, Inc., Microwave
Services, Inc., Telcom-DTS Investors, L.L.C. and
NTTA&T Investment Inc.
Exhibit 3: Stock Contribution Agreement dated as of March
10, 1997 among Associated Communications, L.L.C.,
First Mark Communications, Inc. and Lynn Forester
Exhibit 4: Employment Agreement dated August 19, 1996,
between Associated Communications, L.L.C. and Alex
J. Mandl
Exhibit 5: Form of Underwriter Lock-Up Agreement
<PAGE> 18
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF CHERRYWOOD HOLDINGS, INC.
The names, business addresses and present principal occupation
or employment of the directors and executive officers of Cherrywood Holdings,
Inc. are set forth below. All of the persons listed below are citizens of the
United States.
DIRECTORS
(INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
<TABLE>
<CAPTION>
Name Present Principal
Occupation or Employment
------------------------
<S> <C>
Rajendra Singh Representative on Members Committee,
President, Treasurer & Director Chairman, CEO & Treasurer
Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Neera Singh Representative on Members Committee,
Executive Vice President, Secretary & Director Executive Vice President & Secretary
Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
</TABLE>
<PAGE> 19
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Name Present Principal
Occupation or Employment
------------------------
<S> <C>
Rahul Prakash President, Assistant Treasurer
Vice President, Assistant Treasurer Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Hal B. Perkins General Counsel, Assistant Secretary
General Counsel, Assistant Secretary Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
</TABLE>
<PAGE> 20
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF TELCOM VENTURES, L.L.C.
The names, business addresses and present principal occupation
or employment of the directors and executive officers of Telcom Ventures, L.L.C.
are set forth below. All of the persons listed below are citizens of the United
States.
DIRECTORS
(INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
---- ------------------------------------------
<S> <C>
Rajendra Singh Representative on Members Committee, Chairman,
Representative on Members Committee, CEO & Treasurer
Chairman, CEO & Treasurer Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Neera Singh Representative on Members Committee, Executive
Representative on Members Committee, Vice President & Secretary
Executive Vice President & Secretary Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
The Honorable Richard Darman Partner & Managing Director
Representative on Members Committee The Carlyle Group
1001 Pennsylvania Avenue N.W.
Washington, D.C. 20004
Mark Ein Vice President
Representative on Members Committee The Carlyle Group
1001 Pennsylvania Avenue N.W.
Washington, D.C. 20004
</TABLE>
<PAGE> 21
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Present Principal
Name Occupation or Employment
---- ------------------------
<S> <C>
Rahul Prakash President, Assistant Treasurer
President, Assistant Treasurer Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Hal B. Perkins General Counsel, Assistant Secretary
General Counsel, Assistant Secretary Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
</TABLE>
<PAGE> 22
SCHEDULE III
DIRECTORS AND EXECUTIVE OFFICERS OF TELCOM-DTS INVESTORS, L.L.C.
The names, business addresses and present principal occupation
or employment of the directors and executive officers of Telcom-DTS Investors,
L.L.C. are set forth below. All of the persons listed below are citizens of the
United States.
DIRECTORS
(INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
---- ------------------------------------------
<S> <C>
Rajendra Singh Representative on Members Committee,
Representative on Members Committee, Chairman, CEO, & Treasurer
Chairman, CEO, President & Treasurer Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Neera Singh Representative on Members Committee,
Representative on Members Committee, Executive Vice President & Secretary
Vice President & Secretary Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Mark Ein Vice President
Representative on Members Committee The Carlyle Group
1001 Pennsylvania Avenue N.W.
Washington, D.C. 20004
</TABLE>
<PAGE> 23
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
Present Principal
Name Occupation or Employment
---- ------------------------
<S> <C>
Rahul Prakash President, Assistant Treasurer
President, Assistant Treasurer Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
Hal B. Perkins General Counsel, Assistant Secretary
General Counsel, Assistant Secretary Telcom Ventures, L.L.C.
211 N. Union Street
Suite 300
Alexandria, VA 22314
</TABLE>
<PAGE> 24
SCHEDULE IV
JOINT FILING AGREEMENT
The undersigned parties hereby agree that the Schedule 13D
filed herewith (and any amendments thereto) relating to the stock of Teligent,
Inc. is being filed jointly with the Securities and Exchange Commission pursuant
to Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended, on
behalf of each such person.
Dated: December 8, 1997
CHERRYWOOD HOLDINGS, INC.
By: /s/ Rahul Prakash
--------------------------
Name: Rahul Prakash
Title: Vice President
TELCOM VENTURES, L.L.C.
By: /s/ Rahul Prakash
--------------------------
Name: Rahul Prakash
Title: President
TELCOM-DTS INVESTORS, L.L.C.
By: /s/ Rahul Prakash
--------------------------
Name: Rahul Prakash
Title: President
<PAGE> 25
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
CHERRYWOOD HOLDINGS, INC.
By: /s/ Rahul Prakash
--------------------------
Name: Rahul Prakash
Title: Vice President
TELCOM VENTURES, L.L.C.
By: /s/ Rahul Prakash
--------------------------
Name: Rahul Prakash
Title: President
TELCOM-DTS INVESTORS, L.L.C.
By: /s/ Rahul Prakash
--------------------------
Name: Rahul Prakash
Title: President
DATE: December 8, 1997
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Description Numbered Page
- ------- ----------- -------------
<S> <C> <C>
1 Agreement dated September 29, 1997,
among Teligent, L.L.C., Digital
Services Corporation, Telcom-DTS
Investors, L.L.C., Microwave
Services, Inc., The Associates
Group, Inc. and certain other
parties
2 Stockholders Agreement dated as of
November 26, 1997 by and among
Teligent, Inc., Microwave Services,
Inc., Telcom-DTS Investors, L.L.C.
and NTTA&T Investment Inc.
3 Stock Contribution Agreement dated
as of March 10, 1997 among
Associated Communications, L.L.C.,
First Mark Communications, Inc. and
Lynn Forester
4 Employment Agreement dated August
19, 1996, between Associated
Communications, L.L.C. and Alex J.
Mandl
5 Form of Underwriter Lock-Up
Agreement
</TABLE>
<PAGE> 1
EXHIBIT 1
AGREEMENT
AGREEMENT dated as of September 29, 1997, among Teligent, L.L.C., a
Delaware limited liability company (together with any corporation resulting
from, or which is the successor to Teligent, L.L.C. upon, the conversion of
Teligent, L.L.C. to a corporation, the "Company"), Digital Services Corporation,
a Virginia corporation and a Member of the Company ("DSC"), Telcom-DTS
Investors, L.L.C., a Delaware limited liability company and an Affiliate of DSC
("Telcom"), the members of Telcom, all of whom are listed on Schedule I hereto
(collectively, the "Telcom Members"), Microwave Services, Inc., a Delaware
corporation and a Member of the Company ("MSI"), and The Associated Group, Inc.,
a Delaware corporation and the owner of all of the outstanding capital stock of
MSI ("AGI").
The Company has substantially negotiated a Securities Purchase
Agreement to be entered into by the Company, DSC and MSI with Nippon Telegraph
and Telephone Corporation (the "Investor"), providing for the purchase by the
Investor of a Member Interest (the "Securities Purchase Agreement"), and for the
execution and delivery by MSI, DSC and the Investor at the First Closing under
the Securities Purchase Agreement (the "First Closing") of an Amended and
Restated Limited Liability Company Agreement of the Company (the "Amended LLC
Agreement").
In connection with entering into the Securities Purchase Agreement and
the Amended LLC Agreement and the consummation of the transactions contemplated
thereby, the parties desire to provide for certain rights and obligations of
DSC, Telcom, MSI and AGI relating to their ownership interests in the Company.
In consideration of the foregoing, and the agreements set forth herein,
and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Registration Rights. The Company agrees that DSC will have the
registration rights set forth in this Section 1 with respect to equity interests
or securities of the Company held by DSC at the time of consummation of the
Company's initial public offering of equity securities ("Registrable
Securities").
(a) "Piggyback" Registration Rights. (i) After the consummation by
<PAGE> 2
the Company of an initial public offering of equity securities (the "IPO"), if
the Company at any time proposes to register under the Securities Act of 1933,
as amended (the "Securities Act") (other than a registration on Form S-4 or S-8
or any successor or similar forms thereto and other than a registration pursuant
to paragraph 1(b) below), whether or not for sale for its own account
(including, without limitation, pursuant to the exercise by any other person or
entity of any registration rights granted by the Company), on a form and in a
manner that would permit registration of Registrable Securities for sale to the
public under the Securities Act, it will give written notice to DSC of its
intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such registration will be in
connection with an underwritten offering of equity securities and, if so, the
identity of the managing underwriter and whether such offering will be pursuant
to a "best efforts" or "firm commitment" underwriting and (y) the anticipated
price range at which such equity securities are reasonably expected to be sold
to the public). Upon the written request of DSC delivered to the Company within
15 calendar days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by DSC and the
intended method of disposition thereof), the Company will use reasonable best
efforts to effect the registration under the Securities Act of the Registrable
Securities that the Company has been so requested to register, subject to the
further provisions of this agreement;
(ii) If a registration pursuant to this Section 1 involves an
underwritten offering and the managing underwriter advises the Company that, in
its opinion, the number of Registrable Securities proposed to be included in
such registration should be limited due to market conditions, then the Company
may exclude Registrable Securities requested to be included pursuant to Section
1(a) pro rata, based on the respective numbers of Registrable Securities as to
which registration has been so requested by each holder of Registrable
Securities.
(iii) In connection with any underwritten offering with
respect to which holders of Registrable Securities shall have requested
registration pursuant to this Section 1, the Company shall have the right to
select the managing underwriter with respect to the offering.
(b) Demand Registration Rights. (i) In addition to the registration
rights afforded by Section 1(a) above, at any time commencing six months after
the closing of the IPO (the "Demand Date"), DSC shall be entitled to demand in
writing that the Company effect a registration under the Securities Act and
under such state securities laws as DSC may reasonably request (provided that
the Company shall not be required to
<PAGE> 3
consent to general service of process in any jurisdiction where it is not then
so subject) in respect of all or part of the Registrable Securities held by DSC,
provided that (A) such demand registration right shall apply only if the amount
of Registrable Securities to be registered (1) constitutes at least 20% of the
amount of Registrable Securities owned by DSC or (2) has an anticipated
aggregate offering price (before underwriters' fees, commissions and discounts)
of at least $20,000,000, (B) the Company shall not be obligated to use its
reasonable best efforts to cause to become effective a registration statement
pursuant to this Section 1(b) until a period shall have elapsed from the
effective date of the most recent previous registration statement under the
Securities Act with respect to a public offering of equity securities of the
Company (a "Prior Public Offering") equal to the greater of (1) 120 days and (2)
the shortest period of any lockup of shareholders of the Company required by the
lead managing underwriter of such Prior Public Offering (the "Holdback Period")
and (C) if, while a registration request is pending pursuant to this Section
1(b), the Board of Directors of the Company makes a good faith determination
that the filing or effectiveness of a registration statement would require the
public disclosure of material information, the disclosure of which would
adversely affect the Company, the Company shall not be required to effect a
registration pursuant to this Section 1(b) until such material information is
disclosed to the public or ceases to be material; provided, further, however,
that the foregoing delay shall in no event exceed 120 days. Notwithstanding the
foregoing provisions of Section 1(b), the Company shall not be obligated to
effect more than three registrations pursuant to this Section 1(b)(i).
(ii) At any time after the Demand Date, DSC shall be entitled to
demand in writing that the Company effect a registration under the Securities
Act of all or part of its Registrable Securities on Form S-3 or any similar
short-form ("Short-Form") registration statement ("Short-Form Registrations"),
if available, specifying in the request the number of Registrable Securities to
be registered by DSC and the intended method of distribution thereof (such
notice is hereinafter referred to as an "S-3 Holder Request"); provided, that
the Company shall be obligated to effect a registration of Registrable
Securities pursuant to this Section 1(b)(ii) only if the anticipated aggregated
offering price for such Registrable Securities is in excess of $10,000,000,
provided, further, that the Company shall not be obligated to file and use its
reasonable best efforts to cause to become effective a registration statement
pursuant to this Section 1(b) until a period equal to the Holdback Period shall
have elapsed from the effective date of the Prior Public Offering. The holders
of Registrable Securities will be entitled to request an unlimited number of
Short-Form Registrations. After the Company has become subject to the reporting
requirements of the Securities Exchange Act of 1934, the Company will use
<PAGE> 4
its reasonable best efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities.
(iii) If, in connection with any underwritten
offering pursuant to this Section 1(b), the managing underwriter thereof advises
the Company in writing that in its opinion the number of securities (including,
for purposes of this Section 1(b), securities of the Company which the Company
has proposed to include in such offering) proposed to be included in such
offering should be limited due to market conditions, the Company will promptly
so advise all holders seeking to participate in such offering, and securities
shall be excluded from such offering in the following order until such
limitation has been met: (A) securities requested to be included in such
offering by holders other than DSC, if any, shall be excluded until all such
other securities shall be so excluded, (B) securities that the Company has
elected to include in such offering, if any, shall be excluded until all such
securities have been excluded, and, (C) thereafter, any Registrable Securities
requested to be included in such offering shall be excluded pro rata, based on
the respective number of Registrable Securities as to which registration has
been so requested by each holder thereof.
(iv) If a requested registration pursuant to this
Section 1(b) involves an underwritten offering, the holders of a majority of
Registrable Securities included in such registration shall have the right, with
the approval of the Company (which approval shall not be unreasonably withheld),
to select the managing underwriter for such offering.
(c) [Intentionally Omitted]
(d) Registration Procedures.
(i) If and whenever the Company is required to use its reasonable
best efforts to effect or cause the registration of any Registrable Securities
under the Securities Act as provided in Section 1(a) or 1(b), the Company will,
as expeditiously as possible:
(A) Prepare and promptly file with the
Securities and Exchange Commission (the "Commission") a registration statement
with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become and remain effective;
(B) Prepare and file with the Commission
such amendments (including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period as may be
requested by holders desiring to register their Registrable Securities for sale
<PAGE> 5
not exceeding 90 days and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the Holder or Holders thereof set forth in such
registration statement.
(C) Furnish to each holder of
Registrable Securities covered by the registration statement and to each
underwriter, if any, of such Registrable Securities, such number of copies of a
prospectus and preliminary prospectus for delivery in conformity with the
requirements of the Securities Act, and such other documents, as such Person may
reasonably request, in order to facilitate the public sale or other disposition
of the Registrable Securities.
(D) Use its reasonable best efforts to
register or qualify such Registrable Securities covered by such registration
Statement under such other securities or blue sky laws of such jurisdictions as
each holder thereof shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such holder to
consummate the disposition of the Registrable Securities owned by such holder
in such jurisdictions, except that the Company shall not for any such purpose be
required (A) to qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 1(d)(i)(D)), it is
not then so qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to general or
unlimited service of process in any such jurisdiction where it is not then so
subject.
(E) Use its reasonable best efforts to
cause such Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the holder or holders thereof to consummate the
disposition of such Registrable Securities.
(F) Immediately notify each holder of
Registrable Securities covered by such registration statement, at any time when
a prospectus thereto is required to be delivered under the Securities Act within
the appropriate period mentioned in Section 1(d)(i)(B), if the Company becomes
aware that the prospectus included in such registration statement, as ten in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and, at
the request of any such holder, deliver reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such
<PAGE> 6
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(G) Otherwise use its reasonable best
efforts to comply with all applicable rules and regulations of the Commission
and make generally available to its securityholders, in each case as soon as
practicable, but not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered corresponds to a
fiscal year of the Company), an earnings statement of the Company which will
satisfy the provisions of Section 11(a) of the Securities Act.
(H) Use its reasonable best efforts in
connection with the underwriters of list such Registrable Securities on each
securities exchange as they may reasonably designate.
(I) In the event the offering is an
underwritten offering, use its reasonable best efforts to obtain a "cold
comfort" letter from the independent public accountants for the Company in
customary form and covering such matters of the type customarily covered by such
letters.
(J) Execute and deliver all instruments
and documents (including in an underwritten offering an underwriting agreement
in customary form) and taken such other actions and obtain such certificates and
opinions as are customary in an underwritten public offering.
(ii) Each holder of Registrable Securities will, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 1(d)(i)(F), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 1(d)(i)(F).
(iii) If a registration pursuant hereto involves an underwritten
offering, the Company agrees, if so required by the managing underwriter of such
offering, not to effect any public sale or distribution of any of its equity
securities or securities convertible into or exchangeable or exercisable for any
of such equity securities during a period of up to 180 calendar days after the
effective date of such registration, except for securities sold in such
underwritten offering or except in connection with an option plan, purchase
plan, savings or similar plan, or an acquisition, merger or exchange offer.
<PAGE> 7
(iv) If a registration pursuant hereto involves an underwritten
offering, each holder of Registrable Securities, whether or not such holder's
Registrable Securities are included in such registration, will, if and to the
extent request by the managing underwriter in such offering, enter into an
agreement not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities act (but excluding those Registrable
Securities sold n such offering), of any of the Company's excluding those
Registrable Securities sold in such offering), of any of the Company's equity
securities owned by such holder or securities, without the consent of such
managing underwriter, during a period commencing on the effective date of such
registration and ending a number of calendar days thereafter not exceeding 180
days as such managing underwriter shall reasonably determine is required to
effect a successful offering; provided such agreement is substantially identical
in form and substance to other "lock-up" agreements of the Company's other
stockholders who execute such agreements in connection with such offering.
(e) Indemnification.
(i) In the event of any registration of any securities of the Company
under the Securities Act pursuant hereto, the Company will, and it hereby agreed
to, indemnify and hold harmless, to the extent permitted by law, each holder of
any Registrable Securities covered by such registration statement, its directors
and officers or general and limited partners, each other Person who participates
as an underwriter in the offering or sale of such securities and each other
person, if any, who controls such holder or any such underwriter within the
meaning of the Securities Act, as follows:
(A) against any and all loss, liability, claim, damage and expense
whatsoever arising out of or based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein not
misleading;
(B) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
<PAGE> 8
omission, if such settlement is effected with the written consent of the
Company; and
(C) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, to the extent that any such expense is not paid under subparagraph (A)
or (B) above;
provided, however, that this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such holder, underwriter or control person expressly for use in the preparation
of any registration statement (or any amendment or supplement thereto) and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any , who controls such underwriter with the meaning
of the Securities or to any other Person, if any, who controls such underwriter
with the meaning of the Securities Act, in any such case to the extent that such
loss, liability, claim, damage or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in the final prospectus.
(ii) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance
herewith that the Company shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable Securities to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 1(e)(i) the Company, each director of the Company, each officer
of the Company and each other Person, if any, who controls the Company within
the meaning of the Securities Act with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such holder specifically stating
that it is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement. Such
indemnity shall
<PAGE> 9
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or such director, officer or controlling Person and shall
survive the transfer of such securities by such holder. In that event, the
obligations of the Company and such holders pursuant to this Section 1(e) are to
be several and not joint; provided, however, that with respect to each claim
pursuant to this Section 1(e)(ii), each such holder's liability under this
Section 1(e)(ii) shall be limited to an amount equal to the net proceeds (after
deducting the underwriting discount and expenses) received by such holder from
the sale of such Registrable Securities by such holder.
(iii) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a claim
referred to in this Section 1(e), such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 1(e), except to the extent (not including any such notice of an
underwriter) that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim (in which case the indemnifying party shall not be liable for the fees and
expenses of more than one firm of counsel for a majority of the sellers of
Registrable Securities or more than one firm of counsel for the underwriters in
connection with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof. No
indemnified party shall consent to the entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by an
indemnifying party and for which an indemnifying party may have indemnification
liability hereunder with the consent of such indemnifying party.
(iv) The Company and each seller of Registrable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
<PAGE> 10
qualification of securities under any federal or state law or regulation of any
governmental authority.
(f) Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
1(e) is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more of
the underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each), the parties relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement of omission and any other equitable considerations
appropriate under the circumstances. The Company and each Seller of Registrable
Securities agree with each other that no seller of Registrable Securities shall
be required to contribute any amount in excess of the amount such seller would
have been required to pay to an indemnified party if the indemnity under Section
1(e)(ii) were available. The Company and each such seller agree with each other
and the underwriters of the Registrable Securities, if requested by such
underwriters, that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the underwriters
were treated as one entity for such purpose) or for the underwriters' portion of
such contribution to exceed the percentage that the underwriting discount bears
to the initial public offering price of the Registrable Securities. For purposes
of this Section 1(f), each Person, if any, who controls an underwriter within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and officer of the Company
who signed the registration statement, and each Person, if any, who controls the
Company or a seller of Registrable Securities within the meaning of Section 15
of the Securities Act shall have the same rights to contribution as the Company
or a seller of Registrable Securities, as the case may be.
(g) Expenses. The Company shall bear all registration expenses
(exclusive of underwriting fees, discounts and commissions) in connection with
the registrations effected by it pursuant to Section 1(b) and such registration
expenses incurred in connection with up to three fully completed registrations
of Registrable Securities pursuant to Section 1(a).
<PAGE> 11
(h) Transfer of Registration Rights. DSC may assign its rights under
this Section 1 to any person or entity to whom or which DSC sells, transfers or
assigns not less than 20% of the Registrable Securities; provided that such
person or entity agrees in writing with the Company to be bound by this
Agreement to the same extent as DSC was bound at the time of such sale, transfer
or assignment.
(i) Cessation of Registrable Security Status. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of under such registration statement, (ii) such securities
shall have been transferred pursuant to Rule 144 under the Securities Act, (iii)
such securities shall have been otherwise transferred or disposed of, and new
certificates therefor not bearing a legend restricting further transfer shall
have been delivered by the Company, and subsequent transfer or disposition of
such securities shall not require their registration or qualification under the
Securities Act or any similar state law then in force, or (iv) such securities
shall have ceased to be outstanding.
2. Change in Control Covenants.
(a) Pre-IPO. MSI covenants and agrees with DSC that if, prior to an
IPO, there is a "Change in Control" of MSI or AGI (as defined below), it will
promptly take all action available to it to cause Section 4.1(c) of the Amended
LLC Agreement to be amended in a manner such that (i) MSI will no longer have
the right and power to elect a majority of the members of the Board of Directors
of the Company and (ii) MSI's voting power as a Member (as defined in Amended
LLC Agreement) will be proportionate to its Membership Percentage (as defined in
the Amended LLC Agreement).
(b) Post-IPO. AGI covenants and agrees with DSC that if, from and after
the consummation of an IPO, there is a Change in Control of AGI or MSI, AGI will
immediately convert, and will cause all of its controlled Affiliates to convert,
all of the Class B Common Stock of the Company beneficially owned by AGI and
such Affiliates into shares of Class A Common Stock of the Company such that,
under the Company's Certificate of Incorporation as then in effect, AGI, alone
or together with its controlled Affiliates, will no longer have the right to
elect a majority of the Company's Board of Directors.
(c) Shareholder Meeting; Resignations. Promptly upon a Change in
Control of MSI or AGI, MSI agrees with DSC that it will (i) cause the MSI
Directors to cause the Company's Board of Directors to convene a meeting of
<PAGE> 12
Members (in the case of such a Change in Control of MSI or AGI referred to in
Section 2(a)) or of the Company's stockholders (in the case of such a Change in
Control of MSI or AGI, referred to in Section 2(b)) and (ii) promptly after
taking the action required by clause (i) above, cause such number of the MSI
Directors to resign from the Company's Board of Directors so that the MSI
Directors will no longer constitute a majority thereof.
(d) Definition of "Change in Control" of MSI or AGI. For purposes of
this Section 2, a "Change in Control" of MSI or AGI shall occur (i) in the case
of MSI, if (A) any person or entity, or group of affiliated persons or entities,
other than AGI and its controlled Affiliates, (1) acquires voting securities of
MSI representing a majority of the voting power of all outstanding voting
securities of MSI or (2) otherwise acquires, directly or indirectly, the power
to direct the management and policies of MSI, (B) AGI and its controlled
Affiliates shall cease to be, directly or indirectly, the sole beneficial owners
of voting securities representing at least 50.1% of the voting power of all
outstanding voting securities of MSI and at least 50.1% of the equity ownership
in MSI or (C) individuals who, as of the date hereof, constitute the board of
directors of MSI (the "Incumbent MSI Board") cease for any reason to constitute
a majority of the board of directors of MSI, provided, however, that any
individual becoming a director of MSI after the date hereof whose election, or
nomination for election by MSI's shareholder(s), was approved by a vote of a
majority of the directors of MSI then comprising the Incumbent MSI Board shall
be considered as though such individual were a member of the Incumbent MSI
Board, but excluding for this purpose any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors of MSI or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person, entity or group other than the board of directors of MSI, and (ii) in
the case of AGI, if (A) any person or entity, or group of affiliated persons or
entities, other than any person or entity, or group of affiliated persons or
entities (including for this purpose any director of AGI as of the date hereof,
their respective spouses and children, any estates or trusts (and the executors,
trustees or legal representatives thereof) of which such directors, spouses or
children are an executor, trustee or beneficiary and any entities controlled by
any of such persons) (such persons, entity or group being referred to as the
"Current Control Group") who or which, individually or taken together, as of the
date hereof, own or have the right to acquire voting securities of AGI
representing 15% or more of the voting power of all outstanding voting
securities of AGI, (1) acquires voting securities of AGI representing a majority
of the voting power of all outstanding voting securities of AGI or (2) otherwise
acquires, directly or indirectly, the power to direct the management and
policies of AGI; (B) individuals who are either (1) members
<PAGE> 13
of the Current Control Group or (2) persons whose election, or nomination for
election by the stockholders of AGI, was requested, directly or indirectly, by a
member of the Current Control Group and who have a fiduciary, employment or
similar relationship with the Company or a member of the Current Control Group
(the "Incumbent AGI Board"), cease for any reason (other than death) to
constitute at least 50% of the board of directors of AGI, provided, however,
that any individual becoming a director of AGI after the date hereof whose
election, or nomination for election by AGI's shareholder(s), was approved by a
vote of a majority of the directors of AGI then comprising the Incumbent AGI
Board shall be considered as though such individual were a member of the
Incumbent AGI Board, but excluding, for this purpose, (y) any such individual
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors of AGI or
other actual or threatened solicitation of proxies or consents by or on behalf
of a person, entity or group other than the board of directors of AGI and (z)
any such individual nominated for election to the board of directors of AGI by
any stockholder or group of affiliated stockholders of AGI other than a member
or members of the Current Control Group; or (C) the members of the Current
Control Group cease to beneficially hold (and retain the right to exercise all
voting and dispositive rights with respect to) voting securities of AGI
representing at least 10% of the voting power of all outstanding voting
securities of AGI and any other person or entity, or group of affiliated persons
or entities, beneficially owns voting securities of AGI representing 40% or more
of the voting power of all outstanding voting securities of AGI. Notwithstanding
the foregoing, a Change in Control of MSI or AGI shall not be deemed to have
occurred if, at the time of determination, Telcom and its Affiliates do not have
the Telcom Threshold Membership Percentage. For this purpose, Telcom and its
Affiliates shall be deemed not to have the Telcom Threshold Membership
Percentage if (i) any person or entity, or group of affiliated persons or
entities, other than Rajendra Singh, Neera Singh, any estates or trusts (and the
executors, trustees or legal representatives thereof) of which such persons are
an executor, trustee or beneficiary and any entities controlled by any of such
persons) (such persons, entity or group being referred to as the "Singh Control
Group"), (A) acquires voting securities (or other interests) of Telcom
representing a majority of the voting power of all outstanding voting securities
(or other interests) of Telcom or (B) otherwise acquires, directly or
indirectly, the power to direct the management and policies of Telcom; (ii)
individuals who are either (A) members of the Singh Control Group or (B) persons
whose election, or nomination for election by the stockholders (or members) of
Telcom, was requested, directly or indirectly, by a member of the Singh Control
Group, and who have a fiduciary, employment or similar relationship with the
Company or a member of the Singh Control Group (the "Incumbent Telcom
<PAGE> 14
Board"), cease for any reason (other than death) to constitute at least 50% of
the board of directors (or other governing body) of Telcom, provided, however,
that any individual becoming a director (or member of the governing body) of
Telcom after the date hereof whose election, or nomination for election by
Telcom's shareholder(s) (or members), was approved by a vote of a majority of
the directors (or persons comprising the governing body of Telcom) then
comprising the Incumbent Telcom Board shall be considered as though such
individual were a member of the Incumbent Telcom Board, but excluding, for this
purpose, (y) any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors (or persons comprising the governing body) of Telcom, or
other actual or threatened solicitation of proxies or consents by or on behalf
of a person, entity or group other than the board of directors (or other
governing body) of Telcom and (z) any such individual nominated for election to
the board of directors (or other governing body) of Telcom by any stockholder
(or member) or group of affiliated stockholders (or members) of Telcom other
than a member or members of the Singh Control Group; or (C) the members of the
Singh Control Group cease to beneficially hold (and retain the right to exercise
all voting and dispositive rights with respect to) voting securities (or other
interests of Telcom) representing at least 10% of the voting power of all
outstanding voting securities (or other interests) of Telcom and any other
person or entity, or group of affiliated persons or entities, beneficially owns
voting securities (or other interests) of Telcom representing 40% or more of the
voting power of all outstanding voting securities (or other interests) of
Telcom.
3. Other Agreements. DSC irrevocably agrees with MSI and AGI that it
will (i) execute and deliver the Securities Purchase Agreement substantially in
the form reviewed by DSC and its counsel through the date hereof, and will cause
Telcom, at the First Closing, to execute and deliver the Amended LLC Agreement
substantially in the form reviewed by DSC and its counsel through the date
hereof, (ii) cause the DSC Director (as defined in the LLC Agreement) to vote to
approve the Securities Purchase Agreement, the Amended LLC Agreement, the
Registration Rights Agreement contemplated by the Securities Purchase Agreement
and the transactions contemplated by such agreements and (iii) otherwise fully
support such transactions and not take, or cause or allow any of its Affiliates
to take, any action inconsistent with its agreements contained in this Section
3. Each of MSI and DSC irrevocably agrees with the other that it will not
exercise its rights under Section 5.1(d)(i) of the LLC Agreement with respect to
the $100 million capital contribution to be made by the Investor pursuant to the
Securities Purchase Agreement. Each of AGI and MSI agrees with DSC that it will
not transfer control of any entity which holds a member interest
<PAGE> 15
in, or Class B Common Stock of, the Company to any third party (other than an
Affiliate of AGI, provided such Affiliate agrees to be bound by the provisions
of this Agreement applicable to MSI) without the consent of DSC unless,
concurrently with or prior to such transfer, AGI and MSI take the steps
contemplated by Section 2(a) (in the case of such a transfer prior to an IPO) or
Section 2(b) (in the case of such a transfer concurrently with or after an IPO).
4. Rights of First Refusal and Co-Sale; Certain Representations. MSI
and Telcom agree with the other that, from and after the consummation of the
IPO, each will have right of refusal and co-sale rights, respectively, with
respect to any sale or transfer by the other or its Affiliates of Class A Common
Stock, Class B Common Stock or other class of common stock of the Company
(collectively, "Common Stock") (and AGI, on the one hand, and each of the Telcom
Members, on the other, agree with each other that such right of first refusal
and co-sale rights shall also apply to any sale or transfer by them of shares of
MSI, or member or other equity interests of Telcom, respectively, if, at the
time of such sale or transfer, shares of Common Stock constitute all or
substantially all of the assets of MSI or Telcom, respectively), to the same
extent and exercisable in accordance with the same procedures as set forth in
Sections 10.3(a) and 10.3(b), respectively, of the Amended LLC Agreement (as if
such Sections were in effect and references in such Sections to an "Interest"
being deemed for this purpose to refer to Common Stock or to shares of MSI, or
member or other equity interests of Telcom, respectively, as contemplated
above). Notwithstanding the foregoing, it is acknowledged and agreed that (i)
pursuant to Section 5.8 of the Amended LLC Agreement, upon the conversion of
Teligent, L.L.C. to a corporation in connection with the IPO (the "Conversion"),
the Company will cease to have any rights pursuant to such Sections 10.3(a) and
10.3(b) of the LLC Agreement, and (ii) the right of first refusal and co-sale
rights provided for in this Section 4 will in any event not apply with respect
to (A) any sale or transfer of Common Stock (or of shares of MSI, or member or
other equity interests of Telcom, respectively) which was acquired pursuant to a
public market transaction, (B) any public sale or distribution of Common Stock
(or of shares of MSI, or member or other equity interests of Telcom,
respectively), whether pursuant to a registration statement under the Securities
Act, Rule 144 thereunder or otherwise, (C) any sale or transfer of Common Stock
(or of shares of MSI, or member or other equity interests of Telcom,
respectively) to an Affiliate of the selling or transferring party, provided
such Affiliate executes and delivers to the parties hereto an instrument
agreeing to be bound hereby or (D) any pledge of, or grant of a security
interest in, Common Stock (or shares of MSI, or member or other equity interests
of Telcom, respectively), provided such pledge or grant meets the requirements
set forth in Section 10.2(a)(ii), (a)(iii) and (a)(iv) of the
<PAGE> 16
Amended LLC Agreement (as if such Section were still in effect). Associated
hereby represents and warrants to Telcom that, as of the date hereof, it is the
owner of all of the outstanding capital stock of MSI. MSI hereby represents and
warrants to Telcom that, immediately after the Conversion, MSI will be the sole
record and beneficial owner of the shares of Common Stock into which the member
interest in Teligent, L.L.C. currently held by MSI is converted pursuant to the
Conversion. Each of the Telcom Members, severally and not jointly, hereby
represent and warrant to AGI and MSI that, as of the date hereof, they are the
owners of the respective percentage membership interests in Telcom set forth on
Schedule I hereto. DSC and Telcom hereby represent and warrant to AGI and MSI
that, immediately after the Conversion, Telcom will be the sole record and
beneficial owner of the shares of Common Stock into which the member interest in
Teligent, L.L.C. currently held by DSC is converted pursuant to the Conversion.
Each party hereto represents and warrants to the other parties that such party
has the full legal right, power and authority to execute, deliver and perform
this Agreement, and that this Agreement constitutes the valid and binding
obligation of such party enforceable against such party in accordance with its
terms.
5. Miscellaneous.
(a) Effectiveness. Except for Section 3 hereof and this Section 5,
which shall be effective immediately upon the execution and delivery hereof,
this Agreement shall not be effective, and no party shall have any rights or
obligations hereunder, until the First Closing has occurred, whereupon this
Agreement shall automatically be in full force and effect.
(b) Definitions. Capitalized terms used by not defined herein have the
respective meanings ascribed thereto in the Amended LLC Agreement.
(c) Successors and Assigns. Except as otherwise provided herein, all of
the terms and provisions of this Agreement (to the extent they are or have
become effective pursuant to Section 5(a)) shall be binding upon, shall inure to
the benefit of and shall be enforceable by and against the respective successors
and assigns of the parties hereto, including without limitation, in the case of
DSC, Telcom upon consummation of the transfer and assignment contemplated by
Section 5.9 of the Amended LLC Agreement.
(d) Amendment, Waiver. This Agreement may be amended only by a written
instrument duly executed by the parties hereto. Any failure of any of the
parties to comply with any obligation, covenant, agreement or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with
<PAGE> 17
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
(e) Notices. Any notice, request, claim, demand, docureceipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex or telecopy (with such telex or telecopy confirmed promptly in writing
sent by first class mail), or by reputable overnight courier or other similar
means of communication, as follows:
i) If to the Company, addressed to the
Company at 8065 Leesburg Pike, Vienna, VA 22182, to
the attention of the Company's General Counsel
(Facsimile No. 703-762-5227);
ii) If to MSI or AGI, addressed to it at 3 Bala Plaza
East, Suite 300, Bala Cynwyd, PA 19004, to the attention of AGI's
General Counsel;
iii) If to DSC, Telcom or any of the parties listed on
Schedule I hereto, addressed to such party c/o Telcom Ventures,
L.L.C., 211 North Union Street, Suite 300, Alexandria, VA 22314,
to the attention of President and General Counsel (Facsimile No.
703-706-3801);
or, in each case, to such other address or telex or telecopy number as
such party may designate in writing to the other by written notice given
in the manner specified in this Section 5(e).
(f) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior oral and written agreements and memoranda and undertakings
between the parties hereto with regard to such subject matter.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to its conflicts of laws principles.
(h) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the day and year first written.
<PAGE> 18
TELIGENT, L.L.C.
By:/s/ Laurence E. Harris
-----------------------------------
Name: Laurence E. Harris
Title: Senior Vice President
MICROWAVE SERVICES, INC.
By:/s/ David J. Berkman
-----------------------------------
Name: David J. Berkman
Title: Executive Vice President
THE ASSOCIATED GROUP, INC.
By:/s/ David J. Berkman
-----------------------------------
Name: David J. Berkman
Title: Executive Vice President
DIGITAL SERVICES CORPORATION
By:/s/ Rajendra Singh
-----------------------------------
Name: Rajendra Singh
Title: President
TELCOM-DTS INVESTORS, L.L.C.
By:/s/ Rajendra Singh
-----------------------------------
Name: Rajendra Singh
Title: President
FOR PURPOSES OF SECTION 4 ONLY:
TELCOM VENTURES, L.L.C.
By: /s/ Rajendra Singh
------------------------------
Name: Rajendra Singh
Title: President
CHERRYWOOD HOLDINGS, INC.
<PAGE> 19
By: /s/ Rajendra Singh
------------------------------
Name: Rajendra Singh
Title: President
TC GROUP, L.L.C.
By: /s/ Mark Ein
------------------------------
Name: Mark Ein
Title: Vice President
BIG BEND INVESTMENTS, L.P.
By: /s/ Morton H. Meyerson
------------------------------
Name: Morton H. Meyerson
Title: General Partner
/s/ Vandana Tandon
- ------------------------------
VANDANA TANDON
SCHEDULE I
Members of Telcom-DTS Investors, L.L.C.
Percentage
Name Interest
- ---- ----------
Telcom Ventures, L.L.C., a Delaware limited liability company 98.01%
Cherrywood Holdings Inc., a Kansas corporation 0.75%
TC Group, L.L.C., a Delaware limited liability company 0.25%
Big Bend Investments, L.P., a Texas limited partnership 0.89%
Vandana Tandon 0.10%
--------------
100.00%
<PAGE> 1
EXHIBIT 2
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of November 26, 1997 (this
"Agreement"), by and among Teligent, Inc., a Delaware corporation (the
"Company"), Microwave Services, Inc., a Delaware corporation ("MSI"), Telcom-DTS
Investors, L.L.C., a Delaware limited liability company ("Telcom"), and NTTA&T
Investment Inc. ("New Member" and, together with MSI and Telcom, the
"Stockholders"), an indirect wholly owned subsidiary of Nippon Telegraph and
Telephone Corporation, a Japanese corporation ("NTT").
WHEREAS, the Stockholders are parties to the Amended and Restated
Limited Liability Company Agreement, dated as of November 13, 1997 (the "LLC
Agreement"), of Teligent, L.L.C., a Delaware limited liability company (the
"LLC"), entered into pursuant to the Securities Purchase Agreement dated as of
September 30, 1997 by and among the LLC, MSI, Digital Services Corporation, a
Virginia corporation and an affiliate of Telcom, and NTT (the "Purchase
Agreement");
WHEREAS, upon the terms and subject to the conditions of the
Agreement and Plan of Merger, dated as of October 6, 1997 (the "Merger
Agreement"), by and between the Company and the LLC, immediately prior to the
Company's initial public offering of Class A Common Stock (the "IPO") the LLC
will be merged (the "Merger") with and into the Company;
WHEREAS, the Merger Agreement provides that as a result of the
Merger the Stockholders will receive shares of Common Stock of the Company, as
the entity surviving the Merger; and
WHEREAS, the LLC Agreement contemplates, and the parties hereto have
agreed, that following a Conversion Transaction (as defined in the LLC
Agreement), in connection with an IPO, certain rights, privileges and
obligations set forth in the LLC Agreement with respect to the ownership and
governance of the LLC will, to the extent and upon the terms and subject to the
conditions set forth herein, continue to apply with respect to the ownership and
governance of the Company.
NOW, THEREFORE, in consideration of the premises, and for
<PAGE> 2
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties to this Agreement covenant and agree as
follows:
Section 1. Effectiveness of Agreement; Defined Terms. This Agreement
shall not become effective unless and until the Merger is consummated. If the
Merger Agreement is terminated in accordance with its terms, this Agreement
shall automatically terminate. Capitalized terms used but not defined herein
shall have the respective meanings assigned to such terms in the form of
Certificate of Incorporation of the Company attached as Exhibit I to the Merger
Agreement, which will be effective upon the effectiveness of the Merger (the
"Certificate of Incorporation").
Section 2. Information Made Available. The Company covenants and
agrees with each of MSI, Telcom and New Member that, with respect to MSI, so
long as any shares of Class B-Series 1 Common Stock are outstanding, with
respect to Telcom, so long as any shares of Class B-Series 2 Common Stock are
outstanding, and with respect to New Member, so long as any shares of Class
B-Series 3 Common Stock are outstanding, the Company will use all reasonable
efforts to provide regular information to (and updates thereof), consult with,
and obtain the advice of, representatives of MSI designated by MSI's designees
(the "MSI Directors") to the board of directors of the Company (the "Board of
Directors"), representatives of Telcom designated by Telcom's designee (the
"Telcom Director") to the Board of Directors, and representatives of New Member
designated by New Member's designee (the "New Member Director") to the Board of
Directors, respectively, in connection with ordinary decisions of the Board of
Directors or any committee thereof. This Section 2 shall terminate as to New
Member, and New Member shall have no further rights under such Section, upon New
Member's delivery of, or failure to deliver, the notice required by Section 15.
Section 3. Consultation. The Company covenants and agrees with New
Member and Telcom that, with respect to New Member, so long as any shares of
Class B-Series 3 Common Stock are outstanding, and with respect to Telcom, so
long as any shares of Class B-Series 2 Common Stock are outstanding,
Consultation (as defined below) with New Member or a representative (the "New
Member Representative") designated from time to time by New Member for such
purpose (who need not be the representative described in Section 12 hereof),
and/or with Telcom or a representative (the "Telcom Representative") designated
from time to time by Telcom for such purpose (who need not be the representative
described in Section 12 hereof), respectively, will be required for any action
(each, a "Consultation Event") which (A) materially changes the fundamental
<PAGE> 3
character of the Company's business; (B) replaces the Company's Chief Executive
Officer or Chief Operating Officer; (C) involves the sale or pledge by the
Company of a substantial portion of its assets or any acquisition, divestiture
or merger of the Company with another entity or any joint venture outside the
ordinary course of the Company's business; or (D) involves the issuance by the
Company of shares of Common Stock or Preferred Stock to any telecommunications
carrier (a "Strategic Partner"). "Consultation" shall mean and include
reasonable advance notice and advance disclosure of all material facts regarding
the Consultation Event by the Company to the New Member Representative and/or
the Telcom Representative, respectively, and, in the case of the issuance by the
Company of shares of Common Stock or Preferred Stock to a Strategic Partner, due
consideration of any objections of New Member and/or the Telcom Representative,
respectively. New Member and Telcom shall notify the Company as to who the New
Member Representative and the Telcom Representative, respectively, shall be, and
shall provide the Company with the address, business telephone and facsimile
number for such respective persons. Such persons shall be the New Member
Representative and the Telcom Representative, respectively, until such time as
the Company receives written notice from New Member or Telcom, respectively,
stating the name, address, business telephone and facsimile number of the new
New Member Representative or the new Telcom Representative, respectively. This
Section 3 shall terminate as to New Member, and New Member shall have no further
rights under such Section, upon New Member's delivery of, or failure to deliver,
the notice required by Section 15.
Section 4. Confidential Treatment of Proprietary Information. Except
as provided in Section 14 hereof, in the event any Covered Person (as
hereinafter defined) (the "Receiving Party") obtains from any other Covered
Person or the Company (the "Disclosing Party") information relating to the
Company in whatever form which is confidential or proprietary ("Proprietary
Information"), the Receiving Party (i) shall treat all such Proprietary
Information as confidential; (ii) shall use such Proprietary Information only
for the purposes contemplated in this Agreement; (iii) shall protect such
Proprietary Information, whether in storage or in use, with the same degree of
care as the Receiving Party uses to protect its own proprietary information
against public disclosure, but in no case with less than reasonable care; and
(iv) shall not disclose such Proprietary Information to any third party except
to such employees and agents of the Receiving Party who need to know such
Proprietary Information for the purpose of effectuating this Agreement and who
have been informed of the confidential nature of such Proprietary Information.
"Covered Person" shall mean any Stockholder, or any person (other than the
Company) that directly or indirectly, through
<PAGE> 4
one or more intermediaries, controls, is controlled by, or is under common
control with, the Company or any Stockholder; any officers, directors,
shareholders, controlling persons, partners, employees, representatives or
agents of any Stockholder or its Affiliates (other than the Company); any
director, officer, employee or agent of the Company or its Affiliates; or any
person who was, at the time of the act or omission in question, such a person.
As used in this Agreement, "Affiliate" means, with respect to any specified
person, a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
person specified.
Section 5. Exceptions. The provisions of Section 4 of this Agreement
shall not apply to any Proprietary Information which: (i) was in the public
domain on the date hereof or comes into the public domain other than through the
fault or negligence of the Receiving Party; (ii) was lawfully obtained by the
Receiving Party from a third party without breach of this Agreement and
otherwise not in violation of the Disclosing Party's rights; (iii) was known to
the Receiving Party at the time of disclosure of such Proprietary Information to
the Receiving Party by the Disclosing Party and the Receiving Party was not, at
such time, subject to any confidentiality obligation with respect thereto; (iv)
was independently developed by the Receiving Party without making use of any
Proprietary Information of the Disclosing Party; or (v) is required to be
disclosed pursuant to law.
Section 6. Return of Proprietary Information. Subject to Section
14(d) of this Agreement, upon the dissolution of the Company, and in any event
upon the Disclosing Party's request at any time, the Receiving Party shall: (i)
return to the Disclosing Party all documents (including, any copies thereof)
embodying the Disclosing Party's Proprietary Information and (ii) certify in
writing to the Disclosing Party, within ten (10) days following the Disclosing
Party's request, that all such Proprietary Information has been returned.
Section 7. Equitable Remedies. Each Stockholder acknowledges that
the extent of damages in the event of the breach of any provision of Section 4
or 6 hereof would be difficult or impossible to ascertain, and that there will
be available no adequate remedy at law in the event of any such breach. Each
Stockholder therefore agrees that in the event it or any Covered Person employed
by or affiliated with it breaches any provision of Section 4 or 6 hereof, the
aggrieved party (including, without limitation, the Company) will be entitled to
injunctive or other equitable relief, in addition to any other relief to which
it may be entitled.
<PAGE> 5
Section 8. CEO as Director. The Stockholders agree to vote, or act
by written consent with respect to, all of their respective shares of Common
Stock in favor of the election of the Chief Executive Officer of the Company as
a member of the Board of Directors.
Section 9. Special Board Votes; Other Board Matters. (a) The Company
and the Stockholders agree that, notwithstanding any provision in the Company's
By-Laws to the contrary, the following actions shall require the affirmative
vote of a majority of the Board of Directors, which, so long as any shares of
Class B-Series 2 Common Stock are issued and outstanding, shall include the
affirmative vote of the Telcom Director and, so long as any shares of Class
B-Series 3 Common Stock are issued and outstanding, shall include the
affirmative vote of the New Member Director:
(i) any amendment to the Certificate of Incorporation or
By-laws of the Company which materially and adversely affects the rights
of Telcom or New Member in a manner which discriminates against Telcom or
New Member, either individually or with one or more other Stockholders,
vis-a-vis any of the other Stockholders, provided that the affirmative
vote of a majority of the Board of Directors, including only the Telcom
Director (and not the New Member Director), shall be necessary to approve
such an amendment which so affects Telcom (and not New Member), and the
affirmative vote of a majority of the Board of Directors, including only
the New Member Director (and not the Telcom Director), shall be necessary
to approve such an amendment which so affects New Member (and not Telcom);
(ii) any transaction between the Company and any Stockholder
or Affiliate thereof involving an amount in excess of $150,000, except for
such transactions contemplated by this Agreement, the Securities Purchase
Agreement between the Company and Nippon Telegraph and Telephone
Corporation dated as of September 30, 1997 (the "Purchase Agreement") and
the Technical Services Agreement dated as of October 22, 1997 between the
Company and NTT America, Inc.
(iii) the appointment of any independent accountants or firm
of independent accountants, other than a nationally recognized accounting
firm, to serve as the Company's auditors; and
(iv) any action by the Company seeking protection under any
bankruptcy or insolvency law.
<PAGE> 6
(b) So long as, pursuant to the Certificate of Incorporation, MSI is
entitled to elect a majority of the members of the Board of Directors and to
remove or fill vacancies with respect to such directorships, MSI will use all
reasonable efforts to promptly fill any vacancies in such directorships, however
occurring, and to remove and replace any such director elected by MSI who is or
becomes unwilling or unable to serve as such director.
(c) Without limitation of and subject to Section 4 of Article III of
the Company's By-Laws, the Company covenants and agrees with New Member to use
all reasonable efforts under the circumstances to provide the New Member
Director with at least 72 hours prior notice of any special meeting of the Board
of Directors. If the New Member Director is temporarily unavailable, New Member
may appoint an alternate to act in his stead, with full powers of substitution.
Section 10. Committees. (a) The Company and the Stockholders agree
that, so long as any shares of Class B-Series 3 Common Stock are issued and
outstanding, (i) the New Member Director and the New Member Representative shall
have visitation rights at meetings of all significant internal operating
committees of the Board of Directors, if any, and (ii) the New Member Director
shall be a member of any technical, compensation or audit committee, if any, of
the Board of Directors or any other committee designated by the Board of
Directors with the power to negotiate any Consultation Event. In the event no
audit committee of the Board of Directors has been established, the New Member
Director shall have the right to attend, so long as any shares of Class B-Series
3 Common Stock of the Company are issued and outstanding, all meetings involving
the auditor's review of the Company's financial condition and shall have the
right to review and discuss such auditor's reports with such auditor. The New
Member Director and the New Member Representative shall also, so long as any
shares of Class B-Series 3 Common Stock of the Company are issued and
outstanding, have visitation rights with respect to each committee of the Board
of Directors which is established of which the New Member Director is not a
member and shall receive no less than 48 hours prior written notice of each
meeting of any such committee. If, during the course of the meeting of any such
committee, the New Member Director shall determine that the matter being
considered should be considered by the full Board of Directors, such committee
shall thereupon cease its consideration of such matter and such matter shall
thereupon be referred back to the full Board of Directors. This Section 10(a)
shall terminate, and New Member shall have no further rights under such Section,
upon New Member's delivery of, or failure to deliver, the notice required by
Section 15.
<PAGE> 7
(b) The Company and the Stockholders agree that, so long as any
shares of Class B-Series 2 Common Stock are issued and outstanding, (i) the
Telcom Director and the Telcom Representative shall have visitation rights at
meetings of all significant internal operating committees of the Board of
Directors, if any, and (ii) the Telcom Director shall be a member of any
technical, compensation or audit committee, if any, of the Board of Directors or
any other committee designated by the Board of Directors with the power to
negotiate any Consultation Event. In the event no audit committee of the Board
of Directors has been established, the Telcom Director shall have the right to
attend, so long as any shares of Class B-Series 2 Common Stock of the Company
are issued and outstanding, all meetings involving the auditor's review of the
Company's financial condition and shall have the right to review and discuss
such auditor's reports with such auditor. The Telcom Director and the Telcom
Representative shall also, so long as any shares of Class B-Series 2 Common
Stock of the Company are issued and outstanding, have visitation rights with
respect to each committee of the Board of Directors which is established of
which the Telcom Director is not a member and shall receive no less than 48
hours prior written notice of each meeting of any such committee. If, during the
course of the meeting of any such committee, the Telcom Director shall determine
that the matter being considered should be considered by the full Board of
Directors, such committee shall thereupon cease its consideration of such matter
and such matter shall thereupon be referred back to the full Board of Directors.
Section 11. Annual Business Plans and Budgets. The parties hereto
agree that an annual business plan and budget for the Company shall be prepared
by the officers of the Company and submitted to the Board of Directors for its
approval. Each such annual business plan and budget shall contain: (i) a
comprehensive and detailed budget for the upcoming year (including, without
limitation, projected capital expenditures and projected income, expense and
cash flow levels); (ii) such other financial, marketing and other plans and
projections for the upcoming year as the Board of Directors shall deem
appropriate; and (iii) such financial, marketing and other plans and projections
for the upcoming five-year period as the Board of Directors shall deem
appropriate. New Member shall have no further rights under this Section 11 upon
New Member's delivery of, or failure to deliver, the notice required by Section
15.
Section 12. New Member and Telcom Consultants. The parties hereto
agree that at any meeting of the Board of Directors at which the New Member
Director and/or the Telcom Director, respectively, is present, the New Member
Director and/or the Telcom Director, respectively, may
<PAGE> 8
each invite a representative designated by New Member (and who is employed by
New Member or an Affiliate of New Member) or Telcom (and who is employed by
Telcom or an Affiliate of Telcom), respectively, to attend and consult and
advise the New Member Director or the Telcom Director, respectively, on any
matter; provided, that such respective representatives agree with the Company in
writing to be bound by Sections 4, 5, 6 and 7 hereof as if such representatives
were Covered Persons for purposes of such Sections.
Section 13. Agreement to Hold. Each Stockholder agrees that, for the
two-year period immediately following the date of the LLC Agreement, each will
continue to hold no less than 50% of its interest in the Company which it owns
immediately following the Merger; provided, that the foregoing agreement and all
other restrictions imposed on the ability of New Member or Telcom, respectively,
to transfer their respective interests in the Company, except those imposed by
law, shall lapse and be null, void and without further effect, if a Consultation
Event occurs even though New Member or Telcom, respectively, have objected
thereto; and provided, further, that if at the time the agreement contained in
this Section 13 shall have lapsed and become null and void and without further
effect with respect to Telcom pursuant to the immediately preceding proviso, MSI
is not entitled, pursuant to the Certificate of Incorporation, to elect a
majority of the members of the Board of Directors, then the agreement contained
in this Section 13 shall automatically lapse and become null and void and
without further effect with respect to MSI.
Section 14. New Member Information Right.
(a) Secunded Employees. So long as any shares of Class B-Series 3
Common Stock of the Company are issued and outstanding, New Member and its
Affiliates shall have the right, at their expense, to secund to the Company
employees of New Member or its Affiliates (not exceeding a total of five such
employees in any three month period) to observe the Company's operations,
including its technical and marketing activities (such secunded employees being
referred to as the "Secunded Employees"). This Section 14(a) shall automatically
terminate and be of no further force or effect upon New Member's delivery of, or
failure to deliver, the notice required by Section 15.
(b) Status of Secunded Employees; Expenses. The Secunded Employees
shall be and remain employees of New Member (or its Affiliates) for all
purposes, and New Member (or such Affiliates) shall be solely responsible for,
and shall indemnify and hold the Company harmless from and against any claims
for, the payment of any and all salary, bonuses,
<PAGE> 9
living expenses, travel expenses and other compensation, and the provision of
all retirement, health care, insurance and other benefits to such Secunded
Employees. New Member (or its Affiliate) shall be solely responsible for, and
shall indemnify and hold the Company harmless from and against any claims for,
the payment of any taxes or governmental charges of any kind, including, without
limitation, withholding taxes, payroll taxes or unemployment or worker's
compensation insurance, with respect to any such Secunded Employees. The
Secunded Employees shall, at the Company's expense, be provided, with reasonable
office space and standard office equipment at the Company's facilities to the
extent reasonably necessary for them to carry out their intended purposes as
described in Subsection 14(c) below.
(c) Purpose of Secunded Employees. The Company and New Member
acknowledge that the Secunded Employees will be secunded to the Company so that
they may gain knowledge of the operation of fixed wireless communications
services as conducted by the Company, with a view to enabling New Member and its
Affiliates to provide such services to their customers outside the United
States.
(d) Information Rights. To enable New Member and its Affiliates to
benefit from secunding the Secunded Employees as contemplated by this Section
14, New Member and its Affiliates shall have the non-exclusive, perpetual,
irrevocable royalty free right and license to use, solely in the business of New
Member and its Affiliates outside the United States, such product, service,
marketing, operational and technical information of the Company as shall be
learned or obtained by the Secunded Employees; provided that such right and
license shall not include any right or license with respect to any patent (or
patent application), utility model, design patent, copyright, trademark or
tradename (or other similar property rights arising under United States or other
laws) relating to specific inventions, technical devices, software, publications
or other works of the Company; and provided further that if and to the extent
such information constitutes confidential or proprietary information of the
Company, New Member will, and will cause its Affiliates to, use the same efforts
as it uses with respect to its own confidential or proprietary information to
keep such information of the Company confidential. New Member and its Affiliates
shall not be entitled to sublicense, assign or otherwise transfer to any third
party any of the rights granted, or any of the information relating to the
Company learned or obtained by them, pursuant to this Section 14. In addition,
the grant of rights by the Company pursuant to this Section 15 shall be subject
to the Company's need to comply with its other agreements with third parties in
existence on the date hereof relating to any of the Company information referred
to in this Section 14, it being
<PAGE> 10
understood and agreed that the Company will use all reasonable efforts to afford
New Member and its Affiliates the full benefit of the rights granted pursuant to
this Section 14 in a manner consistent with such other agreements.
Section 15. New Member Notice of Competition. New Member will
provide the Company with at least 90 days prior written notice of any action
which, pursuant to clause (B) of the proviso to Article FOURTH, Section A(1)(d)
of the Certificate of Incorporation, would result in the automatic conversion of
shares of Class B-Series 3 Common Stock into Class A Common Stock.
Section 16. Foreign Ownership Limitation.
(a) The Company shall have the right to limit New Member's ownership
of the Company to ensure that it does not violate the foreign ownership
limitations imposed by the Communications Act of 1934, as amended, and by the
regulations and decisions of the Federal Communications Commission
(collectively, the "Communications Act").
(b) If at any time after the date hereof the Company is required by
a change in the law or other circumstance to reduce the level of foreign
ownership of the Company, and absent the Company's ability to obtain a waiver
(which the Company will use all reasonable efforts to obtain), the Company shall
have the right, and shall be required (i) at New Member's election, to refuse to
sell equity interests in the Company or any equity interests in the License
Companies (as such term is defined in the Purchase Agreement) to any Foreign
Owner (as defined below) if any such transaction would, under the Communications
Act or other applicable law, adversely impact New Member's ability to hold its
then existing equity interest in the Company, and (ii) at the election of any
Stockholder, to repurchase such equity interests in the Company, to the extent
necessary to comply with applicable foreign ownership restrictions, first, from
all persons, other than the Stockholders, who hold Foreign Ownership Interests
(as defined below), and thereafter from each of the Stockholders who hold
Foreign Ownership Interests, on a pro rata basis (based on the percentage of
foreign ownership attributable to each Stockholder), in each case, for an amount
in cash (to the extent permitted by the Delaware corporation law) equal to the
"fair market value" of the equity interests repurchased. If the class of equity
interests to be repurchased (or conversion equivalent) is publicly traded, "fair
market value" shall be the closing price per share or unit of such equity
interest (or conversion equivalent) on the trading day immediately preceding the
date of such repurchase and, if the class of equity interests to be repurchased
(or conversion equivalent) is not
<PAGE> 11
publicly traded, "fair market value" shall be determined by the Board of
Directors. In the event that (i) all or any portion of a Stockholder's equity
interest in the Company is to be repurchased pursuant to this Section 16, (ii)
such class of equity interests (or conversion equivalent) is not publicly traded
and (iii) such Stockholder disputes, by notice to the Company within forty-five
(45) days after receipt of notice from the Board of Directors of the Board of
Director's fair market value determination (a "Valuation Dispute Notice"), then
"fair market value" shall be determined by two appraisers selected by the
Company and such Stockholder, respectively, within forty-five (45) days after
delivery of the Valuation Dispute Notice. If the appraisers chosen by the
Company and such Stockholder cannot reach an agreement within 30 days of their
appointment, "fair market value" shall be determined by a third appraiser to be
selected by the original appraisers chosen by such Stockholder and the Company
within 10 days thereafter. "Foreign Owner" shall mean: (a) any person who is a
citizen of a country other than the United States, (b) any corporation or other
legal entity organized under the laws of any government other than the
government of the United States or of any state, territory or possession of the
United States, (c) any government other than the government of the United States
or of any state, territory or possession of the United States, or (d) any
representative of any of the foregoing, or any entity owned, or whose capital
was contributed, in whole or in part, by any of the foregoing; and "Foreign
Ownership Interests" shall mean any equity interests in the Company or equity
interests in the License Companies held by a Foreign Owner.
Section 17. New Member Co-Sale Rights. MSI and Telcom agree that New
Member will have co-sale rights with respect to any sale or transfer by MSI or
Telcom, respectively, or their respective Affiliates, to a single buyer or
group, of all of the shares of Common Stock held by MSI or Telcom or such
Affiliates, respectively, which co-sale rights shall be exercisable in
accordance with the same procedures as set forth in Section 10.3(b) of the LLC
Agreement (as if such Section were in effect and references in such Section to
an "Interest" being deemed for this purpose to refer to Common Stock).
Notwithstanding the foregoing, it is acknowledged and agreed that (i) pursuant
to Section 5.8 of the LLC Agreement, upon consummation of the Merger, the
Company, New Member and any person or entity who or which was a member of the
LLC but is not a party hereto will cease to have any rights pursuant to such
Sections 10.3(a) and 10.3(b) of the LLC Agreement, except as provided above in
this Section 17 with respect to New Member, and (ii) the co-sale rights provided
for in this Section 17 will in any event not apply with respect to (A) any sale
or transfer of Common Stock which was acquired pursuant to a public market
transaction, (B) any public sale or distribution of
<PAGE> 12
Common Stock, whether pursuant to a registration statement under the Securities
Act, Rule 144 thereunder or otherwise, (C) any sale or transfer of Common Stock
to an Affiliate (as such term is defined in the LLC Agreement) of the selling or
transferring party, provided such Affiliate executes and delivers to the parties
hereto an instrument agreeing to be bound hereby or (D) any pledge of, or grant
of a security interest in, Common Stock, provided such pledge or grant meets the
requirements set forth in Section 10.2(a)(ii), (a)(iii) and (a)(iv) of the LLC
Agreement (as if such Section were still in effect).
Section 18. Miscellaneous.
(a) This Agreement may be modified or amended at any time by
Stockholders holding shares of Common Stock representing at least 50.01% of the
aggregate number of shares of Common Stock held by all Stockholders; provided,
that without the consent of any Stockholder, the Company may (i) enter into
agreements with permitted assignees pursuant to the terms of this Agreement,
providing in substance that such permitted assignees will be bound by this
Agreement and (ii) amend this Agreement (A) to satisfy any requirements,
conditions, guidelines or opinions contained in any opinion, directive, order,
ruling or regulation of the Securities and Exchange Commission, the Internal
Revenue Service or any other United States federal or state agency, or in any
United States federal or state statute, compliance with which the Board of
Directors deems to be in the best interests of the Company, (B) to change the
name of the Company, and (C) to cure any ambiguity or correct or supplement any
provision of this Agreement that may be incomplete or inconsistent with any
other provision contained herein, so long as any amendment under this clause
(ii) does not adversely affect the investment in the Company of any Stockholder;
provided, further, that, notwithstanding the foregoing provisions of this
Section 18(a), no amendment of this Agreement shall (y) deprive a Stockholder of
any of such Stockholder's rights hereunder without the prior written consent of
such Stockholder, or (z) change the provisions of this Section 18(a) without the
prior written consent of each Stockholder.
(b) Any party to this Agreement may extend the time for the
performance of any of the obligations or other acts of any other party hereto,
or waive compliance with any of the agreements of any other party, in each case
only to the extent that such obligations, agreements and conditions are intended
for its benefit.
(c) This Agreement contains the parties' entire understanding and
agreement with respect to its subject matter, and any and all conflicting or
inconsistent discussions, agreements, promises,
<PAGE> 13
representations and statements, if any, between the parties or their
representatives that are not incorporated in this Agreement shall be null and
void and are merged into this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall constitute an original, but all of which together shall
constitute a single agreement.
(e) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to its conflicts
of law principles.
(f) The various section headings are inserted for purposes of
reference only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
(g) The provisions of this Agreement shall be severable, and any
invalidity, unenforceability or illegality of any provision or provisions of
this Agreement shall not affect any other provision or provisions of this
Agreement, and each term and provision of this Agreement shall be construed to
be valid and enforceable to the full extent permitted by law.
(h) This Agreement may not be assigned by any party without the
prior written consent of the other parties; provided, that in connection with
any Stockholder's transfer of shares of Class B Common Stock to a Permitted
Transferee of such Stockholder, such Stockholder shall require such Permitted
Transferee to agree in writing to become a "Stockholder" for purposes of this
Agreement and to be bound by the terms hereof.
(i) This Agreement shall inure to the benefit of, and be binding
upon, the parties to it and their respective successors and permitted assigns.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any person other than the parties to it and their respective successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
(j) All notices, requests, demands and other communications which
are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed given when delivered by hand, fax (provided, that a
confirming copy is sent by a reputable overnight courier service), or reputable
overnight courier service, to the parties at their respective addresses set
forth in Schedule I hereto or to such other address as any party shall have
designated by notice in
<PAGE> 14
writing to the other parties.
(k) The Company, MSI and Telcom covenant and agree with New Member
that any and all disputes hereunder involving any of them and New Member shall
be submitted to the same dispute resolution procedures as are set forth in
Section 7.10 of the Purchase Agreement.
(l) Nothing contained herein shall require any Stockholder to make
any further investment in or otherwise contribute capital to the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
TELIGENT, INC.
By:/s/ Alex J. Mandl
Name: Alex J. Mandl
Title: Chairman & CEO
MICROWAVE SERVICES, INC.
By:/s/ David J. Berkman
Name: David J. Berkman
Title: Executive Vice President
TELCOM-DTS INVESTORS, L.L.C.
By:/s/ Rajendra Singh
Name: Rajendra Singh
Title: President
NTTA&T INVESTMENT INC.
By:/s/ Keisuke Nakasaki
Name: Keisuke Nakasaki
Title: President
<PAGE> 15
SCHEDULE I
Addresses for Notices
Teligent, Inc.
8065 Leesburg Pike
Vienna, Virginia 22182
Phone: 703-762-5100
Fax: 703-762-5227
Attention: General Counsel
Microwave Services, Inc.
650 Madison Avenue, 25th Floor
New York, New York 10022
Phone: 212-301-2800
Fax: 212-301-2811
Attention: President and General Counsel
Telcom-DTS Investors, L.L.C.
211 N. Union Street
Suite 300
Alexandria, Virginia 22314
Phone: 703-706-3800
Fax: 703-706-3801
Attention: President and General Counsel
NTTA&T Investment Inc.
c/o Nippon Telegraph and Telephone Corporation
Tokyo Opera City Tower
20-2 Nishi-Shinjuku 3-chome
Shinjuku, Tokyo 163-14
JAPAN
Phone: 011-81-3-5353-5111
Fax: 011-81-3-5353-5503
Attention: Mr. Osamue Inoue
and
c/o NTT America, Inc.
101 Park Avenue, 41st Floor
<PAGE> 16
New York, New York 10178
Attention: Mr. Mitsuo Murakami
Fax: 212-661-1078
<PAGE> 1
EXHIBIT 3
- ----------------------------------------------------------------------------
STOCK CONTRIBUTION AGREEMENT
DATED AS OF MARCH 10, 1997
BY AND BETWEEN
ASSOCIATED COMMUNICATIONS, L.L.C.,
FIRSTMARK COMMUNICATIONS, INC.
AND
LYNN FORESTER
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Section 1. Definitional Provisions....................................1
(a) Defined Terms...................................1
(b) Other Definitional Provisions...................6
Section 2. Actions of Associated and Contributor Upon Signing
the Agreement...........................................7
Section 3. Contribution of FirstMark Stock............................7
(a) The Closing.....................................7
(b) Contribution of the Stock.......................8
(c) Consideration...................................8
(d) Conversion of Associated........................9
(e) Trust Channels and Related DEMS Systems.........9
(f) Certain Operating Expenses.....................11
Section 4. Conditions to Consummating the Contribution...............11
Section 5. Termination; Extension Payments...........................12
Section 6. Withdrawal of FirstMark DEMS Applications.................14
(a) Withdrawal.....................................14
(b) Conveyance to Trust............................14
Section 7. Additional Covenants and Agreements of Contributor
and FirstMark...........................................14
(a) Cooperation....................................14
<PAGE> 2
(b) Conduct of Business............................15
(c) Access.........................................15
(d) Capital Stock..................................15
(e) Dividends and Distributions....................15
(f) Debt; Liabilities..............................15
(g) Certain Agreements.............................15
(h) Covenants Regarding DEMS Systems and
FirstMark DEMS Applications..................16
(i) Noncompetition.................................17
(j) Confidentiality................................18
(k) Intercompany Indebtedness......................18
Section 8. Additional Covenants and Agreements of Associated.........18
(a) Cooperation by Associated......................18
(b) Conduct of Business............................18
(c) Books and Records; Personnel...................18
(d) Interim Control of DEMS Systems................19
(e) Opposition to DEMS Licenses....................19
(f) Teledesic Settlement...........................20
(g) Contributor Registration Rights................21
(h) Tag-Along and Drag-Along Rights................22
(i) Right of First Refusal.........................23
(j) Confidentiality................................25
(k) Non-disclosure of Financial Terms..............26
(l) Anti-Dilution Rights...........................26
Section 9. Tax Matters...............................................27
(a) Tax Indemnification by Contributor.............27
(b) Apportionment of Taxes.........................27
(c) Refunds........................................28
(d) Cooperation....................................28
(e) Certain Other Definitions......................28
(f) Certain Taxes..................................28
(g) Tax Treatment of Indemnity Payments............28
(h) Certain Representations........................28
Section 10. Representations and Warranties...........................29
(a) Representations and Warranties of
Contributor and FirstMark....................29
(b) Representations and Warranties of Associated...32
Section 11. Miscellaneous............................................34
(a) Further Assurances.............................34
(b) Binding Effect.................................34
(c) Indemnification; Joint and Several
<PAGE> 3
Liability of FirstMark and Contributor
Prior to Closing.............................34
(d) Survival.......................................35
(e) Entire Agreement...............................35
(f) Costs and Expenses.............................35
(g) Amendment......................................35
(h) Waiver; Cumulative Rights......................35
(i) Notices........................................35
(j) Governing Law..................................37
(k) Counterparts...................................37
(l) Headings.......................................37
Schedule I - DEMS Licenses
Schedule II - FirstMark DEMS Applications
Schedule 7(g) Extraordinary Contracts of FirstMark
Schedule 9(h)(i) Tax Matters
Schedule 10(a)(vi) Regulatory Matters
Schedule 10(a)(vii) Subscription Contracts
Schedule 10(a)(x) Assets and Liabilities of FirstMark
Schedule 10(b)(i) Capitalization of Associated
Exhibit A - Signing Opinion of Lukas McGowan Nace & Gutierrez
Exhibit B - Closing Opinion of Lukas McGowan Nace & Gutierrez
STOCK CONTRIBUTION AGREEMENT
AGREEMENT dated as of March 10, 1997, by and between ASSOCIATED
COMMUNICATIONS, L.L.C., a Delaware limited liability company (together with its
successors, "Associated"), FIRSTMARK COMMUNICATIONS, INC., a Delaware
corporation (together with its successors, "FirstMark"), and LYNN FORESTER
("Contributor"), and, for purposes of Sections 8(h) and (i) only, Microwave
Services, Inc., a Delaware corporation (together with its successors, "MSI") and
Digital Services Corporation, a Virginia corporation (together with its
successors, "DSC," and, collectively with MSI, the "Original Shareholders").
WHEREAS, Contributor owns all of the issued and outstanding
capital stock of FirstMark (the "Stock") and all of the issued and outstanding
capital stock of Netwave Inc., a Delaware corporation (together with its
successors, "Netwave"); and
WHEREAS, FirstMark has been granted licenses by the FCC to
provide, and to construct and operate facilities for the provision of,
<PAGE> 4
common carrier digital electronic message services ("DEMS") in the Los Angeles
SMSA and the San Francisco SMSA and has pending before the FCC applications to
provide, and to construct and operate facilities for the provision of, DEMS in
the New York SMSA and the Boston SMSA; and
WHEREAS, Contributor desires to contribute, and Associated desires
to accept the contribution of, the Stock (the "Contribution"), and Associated
desires that Contributor cause, and Contributor has agreed to cause, FirstMark
to withdraw the FirstMark DEMS Applications, all upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in connection with the Contribution, Associated desires
to acquire, and Contributor has agreed to cause Netwave to issue to Associated,
shares of common stock of Netwave, upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
representations, covenants and agreements contained herein, the parties hereto
agree as follows:
Section 1. Definitional Provisions.
(a) Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Accepting Original Shareholder" shall have the meaning set forth
in Section 8(i) hereof.
"Affiliate" shall mean, as to any Person, any other Person (i)
that is a subsidiary of such Person or (ii) that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, such Person. For the purposes of this definition, "control" when
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise; the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing.
"Agreement" shall mean this Agreement, as amended, modified,
supplemented or restated from time to time.
"Associated" shall have the meaning set forth in the first
paragraph hereof.
"Books and Records" shall have the meaning set forth in
<PAGE> 5
Section 8(c) hereof.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New
York, New York are authorized or obligated to close by law or executive order.
"Change in Control Application" shall mean the application
required under FCC regulations to be filed with the FCC for approval of the
Contribution.
"Closing" shall have the meaning set forth in Section 3(a)
hereof.
"Closing Date" shall have the meaning set forth in Section
3(a) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Confidential Information" shall have the meaning set forth
in Section 8(j) hereof.
"Contribution" shall have the meaning set forth in the third
"WHEREAS" clause hereof.
"Contributor" shall have the meaning set forth in the first
paragraph hereof.
"Contributor Registrable Securities" shall have the meaning set
forth in Section 8(g) hereof.
"DEMS" shall have the meaning set forth in the second
"WHEREAS" clause hereof.
"DEMS Facilities" shall mean facilities and equipment for the
provision of DEMS in the geographic area or areas covered by any or all of the
DEMS Licenses.
"DEMS Licenses" shall mean the licenses listed on Schedule I
hereto granted by the FCC to FirstMark (and any FCC waivers relating thereto)
any amendments, modifications or renewals thereof, and any other licenses
granted by the FCC to FirstMark after the date hereof (and any FCC waivers
relating thereto) to construct DEMS Facilities or provide DEMS in any of the
geographic areas covered by any of the licenses listed on
<PAGE> 6
Schedule I hereto, or by any amendments, modifications or renewals thereof, and
any licenses, authorizations or approvals granted to FirstMark by any PUC,
together with any amendments, modifications or renewals thereof, with respect to
any DEMS Facilities or DEMS in any of the geographic areas covered by any of the
licenses listed on Schedule I hereto or by any amendments, modifications or
renewals thereof, in each case whether in the 18 GHz frequency band or any other
frequency band to which DEMS are relocated by the FCC. Except as otherwise
expressly provided herein, as used herein "DEMS License" refers to such license
with respect to any or all of the channels covered thereby.
"DEMS Systems" shall mean all assets, property and equipment
comprising or relating to the DEMS Facilities, including without limitation any
DEMS License(s) relating thereto.
"DSC" shall have the meaning set forth in the first paragraph
hereof.
"Equity Interest" shall have the meaning set forth in Section
8(h) hereof.
"Equityholders Agreement" shall mean any shareholder, operating or
similar agreement which establishes certain rights and obligations of
equityholders of Associated. As of the date hereof, "Equityholders Agreement"
means the Limited Liability Company Agreement.
"Extension Payment" shall mean, with respect to each one year
extension of this Agreement as provided in Section 5(b) hereof, an amount in
cash equal to $1,000,000.
"FCC" shall mean the United States Federal Communications
Commission and any successor agency.
"FirstMark" shall have the meaning set forth in the first
paragraph hereof.
"FirstMark DEMS Application License" shall have the meaning set
forth in Section 6(b) hereof.
"FirstMark DEMS Applications" shall mean the applications of
FirstMark pending on the date hereof before the FCC for licenses to provide, and
to construct and operate facilities for the provision of, DEMS, together with
any amendments, modifications or renewals thereof, in each case whether in the
18 GHz frequency band or any other frequency band to which DEMS are relocated by
the FCC, which applications as currently
<PAGE> 7
pending are listed on Schedule II hereto.
"First Refusal Interest" shall have the meaning set forth in
Section 8(i) hereof.
"First Refusal Notice" shall have the meaning set forth in Section
8(i) hereof.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any entity or official
properly exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Interest" shall have the meaning set forth in the Limited
Liability Company Agreement; provided that, if the Interests in Associated have
been changed into or exchanged for any other equity securities, the term
"Interest" shall refer to the number and class of equity securities into or for
which such Interests have been changed or exchanged.
"IPO" shall have the meaning set forth in Section 8(g)
hereof.
"IRS" shall have the meaning set forth in Section 9(e)
hereof.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement and any capital lease).
"Limited Liability Company Agreement" shall mean the Limited
Liability Company Agreement of the Company dated as of March 5, 1996, as amended
as of August 16, 1996, and as further amended from time to time.
"Mandl " shall mean Alex J. Mandl, currently the Chief
Executive Officer of Associated.
"Mandl Employment Agreement" shall mean the Employment Agreement
dated as of August 19, 1996 between Associated and Mandl, as in effect on the
date hereof.
"Member" shall have the meaning set forth in the Limited
Liability Company Agreement.
"Membership Percentage" shall have the meaning set forth in the
Limited Liability Company Agreement. References in this Agreement to
<PAGE> 8
the Membership Percentage represented by any Interest issued to Contributor
hereunder are to such Membership Percentage calculated as of the date of this
Agreement, after giving effect to the issuance to Contributor of such Interest
and any Interest previously issued to Contributor as if all such Interests had
been issued as of the date of this Agreement (that is, the Interest receivable
by Contributor will be subject to dilution from and after the date of this
Agreement (subject to Section 8(k) hereof), such that the Interest issued to
Contributor at the Closing or upon the release from the Trust of any Trust
Channel or upon the grant by the FCC or the release from the Trust of any
Applicable License may represent a percentage Interest in Associated when so
issued that is less than the Membership Percentage referred to in Sections 3(c)
or 3(e), as applicable).
"MSI" shall have the meaning set forth in the first paragraph
hereof.
"Netwave" shall have the meaning set forth in the first
"WHEREAS" clause hereof.
"Offer" shall have the meaning set forth in Section 8(i)
hereof.
"Offering Price" shall have the meaning set forth in Section
8(i) hereof.
"Operating Expenses" shall have the meaning set forth in
Section 3(f) hereof.
"Original Shareholders" shall have the meaning set forth in
the first paragraph hereof.
"Person" shall mean any individual, corporation, association,
partnership (general or limited), joint venture, trust, joint-stock company,
estate, limited liability company, unincorporated organization or other legal
entity or organization.
"Pre-Closing Tax Period" shall have the meaning set forth in
Section 9(a) hereof.
"Pro Rata Share" shall have the meaning set forth in Section 8(i)
hereof.
"PUC" shall mean any state public utility commission of competent
jurisdiction, the approval of which is required to consummate any DEMS Systems
Transfer.
<PAGE> 9
"Related DEMS System" shall have the meaning set forth in Section
3(e) hereof.
"Representative" shall have the meaning set forth in Section
8(j) hereof.
"Requirement of Law" shall mean, as to any Person, any statute,
law, rule, regulation, ordinance, code, license, permit, order, judgment, decree
or determination of any arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its properties
or to which such Person or any of its property is subject.
"Requisite Approvals" shall have the meaning set forth in
Section 4(a) hereof.
"Requisite Regulatory Approvals" shall mean decisions of the FCC
and of any applicable PUC approving the Contribution, and any other consents,
approvals or authorizations of any other Governmental Authority required in
connection with the Contribution.
"Return" shall have the meaning set forth in Section 9(e)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"SMSA" shall mean Standard Metropolitan Statistical Area.
"Stock" shall mean all of the issued and outstanding stock of
FirstMark.
"Straddle Period" shall have the meaning set forth in Section
9(b) hereof.
"Tax" shall have the meaning set forth in Section 9(e)
hereof.
"Taxing Authority" shall have the meaning set forth in
Section 9(e) hereof.
"Teledesic" shall mean Teledesic Corp., a Delaware
corporation.
"Teledesic Settlement" shall have the meaning set forth in
<PAGE> 10
Section 8(f) hereof.
"Transfer" shall have the meaning set forth in Section 8(i)
hereof.
"Trust" shall have the meaning set forth in Section 3(e)
hereof.
"Trust Agreement" shall have the meaning set forth in Section
3(e) hereof.
"Trust Channel" shall have the meaning set forth in Section
3(e) hereof.
(b) Other Definitional Provisions.
(i) Any term defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(ii) As used herein, the neuter gender shall also
denote the masculine and feminine, and the masculine gender shall also
denote the neuter and feminine, where the context so permits.
(iii) The words "hereof", "herein" and "hereunder",
and words of a similar import, when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of
this Agreement. References to Sections shall refer to Sections of this
Agreement, unless otherwise expressly provided.
Section 2. Actions of Associated and Contributor Upon Signing the Agreement.
(a) As an inducement to Contributor to enter into this Agreement
and in partial consideration for the Contribution, concurrently with the
execution and delivery hereof, Associated is paying or causing to be paid to
Contributor a non-refundable cash payment of $5,570,000, by wire transfer of
immediately available funds to an account previously designated by Contributor
to Associated. Concurrently with and as a condition to such payment, Contributor
is delivering or causing to be delivered to Associated an opinion of Lukas
McGowan Nace & Gutierrez, Chartered, special FCC counsel to Contributor, in the
form of Exhibit A hereto.
(b) As a further inducement to Contributor to enter into this
Agreement and in consideration of the mutual covenants and agreements of
<PAGE> 11
the parties contained herein with respect to the Contribution, as promptly as
practicable after the execution and delivery hereof, pursuant to a Subscription
Agreement in form and substance reasonably satisfactory to Netwave and
Associated, Netwave shall issue to Associated shares of common stock of Netwave
constituting ten percent (10%) of the outstanding shares of capital stock of
Netwave on a fully diluted basis immediately after giving effect to such
issuance, and Associated shall deliver to Netwave $200,000 by wire transfer of
immediately available funds to an account of Netwave previously designated by
Contributor to Associated.
(c) Concurrently with the execution and delivery hereof, FirstMark
is delivering to Associated FirstMark's original technology plan, marketing
study and business plan relating to development of DEMS in the 18 GHz frequency
band.
Section 3. Contribution of FirstMark Stock.
(a) The Closing. The closing of the Contribution (the "Closing")
shall occur at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York, not later than five (5) Business Days after
satisfaction or waiver of the conditions to Closing specified in Sections 4(a)
and (b) hereof, or at such other time and/or place and/or on such other date as
the parties may mutually agree (the "Closing Date").
(b) Contribution of the Stock.
(i) At the Closing, Contributor shall contribute to
Associated, and Associated shall accept the contribution from
Contributor of, the Stock.
(ii) At the Closing, Contributor shall deliver to
Associated certificates representing the Stock, free and clear of all
Liens, duly endorsed in blank for transfer or accompanied by duly
executed stock powers assigning the Stock in blank.
(c) Consideration. The aggregate consideration for the
Contribution (in addition to the amount previously paid pursuant to Section 2(a)
hereof) shall consist of the following:
(i) $4,950,000 payable in cash to Contributor by wire
transfer of immediately available funds to an account designated by
Contributor to Associated not less than two (2) Business Days prior to
the Closing; and
<PAGE> 12
(ii) an Interest of the same class or classes as that
then held by the Original Shareholders which represents a 5.00%
Membership Percentage. Commencing as of the Closing, Contributor shall
share in the profits and losses of Associated as provided in the
Limited Liability Company Agreement and a capital account shall be
established for Contributor in an amount equal to that percentage of
the aggregate capital accounts of the Members equal to Contributor's
percentage Interest. The Interest issued to Contributor shall be
evidenced by the Limited Liability Company Agreement, which Contributor
shall sign at the Closing and thereby become a party to, with Schedule
A thereto appropriately amended to reflect Contributor's admission as a
Member and Contributor's percentage Interest. In the event of any
conflict or inconsistency between the rights and obligations of
Contributor under the Limited Liability Company Agreement and this
Agreement, the provisions of this Agreement shall control. Without
limiting the immediately preceding sentence, Sections 4.1(n), 8.7,
10.3(a) and 10.3(b) (and Section 10.1 to the extent that it relates to
the foregoing subsections of Section 10.3) of the Limited Liability
Company Agreement shall not apply to Contributor. Associated shall give
Contributor written notice of any changes (which notice shall include
the full text of such changes) that are made in the Limited Liability
Company Agreement from time to time, such notice to be given within
fifteen (15) days following any such change; provided that no amendment
or modification to the Limited Liability Company Agreement shall impose
on Contributor any additional financial obligations, other obligations
(except for immaterial non-financial obligations) or any obligations
inconsistent with the two immediately preceding sentences.
(d) Conversion of Associated. If, prior to the Closing, Associated
shall be reorganized as, or converted or merged into, an entity taxed as a
corporation for federal income tax purposes, then Associated shall promptly (and
in any event not less than ten (10) days prior to the Closing) notify
Contributor thereof. If Associated has been reorganized as, or converted or
merged into, an entity taxed as a corporation for federal income tax purposes,
then at Contributor's sole option, exercisable by written notice to Associated
not less than ten (10) days prior to the Closing, the Contribution contemplated
by this Agreement shall be restructured as a merger of FirstMark with and into
Associated or, at Associated's option, a wholly owned subsidiary of Associated,
pursuant to which the Stock shall be converted into the right to receive the
consideration contemplated by this Section 3. If Contributor exercises its
option under this paragraph (d), each of Contributor, FirstMark and Associated
shall take all actions necessary to effect the transactions
<PAGE> 13
contemplated by this Agreement as a merger in lieu of the Contribution.
(e) Trust Channels and Related DEMS Systems
(i) If at the Closing control of any DEMS License or
channels covered thereby is not permitted by the FCC to be transferred
as contemplated by this Agreement, the cash consideration for the
Contribution provided for in Section 3(c) above shall be reduced by
$618,750 for each channel control of which is not permitted to be
transferred to Associated and the Membership Percentage represented by
the Interest in Associated to be issued to Contributor at the Closing
shall be reduced by an amount equal to the product of (a) 0.6250% and
(b) the number of channels control of which is not permitted to be
transferred.
(ii) Any channels control of which is not permitted
to be transferred at the Closing (each, a "Trust Channel" and
collectively, the "Trust Channels") and the related DEMS Systems (each,
a "Related DEMS System" and collectively, the Related DEMS Systems"),
shall be conveyed by FirstMark prior to the Closing to a trust (the
"Trust") established by FirstMark pursuant to a trust agreement (the
"Trust Agreement") containing terms reasonably acceptable to FirstMark,
Contributor and Associated. The operations of the Trust Channels shall
be conducted by the trustee of the Trust in accordance with the
directions of Contributor, and neither Associated nor FirstMark shall
directly or indirectly control, supervise or direct, or attempt to
control, supervise or direct, such operations. After the Closing,
Associated, Contributor and FirstMark shall cooperate and use their
reasonable best efforts, at Associated's expense, to obtain all
Requisite Approvals for the transfer of control of each Trust Channel,
in which event, subject to Section 4(d) hereof, such Trust Channel and
Related DEMS System shall be released from the Trust to FirstMark.
Notwithstanding the foregoing, if less than all of the channels for
which FirstMark holds a DEMS License are Trust Channels, no portion of
the Related DEMS System shall be conveyed by FirstMark to the Trust,
but FirstMark shall enter into arrangements reasonably acceptable to
Contributor and Associated and consistent with the FCC's rules giving
the Trust rights to use such DEMS System in connection with the
operations of the Trust Channels.
(iii) Concurrently with the release of any Trust
Channel and Related DEMS System (if any) from the Trust to FirstMark,
Associated shall deliver to Contributor the following
<PAGE> 14
consideration:
(A) $618,750 in cash with respect to each Trust
Channel and Related DEMS System (if any) so released, which
amount shall be paid to Contributor by wire transfer of
immediately available funds to an account designated by
Contributor to Associated not less than two (2) Business Days
prior to the release of the applicable Trust Channel and
Related DEMS System (if any) from the Trust (provided that the
aggregate cash consideration to be paid by Associated pursuant
to this Section 3 if control of all channels for which
FirstMark holds a DEMS License to construct DEMS Facilities or
provide DEMS in the Los Angeles SMSA and San Francisco SMSA is
transferred by Contributor shall not exceed $4,950,000; and
(B) with respect to each Trust Channel and Related
DEMS System (if any) so released from the Trust to FirstMark,
an Interest in Associated representing a 0.6250% Membership
Percentage (provided that the aggregate Interest in Associated
to be issued to Contributor if control of all channels for
which FirstMark holds a DEMS License to construct DEMS
Facilities or provide DEMS in the Los Angeles SMSA and San
Francisco SMSA is transferred by Contributor shall not exceed
a 5.00% Membership Percentage).
(f) Certain Operating Expenses. Associated shall reimburse
Contributor in cash at the Closing or, with respect to any DEMS License or
channels covered thereby control of which is not permitted to be transferred at
the Closing, upon transfer of control of such DEMS License or channels covered
thereby, for all expenditures incurred and paid by FirstMark or Contributor from
and after the date six (6) months after the date hereof required to fund actions
deemed by Contributor and/or FirstMark to be necessary or desirable to be taken
in order to fulfill customer requirements in connection with the regular
operation of the DEMS Systems, including, without limitation, the implementation
of marketing, construction and development plans and legal fees and expenses
related thereto (collectively, the "Operating Expenses"). Reimbursements by
Associated for Operating Expenses under this Section 3(f) shall be made by wire
transfer of immediately available funds to an account previously designated by
Contributor to Associated, against receipt by Associated of reasonably itemized
invoices or other records documenting such Operating Expenses.
<PAGE> 15
Section 4. Conditions to Consummating the Contribution.
(a) Conditions to Associated's Obligation to Consummate the
Contribution. Associated's obligation to consummate the Contribution is
subject to satisfaction (or, to the extent permissible, waiver by
Associated) of the following conditions:
(i) the representations and warranties of Contributor
and FirstMark contained in this Agreement shall be true and accurate in
all material respects as of the date when made and (unless made as of a
specified date) as of the Closing Date as if made on and as of such
date;
(ii) Contributor and FirstMark shall have performed
in all material respects all of their respective agreements and
covenants contained in this Agreement which are required to be
performed by it on or prior to the Closing Date;
(iii) the parties hereto shall have received all
Requisite Regulatory Approvals, and all other required consents,
approvals or authorizations of any other third party, in connection
with the Contribution (collectively, the "Requisite Approvals") shall
have been obtained and the Requisite Regulatory Approvals shall not be
subject to administrative or judicial review, reconsideration or
appeal; and
(iv) Associated shall have received an opinion of
Lukas McGowan Nace & Gutierrez, Chartered, special FCC counsel to
Contributor, dated the Closing Date, in the form of Exhibit B hereto.
(b) Conditions to Contributor's Obligation to Consummate the
Contribution. Contributor's obligation to consummate the Contribution is
subject to satisfaction (or, to the extent permissible, waiver) of the
following conditions:
(i) the representations and warranties of Associated
contained in this Agreement shall be true and accurate in all material
respects as of the date when made and (unless made as of a specified
date) as of the Closing Date as if made on and as of such date;
(ii) Associated shall have performed in all material
respects all of its agreements and covenants contained in this
Agreement which are required to be performed by it on or
<PAGE> 16
prior to the Closing Date; and
(iii) the parties hereto shall have received all
Requisite Approvals.
(c) Certain Regulatory Matters. Notwithstanding the provisions of
paragraphs (a)(iii) and (b)(iii) of this Section 4, if the Requisite Approvals
in connection with the Contribution have been obtained but contain restrictions
the effect of which is to prevent the transfer of control of a portion of the
DEMS Licenses or channels covered thereby, the parties hereto shall use all
commercially reasonable efforts to cause such restrictions to be removed. If
such restrictions have not been removed within ninety (90) days after the
obtaining of the Requisite Approvals, the conditions set forth in paragraphs
(a)(iii) and (b)(iii) of this Section 4 shall be deemed to have been satisfied,
and with respect to any DEMS License or channels covered thereby which cannot be
transferred at the Closing, the provisions of Section 3(e) shall apply.
(d) Conditions to Release of Trust Channels. The conditions set
forth in paragraphs (a) and (b) above shall apply, mutatis mutandis, to the
release of any Trust Channel and the Related DEMS System (if any) to FirstMark,
and the payment of the consideration therefor, as contemplated by Section 3(e)
hereof.
Section 5. Termination; Extension Payments.
(a) If either (i) the Closing has not theretofore occurred or (ii)
the Closing has occurred but in connection therewith one or more Trust Channels
were conveyed to the Trust and all of such Trust Channels have not been released
to FirstMark from the Trust as contemplated by Section 3(e)(ii) hereof, this
Agreement and any Trust Agreement shall terminate on the second anniversary of
the date hereof; provided that if the Closing has not occurred or any Trust
Channels have not been released to FirstMark from the Trust by reason of the
breach by Contributor or FirstMark, on the one hand, or by Associated, on the
other hand, of any of its respective representations and warranties contained in
this Agreement, then the date of termination of this Agreement shall be
extended, at the option of the non-breaching party, for thirty (30) days from
the date on which this Agreement would otherwise have terminated; and provided,
further, that if the Closing has not occurred or any Trust Channels have not
been released to FirstMark from the Trust by reason of the breach by Contributor
or FirstMark, on the one hand, or by Associated, on the other hand, of any of
its respective covenants contained in this Agreement, then the date of
termination of this Agreement shall be extended, at the option of the
non-breaching party, for a period or periods not to exceed in the aggregate
<PAGE> 17
one (1) year from the date on which this Agreement would otherwise have
terminated.
(b) Notwithstanding the preceding paragraph (a), the date of
termination of this Agreement (and any Trust Agreement) may, at the option of
Associated, be extended (collectively but not individually) for two successive
one year periods if, prior to the then scheduled termination date, Associated
shall have paid or caused to be paid to Contributor an Extension Payment by wire
transfer of immediately available funds to an account previously designated by
Contributor to Associated.
(c) If this Agreement terminates prior to the Closing, the
provisions of this Section 5(c), Sections 5(d), 5(e), 7(h)(v), 7(j), 8(f) (but
only in the event that there has been a Teledesic Settlement prior to such
termination and subject to the last sentence of Section 8(f)), 8(j), 8(k),
11(e), 11(f), 11(h), 11(j) and 11(l) hereof shall survive such termination
without limitation as to time, and all other provisions of this Agreement shall
become void and of no further force or effect; provided, however, that any
termination of this Agreement shall not relieve any party of any damages or
other amounts for which it would otherwise be liable by reason of any breach,
prior to such termination, of any of its representations and warranties or
covenants contained in this Agreement; and provided, further, that no party
shall have any liability under this Agreement for the failure of any
representation or warranty of such party which was true and correct as of the
date of this Agreement to continue to be true and correct after the date of this
Agreement, unless the failure of such representation or warranty to continue to
be true and correct results from the breach by such party of any of its
agreements or covenants contained in this Agreement.
(d) If this Agreement is terminated prior to the Closing by reason
of a breach of this Agreement by Contributor or FirstMark, Contributor shall be
obligated to pay to Associated, promptly (and in any event within two (2)
Business Days) following such termination, the sum of $600,000 in cash. If this
Agreement is terminated without fault of any party hereto, Contributor shall be
obligated to pay to Associated, promptly (and in any event within two (2)
Business Days) following such termination, the sum of $300,000 in cash.
(e) If this Agreement is terminated prior to the Closing, each of
Associated, Contributor and FirstMark agrees that neither it nor any of its
Affiliates shall, after such termination, oppose, challenge or in any manner
take an adverse position, directly or indirectly, with respect to any DEMS
application of the other party or any of its Affiliates or the grant to the
other party or any of its Affiliates of any DEMS
<PAGE> 18
license, in each case whether in the 18 GHz frequency band or any other
frequency band to which DEMS are relocated by the FCC; provided that, subject to
and without limitation of the obligations of any party under the other
provisions of this Agreement, the provisions of this paragraph (e) shall not
apply to any existing or future DEMS application or DEMS license of any party to
the extent such DEMS application or DEMS license is with respect to a channel as
to which the other party, currently or in the future, holds a DEMS application
or DEMS license.
Section 6. Withdrawal of FirstMark DEMS Applications.
(a) Withdrawal. At such time or times prior to the Closing and in
such manner as Associated may specify, Contributor shall cause FirstMark
promptly to withdraw the FirstMark DEMS Applications (other than with respect to
channel 31 for the New York SMSA) and, upon the request and at the expense of
Associated, Contributor and FirstMark will assist and cooperate with Associated
in seeking to obtain FCC approval of any license applications filed by MSI or
Associated or any of their respective Affiliates with the FCC to provide DEMS in
the New York SMSA or the Boston SMSA. In consideration of the withdrawal by
FirstMark of the foregoing FirstMark DEMS Applications, upon the FCC's grant of
FirstMark's request for withdrawal of such FirstMark DEMS Applications and for
approval of this Agreement, Associated shall pay to Contributor the sum of
$50,000 in reimbursement of expenses incurred by Contributor and FirstMark in
connection with such FirstMark DEMS Applications.
(b) Conveyance to Trust. If, (i) either (x) prior to the Closing,
FirstMark is granted a DEMS license by the FCC pursuant to the FirstMark DEMS
Application with respect to channel 31 in the New York SMSA (the "FirstMark DEMS
Application License") or (y) the FirstMark DEMS Application License has not been
granted prior to the Closing and the FirstMark DEMS Application with respect to
channel 31 remains outstanding, and (ii) the transfer of control at the Closing
of the FirstMark DEMS Application License or such FirstMark DEMS Application, as
the case may be, is not permitted under the terms of the Requisite Approvals,
the FirstMark DEMS Application License or such FirstMark DEMS Application, as
the case may be, shall be conveyed by FirstMark prior to the Closing to the
Trust. After the Closing, Associated, Contributor and FirstMark shall cooperate
and use their reasonable best efforts, at Associated's expense, to obtain all
Requisite Approvals for the transfer of control of the FirstMark DEMS
Application License or such FirstMark DEMS Application, as the case may be, in
which event the FirstMark DEMS Application License or such FirstMark DEMS
Application, as the case may be, shall be released from the Trust to FirstMark,
without payment of any additional consideration by Associated.
<PAGE> 19
Section 7. Additional Covenants and Agreements of Contributor and FirstMark.
(a) Cooperation. From and after the date this Agreement,
Contributor and FirstMark shall use their reasonable efforts, and shall
cooperate with Associated, in each case at Associated's expense, to secure all
Requisite Approvals to enable Contributor, FirstMark and Associated to effect
the transactions contemplated by this Agreement, and shall otherwise use their
reasonable efforts, at Associated's expense, to cause the consummation of such
transactions in accordance with the terms and conditions of this Agreement.
(b) Conduct of Business. Except as may be otherwise contemplated
by this Agreement or the Exhibits or Schedules hereto, or except as Associated
may otherwise consent to in writing, from the date of this Agreement through the
Closing, Contributor and FirstMark shall operate the business of FirstMark
solely in the ordinary course of business; it being understood that the
relocation by FirstMark of radio equipment from one site to another site in
connection with the fulfillment of customer build-out requirements shall not be
prohibited by this paragraph.
(c) Access. From the date of this Agreement and prior to the
Closing, Contributor and FirstMark shall provide Associated with such
information as Associated may from time to time reasonably request with respect
to FirstMark and the transactions contemplated by this Agreement, and shall
provide Associated and its representatives reasonable access during regular
business hours and upon reasonable notice to the properties, books and records
of FirstMark as Associated may from time to time reasonably request.
(d) Capital Stock. Neither FirstMark nor Contributor shall issue,
sell, transfer, pledge or otherwise encumber any shares of capital stock of
FirstMark, or grant or issue any option, warrant, right or convertible or
exchangeable security exercisable for, convertible into or exchangeable for
shares of capital stock of FirstMark, or make any other changes in the capital
structure of FirstMark, or enter into any contract with respect to any of the
foregoing.
(e) Dividends and Distributions. FirstMark shall not declare, set
aside, pay or make any dividend or other distribution or payment with respect to
shares of its capital stock, and shall not purchase or redeem any shares of its
capital stock.
(f) Debt; Liabilities. FirstMark shall not incur or assume any
indebtedness for borrowed money other than any such indebtedness that will be
paid in full prior to the Closing and shall not make any loans,
<PAGE> 20
advances or capital contributions to, or investments in, any other Person. From
the date of this Agreement through the Closing, FirstMark shall incur no
liabilities other than liabilities arising in the ordinary course of business of
the operations of the DEMS Systems that will not, individually or in the
aggregate, have a material adverse effect on the assets, business or operations
of FirstMark.
(g) Certain Agreements. FirstMark shall not (i) encumber (unless
such encumbrance is removed prior to the Closing without cost or expense to
Associated), sell, lease or otherwise dispose of any assets, or acquire any
assets other than in the ordinary course of business or as otherwise necessary
or desirable to fulfill customer requirements, (ii) authorize, propose or enter
into an agreement in principle or definitive agreement with respect to any
merger, consolidation, other business combination, liquidation or dissolution
pursuant to which FirstMark would be acquired or would acquire or dispose of (in
any such case, by merger, consolidation, acquisition or disposition of stock or
assets, or similar transaction) assets, (iii) assume, guarantee, endorse (other
than checks in the ordinary course of business) or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, (iv) enter into any commitment or transaction outside the
ordinary course of business except as set forth on Schedule 7(g) hereto, or (v)
enter into any contract or commitment to do any of the foregoing.
(h) Covenants Regarding DEMS Systems and FirstMark DEMS
Applications.
(i) Between the date of this Agreement and the
Closing, at Associated's expense, Contributor and FirstMark shall use
all commercially reasonable efforts to maintain in full force and
effect all necessary federal, state and local regulatory agency
authorizations relating to such DEMS System, and shall operate such
DEMS System in accordance with all Requirements of Law applicable
thereto.
(ii) Between the date of this Agreement and the
Closing, neither Contributor nor FirstMark shall sell or otherwise
dispose of, or create Liens or otherwise encumber, any of the DEMS
Systems (including without limitation any of the DEMS Licenses or DEMS
Facilities).
(iii) Upon and as a condition to Associated's
issuance to Contributor of any Interest, Contributor shall execute and
deliver, and thereby become a party to, any Equityholders Agreement,
subject to the last three sentences of Section 3(c) of
<PAGE> 21
this Agreement.
(iv) Except as contemplated by Schedule 7(g), between
the date of this Agreement and the Closing, all customer subscription
contracts with respect to DEMS to be provided through one or more of
the DEMS Systems entered into after the date hereof shall be entered
into by FirstMark only in the ordinary course of business and shall
contain only customary provisions.
(v) Until the Closing, or until such time prior to
the Closing as Associated directs Contributor to cause FirstMark to
withdraw a FirstMark DEMS Application pursuant to Section 6 hereof,
FirstMark shall, and Contributor shall cause FirstMark to, prosecute
such FirstMark DEMS Application, at Associated's expense, to the extent
required by the FCC's rules to retain FirstMark's eligibility and
qualifications for the DEMS licenses requested by such FirstMark DEMS
Application.
(vi) Neither Contributor, FirstMark nor any of their
Affiliates shall (A) oppose, challenge or in any manner take an adverse
position, directly or indirectly, with respect to (i) any existing or
future DEMS applications or licenses of Associated, DSC or MSI, in each
case whether in the 18 GHz frequency band or any other frequency band
to which DEMS are relocated by the FCC (and FirstMark shall promptly
withdraw or rescind any such previous opposition, challenge or adverse
position); provided that, subject to and without limitation of
Contributor's and FirstMark's obligations under the other provisions of
this Agreement, prior to the Closing the provisions of this clause (A)
shall not apply to any existing or future DEMS application or DEMS
license of Associated to the extent such DEMS application or DEMS
license is with respect to a channel as to which FirstMark holds a DEMS
License, or (ii) any change or modification to the rules generally
applicable to DEMS, DEMS licenses or DEMS frequencies proposed, ordered
or implemented by the FCC, so long as such change or modification would
not adversely affect FirstMark in a manner different (on a
proportionate and comparable basis) from Associated, MSI, DSC and their
Affiliates, or (B) seek authorizations, directly or indirectly, with
respect to any DEMS channel in the New York SMSA or the Boston SMSA, in
each case whether in the 18 GHz frequency band or any other frequency
band to which DEMS are relocated by the FCC (except pursuant to a
FirstMark DEMS Application).
(i) Noncompetition. Contributor agrees with Associated that,
<PAGE> 22
from and after the date hereof, neither Contributor nor any of its Affiliates
will, alone or as a member, employee or agent of any partnership, corporation,
limited liability company or other business entity, or as an officer, agent,
employee, director, shareholder (except for passive investments of not more than
five percent (5%) of the outstanding shares of or any other equity interest in
any company or entity listed or traded on a national securities exchange or on
an over-the-counter securities market) of or investor in any partnership,
corporation, limited liability company or other business entity, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation or control of, or work for or permit the use of her or its
name by, or be connected in any manner with, any business (other than
Associated) or activity (including without limitation submitting any application
for a license to provide services or construct or operate equipment or
facilities) which engages in or proposes to engage in the provision in the
United States of DEMS in the 18 GHz frequency band or such other frequency band
to which DEMS are relocated by the FCC or the provision in Canada of fixed
wireless voice, video or data transmission services in any frequency band;
provided that the foregoing shall not apply to the ownership or operation by
Contributor of FirstMark and the business of FirstMark with respect to the DEMS
Systems and the FirstMark DEMS Applications to the extent consistent with the
other provisions of this Agreement. The parties intend that the covenant
contained in this Section 7(i) shall be deemed to be a series of separate
covenants, one for each county of each state of the United States and province
of Canada. Except for geographic coverage, each separate covenant shall be
deemed identical in terms to the covenant contained in this paragraph. If, in
any judicial proceeding, a court shall refuse to enforce all of the separate
covenants deemed included in this paragraph, because, taken together, they cover
too extensive a geographic area, the parties intend that those of such covenants
(taken, in the case of the states, territories or counties within any state in
order of the applicable states, territories or counties which are less populous)
which, if eliminated, would permit the remaining separate covenants to be
enforced in such proceedings shall, for the purpose of such proceedings, be
deemed eliminated from the provisions of this paragraph. The term "county" as
used herein shall be deemed to apply to other similar political subdivisions,
such as parishes, in those areas which have such other political subdivisions.
(j) Confidentiality. If Contributor or FirstMark obtains, directly
or indirectly, information or records, whether prepared by Associated, its
advisors or otherwise, and whether written or oral, concerning the business of
Associated, Contributor and FirstMark shall be bound by the provisions of
Section 8(j) with respect to such information or records to the same extent that
Associated would be bound with respect to
<PAGE> 23
Confidential Information.
(k) Intercompany Indebtedness. Prior to the Closing, Contributor
and FirstMark shall cause all outstanding indebtedness of FirstMark to
Contributor or any of her Affiliates to be cancelled or discharged without any
cost, liability (including, without limitation, any Tax liability) or expense
being incurred by FirstMark.
Section 8. Additional Covenants and Agreements of Associated.
(a) Cooperation by Associated. From and after the date of this
Agreement, Associated will use its reasonable efforts, and will cooperate with
Contributor, in each case at Associated's expense, to secure all Requisite
Approvals to enable Contributor and Associated to effect the transactions
contemplated by this Agreement, and will otherwise use its reasonable efforts to
cause the consummation of such transactions in accordance with the terms and
conditions of this Agreement.
(b) Conduct of Business. From the date of this Agreement through
the Closing, Associated shall not operate its business in any manner with the
intention of diminishing the value of the Interest to be received by Contributor
pursuant to this Agreement.
(c) Books and Records; Personnel. For a period of seven years
from the Closing Date:
(i) Associated shall not, and shall cause FirstMark
not to, dispose of or destroy any of the books and records of FirstMark
in their possession relating to periods prior to the Closing ("Books
and Records") without the prior written consent of Contributor (which
shall be deemed given if Contributor fails to object in writing to such
disposal or destruction with twenty (20) days of receipt of notice from
Associated of its intention to effect such disposal or destruction).
(ii) Associated shall, and shall cause FirstMark to,
upon at least three (3) days prior written notice from Contributor,
allow Contributor and its agents reasonable access to all Books and
Records during normal working hours at Associated's principal place of
business or at any location where any Books and Records are stored, and
Contributor shall have the right, at its own expense, to make copies of
any Books and Records, in connection with (x) any pending or threatened
litigation in which Contributor or any of its Affiliates is involved,
(y) any investigation or proceeding of any Governmental Authority in
which
<PAGE> 24
Contributor or any of its Affiliates is involved, or (z) the
preparation of any Returns; provided, however, that any such access or
copying shall be had or done in such a manner so as not to interfere
with the normal conduct of Associated's or FirstMark's businesses, as
applicable.
(iii) Contributor shall, and shall cause its
representatives to, keep confidential all Books and Records and the
information contained therein.
(d) Interim Control of DEMS Systems. Without limiting Section 7
hereof, between the date of this Agreement and the Closing, Associated shall not
directly or indirectly control, supervise or direct, or attempt to control,
supervise or direct, the operation of the DEMS Systems of FirstMark and its
Affiliates, and the operations of FirstMark and its Affiliates shall be the sole
responsibility of Contributor and FirstMark and its Affiliates.
(e) Opposition to DEMS Licenses. Neither Associated nor any of its
Affiliates shall oppose, challenge or in any manner take an adverse position,
directly or indirectly, with respect to any DEMS License (and Associated or its
Affiliates shall promptly withdraw or rescind any such previous opposition,
challenge or adverse position); provided that, subject to and without limitation
of Associated's obligations under the other provisions of this Agreement, prior
to the Closing, the provisions of this paragraph (e) shall not apply to any
channel covered by an existing or future DEMS License to the extent such DEMS
License is with respect to a channel as to which Associated holds a DEMS
license. Notwithstanding any other provision of this Agreement, if the FCC
revokes a DEMS License with respect to channel 31 in the Los Angeles SMSA or
channel 30 in the San Francisco SMSA and grants, pursuant to a decision that is
no longer subject to administrative or judicial review, reconsideration or
appeal, a DEMS license with respect to such channel, or a channel in
substitution for such channel, to MSI, DSC, Associated or any of their
respective Affiliates, then Contributor shall receive the consideration that she
would have received under Section 3(c) or Section 3(e), at the same time she
would have received such consideration under Section 3(c) or 3(e), if such
channel had been an asset of FirstMark at the Closing and/or had been released
from the Trust, as applicable.
(f) Teledesic Settlement. Associated agrees that (i) any
settlement with Teledesic with respect to DEMS licenses in the 18 GHz frequency
band which involves the relocation of DEMS to a frequency band other than 18 GHz
(a "Teledesic Settlement") will not adversely affect FirstMark in a manner
different (on a proportionate and comparable basis),
<PAGE> 25
after giving effect to clause (ii) below, from Associated, MSI and DSC and their
respective Affiliates and (ii) Associated will reimburse Contributor for
expenditures actually made by FirstMark prior to the date of this Agreement (and
as to which Associated receives reasonable documentary evidence from FirstMark
as to incurrence and amount) in connection with the DEMS Systems to the same
extent (on a proportionate and comparable basis) and subject to the same
conditions and payable to Contributor by wire transfer of immediately available
funds to an account previously designated by Contributor to Associated at the
same time as Associated, MSI or DSC or their respective Affiliates receive,
pursuant to a Teledesic Settlement, reimbursement for expenditures actually made
by them prior to the date of this Agreement in connection with the DEMS licenses
and DEMS systems of Associated, MSI or DSC or their respective Affiliates;
provided that any such reimbursement of Contributor shall not exceed $600,000 in
the aggregate, and shall be reduced dollar for dollar to the extent that
Contributor or FirstMark receives any amounts from Teledesic pursuant to any
separate agreement, arrangement or understanding with Teledesic (and FirstMark
and Contributor agree promptly to notify Associated of their receipt of any such
payments). Associated agrees that it shall, promptly following receipt of FCC
approval of the Teledesic Settlement which is no longer subject to
administrative or judicial review, reconsideration or appeal, provide
Contributor with a true and correct copy of the agreement(s) providing for the
Teledesic Settlement, subject to execution of an appropriate confidentiality
agreement by Contributor. Without the prior written consent of Associated,
neither Contributor nor FirstMark nor any of their respective Affiliates shall
oppose, challenge, or in any manner take, directly or indirectly, an adverse
position with respect to, any Teledesic Settlement, or any term thereof, or any
plan adopted or order issued by the FCC to relocate DEMS to a frequency band
other than 18 GHz. If this Agreement is terminated prior to the Closing (x) by
reason of a breach of this Agreement by Contributor or FirstMark, the provisions
of clause (ii) of the first sentence of this paragraph shall be of no further
force or effect, (y) by reason of a breach of this Agreement by Associated, the
provisions of clause (ii) of the first sentence of this paragraph shall survive
termination, or (z) without fault of either party, the provisions of clause (ii)
of the first sentence of this paragraph shall survive termination, except that
the obligation of Associated under such clause shall be limited to 50% of the
expenditures reimbursable under such clause (ii) and not more than $300,000 in
the aggregate.
(g) Contributor Registration Rights.
(i) Contributor "Piggyback". Contributor shall have
the same rights with respect to registration, pursuant to a
registration statement filed by Associated under the Securities
<PAGE> 26
Act, of equity securities of Associated issued to Contributor pursuant
to this Agreement as Mandl has pursuant to clause (A) of Section
4(d)(I) of the Mandl Employment Agreement. Associated shall, if
requested in writing by Contributor, use all reasonable efforts to
cause to be included in such registration statement up to an amount of
the equity securities of Associated then owned by Contributor (of the
same class as the equity securities of Associated then owned by or
issuable to Mandl) which were issued to Contributor pursuant to this
Agreement ("Contributor Registrable Securities") proportionate to the
amount of equity securities which are then owned by or issuable to
Mandl which are entitled to be included in such registration statement
(based on the total amount of such equity securities then owned by or
issuable to Mandl and the total amount of Contributor Registrable
Securities then owned by Contributor, respectively). If, in connection
with an underwritten offering registered pursuant to a registration
statement, the managing underwriter imposes a limitation on the amount
of equity securities which may be included in such registration
statement, then Associated shall be obligated to use all reasonable
efforts to include in such registration statement the Contributor
Registrable Securities validly requested by Contributor in accordance
with the terms hereof to be included in such registration statement (x)
only after the inclusion of all equity securities proposed to be sold
by Associated for its own account and (y) subject to reduction of the
amount of Contributor Registrable Securities and any other equity
securities to be included in such registration statement on behalf of
any Person other than Associated on a pro rata basis in accordance with
the number of Contributor Registrable Securities and such other equity
securities requested to be included in such registration statement.
(ii) Demand Registration Rights. In addition to the
registration rights afforded by clause (i) of this Section 8(g), at any
time after the first anniversary of the closing of Associated's initial
public offering (the "IPO"), Contributor shall be entitled to one
demand registration under the Securities Act and under such state
securities laws as Contributor may reasonably request (provided that
Associated shall not be required to consent to general service of
process in any jurisdiction where it is not then so subject) in respect
of Contributor Registrable Securities, provided that such demand
registration right shall apply only if the amount of Contributor
Registrable Securities to be registered (x) constitutes at least 50% of
the greatest amount of Contributor Registrable Securities owned by
Contributor at any
<PAGE> 27
time and (y) has an anticipated aggregate offering price (before
underwriters' fees, commissions and discounts) of at least $10,000,000.
(iii) Restrictions. The registration rights of
Contributor provided for in this Section 8(g) shall not be transferable
to any transferee of Contributor Registrable Securities except (i)
during her lifetime by gratuitous transfers to grantor trusts,
charitable remainder trusts or to immediate family members or trusts
for their benefit, provided that any such transferee agrees in writing
to be bound by the provisions of this Section 8(g) or (ii) upon her
death by will or the laws of descent and distribution. In addition,
such registration rights shall be subject to Contributor entering into
underwriting (if applicable), indemnification, and other customary
agreements, including customary lock-up provisions requested by the
managing underwriter of any offering, and to Associated's right to
defer (or require Contributor to suspend sales pursuant to) any such
registration if (but only for so long as) it determines in good faith
that such registration (or continued sales) would require disclosure
which would be materially adverse to Associated's interests. Associated
shall keep any registration statement filed under clause (ii) above
effective for at least ninety (90) days (increased by the number of
days, if any, that sales under such registration statement are
suspended as provided above). Associated shall bear all registration
expenses (exclusive of underwriting fees, discounts and commissions)
under this Section 8(g) and in such connection shall provide
Contributor with indemnification and contribution against liabilities
under the securities laws in customary form.
(iv) Contributor agrees to execute a customary
lock-up agreement in connection with the IPO, whether or not
Contributor is a selling stockholder in the IPO.
(h) Tag-Along and Drag-Along Rights. If, prior to the time that
equity securities of Associated (of the same class as the Contributor
Registrable Securities) are publicly traded, the Original Shareholders shall
sell to a third party (other than an Affiliate of such Original Shareholder) any
of their equity interests in Associated at a time when Contributor holds any
equity interest in the Company (an "Equity Interest"):
(i) The Original Shareholders shall require the
purchaser of their equity interests to purchase, at Contributor's
<PAGE> 28
election, the same percentage of the aggregate Equity Interest then
held by Contributor as the percentage of the aggregate equity interests
of the Original Shareholders which is being purchased; such purchase
from Contributor shall be made on the same terms and for the same
consideration as the purchase from the Original Shareholders; and
(ii) The Original Shareholders, at their election,
may require the purchaser of their equity interests to purchase, and
Contributor to sell, the same percentage of the aggregate Equity
Interest then held by Contributor as the percentage of the aggregate
equity interests of the Original Shareholders which is being purchased;
any such purchase from Contributor shall be made on the same terms and
for the same consideration as the purchase from the Original
Shareholders.
(i) Right of First Refusal. Upon the terms and subject to the
conditions of this Section 8(i), Contributor grants the Original Shareholders a
right of first refusal with respect to any sale or other disposition for value
by Contributor (a "Transfer") of any Equity Interest.
(i) If Contributor desires to effect a Transfer of
some or all of its Equity Interest pursuant to a bona fide offer (an
"Offer") from any person or entity (an "Offeror"), Contributor shall
give written notice of such Offer (a "First Refusal Notice") to each of
the Original Shareholders. The First Refusal Notice shall specify the
number or amount of securities comprising the Equity Interest proposed
to be transferred pursuant to such Offer (the "First Refusal
Interest"), the price proposed to be paid by the Offeror (the "Offer
Price"), the identity of the Offeror and the other terms and conditions
of such Offer, and shall be accompanied by a true and correct copy of
the Offer. If any part of the consideration proposed in the Offer
consists of property other than cash, the price proposed to be paid
pursuant to such Offer shall be deemed to include the fair market value
of such non-cash consideration, as determined in good faith by the
board of directors of Associated. If Contributor objects to the fair
market value, as so determined, Contributor may require that Associated
obtain a determination of the fair market value of such non-cash
consideration pursuant to the procedures set forth in paragraph (v) of
this Section 8(i), and such determination shall be final and binding on
all parties.
(ii) Each Original Shareholder shall have the option
to purchase the First Refusal Interest at the Offer Price
<PAGE> 29
and on such other terms as are set forth in the Offer, by giving notice
to Contributor within thirty (30) days of receipt by such Original
Shareholder of the First Refusal Notice (an Original Shareholder which
gives such notice being referred to as an "Accepting Original
Shareholder"), and by purchasing such First Refusal Interest for the
Offer Price in cash, against delivery of the First Refusal Interest
(with appropriate transfer documentation) free and clear of any Liens
within fifteen (15) days following the expiration of such thirty (30)
day period; provided, however, that if Accepting Original Shareholders
elect in the aggregate to purchase more than 100% of the First Refusal
Interest, then the portion of the First Refusal Interest which may be
purchased by any Accepting Original Shareholder that has elected to
purchase more than such Accepting Original Shareholder's Pro Rata Share
(as defined below) of the First Refusal Interest shall be reduced
(based on each such Accepting Original Shareholder's Pro Rata Share),
but not below such Accepting Original Shareholder's Pro Rata Share; and
provided, further, that the date for such purchase may be deferred
solely to the extent necessary to obtain any governmental consents or
approvals required to complete such purchase or, if applicable, to the
extent necessary to complete the determination of the fair market value
of any non-cash consideration proposed to be paid by the Offeror, as
provided in paragraph (i) above. For purposes of this paragraph (ii) of
this Section 8(i), an Accepting Original Shareholder's "Pro Rata Share"
shall be the percentage which such Accepting Original Shareholder's
ownership interest in Associated represents of the ownership interest
in Associated of all Accepting Original Shareholders.
(iii) If the Original Shareholders do not give timely
notice of their election to purchase the entire First Refusal Interest,
or if such notice is timely given but the Accepting Original
Shareholders fail to purchase the entire First Refusal Interest within
the applicable time period specified in this Section 8(i), then
Contributor may, within the 90-day period immediately following the
expiration of the period during which the Original Shareholders may
give notice of such election, or, if applicable, within the 90-day
period immediately following such failure to purchase the entire First
Refusal Interest, transfer the First Refusal Interest to the Offeror at
a price not less than the Offer Price and on the same terms and subject
to the same conditions as were set forth in the First Refusal Notice.
If Contributor does not complete such Transfer within such 90-day
period, no subsequent Transfer of all or any part of its Equity
<PAGE> 30
Interest may be made without again complying with this Section 8(i), it
being understood and agreed that the retention by Contributor of a
security interest in some or part of the First Refusal Interest which
is transferred shall not mean that such Transfer has not been
completed.
(iv) If Contributor fails to comply with this Section
8(i) with respect to all or any part of its Equity Interest (including
without limitation any beneficial interest therein), any attempted or
purported Transfer thereof shall be void and of no force or effect.
(v) The fair market value of any non-cash
consideration or property the value of which is to be determined
pursuant to the last sentence of paragraph (i) of this Section 8(i)
shall be determined in accordance with the following procedure:
Contributor and Associated shall each select a nationally recognized
appraiser, which shall determine the valuation or other issue in
question. If the higher of the two original appraisal values is not
more than ten percent (10%) above the lower appraisal value, the value
in question shall be the value agreed upon by the two original
appraisers or, in the absence of such an agreement, the value in
question shall be the average of the two original appraisal values. If
the higher of the two original appraisal values is more than ten
percent (10%) above the lower appraisal value, the two appraisers shall
select a third nationally recognized appraiser who shall determine a
value which shall be at least equal to the lower appraisal value and
whose determination of the value in question shall be final and binding
on all parties. All costs and expenses relating to any appraisal or
review conducted under this paragraph shall be borne by Associated.
(vi) This Section 8(i) shall not apply to the sale by
Contributor in the public market of Contributor Registrable Securities
registered under the Securities Act or pursuant to Rule 144 under the
Securities Act.
(j) Confidentiality.
(i) Associated shall, and shall cause its
representatives to, keep confidential all information and records,
whether prepared by Contributor, its advisors or otherwise, and whether
written or oral, which were obtained, directly or indirectly, by
Associated or its representatives concerning the
<PAGE> 31
business of FirstMark ("Confidential Information"). Associated shall,
and shall cause its representatives to, use Confidential Information
solely in connection with its analysis and review of the transactions
contemplated by this Agreement or in connection with operating the
business of FirstMark.
(ii) Associated may disclose Confidential Information
to any of its directors, officers, employees, agents and advisors (each
a "Representative" and, collectively, the "Representatives") who need
to know such Confidential Information for the purpose of assisting
Associated in connection with the transactions contemplated by this
Agreement or with operating the business of FirstMark; provided,
however, that prior to making such disclosure, Associated shall advise
each such Representative of Associated's obligations under this Section
8(j) and Associated shall be responsible for any breach of this
Agreement by any such Representative. Associated may disclose
Confidential Information if required by legal process or by operation
of applicable law; provided, however, that Associated shall first
promptly advise and consult with Contributor and its counsel concerning
the information Associated proposes to disclose.
(iii) Associated's obligations under clauses (i) and
(ii) of this Section 8(j) do not apply to information which (x) was
known by Associated prior to such disclosure and not subject to any
confidentiality agreement or obligation of secrecy to Contributor or
FirstMark of which Associated is aware or reasonably should be aware,
(y) at the time of disclosure is generally available to and known by
the public or the telecommunications industry other than as a result of
disclosure in violation of clause (i) or (ii) of this Section 8(j) or
(z) was or becomes available to Associated on a non-confidential basis
from a source other than Contributor or its agents or advisors;
provided, however, that such source is not bound by a confidentiality
agreement or obligation of secrecy to Contributor in respect thereof of
which Associated is aware or reasonably should be aware.
(iv) In the event that this Agreement is terminated,
all Confidential Information, whether or not then in Associated's
possession, and any copies thereof or notes or extracts therefrom,
shall be returned to Contributor, without retaining any copies thereof,
and Associated shall destroy, as soon as practicable, all copies of any
analyses, studies, compilations or other documents prepared by
Associated or any of
<PAGE> 32
its Representatives to the extent that they contain, reflect or are
generated from any Confidential Information.
(v) Associated acknowledges and agrees that any
breach by it of the provisions of this Section 8(j) will cause
Contributor irreparable injury and damage, for which Contributor cannot
be adequately compensated in damages. Associated, therefore, expressly
agrees that Contributor shall be entitled to seek injunctive relief
and/or other equitable relief to prevent any breach of the provisions
of this Section 8(j), or any part thereof, and to secure their
enforcement.
(vi) The provisions of this Section 8(j) shall not
survive the Closing, except that the provisions of this Section 8(j)
shall survive with respect to any DEMS Licenses and DEMS Systems unless
and until control thereof is transferred to Associated pursuant to this
Agreement.
(k) Non-disclosure of Financial Terms. Associated agrees that,
except as requested by the FCC or required by law or legal process or in
connection with any financing, strategic alliance, acquisition or disposition
transaction, it shall not disclose to any third party, other than its Affiliates
or Representatives, the financial terms of the transactions contemplated by this
Agreement without the prior written consent of Contributor.
(l) Anti-Dilution Rights. Associated agrees that the Membership
Percentage represented by the Interest to be issued to Contributor under this
Agreement (regardless of when any portion of such Interest is issued hereunder)
shall not be diluted by the first $75 million of equity investments in
Associated by the Original Shareholders and their Affiliates from the date of
this Agreement through August 19, 1997 and shall be diluted in respect of any
other equity investments by the Original Shareholders or their Affiliates after
the date of this Agreement based upon (A) the amount of such equity investment
and (B) the fair market value of Associated (as determined in good faith by the
board of directors of Associated).
Section 9. Tax Matters.
(a) Tax Indemnification by Contributor.
(i) Contributor shall be liable for, and shall
indemnify Associated and its Affiliates and hold them harmless from and
against, any Taxes of FirstMark for taxable periods ending on or before
the Closing Date ("Pre-Closing Tax Periods") or portions of taxable
periods
<PAGE> 33
ending on or before the Closing Date and any loss, damage, liability or
expense, including, but not limited to, reasonable fees for attorneys
and other outside consultants, incurred in connection with such Taxes.
(ii) Payments required under this Section 9(a) shall
be made within 30 days of Associated furnishing Contributor with
written evidence that Associated has paid such amounts or such amounts
are due and payable to a Taxing Authority.
(b) Apportionment of Taxes. In order to apportion appropriately
any Taxes relating to any taxable period beginning prior to and ending after the
Closing Date ("Straddle Period"), the parties hereto shall, to the extent
permitted under applicable law, elect with the relevant Tax Authority to treat
for all purposes, the Closing Date as the last day of the taxable year or period
of FirstMark, and such period shall be treated as a short taxable year and a
Pre-Closing Tax Period for purposes of this Section 9. In any case where
applicable law does not permit FirstMark to treat the Closing Date as the last
day of the taxable year or period with respect to Taxes that are payable with
respect to a Straddle Period, the portion of any such Taxes that are allocable
to the portion of the taxable year ending on the Closing Date shall be deemed to
be equal to the amount which would be payable if the taxable year or period
ended on the Closing Date.
(c) Refunds.
(i) Contributor shall be entitled to any refunds of
Taxes attributable to FirstMark (including refunds paid by means of
credit against other or future Tax liabilities) for a Pre-Closing Tax
Period or the portion of a Straddle Period ending on or before the
Closing Date other than refunds arising from a carryback of a loss or
credit from any period other than a Pre-Closing Tax Period.
(ii) Associated shall forward to Contributor any
refunds to which Contributor is entitled (pursuant to the terms of this
Section 9(c)) within 5 days after receipt thereof. In the case of a
refund received in the form of a credit against other or future Tax
liabilities, reimbursement in respect of such refund shall be due on
the due date for payment of the Taxes against which such refund has
been credited.
(d) Cooperation. After the Closing Date, each of Associated
<PAGE> 34
and Contributor shall make available to the other, as reasonably requested, and
to any Taxing Authority, all information, records and documents relating to Tax
liabilities or potential Tax liabilities relating to FirstMark and shall
preserve all such information, records and documents until the expiration of any
applicable statute of limitations or extension thereof. Associated shall render
such assistance as shall be reasonably requested by Contributor so as to comply
with the responsibilities imposed on Contributor by Section 9(f).
(e) Certain Other Definitions. For purposes of this Agreement (i)
"IRS" means the Internal Revenue Service; (ii) "Return" means all returns,
reports, declarations, estimates, information returns, statements and forms of
any nature regarding Taxes, including remittance advices, required to be filed
with any Taxing Authority or depository; (iii) "Tax" means any federal, state,
local or foreign tax, including, without limitation, income (net or gross),
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, and including any interest, penalties or additions to tax
imposed with respect thereto; and (iv) "Taxing Authority" means any Governmental
Authority, domestic or foreign, having jurisdiction over the assessment,
determination, collection, or other imposition of Tax.
(f) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement ("Transfer Taxes") shall be
paid by Contributor when due, and Contributor shall file all necessary Returns
and other documentation with respect to all such Transfer Taxes, and, if
required by applicable law, Associated will, and will cause FirstMark to, join
in the execution of any such Returns and other documentation. Associated shall
reimburse Contributor for one-half of all Transfer Taxes and one-half of the
cost of filing Returns relating to Transfer Taxes.
(g) Tax Treatment of Indemnity Payments. The Tax treatment of all
indemnity payments made by either party to or for the benefit of the other party
under this Agreement shall be treated by the parties hereto as an adjustment to
the consideration.
(h) Certain Representations. Contributor and FirstMark hereby
jointly and severally represent and warrant to Associated that (i) except as set
forth on Schedule 9(h)(i), FirstMark has filed or has had filed on
<PAGE> 35
its behalf in a timely manner (within any applicable extension periods) with the
appropriate Taxing Authority all income and other materials Returns with respect
to Taxes of FirstMark; (ii) all material Taxes with respect to FirstMark have
been paid in full or have been provided for in accordance with generally
accepted accounting principles on Schedule 10(a)(x); (iii) there are no
outstanding agreements or waivers extending the statutory period of limitations
applicable to any federal, state, local or foreign income or other material
Returns required to be filed by or with respect to FirstMark; (iv) none of the
Returns of or with respect to FirstMark is currently being audited or examined
by any Taxing Authority; and (v) no deficiency for any income or other material
Taxes has been assessed with respect to FirstMark which has not been abated or
paid in full. FirstMark is not, and has not at any time been, a member of a
consolidated group for federal income tax purposes.
Section 10. Representations and Warranties.
(a) Representations and Warranties of Contributor and
FirstMark. Contributor and FirstMark hereby jointly and severally represent
and warrant to Associated as follows:
(i) Capitalization. The authorized capital stock of
FirstMark consists of one thousand (1,000) shares of common stock, par
value $.01 per share, of which one hundred (100) shares are issued and
outstanding and owned of record and beneficially by Contributor. All of
the shares comprising the Stock are validly issued, fully paid and
non-assessable and are held by Contributor free and clear of all Liens.
There are outstanding no securities convertible into, exchangeable for,
or carrying the right to acquire, equity securities of FirstMark, or
subscriptions, warrants, options, rights or other arrangements or
commitments obligating FirstMark to issue or dispose of any securities
or any ownership interest therein. The Contribution of the Stock to
Associated pursuant to Section 3 hereof will vest in Associated legal
and valid title to the Stock, free and clear of all Liens (other than
Liens created by Associated).
(ii) Litigation. There is no action or proceeding in
any court or before any Governmental Authority pending or, to
Contributor's knowledge, threatened against Contributor or any of its
Affiliates, with respect to which there is a reasonable likelihood of a
determination which would have a material adverse affect on the ability
of Contributor to perform its obligations under this Agreement or which
is otherwise material to FirstMark. Neither Contributor nor any of its
<PAGE> 36
Affiliates is subject to any outstanding order, ruling, judgment or
decree which would have a material adverse effect on the ability of
Contributor to perform its obligations under this Agreement or which is
otherwise material to FirstMark.
(iii) Corporate Organization. FirstMark is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(iv) Enforceability. This Agreement has been duly
executed and delivered by, and constitutes the valid and binding
obligation of, Contributor and FirstMark, enforceable against
Contributor and FirstMark in accordance with its terms.
(v) No Violation; No Consents or Approvals. The
execution, delivery and performance by Contributor and FirstMark of
this Agreement does not conflict with, result in a breach of or cause a
default under, with or without the giving of notice or the passage of
time, or both, or require any consent or approval of any party pursuant
to, the certificate of incorporation of FirstMark or any material
agreement or instrument to which Contributor or FirstMark is a party or
by which either of them or any of their respective properties is bound,
nor does it conflict with or violate any Requirement of Law or require
any consent or approval of any Governmental Authority other than the
Requisite Regulatory Approvals.
(vi) DEMS Licenses; FirstMark DEMS Applications.
(A) FirstMark duly and validly holds each of the DEMS
Licenses listed on Schedule I, which are the only licenses for DEMS
granted to FirstMark or any of its Affiliates as of the date of this
Agreement. Each of the DEMS Licenses has been validly issued, is in
full force and effect, has not been suspended, revoked, canceled, or
modified in any adverse way, is not subject to any conditions or
requirements that have not been imposed upon all such licenses
generally, and, except as set forth on Schedule 10(a)(vi) hereto, is
not subject to any pending regulatory or judicial review. To the best
knowledge of Contributor and FirstMark, other than objections by
Teledesic, there is not pending any application, petition, objection,
or other pleading with the FCC or any court of appeals which questions
the validity of or contests any of the DEMS Licenses. To the best
knowledge of Contributor and FirstMark, no pending or threatened action
or matter has occurred that would inhibit or preclude the renewal of
<PAGE> 37
any DEMS License in the ordinary course.
(B) FirstMark has, at all times, operated the DEMS
Systems in material compliance with the Communications Act of 1934, as
amended (the "Act"), the rules of the FCC, and the terms of the DEMS
Licenses. No noncompliance with the Act, the rules of the FCC or the
terms of the DEMS Licenses has occurred with respect to the DEMS
Licenses which permits, or after notice or lapse of time or both would
permit, revocation or termination of any DEMS License or would result
in any impairment of the rights of FirstMark with respect to the DEMS
Licenses. All applications and material reports required by the rules
of the FCC have been timely filed and all representations made in such
applications and reports are truthful and accurate in all material
respects.
No radio equipment used in the operation of the DEMS Systems has been
modified from its manufacturers' type-accepted specifications or causes
interference to other FCC-licensed radio station facilities. All
structures that support radio equipment used in the operation of the
DEMS Systems are, and since their construction have been, reported,
registered, marked, lighted, inspected and maintained in accordance in
all material respects with the rules of the FCC and the standards of
the Federal Aviation Administration.
(C) Schedule I includes a list of all applications
for additions to or modifications of the DEMS Systems that are pending
as of the date of this Agreement before the FCC.
(D) Except as disclosed on Schedule 10(a)(vi) hereto,
FirstMark possesses all authorizations required by any PUC or other
Governmental Authority with jurisdiction over the DEMS Systems,
including, without limitation, certificates of public convenience and
necessity, permits necessary for the use of land or construction of
facilities, and zoning variances (collectively, the "Local
Authorizations"). A list of all Local Authorizations in effect as of
the date of this Agreement is included in Schedule I. The Local
Authorizations are in full force and effect, have not been suspended,
revoked, canceled, or modified in any adverse way, and are not subject
to any conditions or requirements that have not been imposed upon all
wireless communications providers generally and are not subject to any
pending regulatory or judicial review. To the best knowledge of
Contributor and FirstMark, there is not pending any application,
petition, objection, or other pleading with any state, county, or other
<PAGE> 38
local regulatory agency or court of appeals which questions the
validity of or contests any of the Local Authorizations. FirstMark has
at all times operated the DEMS Systems in material compliance with all
state, county, and other local statutes and ordinances. All facilities
used in the operation of the DEMS Systems are, and since their
construction have been, in material compliance with all applicable land
use and zoning statutes and ordinances.
(E) No communications facility used in connection
with the DEMS Systems has been constructed by FirstMark under
circumstances where such construction may have significantly affected
the environment pursuant to the rules of the FCC, without the
preparation of an environmental assessment and a prior determination by
the FCC that such construction would result in no significant
environmental effect.
(F) The FirstMark DEMS Applications are the only
applications of FirstMark or any of its Affiliates for any DEMS
license.
(vii) Subscription Contracts. Schedule 10(a)(vii)
hereto (as supplemented at the Closing by identifying all additions
thereto between the date hereof and such date) sets forth all
subscription contracts for the provision of DEMS entered into by
FirstMark. Accurate and complete copies of all contracts listed on
Schedule 10(a)(vii) have been provided to Associated.
(viii) Tangible Assets. All material tangible
assets comprising a part of the DEMS Systems are in good working
order and condition.
(ix) Intellectual Property. FirstMark has, and upon
consummation of the Contribution will have, all intellectual property
rights associated with the DEMS Systems and such intellectual property
rights do not and will not infringe upon the intellectual property
rights of any Person.
(x) No Undisclosed Assets or Liabilities. Schedule
10(a)(x) hereto sets forth all assets and liabilities of FirstMark as
of the date of this Agreement. Between the date of this Agreement and
the Closing, except as expressly permitted by this Agreement, the
Schedules and Exhibits hereto, FirstMark will not incur any liabilities
other than liabilities arising in the ordinary course of business of
the operations of the DEMS Systems that will not, individually or in
the aggregate, have a material
<PAGE> 39
adverse effect on the assets, business or operations of FirstMark.
(b) Representations and Warranties of Associated. Associated
hereby represents and warrants to Contributor and FirstMark as follows:
(i) Capitalization. Schedule 10(b)(i) sets forth the
outstanding Membership Percentage and the capital account of each
Member as of the date of this Agreement. As of the date of this
Agreement, except pursuant to the Mandl Employment Agreement and under
Associated's Equity Incentive Plan, there are outstanding no securities
or other instruments convertible into, exchangeable for, or carrying
the right to acquire, any Interest, or subscriptions, warrants,
options, rights or other arrangements or commitments (other than this
Agreement) obligating Associated to issue any Interest, or any
ownership interest therein.
(ii) Corporate Organization. Associated is a
limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(iii) Corporate Power and Authority. Associated has
the requisite limited liability company power and authority to enter
into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by Associated of this Agreement and the
consummation by Associated of the transactions contemplated hereby have
been duly authorized by all requisite limited liability company action
on the part of Associated, and no other limited liability company
proceedings on the part of Associated or its members are necessary to
authorize this Agreement and the transactions contemplated hereby. The
Original Shareholders have irrevocably waived all rights under Section
5.1(d) of the Limited Liability Company Agreement in connection with
the transactions contemplated by this Agreement. This Agreement has
been duly executed and delivered by Associated and constitutes the
valid and binding obligation of Associated, enforceable against
Associated in accordance with its terms.
(iv) No Violation. The execution, delivery and
performance by Associated of this Agreement does not conflict with,
result in a breach of or cause a default under, with or without the
giving of notice or the passage of time, or both, or require any
consent or approval of any party pursuant to, its operating agreement
or any material agreement or instrument to which it is a party or by
which it or any of its property is
<PAGE> 40
bound, nor does it conflict with or violate any Requirement of Law or
require any consent or approval of any Governmental Authority other
than the Requisite Regulatory Approvals.
(v) Litigation. As of the date of this Agreement,
there is no litigation pending or, to Associated's knowledge,
threatened against Associated or any of its Affiliates with respect to
which there is a reasonable likelihood of a determination which would
have a material adverse effect on the ability of Associated to perform
its obligations under this Agreement. As of the date of this Agreement,
neither Associated nor any of its Affiliated is subject to any
outstanding orders, rulings, judgments or decrees which would have a
material adverse effect on the ability of Associated to perform its
obligations under this Agreement.
(vi) Acquisition of DEMS Licenses. As of the date of
this Agreement, Associated and its Affiliates have no agreement or
understanding with any Person (other than Contributor or FirstMark)
with respect to the direct or indirect purchase or sale of any DEMS
license or any Person which holds any DEMS license, and as of the date
of this Agreement, neither Associated nor any of its Affiliates is
engaged in any discussions or negotiations relating to any such
purchase or sale.
Section 11. Miscellaneous.
(a) Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under any Requirement of Law to perform
its obligations hereunder and to consummate and make effective the transactions
contemplated to be consummated by such party under this Agreement. Without
limitation of the generality of the foregoing, each party hereto (i) agrees to
use all reasonable efforts to obtain, and to cooperate with the other party in
obtaining, as promptly as practicable as contemplated by this Agreement, any and
all Requisite Approvals, and (ii) agrees that it will not take any action, or
enter into any agreement, which is inconsistent with, or which would impair or
restrict in any manner, its right or ability to promptly perform its obligations
hereunder.
(b) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the respective successors, heirs, personal representatives and
permitted assigns of the parties hereto, provided that
<PAGE> 41
neither this Agreement nor any rights or obligations hereunder may be assigned
or delegated by Contributor without Associated's prior written consent. For
purposes of this Agreement the term "successor" includes, without limitation,
any Person who or which acquires in a single or series of related transactions
more than 50% of the assets, earnings or voting stock of a party.
(c) Indemnification; Joint and Several Liability of FirstMark
and Contributor Prior to Closing.
(i) From and after the Closing, Contributor shall be
liable for, and shall indemnify Associated and hold her harmless from
and against, any and all losses, claims, damages or liabilities
incurred by Associated, or to which Associated becomes subject, to the
extent that such losses, claims, damages or liabilities result from the
breach by Contributor or FirstMark of any of their respective
representations and warranties or covenants contained in this
Agreement. In addition, Contributor shall be liable for, and shall
indemnify Associated and its Affiliates (including FirstMark) and hold
them harmless from and against, any and all losses, claims, damages or
liabilities incurred by Associated or any of its Affiliates, or to
which any of them becomes subject, to the extent that such losses,
claims, damages or liabilities result from FirstMark's former status as
an Affiliate of Contributor. Payments required under this paragraph
shall be made within 30 days of Associated's request therefor.
(ii) From and after the Closing, Associated shall be
liable for, and shall indemnify Contributor and hold her harmless from
and against, any and all losses, claims, damages or liabilities
incurred by Contributor, or to which Contributor becomes subject, to
the extent that such losses, claims, damages or liabilities result from
the breach by Associated of any of its representations and warranties
or covenants contained in this Agreement. Payments required under this
paragraph shall be made within 30 days of Contributor's request
therefor.
(iii) Contributor and FirstMark shall be jointly and
severally liable for any breach by either of them prior to the Closing
of their obligations hereunder; provided that, if the Closing has
occurred, Contributor shall be solely liable for any such breach.
(d) Survival. The representations and warranties of the parties
contained herein shall survive the Closing of the transactions
<PAGE> 42
contemplated hereby. The covenants and agreements contained herein to be
performed or complied with prior to the Closing (or termination of the Trust
Agreement, if applicable) shall expire at the Closing (or termination of the
Trust Agreement, if applicable). The covenants and agreements contained herein
to be performed or complied with after the Closing shall survive the Closing in
accordance with their terms without limitation as to time unless otherwise
specifically indicated. Nothing in this Section 11(d) shall limit the rights and
remedies of any party for any breach by another party of any of its
representations, warranties, covenants or other agreements under this Agreement.
(e) Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the other agreements and instruments which may be entered
into in connection herewith constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and shall supersede
any prior expressions of intent or understanding with respect to the
transactions provided for herein and therein.
(f) Costs and Expenses. Except as otherwise provided in this
Agreement, each party agrees to bear its own expenses, fees and costs incurred
in connection with the transactions contemplated by this Agreement.
(g) Amendment. Any amendment hereto shall be effective only
if in writing and signed by each of the parties hereto.
(h) Waiver; Cumulative Rights. No provision of this Agreement
shall be deemed to have been waived by any act or knowledge of either party or
of such party's agents, officers or employees, but only by an instrument in
writing signed by such party and delivered to the other party hereto specifying
such waiver. The failure or delay of either party to require performance by the
other party of any provision hereof shall not affect its right to require
performance of such provision unless and until such performance has been waived
in writing. Each and every right hereunder is cumulative and may be exercised in
whole or in part from time to time.
(i) Notices. All notices, demands, requests, certificates or other
communications under this Agreement shall be in writing and shall be mailed by
certified or registered mail (return receipt requested) with charges prepaid,
hand delivered or sent by facsimile transmission or by commercial courier to the
address set forth below for each of the parties (or at such other address as
shall be specified by a party by like notice to the other party):
(i) if to Associated:
<PAGE> 43
Associated Communications, L.L.C.
11 Canal Center Plaza Suite 300A
Alexandria, VA 22314
Attention: Laurence Harris, Esq.
General Counsel
Facsimile: (703) 299-4585
with copies to:
The Associated Group, Inc.
3 Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Attention: Scott G. Bruce, Esq.
Facsimile: (610) 660-4920
and
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Attention: Kent A. Coit, Esq.
Facsimile: (617) 573-4822
(ii) if to Contributor or FirstMark:
Lynn Forester
c/o FirstMark Holdings, Inc.
527 Madison Avenue
New York, New York 10022
and
Lynn Forester
1185 Park Avenue
Apartment 14B
New York, New York 10128
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, Esq.
Facsimile: (212) 859-4000
<PAGE> 44
and
Starr & Company
350 Park Avenue
New York, New York 10022
Attention: Kenneth Starr
Facsimile: (212) 759-6694
Notices shall be deemed delivered when received; provided that any notice
delivered after business hours or on a Saturday, Sunday or legal holiday at the
place of such delivery shall be deemed for purposes of computing any time period
hereunder to have been delivered on the next business day in such place of
delivery. Nothing in this Section 11(i) shall be deemed to constitute consent to
the manner and address for service of process in connection with any legal
proceeding (including litigation arising out of or in connection with this
Agreement), which service shall be effected as required by applicable law.
(j) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York,
without reference to its conflicts of law principles.
(k) Counterparts. This Agreement may be signed in counterparts,
each of which shall be deemed an original but which together shall constitute
one and the same instrument.
(l) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereof on the date first above written.
ASSOCIATED COMMUNICATIONS, L.L.C.
By: /s/ Alex J. Mandl
-----------------------------------
Name: Alex J. Mandl
Title: Chairman & CEO
FIRSTMARK COMMUNICATIONS, INC.
<PAGE> 45
By: /s/ Lynn Forester
----------------------------------
Name: Lynn Forester
Title:President and Chief Executive Officer
/s/ Lynn Forester
----------------------------------
Lynn Forester
Signed and agreed upon, as to
Sections 8(h) and 8(i) only.
MICROWAVE SERVICES, INC.
By: /s/ William H. Berkman
-------------------------------
Name: William H. Berkman
Title: President
DIGITAL SERVICES CORPORATION
By: /s/ Rajendra Singh
-------------------------------
Name: Rajendra Singh
Title: President
<PAGE> 1
EXHIBIT 4
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 19th day of August 1996, to be effective
September 1, 1996 (the "Effective Date"), between Associated Communications,
L.L.C. (formerly DMT, L.L.C.), a Delaware limited liability company (the
"Company"), and Alex J. Mandl (the "Executive"), and, as to the last sentence of
Section 4(d)(I) and Sections 4(d)(II), 4(d)(III), 4(f), 8(a)(ii), 10(c) and 14
hereof only, Microwave Services, Inc., a Delaware corporation ("MSI"), and
Digital Services Corporation, a Virginia corporation ("DSC", and collectively
with MSI, the "Original Shareholders").
The Board of Directors of the Company (the "Board") desires to provide
for the employment of the Executive as a member of the Company's management. The
Executive is willing to commit himself to serve the Company, on the terms and
conditions herein provided.
In order to effect the foregoing, the Company and the Executive wish to
enter into an employment agreement on the terms and conditions set forth below.
Accordingly, in consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein.
2. Term. The Company hereby employs the Executive, and the Executive
hereby accepts such employment, for the period commencing on the Effective Date
and ending on the sixth anniversary of the Effective Date, unless further
extended as provided in this Section 2 or sooner terminated in the event that
Executive's employment is terminated pursuant to Section 6 hereof (the "Term of
Employment"). On the sixth and each subsequent anniversary of the Effective
Date, the Term of Employment ---- shall automatically be extended for an
additional year unless, not later than 180 days prior to any such anniversary,
the Company or the Executive shall have given notice not to extend the Term of
Employment.
3. Position and Duties. Commencing on the Effective Date and continuing
for the remainder of the Term of Employment, the Executive shall
<PAGE> 2
be employed as Chairman of the Board and Chief Executive Officer of the Company.
He shall have such authorities, duties and responsibilities customarily assigned
to a Chairman of the Board and Chief Executive Officer of an enterprise like the
company (including those associated with a public company if the Company becomes
a Public Company, as such term is defined in Section 4(d)(I) below). The
Executive shall be assigned no duties or responsibilities that are materially
inconsistent with, or that materially impair his ability to discharge, the
foregoing duties and responsibilities. He shall report solely and directly to
the Board. Upon any termination of the Executive's employment with the Company,
the Executive shall resign from the Board. The Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Company; provided, however, that the Executive may also (a) serve on the
boards of directors or trustees of the business enterprises listed on Exhibit A
hereof, as well as any others to which the Board gives its written consent,
which shall not be unreasonably withheld, (b) serve on the boards of directors
or trustees of trade associations and/or charitable organizations or engage in
charitable activities and community affairs, and (c) manage his personal
investments and affairs, provided that such activities do not interfere with the
proper performance of his duties and responsibilities under this Agreement.
4. Compensation and Related Matters.
(a) Salary. The Company shall pay Executive a base salary ("Base
Salary") during the period of the Executive's employment hereunder, which shall
be at an initial rate of five-hundred-thousand dollars ($500,000) per annum. The
Base Salary may be adjusted from time to time as provided in the next paragraph
and shall be paid in accordance with the Company's standard payroll procedure.
Prior to the third anniversary of the Effective Date, the Base
Salary shall be reviewed for increase effective on such third anniversary in the
discretion of the Board. Thereafter, the Base Salary shall be reviewed at least
annually for increase in the discretion of the Board. The Executive's Base
Salary may not be decreased at any time during the Term of Employment.
(b) Annual Bonus. For the Company's fiscal year in which the Term of
Employment begins, the Company shall pay the Executive an amount equal to the
product of five-hundred-thousand dollars ($500,000) multiplied by a fraction,
the numerator of which is the number of calendar days of such fiscal year during
which the Executive is employed hereunder, and the denominator of which is 366.
With respect to each of the first three full fiscal years of the Company during
the period of the Executive's employment
<PAGE> 3
hereunder, the Company shall pay the Executive an annual bonus of
five-hundred-thousand dollars ($500,000). The respective bonus amounts referred
to in the preceding sentences of this on 4(b) shall be paid within thirty (30)
days after the end of the Company's fiscal year in respect of which such bonus
amount is payable. With respect to the fourth and subsequent full fiscal years
of the Company during the period of the Executive's employment hereunder, the
Executive shall be entitled to an annual bonus in such amount and based upon
such criteria as the Board may determine in its discretion.
(c) Non-Equity-Based Annual Compensation Programs. Beginning on the
third anniversary of the Effective Date, the Executive shall participate in all
annual (but not long-term) executive compensation plans and programs of the
Company which are not equity-based at a level commensurate with his seniority
and position at the Company, provided that this Section 4(c) shall not duplicate
the amount of any benefit provided pursuant to the last sentence of Section 4(b)
hereof.
(d) Company Appreciation Rights.
(I) As of the Effective Date, the Company shall grant the Executive six
separate Company Appreciation Rights ("CARs") which will expire on the tenth
anniversary of the Effective Date and which will vest on the first through sixth
anniversaries of the Effective Date, respectively, if the Executive shall be
employed by the Company on the respective six anniversaries; provided, however,
that, if the Executive's employment shall be terminated for any reason (other
than a termination by the Company for "Cause," as defined in Section 6(c)
hereof), the CAR which would otherwise have vested on the anniversary of the
Effective Date next following the issuance of a Notice of Termination (as
defined in Section 6(e) hereof, except in the case of termination due to death
in which event the date of death shall be deemed to be the issuance of such
Notice for this purpose) in connection with such termination shall vest on the
Executive's Date of Termination (as defined in Section 6(f) hereof). Each vested
CAR will entitle the Executive to receive, as soon as practicable after its
Settlement Date (defined below) in accordance with the terms hereof, an amount
equal to three percent (3%) (subject to adjustment as described below) of the
amount by which the equity value of the Company on the Settlement Date
(calculated based on the Fair Market Value, as defined below) exceeds the
applicable Target Value, as set forth in the table below (subject to adjustment
as described below). If on a Settlement Date the Company's equity securities
which may be paid to the Executive upon settlement of a CAR are not listed and
traded on a national securities exchange or on the Nasdaq National Market (if
such equity securities are so listed and traded, the Company shall be deemed to
be a "Public Company"),
<PAGE> 4
the amount to be paid to the Executive shall be paid as soon as practicable, and
in any event within 120 days, after the Company has received notice of the final
determination of the Company's Fair Market Value made in accordance with Section
4(d)(VI) hereof. In the discretion of the Board, the amount to be paid to the
Executive may be paid in cash, equity securities of the Company, or any
combination thereof, and/or such other form of consideration as the Board may
determine in good faith; provided, that, if equity securities of the Company are
used and more than one class of equity securities is outstanding, the Executive
shall have the right to request an appraisal of the fair market value of such
equity securities in accordance with the procedures set forth in Section
4(d)(VI) hereof for determining the Fair Market Value of the Company; and
provided, further, that a form of consideration other than cash or equity
securities of the Company can be used only with the consent of the Executive,
which shall not be unreasonably withheld. If the Executive gives the Company
notice that he does not consent to payment in such form, the Company shall pay
him promptly in cash and/or equity securities of the Company. If equity
securities of the Company are paid to the Executive, all such securities shall
be of the same type as the securities owned at the time of payment by the
Original Shareholders. If the equity securities of the Company delivered to the
Executive upon the settlement of a CAR are of more than one class of security,
the number of securities of each class so delivered shall bear the same
proportionate relationship as the securities of such classes then owned by the
Original Share holders (including for purposes of this Section 4(d)(I), their
respective successors) bear to each other. If the Company becomes a Public
Company pursuant to an initial public offering (the "IPO") of equity securities
pursuant to a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or otherwise, (A) the Company will, if requested
in writing by the Executive, use its reasonable best efforts to cause to be
included in any registration statement with respect to a public offering
(including the IPO) of equity securities of the class or classes issued to the
Executive upon settlement of a CAR or issued or issuable to the Executive upon
exercise of an Option (as defined in Section 4(d)(V) below) an amount of such
equity securities so issued to and owned by, or so issuable to, the Executive,
as of the Conversion Date (as defined in Section 4(d)(V) below) (the total
number of such equity securities, subject to adjustments for splits,
combinations and the like, being referred to as the "Maximum Amount"),
proportionate to the amount of such equity securities then owned by the Original
Shareholders which are included in such registration statement (based on the
total amount of such equity securities then owned by the Original Shareholders,
and the Maximum Amount, respectively), and (B) in each of the four successive
twelve-month periods, the first of which commences on the Conversion Date and
each of the remaining three of which commences on each of the three respective
subsequent anniversaries thereof, the Company will,
<PAGE> 5
if requested in writing by the Executive (which request with respect to the
first such twelve-month period may not be made prior to six months after
consummation of the IPO), use its reasonable best efforts to promptly cause to
be registered under the Securities Act, and registered or qualified under such
state securities laws as the Executive may reasonably request (provided that the
Company shall not be required to consent to general service of process in any
jurisdiction where it is not then so subject), for public sale by the Executive
an amount of such equity securities constituting at least 25% of the difference
between the Maximum Amount and the number of such equity securities, if any,
sold by the Executive in the IPO (such difference being referred to as the
"Maximum Annual Amount"); provided that in no event will the Executive sell
publicly more than the Maximum Annual Amount in any such twelve-month period.
Such registration rights shall not be transferable to any transferee of such
equity securities (except to transferees referred to in clauses (i) and (ii) of
the last sentence of Section 4(d)(IV) or in the last sentence of Section
4(d)(V)). In addition, such registration rights shall be subject to the
Executive entering into underwriting (if applicable), indemnification, and other
customary agreements, and to the Company's right to defer (or require the
Executive to suspend sales pursuant to) any such registration if (but only for
so long as) it determines in good faith that such registration (or continued
sales) would require disclosure which would be materially adverse to the
Company's interests. The Company shall keep any registration statement filed
under clause (B) above effective for at least 90 days (increased by the number
of days, if any, that sales under any such registration statement are suspended
as provided above). If sold in the public market, shares registered pursuant to
this Section 4(d)(I) shall not be subject to the first refusal rights set forth
below in Section 4(d)(III). The Company shall bear all registration expenses
(exclusive of underwriting discounts and commissions) under this Section 4(d)(I)
and shall provide the Executive with indemnification against liabilities under
the securities laws in customary form.
CAR Vesting Target
Date Value
1 1st Anniversary $200 million
2 2nd Anniversary $250 million
3 3rd Anniversary $325 million
4 4th Anniversary $425 million
<PAGE> 6
5 5th Anniversary $500 million
6 6th Anniversary $2.75 billion
The applicable percentage (initially three percent (3%)) shall be appropriately
adjusted downward by the Board in good faith to reflect equity investments in
the Company (whether such investments are made in cash or in kind and whether
made prior to, on or after the Effective Date); provided, however, that (i) no
such adjustment shall be made in respect of up to $25 million of equity
investments in the Company to the extent such investments were or are made by
the Original Shareholders or their respective affiliates prior to one year after
the Effective Date, (ii) if equity investments in the Company in excess of $25
million up to a total of $75 million (i.e., $50 million over and above such $25
million) were or are made by the Original Shareholders or their respective
affiliates prior to one year after the Effective Date, in lieu of adjusting the
applicable percentage, the applicable Target Value of each CAR shall be adjusted
upward by the amount of such excess equity investments and (iii) if equity
investments in the Company not covered by clause (i) or (ii) above were or are
made by the Original Shareholders or their respective affiliates, the
appropriate adjustment in the applicable percentage in respect of such equity
investments shall be based on (A) the amount of such equity investment, and (B)
the Fair Market Value of the Company (determined in accordance with Section
4(d)(VI)) at the time of such equity investment. For purposes of this Section
4(d), equity investments made by the Original Shareholders or their respective
affiliates shall include (and shall be deemed made at the time of the payment or
advancement of), in addition to actual capital contributions or investments,
amounts paid by the Original Shareholders or their respective affiliates to the
Company in reimbursement of costs or expenses incurred by or on behalf of the
Company and the amount of the loan advanced by the Original Shareholders to the
Executive pursuant to Section 4(d), provided that if the "DTS Systems Transfers"
are "consummated" (with such quoted terms having the same meaning as in the
Limited Liability Company Agreement, dated as of March 5, 1996 between the
Original Shareholders (the "DMT L.L.C. Agreement")), the contribution to the
Company of "DTS Licenses" (with such quoted term having the same meaning as in
the DMT L.L.C. Agreement) pursuant thereto shall not be considered an investment
for purposes of this Section 4(d).
The applicable Target Value of each CAR shall be appropriately adjusted downward
dollar for dollar by the Board in good faith to reflect distributions from the
Company in respect of equity interests in the Company (whether such
distributions are made in cash or in kind); provided, however, that no
adjustment shall be made with respect to distributions for tax liabilities
attributable to such equity interests. For the thirty-day
<PAGE> 7
period immediately following the Company's notice to the Executive that an
additional non-cash equity investment has been made in the Company (other than a
non-cash equity investment pursuant to the DTS Systems Transfers) , or that the
Company has made a non-cash distribution in respect of equity interests in the
Company (which notice the Company agrees to provide within fifteen (15) days
following any such investment or distribution) the Executive shall have a right
to request an appraisal of the fair market value of such equity investment or
distribution in accordance with the procedures set forth in Section 4(d)(VI)
hereof. In the event the Company fails to give notice to the Executive as
provided in the preceding sentence, the thirty-day period during which the
Executive may request such appraisal shall commence on the first date, after the
end of the fifteen (15) day notice period for the Company, on which the
Executive knows of the applicable equity investment or distribution. Any
appraisal so requested shall be made only at the first subsequent Settlement
Date, unless the Company, in its discretion, decides to have the appraisal made
earlier; provided, however, that if the aggregate value of all such non-cash
equity investments or distributions, respectively, would reasonably be estimated
to exceed $50 million, the Executive may include in the foregoing request a
request for a current appraisal (including of the dilutive effect of such
investments) in which event an appraisal thereof in accordance with Section
4(d)(VI) shall be made as promptly as reasonably possible. In the case of an
equity investment in cash whereby equity interests in the Company of a different
class from the equity interests held by the Original Shareholders are issued,
the Executive may request an appraisal of the dilutive effect of such investment
on equity interests and the CARs, in which event an appraisal in accordance with
Section 4(d)(VI) shall be made as promptly as practicable. It shall be a
condition to the Executive's receipt of an Equity Interest (as defined in
Section 4(d)(II) below) that, if requested by the Company, the Executive becomes
a party to the DMT L.L.C. Agreement as then in effect, or any analogous
partnership, stockholders or other governance agreement (with respect to any
successor partnership or corporate entity) to which the Original Shareholders
(or their successors) are parties (such DMT L.L.C. Agreement or analogous
agreement being sometimes referred to as a "Company Governance Agreement"). The
Company shall give the Executive written notice of any changes (which notice
shall include the full text of such changes) which are made in the Company
Governance Agreement from time to time, such notice to be given within fifteen
(15) days following any such change. It is agreed that if the Executive becomes
a party to a Company Governance Agreement, in the event of any conflict or
inconsistency between the respective rights and obligations of the Executive,
the Company and the Original Shareholders thereunder and under this Agreement,
the provisions of this Agreement shall control.
<PAGE> 8
(II) If the Original Shareholders (including for purposes of this
Section 4(d)(II) and Section 4(d)(III), their respective successors) shall sell
to a third party any of their equity interests in the Company at a time (whether
or not during the Term of Employment) when the Executive holds vested CARs or
owns any equity interest in the Company as a result of the settlement of any CAR
or otherwise (an "Equity Interest"):
(A) The Original Shareholders shall require the purchaser of
their equity interests to purchase, at the Executive's election, the same
percentage of the aggregate of the Executive's vested CARs (treating such vested
CARs as if the date of purchase were a Settlement Date and the vested CARs had
been converted into an Equity Interest as provided in Section 4(d)(I) above
immediately prior to such purchase) and Equity Interest as the percentage of the
aggregate equity interests of the Original Shareholders which is being
purchased; the purchase from the Executive shall be made on the same terms and
for the same consideration as the purchase from the Original Shareholders; and
(B) The Original Shareholders, at their election, may require the
purchaser of their equity interests to purchase, and the Executive to sell, the
same percentage of the aggregate of the Executive's vested CARs (treating such
vested CARs as if the date of purchase were a Settlement Date and the vested
CARs had been converted into an Equity Interest as provided in Section 4(d)(I)
immediately prior to such purchase) and Equity Interest as the percentage of the
aggregate equity interests of the Original Shareholders which is being
purchased; the Original Shareholders, in their discretion, may direct the
Company to vest part or all of the Executive's unvested CARs immediately prior
to such date of purchase; any purchase from the Executive shall be made on the
same terms and for the same consideration as the purchase from the Original
Shareholders.
(III) Upon the terms and subject to the conditions of this
Section 4(d)(III), the Executive grants the Original Shareholders a right of
first refusal with respect to any sale or other disposition for value by the
Executive (a "Transfer") of any Equity Interest.
(i) If the Executive desires to effect a Transfer of some
or all of his Equity Interest pursuant to a bona fide offer (an "Offer") from
any person or entity (an "Offeror"), the Executive shall give written notice of
such Offer (a "First Refusal Notice") to each of the Original Shareholders. The
First Refusal Notice shall specify the number or amount of securities comprising
the Equity Interest proposed to be transferred pursuant to such Offer (the
"First Refusal Interest"), the price proposed to be paid by the Offeror (the
"Offer Price"), the identity of the Offeror and the other terms and conditions
of such Offer, and shall be accompanied by a true and
<PAGE> 9
correct copy of the Offer. If any part of the consideration proposed in the
Offer consists of other than cash, the price proposed to be paid pursuant to
such Offer shall be deemed to include the fair market value of such non-cash
consideration, as determined in good faith by the Board. If the Executive
objects to the fair market value, as so determined, the Executive may require
that the Company obtain a determination of the fair market value of such
non-cash consideration pursuant to the procedures set forth in Section 4(d)(VI)
hereof for determining the fair market value of the Company, and such
determination shall be final and binding on all parties.
(ii) Each Original Shareholder shall have the option to
purchase the First Refusal Interest at the Offer Price and on such other terms
as are set forth in the Offer, by giving notice to the Executive within thirty
(30) days of receipt by such Original Shareholder of the First Refusal Notice
(an Original Shareholder which gives such notice being referred to as an
"Accepting Original Shareholder"), and by purchasing such First Refusal Interest
for the Offer Price in cash, against delivery of the First Refusal Interest
(with appropriate transfer documentation) free and clear of any liens or
encumbrances within fifteen (15) days following the expiration of such thirty
(30) day period; provided, however, that if Accepting Original Shareholders
elect in the aggregate to purchase more than 100% of the First Refusal Interest,
then the portion of the First Refusal Interest which may be purchased by any
Accepting Original Shareholder that has elected to purchase more than such
Accepting Original Shareholder's Pro Rata Share (as defined below) of the First
Refusal Interest shall be reduced (based on each such Accepting Original
Shareholder's Pro Rata Share), but not below such Accepting Original
Shareholder's Pro Rata Share; and provided, further, that the date for such
purchase may be deferred solely to the extent necessary to obtain any
governmental consents or approvals required to complete such purchase or, if
applicable, to the extent necessary to complete the determination of the fair
market value of any non-cash consideration proposed to be paid by the Offeror,
as provided in subparagraph (i) above. For purposes of this paragraph (ii) of
this Section 4(d)(III), an Accepting Original Shareholder's "Pro Rata Share"
shall be the percentage which such Accepting Original Shareholder's ownership
interest in the Company represents of the ownership interest in the Company of
all Accepting Original Shareholders.
(iii) If the Original Shareholders do not give timely notice
of their election to purchase the entire First Refusal Interest, or if such
notice is timely given but the Accepting Original Shareholders fail to purchase
the entire First Refusal Interest within the applicable time period specified in
this Section 4(d)(III), then the Executive may, within the 90-day period
immediately following the expiration of the period during which the Original
Shareholders may give notice of such election, or, if
<PAGE> 10
applicable, within the 90-day period immediately following such failure to
purchase the entire First Refusal Interest, transfer the First Refusal Interest
to the Offeror at a price not less than the Offer Price and on the same terms
and subject to the same conditions as were set forth in the First Refusal
Notice. If the Executive does not complete such Transfer within such 90-day
period, no subsequent Transfer of all or any part of his Equity Interest may be
made without again complying with this Section 4(d)(III), it being understood
and agreed that the retention by the Executive of a security interest in some or
part of the First Refusal Interest which is transferred shall not mean that such
Transfer has not been completed.
(iv) If the Executive fails to comply with this Section
4(d)(III) with respect to all or any part of his Equity Interest (including
without limitation any beneficial interest therein), any attempted or purported
Transfer thereof shall be void and of no force or effect.
(IV) Upon any termination of Executive's employment, the
Executive's CARs which have not vested on or before the Date of Termination
shall be forfeited. No Settlement Date shall occur with respect to forfeited
CARs. Except to the extent provided in Section 4(d)(II) hereof, CARs held by the
Executive (whether vested or not) can be transferred (i) during his lifetime
only by gratuitous transfers to immediate family members or to trusts for their
benefit, and (ii) upon his death by his will or the laws of descent and
distribution.
(V) Except to the extent previously settled pursuant to Section
4(d)(II) hereof, the Settlement Date of each vested CAR shall occur, at the
Executive's election, at any time after its vesting and before the tenth
anniversary of the Effective Date, even if the Term of Employment shall have
already ended. Notwithstanding the foregoing, if any vested CAR shall still be
outstanding on the tenth anniversary of the Effective Date, such anniversary
shall be its Settlement Date (and it shall automatically be settled and thereby
expire). If the Company becomes a Public Company, the Board shall effect as
promptly as practicable the conversion (the "Conversion") of each outstanding
CAR (whether or not vested) into a stock option ("Option"), effective as of the
date the Company becomes a Public Company (such date being referred to as the
"Conversion Date"), having the same vesting schedule, vesting rights (including
upon termination of employment) and term as the CAR being converted, commencing
with the Effective Date. In converting the CARs into Options, the Board shall
proceed in good faith and on an equitable basis so as to preserve the value and
economic opportunities previously represented by the CARs. If on the Conversion
Date there are outstanding equity interests of the Company of a different class
than the shares of common stock for which, as a result of
<PAGE> 11
the Conversion, the Options will be exercisable, the terms of the Conversion as
determined by the Board shall be subject to review, at the Executive's request,
in accordance with the procedures described in Section 4(d)(VI), including,
without limitation, determination of the exercise price and the number of shares
subject to the Options. Each Option shall be exercisable for shares of a class
of common stock of the Company that is listed on a national securities exchange
or on the Nasdaq National Market. Pursuant to the Conversion, each CAR shall
become an Option to acquire shares having an aggregate value (valued at the
average closing price of a share over the first twenty (20) days of public
trading of such class of shares commencing on the Conversion Date or, if, in
accordance with Section 4(d)(I), the Executive is selling shares in the IPO
whereby the Company becomes a Public Company, valued at the price per share to
the public of such shares in the IPO (the "Share Value")) equal to the product
of multiplying (1) the equity value of the Company on the Conversion Date,
which, unless on the Conversion Date there are outstanding equity interests of
the Company of a different class than the shares of common stock for which, as a
result of the Conversion, the Options will be exercisable, shall be the Share
Value times the number of outstanding shares of common stock of the Company as
of the Conversion Date (and in any event the determination of such equity value
shall take the Share Value into account) by (2) the applicable percentage for
the CAR as set forth in Section 4(d)(I), as adjusted in accordance with that
Section (the "CAR Percentage"). Such Option shall have an aggregate exercise
price equal to the product of multiplying (1) the Target Value of the CAR, as
adjusted if applicable, on the Conversion Date by (2) the CAR Percentage. Such
Option shall provide that in the event that any dividend or other distribution
(whether in the form of cash, stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution, or other
similar corporate transaction or event occurs that affects the stock subject to
the Option so that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of the Option holder, then the Option shall, in such
manner as is equitable, be adjusted as to any or all of (i) the number and kind
of shares of stock which may thereafter be issued in connection with the Option
and (ii) the exercise price of the Option. Any dispute arising under the prior
sentence shall be resolved in accordance with the procedures described in
Section 15. Each Option (when otherwise exercisable) may be exercised in full,
or in part, at the Executive's election. Any part of the exercise price of any
Option may, at the Executive's election, be paid through the withholding of
shares subject to the Option with a value equal to the portion of the exercise
price to be paid in shares. In addition, any part of the exercise price of any
Option and any related tax withholding amount may, at the Executive's election,
be paid through a cashless exercise procedure that affords the Executive the
<PAGE> 12
opportunity to sell immediately some or all of the shares underlying the
exercised portion of the Option in order to generate sufficient cash to pay the
Option exercise price and/or to satisfy tax withholding obligations relating to
the Option (and if such tax withholding obligations are not satisfied through
such cash, the Executive shall, as a condition of such exercise, pay to the
Company, or make arrangements satisfactory to the Company for the payment of,
the full amount of such tax withholding obligations), provided that such
cashless exercise procedure shall be available only if at the time of such
exercise the shares subject to the Option being exercised are freely
transferable without restriction under the Securities Act, state securities or
"blue sky" laws or otherwise. Any Option held by the Executive (whether vested
or not) may be transferred (1) during his lifetime only by gratuitous transfers
to immediate family members or to trusts for their benefit, and (2) upon his
death by his will or the laws of descent and distribution.
(VI) For purposes of this Agreement, except as otherwise expressly
provided in this Agreement, (A) the "Fair Market Value" of the Company on any
Settlement Date on which the Company is not a Public Company (or on any other
date for which a valuation of the Company is required by this Agreement), (B)
the fair market value of any non-cash consideration or property the value of
which is to be determined under this Section 4(d) (including, if required by
Section 4(d)(V), the terms of the Conversion) and (C) if required by Section
4(d)(V), the dilutive effect of any equity investments or distributions on
equity, shall be determined in accordance with the following procedure: The
Executive and the Company shall each select a nationally recognized appraiser,
which shall determine the valuation or other issue in question. If, in the case
of a valuation issue, the higher of the two original appraisal values is not
more than ten percent (10%) above the lower appraisal value, the value in
question shall be the value agreed upon by the two original appraisers or, in
the absence of such an agreement, the value in question shall be the average of
the two original appraisal values. If, in the case of a valuation issue, the
higher of the two original appraisal values is more than ten percent (10%) above
the lower appraisal value, the two appraisers shall select a third nationally
recognized appraiser who shall determine a value which shall be at least equal
to the lower appraisal value and whose determination of the value in question
shall be final and binding on all parties. In the case of any other issue, if
either appraiser concludes that the two appraisers are not in substantial
agreement, the two appraisers shall select a third nationally recognized
appraiser who shall resolve the remaining differences and whose determination
shall be final and binding on all parties. All costs and expenses relating to
any appraisal or review conducted under this Section 4(d)(VI) shall be borne by
the Company.
<PAGE> 13
(VII) For purposes of this Section 4(d), equity securities of the
Company which are identical except for voting rights shall not be deemed to be
equity securities of different classes.
(e) Special Payment. During the Term of Employment, the Company shall
make no distributions to its members (other than for tax liabilities
attributable to their interests in the Company) until the fifth anniversary of
the Effective Date unless the Company first makes a payment to the Executive in
the amount of five million dollars ($5,000,000). Promptly upon the fifth
anniversary of the Effective Date, if the Executive has not previously received
a payment of five million dollars ($5,000,000) pursuant to either the
immediately preceding sentence or clause (iii) of Section 8(a) hereof, the
Company shall pay the Executive the following amount, and the Executive shall
have no further rights under this Section 4(e):
(i) If the Executive is employed hereunder on such fifth
anniversary of the Effective Date, the amount of five million dollars
($5,000,000);
(ii) If the Executive's employment has been terminated by the
Company for Cause prior to such fifth anniversary, an amount equal to one
million dollars ($1,000,000) for each completed year of employment hereunder;
(iii) If the Executive's employment has been terminated by the
Executive without Good Reason prior to such fifth anniversary, an amount equal
to eighty-three thousand three hundred and thirty-three dollars ($83,333) for
each completed month of employment hereunder; and
(iv) If the Executive's employment has been terminated for any
other reason prior to such fifth anniversary, the amount of five million dollars
($5,000,000).
Any payment made pursuant to this Section 4(e) shall not be offset by any
payment received, or to be received, by the Executive pursuant to any other
provision of this Agreement.
(f) Recourse Loan. As of the Effective Date, the Original Shareholders
shall loan the Executive (in proportion to their respective equity interests in
the Company) the aggregate amount of fifteen million dollars ($15,000,000). The
Executive shall be personally liable, subject to the terms of this Agreement,
for the repayment of such loans, which shall become due and payable in full on
the fifth anniversary of the Effective Date. Interest shall accrue on such loans
at the "Applicable Federal Rate", determined in accordance with section 1274(d)
of the Internal Revenue Code
<PAGE> 14
of 1986, as amended from time to time (the "Code"). On each of the first two
anniversaries of the Effective Date, if, and only if, the Executive shall be
employed by the Company on such anniversary date, all interest then accrued on
such loans and one-fifth (1/5) of the principal amount of such loans shall
automatically be forgiven. Upon any termination of the Executive's employment
for Cause prior to the fifth anniversary of the Effective Date, the entire
outstanding principal balance of such loans and all accrued interest thereon
shall become due and payable immediately. Upon the earlier to occur of the fifth
anniversary of the Effective Date (if, and only if the Executive shall be
employed by the Company on such date) or any termination of the Executive's
employment prior to the fifth anniversary of the Effective Date by the Company
(other than for Cause), by the Executive for Good Reason (as defined in Section
6(d)(i) hereof), or by reason of the Executive's death or Disability, the entire
outstanding principal balance of such loans and the accrued interest thereon
shall automatically be forgiven. If the Executive's employment is terminated by
the Executive prior to the fifth anniversary of the Effective Date (other than
for Good Reason or by reason of his death or Disability), forgiveness of
outstanding principal and accrued interest of such loans (beyond amounts
required to be forgiven pursuant to the fourth sentence of this Section 4(f))
shall not occur, and the remaining principal and accrued interest of such loans
shall immediately become due and payable. On September 3, 1996, the Executive
shall execute promissory notes evidencing such loans substantially in the forms
attached hereto as Exhibits B-1 and B-2, respectively. The parties acknowledge
that such promissory notes may be assigned by the Original Shareholders to the
Company, in which case the rights and obligations under such notes shall inure
to the benefit of and be binding upon, and shall be enforceable by, the Company;
provided that no such assignment shall occur prior to the earlier of (i) the
second anniversary of the Effective Date and (ii) the Company having raised an
aggregate of $150 million of equity or debt financing.
(g) Non-Equity-Based Benefit Plans. The Executive shall be entitled to
participate in or receive benefits under any "employee benefit plan" (as
currently defined in section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) or employee benefit arrangement which is not
equity-based and is made available by the Company from time to time during the
period of the Executive's employment hereunder to its executives and key
management employees, on terms and conditions commensurate with his position at
the Company, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements; provided, however, that
there shall be no duplication of the benefits or compensation elements created
by this Agreement; and provided, specifically, without limitation, that there
shall be no duplication of amounts paid in respect of the annual bonuses and
<PAGE> 15
annual bonus opportunities provided by Sections 4(b) and 4(c) hereof.
(h) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable and customary expenses incurred by the
Executive in performing services hereunder during the Term of Employment,
including all expenses of travel and living expenses while away from home on
business or at the request of and in the service of the Company, provided that
such expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company. The Executive shall be entitled to
receive prompt reimbursement for his reasonable legal and public relations
expenses incurred in connection with the execution of this Agreement.
(i) Place of Employment; Services Furnished. The Executive shall be
based in the Company's principal executive offices, currently located in the
Washington, D.C. area, except for reasonable required travel on Company
business. The Company shall furnish the Executive with appropriate office space
and such other facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties as set forth in Section
3 hereof. If the Company's principal executive offices shall be moved out of the
Washington, D.C. area, the Company shall promptly reimburse the Executive for
the reasonable costs of relocating his family, and principal residence, to the
new location of such offices.
5. Offices. At the reasonable request of the Company, the
Executive agrees to serve without additional compensation as a director of
any of the Company's subsidiaries and in one or more executive offices of
any of the Company's subsidiaries or affiliates.
6. Termination.
(a) Death. The Executive's employment hereunder shall terminate
upon his death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness (as determined by a medical doctor chosen by the
Company and reasonably satisfactory to the Executive or his legal
representative), the Executive shall have been absent from his duties hereunder
on a full-time basis for the entire period of one-hundred-eighty (180)
consecutive days, the Executive's employment hereunder shall be terminated for
Disability.
(c) Cause. The Company may terminate the Executive's employment
hereunder for "Cause". For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder if (i) the
<PAGE> 16
Executive is convicted of a felony; or (ii) the Executive engages in conduct
that constitutes willful gross neglect or willful gross misconduct in carrying
out his duties under this Agreement, resulting, in either case, in material harm
to the Company, monetarily or otherwise, unless the Executive reasonably
believed in good faith that such act or non-act was in (or not opposed to) the
best interests of the Company). Unless the Executive has been convicted of a
felony, no termination for Cause shall take effect unless the following
provisions of this paragraph shall have been complied with. The Board shall give
the Executive written notice of its intention to terminate him for Cause, such
notice (i) to state in detail the particular circumstances that constitute the
grounds on which the proposed termination for Cause is based and (ii) to be
given within four (4) months of the Board learning of such circumstances. The
Executive shall have ten (10) days, after receiving such special notice, to cure
such grounds, to the extent such cure is possible. If he fails to cure such
grounds to the Board's satisfaction, the Executive shall then be entitled to a
hearing by the Board, during which he may, at his election, be represented by
counsel. Such hearing shall be held within thirty (30) days of his receiving
such special notice, provided he requests a hearing within fifteen (15) days of
receiving the notice. If the Board gives written notice to the Executive within
five (5) days following such hearing confirming that, in the good faith judgment
of a majority of the Board, Cause for terminating him on the basis set forth in
the original notice exists, he shall thereupon be terminated for Cause.
(d) Termination by the Executive.
(i) The Executive may terminate his employment hereunder for "Good
Reason", which, for purposes of this Agreement, shall mean any failure by the
Company or the Original Shareholders to comply with any material provision of
this Agreement required by the terms hereof to be complied with by such entity
(including, without limitation, any breach of any of the Company's obligations
under Sections 3, 4(a), 4(b), 4(c), 4(d), 4(e), 4(f), 8(a), 9 or 15) that has
not been cured within twenty (20) days after written notice of such
noncompliance (specifying in reasonable detail the particulars of such
noncompliance) has been given by the Executive to the Company.
(ii) The Executive may terminate his employment hereunder without
Good Reason, upon giving four months notice to the Company (which notice period
shall end earlier if the Company's designated successor to the Executive
commences employment with the Company before the end of such period).
(e) Notice of Termination. Any termination of the Executive's
<PAGE> 17
employment by the Company or by the Executive (other than termination pursuant
to Section 6(a) hereof) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 17 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated, except that in the case of a termination by the Company
without Cause, or a termination by the Executive without Good Reason, the Notice
may merely state that Cause/Good Reason for termination is not claimed.
(f) Date of Termination. "Date of Termination" shall mean the
following: (i) if the Executive's employment is terminated by his death, the
date of his death; (ii) if the Executive's employment is terminated pursuant to
Section 6(b) hereof, thirty (30) days after the Notice of Termination is given;
(iii) if the Executive's employment is terminated pursuant to Section 6(c)
hereof, the date specified in the Notice of Termination; (iv) if the Executive's
employment is terminated pursuant to Section 6(d)(i) hereof, thirty (30) days
after the Notice of Termination is given; (v) if the Executive's employment is
terminated pursuant to Section 6(d)(ii) hereof, the date determined in
accordance with said Section; and (vi) if the Executive's employment is
terminated by the Company without Cause, thirty (30) days after the Notice of
Termination is given. Notwithstanding the immediately preceding sentence, if
within thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party in good faith that
a dispute exists concerning the termination, the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual written
agreement of the parties or by a binding and final arbitration award. Anything
herein to the contrary notwithstanding, if the Executive gives Notice of
Termination on the basis of Good Reason, his absence from employment after the
30th day following such notice shall not constitute a basis for termination for
Cause.
7. Compensation Upon Termination or During Disability.
(a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his Base Salary
at the rate and frequency then in effect for such period and all other
compensation and benefits provided herein until his employment is terminated
pursuant to Section 6(b) hereof, provided that payments so made to the Executive
shall be reduced by the sum of the amounts, if any, payable to the Executive at
or prior to the time of any such payment under
<PAGE> 18
disability benefit plans of the Company or under the Social Security disability
insurance program, and which amounts were not previously applied to reduce any
such payment.
(b) If the Executive's employment is terminated (i) by his death, (ii)
for Disability under Section 6(b) hereof, (iii) by the Company for Cause under
Section 6(c) hereof, or (iv) by the Executive without Good Reason, the Company
shall promptly pay the Executive (or the Executive's legal representative in
accordance with Section 15(b) hereof) his (A) Base Salary through the Date of
Termination at the rate in effect on the Date of Termination (plus, in the case
of termination due to death, Base Salary at that rate through the ninetieth
(90th) day after the date of death); (B) any amounts due the Executive through
the Date of Termination pursuant to Section 4 hereof, provided that the
Company's post-termination obligations with respect to CARs shall be as provided
pursuant to Section 4(d) hereof; and (C) any other or additional benefits to be
provided in accordance with pertinent plans, programs, or obligations of the
Company.
(c) If (A) the Company shall terminate the Executive's employment
(other than for Cause), (B) the Executive shall terminate his employment for
Good Reason or (C) the Executive's employment shall be terminated for
Disability, then, subject to the Executive's continuing compliance with Section
12 hereof (provided that the Company's post-termination obligations with respect
to CARs, which are provided for in Section 4(d) hereof, shall not be subject to
such compliance),
(i) the Company shall promptly pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, any previously awarded but unpaid bonus for any fiscal
year completed prior to the Date of Termination, all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of Termination under this
Agreement or any compensation plan or program of the Company, at the time such
payments are due, and a pro-rata bonus for the year of termination based on his
prior year's bonus award (or, if the Date of Termination shall occur prior to
the end of the first full fiscal year of the Company during the Term of
Employment, based on an annual bonus of five-hundred thousand dollars
($500,000));
(ii) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, the Company shall
pay as severance to the Executive an amount (the "Severance Amount") equal to
two (2) times the sum of (A) the Executive's annual Base Salary rate in effect
as of the Date of Termination (or, if the termination is for Good Reason based
on a reduction in Base Salary, then the rate shall be the rate in effect
immediately prior to such reduction), plus (B) if the Date
<PAGE> 19
of Termination occurs on or before December 31, 1999, a deemed annual bonus of
five-hundred-thousand dollars ($500,000); the Severance Amount shall be paid in
substantially equal installments and in the same manner and over the same period
of time as the Executive's salary payments would have been made, except that if
the Date of Termination occurs within the two-year period immediately following
a "Change in Control" (as defined in Section 8 hereof) the Severance Amount
shall be paid in a single lump sum payment within the ten-day period immediately
following such Date of Termination;
(iii) the Company shall maintain in full force and effect, for the
continued benefit of the Executive for two years, each "employee welfare benefit
plan" (as defined in section 3(1) of ERISA) in which the Executive was entitled
to participate immediately prior to the Date of Termination (with no reduction
in benefits), provided that the Executive's continued participation is possible
under the general terms and provisions of such plans. In the event that the
Executive's participation in any such plan is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive would otherwise have been entitled to receive under the plan from
which his continued participation is barred (with no reduction in benefits); and
(iv) the Company shall promptly pay to the Executive (A) any other
amounts due and owing to the Executive under Section 4 of this Agreement and (B)
any other or additional benefits to be provided in accordance with pertinent
plans, programs and obligations of the Company.
(d) After completing the payments and providing the benefits required
by this Section 7 and Section 4 hereof, the Company shall have no further
obligations to the Executive under this Agreement except as expressly set forth
in Sections 9, 10, 14 and 15 hereof. Any amounts due under this Section 7 and
Section 4 hereof are in the nature of compensation or severance payments
considered to be reasonable by the Company and are not in the nature of a
penalty.
8. Change in Control of the Company.
(a) Notwithstanding any other provision of this Agreement, if a "Change
in Control" (as defined in Section 8(b) hereof) shall occur while the Executive
is employed by the Company hereunder, (i) all of the Executive's outstanding
CARs shall immediately vest, (ii) the principal balance remaining of the loans
to the Executive pursuant to Section 4(f) hereof (and all accrued interest
thereon) shall automatically be forgiven, and (iii) if the Company has not
previously made a payment in full to the Executive pursuant to Section 4(e)
hereof, the Company shall immediately pay the Executive the sum of five million
dollars ($5,000,000) less any
<PAGE> 20
amounts previously paid the Executive pursuant to Section 4(e), in complete
settlement of the Executive's rights pursuant to such Section 4(e).
(b) For purposes of this Agreement, a Change in Control shall occur if
(i) any person or entity, or group of affiliated persons or entities, other than
the Original Shareholders and/or their respective affiliates (for this purpose,
the Executive shall be deemed to be an affiliate of the Original Shareholders),
acquires membership interests, stock or other equity interests of the Company
representing more than 50% of the voting power of all such outstanding
membership interests, stock or other equity interests, (ii) the majority of the
Board (or comparable governing group) consists of persons who are designees of
any person or entity or group of affiliated persons or entities which hold
membership interests, stock or other equity interests in the Company, other than
the Original Shareholders and/or their respective affiliates (for this purpose
the Executive shall be deemed a designee of the Original Shareholders), (iii)
the Company adopts a plan of liquidation providing for the distribution of all
or substantially all of its assets, or (iv) all or substantially all of the
business enterprise of the Company is disposed of pursuant to a sale of assets
transaction or a merger, consolidation or similar transaction in which the
Company is not the surviving entity (unless (A) no person or entity, or group of
affiliated persons or entities, other than the Original Shareholders and/or
their respective affiliates (for this purpose, the Executive shall be deemed to
be an affiliate of the Original Shareholders) owns immediately after such
transaction membership interests, stock or other equity interests of the entity
which succeeds to the business of the Company as a result of such transaction
representing more than 50% of the voting power of all such outstanding
membership interests, stock or other equity interests, (B) a majority of the
board of directors (or comparable governing body) of the entity which succeeds
to the business of the Company as a result of such transaction consists of
persons (or persons designated by such persons) who constituted a majority of
the Board of the Company immediately prior to such transaction, and (C) such
successor entity assumes in writing the Company's obligations hereunder and,
with respect to the CARs, agrees in writing to substitute for the CARs on an
equitable basis equity-based awards having the same vesting schedule as the
CARs, the same period of time during which the Executive can exercise a right
equivalent to the settlement right associated with the CARs and otherwise
providing substantially equivalent economic opportunity to that afforded by the
CARs determined, if the Executive requests, as provided in Section 4(d)(VI) (it
being understood and agreed that if the common stock of such successor entity is
listed and traded on a national securities exchange or the Nasdaq National
Market, such substitution will be effected through the conversion of the CARs
into stock options for the purchase of such common stock, or
<PAGE> 21
other equity based awards of such entity having the same economic value, in the
manner described in Section 4(d)(V)). For purposes of this Agreement,
"affiliate" (or derivations thereof, i.e., "affiliated") of any person or entity
means any other person or entity directly or indirectly controlling or
controlled by or under direct or indirect common control with such person or
entity; and for purposes of such definition, "control" when used with respect to
any person or entity means the power to direct the management and policies of
such person or entity, directly or indirectly, whether through the ownership of
voting securities or other equity interests, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
9. Gross-Up Payment. In the event that the aggregate of any payments or
benefits made or provided to the Executive under this Agreement (other than any
payment pursuant to this Section 9) and under any other plans, programs or
arrangements of the Company (the "Aggregate Payment") is determined to
constitute a Parachute Payment, as such term is defined in Section 280G(b)(2) of
the Code, or any successor provision, then, subject to the last sentence of this
Section 9, the Company shall pay to the Executive, prior to the time any excise
tax imposed by Section 4999 of the Code, or any successor provision ("Excise
Tax"), is payable with respect to such Aggregate Payment, an additional amount
which, after the imposition of all income and excise taxes thereon, is equal to
the Excise Tax on the Aggregate Payment. The determination of whether an
Aggregate Payment constitutes a Parachute Payment and, if so, the amount to be
paid to the Executive and the time of payment shall be made by an independent
Tax Auditor (the "Tax Auditor") jointly selected by the Company and the
Executive and paid by the Company. The Tax Auditor shall be a nationally
recognized United States public accounting firm that has not, during the two
years preceding the date of its selection, acted in any way on behalf of the
Company or any affiliate thereof. If the Executive and the Company cannot agree
on a firm to serve as the Tax Auditor, then the Executive and the Company shall
each select one nationally recognized United States accounting firm and those
two firms shall jointly select the accounting firm to serve as the Tax Auditor.
Notwithstanding the foregoing (but subject to the last sentence of this Section
9), in the event that the amount of the Executive's Excise Tax liability is
subsequently determined to be greater than the Excise Tax liability with respect
to which an initial payment to the Executive under this Section 9 has been made,
the Company shall pay to the Executive an additional amount with respect to such
additional Excise Tax (and any interest and penalties thereon) at the time that
the amount of the actual Excise Tax liability is finally determined, such
additional amount to be calculated in the same manner as such initial payment.
The Executive and the Company shall cooperate with each other in connection with
any proceeding or claim relating to the
<PAGE> 22
existence or amount of liability for Excise Tax, and all expenses relating to
any such proceeding or claim (including all reasonable attorney's fees and other
expenses incurred by the Executive in connection therewith) shall be paid by the
Company promptly upon written demand by the Executive. Notwithstanding any of
the foregoing provisions of this Section 9, the aggregate amounts payable to the
Executive pursuant to this Section 9 with respect to the Excise Tax liability
(exclusive of the aforesaid expenses incurred by the Executive in connection
therewith) shall not exceed one million dollars ($1,000,000).
10. Indemnification.
(a) The Company agrees that (i) if the Executive is made a party, or is
threatened to be made a party, to any proceeding, by reason of the fact that he
is or was a director, officer, employee or agent of the Company or is or was
serving at the request of the Company as a director, officer, member, employee
or agent of another corporation, partnership, joint venture, trust, person or
other entity, including service with respect to employee benefit plans, whether
or not the basis of such proceeding is the Executive's alleged action in an
official capacity while serving as a director, officer, member, employee or
agent, or (ii) if any claim, demand, request, threat, or request for
information, documents or testimony (collectively, "Claim") is made, or is
threatened to be made, that arises out of or relates to the Executive's service
in any of the foregoing capacities, then the Executive shall promptly be
indemnified and held harmless by the Company to the fullest extent permitted or
authorized by the Company's limited liability company agreement, certificate of
incorporation, bylaws, or other corporate governance documents or, if greater,
by the laws of the State of Delaware, against any and all costs, expenses,
liabilities and losses (including, without limitation, reasonable attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
he has ceased to be a director, member, employee or agent of the Company or
other person or entity, and shall inure to the benefit of the Executive's heirs,
beneficiaries, executors, administrators and other representatives and
successors. The Company shall pay all reasonable out-of-pocket costs and
expenses incurred by the Executive in connection with any such proceeding or
Claim within fifteen (15) days of receiving written notice requesting such
payment and providing evidence reasonably satisfactory to the Company of the
Executive's incurrence of such costs and expenses. Such notice shall include an
undertaking by the Executive to repay the amount of such payment if he is
ultimately determined not to be entitled to indemnification against such costs
or expenses. Notwithstanding the foregoing provisions of this Section
<PAGE> 23
10(a), the Company shall not indemnify and hold harmless the Executive, and
shall not pay any costs or expenses incurred by the Executive, in connection
with any action, suit or proceeding by the Executive against the Company or any
of its directors, officers, subsidiaries or affiliates; provided that this
sentence shall not affect the Executive's right to indemnification and payment
of costs and expenses if the Company is made a party to a third party action,
suit or proceeding against the Executive, but no such right to indemnification
or payment shall apply with respect to any claim (other than a claim for
indemnification under this Section 10(a) to which the Executive is otherwise
entitled), counterclaim or cross-claim by the Executive against the Company or
any of its directors, officers, subsidiaries or affiliates.
(b) Neither (i) the failure of the Company (including its Board,
independent legal counsel or stockholders) to have made a determination, in
connection with any request for payment or reimbursement under Section 10(a),
that the Executive has satisfied any applicable standard of conduct, nor (ii) a
determination by the Company (including its Board, independent legal counsel or
stockholders) that the Executive has not satisfied any applicable standard of
conduct, shall create a presumption that the Executive has not met an applicable
standard of conduct.
(c) Until such time as the Company shall obtain officers' and
directors' liability insurance coverage providing protections to the Executive
(as part of a policy covering officers and directors of the Company, generally)
as comprehensive as possible (taking into account scope, exclusions,
deductibles, maximum liability and other factors) for an annual premium not
exceeding $100,000, the guarantee provided in Section 14 hereof shall remain in
full force and effect with respect to Section 10(a) hereof (whether or not it
has terminated for all other purposes); it being understood and agreed that from
and after the time such guarantee is no longer in effect with respect to Section
10(a) hereof until the termination of the Executive's employment with the
Company, the Company will continue to maintain the aforesaid officers' and
directors' liability insurance to the extent available at an annual premium not
exceeding $100,000.
11. No Offset; No Mitigation. If the Executive's employment is
terminated for any reason during the Term of Employment, the Executive shall not
be required to mitigate damages by seeking other employment, and there shall be
no offset against amounts due the Executive under this Agreement on account of
(i) any remuneration or benefits attributable to any subsequent employment that
the Executive may obtain or (ii) any claims the Company or any of its affiliates
may have against the Executive.
12. Confidentiality, Noncompetition and Nonsolicitation.
<PAGE> 24
(a) The Executive will not, during or after the Term of Employment,
disclose to any entity or person any information (including, but not limited to,
information about customers or about the design, manufacture or marketing of
products or services) (i) which is not generally known to the public (other than
through the Executive's own breach of this Agreement); (ii) which relates to the
business of the Company or any of its subsidiaries; (iii) which is treated as
confidential by the Company; and (iv) to which the Executive gains access by
reason of his position as an employee or director of the Company, except as such
disclosure (i) is required or appropriate in connection with his work as an
employee of the Company, or (ii) is required by a court of law, by any
governmental agency having supervisory authority over the business of the
Company, or by any other person or body with apparent jurisdiction to order him
to disclose such information.
(b) While the Executive continues to be an employee of the Company and
for the two-year period immediately following his Date of Termination (or if the
Executive's employment is terminated by the Company without Cause or by the
Executive with Good Reason, for the one-year period immediately following his
Date of Termination), the Executive shall not, except as permitted by the
Company upon its prior written consent, (i) enter, directly or indirectly, into
the employ of or render or engage in, directly or indirectly, any services to
any person, firm, corporation or other entity that is in competition (or is
actively planning to engage in competition) with the Company with respect to (x)
any local loop business (if the Company is engaged in such business on the Date
of Termination), (y) any business actively conducted by the Company on the Date
of Termination or (z) any business which, on the Date of Termination, the
Company plans to enter pursuant to a business strategy in the development of
which the Executive actively participated and which was adopted by the Board
before the Executive's termination of employment (any of the foregoing being
referred to herein as a "Competitive Business"), or (ii) become interested,
directly or indirectly, in any such person, firm, corporation or other entity as
an individual, partner, member, shareholder, creditor, director, officer,
principal, agent, employee, trustee, consultant, advisor or in any other
relationship or capacity. The ownership of three percent (3%) of any class of
the outstanding securities of any corporation, even though such corporation may
conduct (or be planning to conduct) a Competitive Business, shall not be deemed
as constituting an interest which violates clause (ii) of the immediately
preceding sentence. Further, the Executive shall not be deemed to have violated
the first sentence of this Section 12(b) solely by reason of the fact that the
Executive is employed by, or rendering services to, a person, firm, corporation
or other entity which conducts or provides services to (or may be planning to
conduct or provide services to) a Competitive Business, so
<PAGE> 25
long as the Executive's employment is, or his services rendered are, solely in
connection with businesses of such person, firm, corporation or other entity
which are not Competitive Businesses and which do not involve the provision of
services to any Competitive Business, and the Executive has no direct or
indirect authority or involvement in connection with any Competitive Business
conducted (or planned to be conducted), or any services provided (or planned to
be provided) to any Competitive Business, by such person, firm, corporation or
other entity.
(c) While the Executive continues to be an employee of the Company and
for the two-year period immediately following his Date of Termination, the
Executive shall not, except as permitted by the Company upon its prior written
consent, attempt, directly or indirectly, to induce any employee employed by or
performing services for the Company, or any subsidiary or affiliate of the
Company ("Another Employee"), to be employed or perform services elsewhere;
provided, however, the Executive shall not be deemed to have induced Another
Employee to be employed or perform services elsewhere solely as a result of any
actions properly taken in the performance of his duties hereunder. If the
Executive engages in discussions with an entity other than the Company, its
subsidiaries or affiliates about his own subsequent employment or performance of
services for such entity or makes plans to establish an entity by which he will
be employed or for which he will perform services (in either case, the
"Subsequent Employer"), the Executive shall not discuss with Another Employee
(or communicate to Another Employee in any manner) the possibility of the
employment of Another Employee, or the engagement of Another Employee to perform
services, by the Subsequent Employer.
(d) Any violation by the Executive of Section 12 hereof, occurring
after the Date of Termination, shall entitle the Company to cease making any
payments and providing any welfare benefits otherwise required under Section
7(c) hereof (provided that the Company's post-termination obligations with
respect to CARs which are provided for in Section 4(d) hereof shall not be
subject to this provision). Additionally, the Company shall have the right and
remedy to have the provisions of this Section 12 specifically enforced,
including by temporary and/or permanent injunction, it being acknowledged and
agreed that any such violation may cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company. The
Company shall in any event have the right to seek damages for any breach of this
Section 12.
13. Independence and Severability of Section 12 Provisions. Each of the
rights and remedies enumerated in Section 12 shall be independent of the others
and shall be severally enforceable and all of such rights and remedies shall be
in addition to, and not in lieu of, any other rights and
<PAGE> 26
remedies available to the Company under law or in equity. If any of the
covenants contained in Section 12 or if any of the rights or remedies enumerated
in Section 12, or any part of any of them, is hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants or rights or remedies which shall be given full effect without regard
to the invalid portions. If any of the covenants contained in Section 12 is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court or arbitrator making such
determination shall have the authority to reduce the duration and/or area of
such provision, and in its reduced form said provision shall then be
enforceable.
14. Guarantee. The Original Shareholders, in proportion to their
respective ownership interests (as such interests may vary from time to time) in
the Company, severally and unconditionally guarantee prompt payment of all
amounts that become due and owing to the Executive from the Company under this
Agreement; provided that at such time, if any, as the "DTS Systems Transfers"
are fully "consummated" (with the quoted terms having the same meaning as in the
DMT, L.L.C. Agreement), such guarantee shall automatically terminate and be of
no further force or effect, except with respect to the guarantee of the
Company's obligations under Section 10(a) hereof, which guarantee shall be
governed by the provisions of Section 10(c) hereof. Each of the Original
Shareholders hereby represents and warrants, as to itself, that it is fully
authorized and empowered to enter into this Agreement to the extent provided in
the first paragraph hereof and that the performance of its obligations under
this Agreement does not violate any law, regulation or order, or any agreement
between it and any other person or entity.
15. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, any amendment of this Agreement, or any breach of any of the
foregoing, shall, at the election of the Company or the Executive, be settled by
confidential arbitration, to be held in Washington D.C., in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator(s) shall apply the provisions of this Agreement strictly as written
(unless doing so violates the clear intent of this Agreement), and shall explain
the reasons and basis of his (their) award in detail and in writing. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. All costs and expenses relating to any controversy or
claim that is arbitrable under this Section (including reasonable attorney's
fees of the Executive) shall be paid by the Company promptly on written demand,
except that the arbitrator(s) are authorized to require reimbursement of the
Company for moneys paid by it pursuant to this sentence if the arbitrator(s)
determine that the substantive positions of the Executive in
<PAGE> 27
the arbitration were entirely without merit. Pending final resolution of any
arbitration or court proceeding, the Company shall continue prompt payment of
all amounts due the Executive under this Agreement or any amendment thereof and
prompt provision of all benefits to which the Executive or his beneficiaries are
entitled. Notwithstanding the foregoing, nothing contained in this Section 15
shall limit a party's right to seek equitable relief in any court of competent
jurisdiction.
16. Successors; Binding Agreement.
(a) No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or in connection with the sale or
liquidation of all or substantially all of the assets of the Company, or in
connection with the disposition of the business of the Company substantially as
an entirety, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company under this
Agreement, either contractually or as a matter of law.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amounts would still
be payable to him hereunder if he had continued to live, all such amounts unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee or, if there be
no such designee, to the Executive's estate.
17. Notice.
(a) For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
addressed as follows:
If to the Executive:
Mr. Alex J. Mandl
If to the Company:
<PAGE> 28
Associated Communications, L.L.C.
c/o The Associated Group, Inc.
680 Fifth Avenue
11th Floor
New York, NY 10019
Attention: William H. Berkman
Facsimile No.: 212-265-6443,
with copies to:
The Associated Group, Inc.
Three Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Attention: David J. Berkman
Scott G. Bruce, Esq.
Facsimile No.: 610-660-4920;
Skadden, Arps, Slate, Meagher & Flom
One Beacon Street
Boston, MA 02108
Attention: Kent A. Coit
Facsimile No.: 617-573-4822;
and
Digital Services Corporation
2300 Clarendon Boulevard
Suite 800
Arlington, Virginia 22201
Attention: President
Attention: General Counsel
Facsimile No.: 703-234-4960
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) Notices and communications given in accordance with the foregoing
shall conclusively be deemed to have been received and to be effective on the
day on which delivered to the designated recipient, or, if sent by United States
certified or registered mail, postage prepaid, on the fifth business day after
the day on which mailed, provided that a telecopy or cable of identical content
has been sent to the relevant address
<PAGE> 29
specified above within two days after the posting date of such mail. "Business
day" shall mean any day not a Saturday, Sunday or a legal holiday for
non-government employees in the District of Columbia.
18. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer of the Company as may be
duly authorized by the Board. No waiver by either party hereto at any time of
any prospective or past breach of any condition or provision of this Agreement
by the other party hereto shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time (unless
otherwise specified in the waiver). No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
The validity, interpretation, construction and, performance and enforcement of
this Agreement shall be governed by the laws of the State of Delaware without
regard to its conflicts of law principles. To the extent that the rights and
obligations under this Agreement of the parties hereto and their successors, as
such rights and obligations are described herein, may require performance after
the termination or expiration of this Agreement, such rights and obligations
shall survive the Term of this Agreement and shall be fully enforceable
thereafter. In the event that any portion or aspect of any provision of this
Agreement shall be deemed to be invalid or unenforceable for any reason, in
whole or in part, the remainder of this Agreement shall remain in full force and
effect to the fullest extent permitted by law so as to achieve the purposes of
this Agreement. The Executive shall be entitled, to the fullest extent permitted
by law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefit hereunder following the Executive's death. In the event
of the Executive's death or a judicial determination of his incompetence,
references in this Agreement to the Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal representative.
The Executive agrees that he will cooperate with any application by the Company
to obtain insurance to assist in funding its obligations to him under this
Agreement. The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement does not violate any law, regulation or order,
or any agreement between it and any other person or entity. The Executive
represents that there are no restrictions or limitations of any kind imposed by
his current employer which would affect his ability to execute this Agreement
and perform his obligations hereunder and further represents that such execution
and performance will not create any liabilities to his current employer or
breach the terms of any agreement to which the Executive is a party (except
<PAGE> 30
to the extent of triggering loss of various rights, options, and other benefits
from the Executive's current employer), including without limitation, any
agreement to keep in confidence the confidential or proprietary information of
his current (or any prior) employer. The Executive shall not, during his
employment with the Company or thereafter, disclose to the Company or otherwise
use in an unauthorized manner any confidential or proprietary information of any
third party, including his current (or any prior) employer. All payments and
benefits provided to Executive hereunder shall be subject to applicable
withholding taxes, and no such payments or benefits shall be made without
adequate arrangement, reasonably acceptable to the Company, for the satisfaction
of such withholding taxes. Notwithstanding any other provision of this
Agreement, wherever this Agreement provides for an action to be taken, or a
decision to be made, by the Company, the action or decision shall be taken or
made by the Company's Board, or by such individual (including, without
limitation, the Executive) or a group of individuals as shall have been duly
authorized by the Company's Board.
19. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
21. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
ASSOCIATED COMMUNICATIONS, L.L.C.
By: /s/David J. Berkman
--------------------------
Name: David J. Berkman
<PAGE> 31
Title:
EXECUTIVE
/s/ Alex J. Mandl
------------------------------
Alex J. Mandl
Signed and agreed upon, as to the last sentence of Section 4(d)(I) and Sections
4(d)(II), 4(d)(III), 4(f), (8)(a)(ii), 10(c) and 14 hereof only.
MICROWAVE SERVICES, INC.
By: /s/ David J. Berkman
-----------------------
Name: David J. Berkman
Title: Executive Vice President
DIGITAL SERVICES CORPORATION
By: /s/ Rajendra Singh
------------------------
Name: Rajendra Singh
Title: President
<PAGE> 1
EXHIBIT 5
November 12, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SALOMON BROTHERS INC
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH INTERNATIONAL
SALOMON BROTHERS INTERNATIONAL LIMITED
BEAR, STEARNS INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreements
North Tower
World Financial Center
New York, New York 10281
Re: Proposed Public Offering by Teligent, Inc.
Dear Sirs:
The undersigned, understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Salomon Brothers
Inc, Bear, Stearns & Co., Inc. and Goldman, Sachs & Co. propose to enter into a
U.S. Purchase Agreement and Merrill Lynch International, Salomon Brothers
International Limited, Bear, Stearns International Limited and Goldman Sachs
International propose to enter into an International Purchase Agreement
(together, the "Purchase Agreements") with Teligent, Inc., a Delaware
corporation (the "Company") providing for the public offering of shares (the
"Securities") of the Company's Class A Common Stock, par value $.01 per share.
In recognition of the benefit that such an offering will confer upon
the undersigned and for other good and valuable consideration, the receipt and
sufficiency of which are hereby
<PAGE> 2
acknowledged, the undersigned agrees with each underwriter to be named in the
Purchase Agreements that, during a period of 180 days from the date of the
Purchase Agreements, the undersigned will not, without the prior written consent
of Merrill Lynch, directly or indirectly, (i) offer, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant for the sale of, or otherwise dispose
of or transfer any shares of common stock of the Company or any securities
convertible into or exchangeable or exercisable for common stock of the Company,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any common stock of the
Company, whether any such swap or transaction is to be settled by delivery of
common stock of the Company or other securities, in cash or otherwise; provided,
however, that the undersigned may without such consent (i) exercise any
outstanding stock options granted pursuant to employment agreements or employee
benefit plans of the Company referred to in the Prospectuses (as defined in the
Purchase Agreements) so long as the undersigned agrees to be bound by this
Agreement with respect to shares of common stock issued upon such exercise, (ii)
make bona fide gifts of shares of common stock of the Company so long as the
transferee agrees to be bound by this Agreement with respect to such shares and
(iii) make a bona fide pledge or pledges of shares of common stock of the
Company, provided the pledgee agrees in writing to be bound by this Agreement
upon becoming entitled to obtain ownership of such shares pursuant to any
seizure or foreclosure with respect to such pledged shares.
Very truly yours,
Signature: _______________________
Print Name: _______________________
