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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
October 1, 1999
RCN CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-22825 22-3498533
(State of incorporation (Commission File Number) (I.R.S. Employer
or organization) Identification No.)
105 Carnegie Center
Princeton, NJ 08540-6215
(Address, including zip code of Registrant's principal executive offices)
Registrant's telephone number, including area code: (609) 734-3700
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Item 5: Other Events
On October 4, 1999, the Registrant announced that Vulcan Ventures
Incorporated ("Vulcan"), the investment organization of Paul G. Allen, has
agreed to make a $1.65 billion investment in the Registrant. The investment is
in the form of mandatorily convertible preferred stock (the "Preferred Stock"),
which will be converted into the Registrant's Common Stock, par value $1.00 per
share ("Common Stock"), no later than seven years after it is issued. Vulcan
has agreed to purchase 1,650,000 shares of the Preferred Stock. The Preferred
Stock has a liquidation preference of $1,000 per share and is convertible into
Common Stock at a price of $62 per share.
If Vulcan were to convert its Preferred Stock into Common Stock
immediately, it would receive approximately 26.6 million shares of Common
Stock, which together with the 3,407,100 shares of Common Stock currently owned
by Vulcan would represent approximately 27.4% of the outstanding Common Stock
after such conversion and assuming the conversion of the Registrant's currently
outstanding Series A 7% Senior Convertible Preferred Stock. Vulcan is, however,
generally limited to owning Common Stock representing no more than 15% of the
vote entitled to be cast by the Registrant's shareholders; provided that if a
change of control transaction is proposed to the shareholders for approval, the
15% limitation is increased to an amount equal to the voting percentage of
Level 3 Telecom Holdings, Inc. ("LTTH"), which owns 26,640,970 shares of Common
Stock. In order to accommodate the voting limitation, the Preferred Stock is
also convertible into the Registrant's Class B Common Stock, par value $1.00
per share ("Class B Stock"), which is essentially identical to the Common Stock
except that it is not entitled to vote. Vulcan has agreed to vote the Common
Stock it holds (i) with respect to the election of members of the Board of
Directors of Registrant, for nominees who have been recommended by the Board of
Directors and (ii) with respect to all other matters (and subject to exceptions
in the case of proposals to approve a change of control transaction or to
approve a stock issuance), either pro rata with the voting of other
shareholders or as recommended by the Board of Directors of the Registrant to
shareholders generally, at the election of Vulcan. The Preferred Stock is
entitled to vote, but will be voted pro rata with the voting of other
shareholders with certain limited exceptions.
Vulcan will generally be permitted to appoint two members to the
Registrant's Board of Directors, and will be subject to a standstill covenant
under which, among other things, it will not increase its ownership in the
Registrant. The term of the standstill covenant is seven years, subject to
early termination in certain limited circumstances. After 3.5 years (the
"Non-Call Period"), the Preferred Stock may, at the Registrant's election, be
called for cash at a call price equal to the liquidation preference of the
Preferred Stock. The Preferred Stock will automatically be converted to Common
Stock or Class B Stock seven years after the transaction closes, if not
previously called or converted. The Preferred Stock has a dividend rate of 7%
per annum. All dividends will be paid in additional shares of Preferred Stock.
In the event of a change of control (as defined) of the Registrant, Vulcan
may, at its election (i) continue to hold the Preferred Stock, (ii) convert the
Preferred Stock into Common Stock and receive, in addition, an amount of cash
equal to the value on an as-converted basis of the additional Preferred Stock
dividends it would have received on the Preferred Stock if it had remained
outstanding through the Non-Call Period, or (iii) redeem the Preferred Stock
(or, if the change of control occurs on or after February 15, 2003, 50% of the
Preferred Stock) for a cash price equal to 110% of the value of the Preferred
Stock on an as-converted basis, provided that if the change of control occurs
after the end of the Non-Call Period, the redemption price will be 100% of the
liquidation preference.
The Registrant has agreed to give Vulcan the opportunity to participate on
a pro rata basis if the Registrant issues common equity securities for cash and
has agreed to give Vulcan customary registration rights.
The investment is expected to close in the first quarter of 2000. The
closing is subject to customary conditions, such as antitrust and other
regulatory approvals, and no assurances can be given that any transaction will
occur. It is not expected that shareholder approval of the issuance of the
Preferred Stock will be required under the applicable rules of the Nasdaq
National Market. If such approval is required, however, LTTH has agreed
pursuant to a Voting Agreement among the Registrant, Vulcan and LTTH to vote
its shares of Common Stock in favor of approval of the issuance.
2
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In connection with the Vulcan investment, the Registrant has entered into
three other agreements: (i) a digital channel capacity access agreement with
Vulcan, (ii) an agreement with Charter Communications, Inc. to form a joint
venture to provide telephony services to Charter subscribers in Los Angeles and
(iii) an agreement with respect to the broadband portal of Broadband Partners.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
10.01 Stock Purchase Agreement dated as of October 1, 1999 between
the Registrant and Vulcan Ventures Incorporated.
10.02 Voting Agreement dated as of October 1, 1999 among the
Registrant, Vulcan Ventures Incorporated and Level 3 Telecom
Holdings, Inc.
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned hereunto duly authorized.
RCN CORPORATION
By: /s/ Bruce C. Godfrey
----------------------------------
Name: Bruce C. Godfrey
Title: Executive Vice President and
Chief Financial Officer
Date: October 15, 1999
4
EXHIBIT 10.01
CONFORMED COPY
STOCK PURCHASE AGREEMENT
dated as of
October 1, 1999
between
RCN CORPORATION
and
VULCAN VENTURES INCORPORATED
relating to the purchase and sale
of
Series B 7% Senior Convertible Preferred Stock
of
RCN CORPORATION
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TABLE OF CONTENTS
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Page
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale...............................................8
SECTION 2.02. Closing.........................................................8
SECTION 2.03. Certificates for Shares.........................................8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
SECTION 3.01. Corporate Existence and Power...................................9
SECTION 3.02. Corporate Authorization........................................10
SECTION 3.03. Authorization..................................................10
SECTION 3.04. Non-contravention..............................................10
SECTION 3.05. Capitalization.................................................11
SECTION 3.06. Authorization of Preferred Shares..............................11
SECTION 3.07. Finders' Fees..................................................12
SECTION 3.08. SEC Reports....................................................12
SECTION 3.09. Proxy Materials................................................12
SECTION 3.10. Financial Statements...........................................12
SECTION 3.11. Absence of Certain Changes.....................................13
SECTION 3.12. Litigation.....................................................13
SECTION 3.13. Offering of Preferred Shares...................................13
SECTION 3.14. Governmental Authorizations....................................13
SECTION 3.15. State Takeover Statutes........................................14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. Corporate Existence and Power..................................14
SECTION 4.02. Corporate Authorization........................................14
SECTION 4.03. Authorization..................................................15
SECTION 4.04. Non-contravention..............................................15
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Page
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SECTION 4.05. Purchase for Investment........................................15
SECTION 4.06. Current Ownership..............................................15
SECTION 4.07. Voting Arrangements............................................15
SECTION 4.08. Litigation.....................................................16
SECTION 4.09. Finders' Fees..................................................16
SECTION 4.10. Proxy Materials................................................16
ARTICLE 5
COVENANTS OF THE CORPORATION
SECTION 5.01. Access to Information..........................................16
SECTION 5.02. Certificate of Designations....................................17
SECTION 5.03. Restrictions Pending the Closing...............................17
SECTION 5.04. Buyer Director.................................................17
SECTION 5.05. Reservation of Shares..........................................19
SECTION 5.06. Other Transfers of Restricted Securities.......................19
SECTION 5.07. Pro-rata Participation.........................................19
SECTION 5.08. Exchange of Class B Stock......................................21
SECTION 5.09. Change of Control..............................................22
SECTION 5.10. Cross Ownership................................................24
SECTION 5.11. Special Preferred Stock........................................24
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. Confidentiality................................................25
SECTION 6.02. Sale or Transfer of Restricted Securities......................26
SECTION 6.03. Acquisition of Voting Securities...............................27
SECTION 6.04. Standstill.....................................................28
SECTION 6.05. Voting Arrangements............................................32
SECTION 6.06. Voting of Preferred Stock......................................32
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts;
Further Assurances.............................................33
SECTION 7.02. Certain Filings................................................33
SECTION 7.03. Public Announcements...........................................34
SECTION 7.04. Registration Rights Agreement..................................34
SECTION 7.05. Shareholder Meeting............................................34
SECTION 7.06. Buyer's Option.................................................35
iii
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Page
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ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Buyer and the Corporation.........37
SECTION 8.02. Conditions to Obligation of Buyer..............................37
SECTION 8.03. Conditions to Obligation of the Corporation....................38
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination........................................39
SECTION 9.02. Effect of Termination..........................................39
ARTICLE 10
SURVIVAL; INDEMNIFICATION
SECTION 10.01. Survival of Representation and Warranties.....................40
SECTION 10.02. Indemnification...............................................40
SECTION 10.03. Procedures....................................................41
SECTION 10.04. Inspections; No Other Representations ........................41
SECTION 10.05. Exclusivity...................................................42
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices.......................................................42
SECTION 11.02. Amendments and Waivers........................................43
SECTION 11.03. Expenses......................................................43
SECTION 11.04. Assignment....................................................43
SECTION 11.05. Governing Law.................................................44
SECTION 11.06. Jurisdiction..................................................44
SECTION 11.07. Counterparts; Third Party Beneficiaries.......................44
SECTION 11.08. Entire Agreement..............................................45
SECTION 11.09. Captions......................................................45
SECTION 11.10. Severability..................................................45
SECTION 11.11. Specific Performance..........................................45
SECTION 11.12. No Recourse...................................................45
Exhibit A Certificate of Designations, Preferences and Rights
of Series B 7% Senior Convertible Preferred Stock
iv
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Page
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Exhibit B Registration Rights
v
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STOCK PURCHASE AGREEMENT
AGREEMENT dated as of October 1, 1999 between RCN Corporation, a
Delaware corporation (the "Corporation"), and Vulcan Ventures Incorporated, a
Washington corporation ("Buyer").
WHEREAS, the Corporation desires to sell the Preferred Shares (as
defined herein) to Buyer, and Buyer desires to purchase the Preferred Shares
from the Corporation, upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, as a condition to Buyer's willingness to enter into this
Agreement, simultaneously with the execution of this Agreement Buyer is entering
into a Voting Agreement (the "Voting Agreement") with Level 3 Telecom Holdings
Inc., a stockholder of the Corporation, and the Corporation.
WHEREAS, simultaneously with the execution of this Agreement, the
Corporation is entering into (i) the Channel Agreement and the Portal Agreement
(as defined herein) with Buyer and (ii) the LA Agreement (as defined herein)
with Charter Communications, Inc., a Delaware corporation ("Charter").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"10-Day Market Price" means the average of the daily Market Prices of
the Common Stock for the 10 consecutive trading days ending the day prior to the
date for which such value is to be computed.
"Affiliate" means, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether
<PAGE>
through the ownership of voting securities, by contract or otherwise, and the
terms "affiliated," "controlling," and "controlled" have meanings correlative to
the foregoing.
"Agreed Percentage" means 15%; provided that (i) if the Corporation
submits to the vote of the Corporation's stockholders any Takeover Proposal, the
Agreed Percentage shall be equal to the greater of 15% and the Voting Percentage
entitled to be cast by the Level 3 Holders (assuming that the Level 3 Holders
continued to hold any Voting Securities transferred by a Level 3 Holder to any
Person other than a Level 3 Holder after the date hereof) in such vote after
taking into account the conversion of Preferred Stock to Common Stock by Buyer
in order to increase its vote to the same Voting Percentage as the Level 3
Holders; and (ii) if (A) the Corporation shall issue to any Person, in one
transaction or a series of related transactions, Voting Securities (excluding
the shares of Common Stock issuable on conversion of the Series A Preferred
Stock and on exercise of employee options) or Convertible Voting Securities,
representing 5% or more of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such Person or
any Group of which such Person is a member), (B) as a result thereof the Voting
Percentage of such Person or any Group of which such Person is a member
increases by more than 1% of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such Person or
Group) and (C) immediately following such issuance, such Person or any Group of
which such Person is a member shall beneficially own 15% or more of the Total
Voting Power (assuming the conversion, exercise or exchange of all Convertible
Voting Securities held by such Person or Group), then the Agreed Percentage
shall be equal to the greater of 15% and the maximum Voting Percentage such
Person is allowed by the Corporation to cast; provided that if such issuance is
in connection with a bona fide public offering in which the Corporation uses
commercially reasonable efforts to avoid issuing, and does not knowingly issue,
Voting Securities to any Person (other than a Person in respect of which the
Corporation agrees that this proviso shall be disregarded) who immediately
following such issuance shall, together with the members of any Group of which
such Person is a member, beneficially own 15% or more of the Total Voting Power
(assuming the conversion, exercise or exchange of all Convertible Voting
Securities held by such Person or Group), this clause (ii) shall be disregarded
in connection with such issuance (other than with respect to a Person in respect
of which the Corporation agrees that this proviso shall be disregarded). In the
event that more than one of the events referred to in clause (i) or (ii) of the
proviso to the preceding sentence shall occur, the Agreed Percentage shall be
the greatest percentage provided for under clause (i) or (ii).
"beneficial owner" has the meaning set forth in Rule 13d-3 under the
Exchange Act, and derivative terms such as "beneficially own" shall be given
corresponding meanings.
2
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"Board of Directors" means the Board of Directors of the Corporation.
"Change of Control" means the occurrence of any of the following
events: (a) any Person or Group is or becomes the beneficial owner (as defined
herein, except that a Person shall be deemed to have "beneficial ownership" of
all securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Securities of the Corporation;
or (b) the Corporation consolidates with, or merges with or into, another Person
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into the Corporation, in any such event pursuant to a
transaction in which the outstanding Voting Securities of the Corporation are
converted into or exchanged for cash, securities or other property, other than
any such transaction where (i) the outstanding Voting Securities of the
Corporation are converted into or exchanged for Voting Securities of the
surviving or transferee corporation or its parent corporation and/or cash,
securities or other property in an amount which could be paid by the Corporation
under the terms of the Corporation's credit and financing agreements and (ii)
immediately after such transaction no Person or Group is the beneficial owner
(as defined herein, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Securities of the
surviving or transferee corporation, as applicable; or (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
"Change of Control Premium Date" means three years from the earlier
of: (i) the Closing Date and (ii) February 15, 2000.
"Channel Agreement" means the letter agreement dated as of the date
hereof between the Corporation and Buyer regarding certain rights of access to
channel capacity.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Equity" means shares of Common Stock, shares of Class B Stock
and Convertible Securities (including the Preferred Stock).
3
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"Controlled Affiliate" means, with respect to any Person, any
corporation or other entity of which 75% or more of the securities or other
ownership interests having ordinary voting power to elect directors to the Board
of Directors (or other governing body) of such corporation or other entity are
directly or indirectly owned by such Person.
"Convertible Securities" means any securities convertible into or
exchangeable or exercisable for Common Stock or Class B Stock.
"Convertible Voting Securities" means securities convertible into or
exchangeable or exercisable for Voting Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Group" means a group within the meaning of Section 13(d)(3) of the
Exchange Act.
"LA Agreement" means the term sheet dated as of the date hereof between
the Corporation and Charter regarding the provision of telephony services in the
Los Angeles metropolitan area.
"Level 3 Holders" means Peter Kiewit Sons Inc., Level 3
Communications, Inc. and Level 3 Telecom Holdings, Inc. and any of their
respective controlled Affiliates.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind.
"Market Price" means, with respect to the Common Stock, on any given
day, (i) the price of the last trade, as reported on the Nasdaq National Market,
not identified as having been reported late to such system, or (ii) if the
Common Stock is so quoted, but not so traded, the average of the last bid and
ask prices, as those prices are reported on the Nasdaq National Market, or (iii)
if the Common Stock is not listed or authorized for trading on the Nasdaq
National Market or any comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose; provided that, in connection with (i) or (ii), the Corporation may from
time to time specify in advance the time at which the trade price or bid and ask
prices, respectively, shall be determined for purposes of a particular
calculation under this Agreement. If the Common Stock is not listed and traded
in a manner that the quotations referred to above are available for the period
required hereunder, the Market Price per share of Common Stock shall be deemed
to be the fair value per share of such security as determined in good faith by
the Board of Directors.
4
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"Material Adverse Effect" means (i) with respect to the Corporation, a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of the Corporation and its Subsidiaries, taken
as whole, excluding any such effect resulting from or arising in connection with
(A) this Agreement, the transactions contemplated hereby or the announcement
thereof, (B) changes or conditions generally affecting the industries in which
the Corporation and its Subsidiaries operate or (C) changes in general economic,
regulatory or political conditions, (ii) with respect to Buyer, a material
adverse effect on the condition (financial or otherwise), business, assets or
results of operations of Buyer and its Subsidiaries, taken as a whole, excluding
any such effect resulting from or arising in connection with (A) this Agreement,
the transactions contemplated hereby or the announcement thereof, (B) changes or
conditions generally affecting the industries in which Buyer and its
Subsidiaries operate or (C) changes in general economic, regulatory or political
conditions, or (iii) with respect to Charter, a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
Charter and its Subsidiaries, taken as a whole, excluding any such effect
resulting from or arising in connection with (A) this Agreement, the
transactions contemplated hereby or the announcement thereof, (B) changes or
conditions generally affecting the industries in which Charter and its
Subsidiaries operate or (C) changes in general economic, regulatory or political
conditions.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust and any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Portal Agreement" means the Video Portal Agreement Term Sheet dated as
of the date hereof between the Corporation and Buyer.
"Preferred Shares" means 1,650,000 shares of Preferred Stock issued on
the Closing Date.
"Preferred Stock" means the Series B 7% Senior Convertible Preferred
Stock of the Corporation.
"Restricted Securities" means (i) Common Equity and (ii) any other
Voting Securities or Convertible Voting Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any corporation or other
entity (and any predecessor thereof) of which the securities or other ownership
interests having ordinary voting power to elect a majority of the Board of
5
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Directors or other persons performing similar functions are directly or
indirectly owned by such Person.
"Takeover Proposal" means any solicited or unsolicited tender or
exchange offer (or a proposal therefor) or proposal for a merger, consolidation,
sale of assets or other business combination or transaction (including a sale or
issuance of equity securities or a proxy contest) that, in any such case, could
reasonably be expected to result in a Change of Control.
"Total Voting Power" means the aggregate number of votes which may be
cast by holders of Voting Securities in respect of Voting Securities.
"Voting Percentage" means, with respect to any Person, the percentage of
the Total Voting Power beneficially owned by such Person.
"Voting Securities" means securities of the Corporation ordinarily
having the power to vote for the election of directors of the Corporation other
than the Preferred Stock and the Special Preferred; provided that when the term
"Voting Securities" is used with respect to any other Person it means the
capital stock or other equity interests of any class or kind ordinarily having
the power to vote for the election of directors or other members of the
governing body of such Person.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Advance Pro Rata Notice 5.07
Approved Shares 7.06
Authorizations 3.14
Buyer Director 5.04
Buyer Proposal 6.04
Certificate of Designations 3.06
Change of Control Date 5.09
Change of Control Offer 5.09
Change of Control Payment Date 5.09
Class B Stock 3.05
Closing 2.02
Common Stock 3.05
Current Shares 4.06
Damages 10.02
Determination Period 6.04
DGCL 3.15
Election Notice 5.09
Fully Financed 6.04
6
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Term Section
First Call Date 5.09
Gross Up Adjustment 10.02
HSR Act 3.03
Indemnified Party 10.03
Indemnifying Party 10.03
Initial Shares 7.06
Issuance 5.07
NASD 7.05
Negotiated Proposal 6.04
Negotiation Notice 6.04
Offer 6.04
Permitted Actions 6.04
Permitted Transferee 6.02
Pro-Rata Notice 5.07
Pro-Rata Securities 5.07
Proxy Statement 3.09
Purchase Price 2.01
Redemption Price 5.09
Regulatory Authorities 3.03
Representatives 6.01
Rights 5.07
Schedule 3.04 Consent 3.04
SEC Reports 3.05
Second Closing 7.06
Section 6.04(e) Event 6.04
Series A Preferred Stock 3.05
Special Preferred 5.11
Standstill Period 6.04
Stock Issuance Proposal 6.05
Stockholder Approval 7.06
Stockholder Meeting 7.05
Voting Agreement Recitals
(c) The following definitional provisions shall apply to this Agreement:
(i) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(ii) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
7
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(iii) The terms "Dollars" and "$" shall mean United States Dollars.
(iv) References herein to a specific Section, Subsection or
Schedule shall refer, respectively, to Sections, Subsections or
Schedules of this Agreement, unless the express context otherwise
requires.
(v) Wherever the word "include," "includes," or "including" is used
in this Agreement, it shall be deemed to be followed by the words
"without limitation."
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Corporation agrees to sell to Buyer, and Buyer
agrees to purchase from the Corporation, the Preferred Shares at the Closing.
The purchase price (the "Purchase Price") for the Preferred Shares is
$1,650,000,000 in cash. The Purchase Price shall be paid as provided in Section
2.02.
SECTION 2.02. Closing. The closing (the "Closing") of the purchase and
sale of the Preferred Shares hereunder shall take place at the offices of Davis
Polk & Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible,
and in no event later than five business days after satisfaction or waiver of
the conditions set forth in Article 8 (other than those conditions that by their
nature are to be satisfied at the Closing and will in fact be satisfied at the
Closing), or at such other time or place as Buyer and the Corporation may agree.
At the Closing:
(a) Buyer shall deliver to the Corporation the Purchase Price in
immediately available funds by wire transfer to an account of the Corporation
with a bank designated by the Corporation, by notice to Buyer, not later than
two business days prior to the Closing Date.
(b) The Corporation shall deliver to Buyer certificates for the
Preferred Shares.
SECTION 2.03. Certificates for Shares. (a) Each certificate for
Preferred Stock or Restricted Securities issued to Buyer shall bear the
following legend:
8
<PAGE>
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be offered,
sold, transferred or otherwise disposed of except in compliance
with such Act and other applicable laws.
(b) Each certificate for Restricted Securities beneficially owned by
Buyer will bear the following legend:
"The securities represented hereby are subject to certain
restrictions under the terms of the Stock Purchase Agreement
dated October 1, 1999, as amended from time to time, between
Vulcan Ventures Incorporated and RCN Corporation and may not be
offered, sold, transferred or otherwise disposed of except in
accordance with the terms of that Agreement."
At the Closing, Buyer will deliver to the Corporation all certificates
representing Restricted Securities beneficially owned by Buyer so that the
Corporation may place such legend on such certificates.
(c) The Corporation agrees that, at the request of Buyer or any
Permitted Transferee, it will remove from the certificates representing any
Preferred Stock or Restricted Securities the legend contemplated by subsection
(a) regarding the restriction under the Securities Act in the event that outside
counsel for Buyer or such Permitted Transferee determines that the transfer of
such Restricted Securities is no longer restricted by the Securities Act and
outside counsel for the Corporation concurs in such determination (such
concurrence not to be unreasonably withheld). The Corporation agrees that, at
the request of Buyer, it will remove from the certificates representing
Restricted Securities the legend contemplated by subsection (b) regarding the
restrictions under this Agreement at the time after which such restrictions are
no longer applicable. If Buyer transfers any Restricted Securities in accordance
with Section 6.02, the Corporation will issue to such transferee a certificate
representing such transferred Restricted Securities without the legend
contemplated by subsection (b) regarding the restrictions under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date hereof
and as of the Closing that:
SECTION 3.01. Corporate Existence and Power. The Corporation is a
corporation duly incorporated, validly existing and in good standing under the
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laws of the State of Delaware, and has all corporate powers required to carry on
its business as now conducted.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance of this Agreement by the Corporation is within the Corporation's
corporate powers and, except for any required approval of the Corporation's
stockholders, has been duly authorized by all necessary corporate action on the
part of the Corporation.
(b) This Agreement constitutes a legal and binding agreement of the
Corporation, enforceable against the Corporation in accordance with its terms,
except (i) as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and (ii)
for limitations imposed by general principles of equity.
SECTION 3.03. Authorization. The execution, delivery and performance of
this Agreement by the Corporation requires no action by or in respect of, or
filing with, any governmental or non-governmental body, agency, official or
authority other than (i) compliance with any applicable requirements of the
Exchange Act, (ii) with respect to the Corporation's obligations under Section
7.04, compliance with any applicable requirements of the Securities Act, (iii)
the filing of the Certificate of Designations in accordance with the laws of
Delaware, (iv) compliance with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (v) filings with, notifications to and consents from the Federal
Communications Commission, franchising authorities, state public utility
commissions and other similar governmental entities (collectively, "Regulatory
Authorities") and (vi) other filings, notifications and consents that are
immaterial to the consummation of the transactions contemplated hereby.
SECTION 3.04. Non-contravention. Assuming compliance with the matters
referred to in Section 3.03 and receipt of approval from the Corporation's
stockholders, if required, the execution, delivery and performance of this
Agreement by the Corporation do not and will not (i) violate the certificate of
incorporation or bylaws of the Corporation, (ii) violate any applicable law,
rule, regulation, judgment, injunction, order or decree binding upon the
Corporation, other than violations that would be immaterial to the Corporation
or Buyer, or (iii) except for the consent forth on Schedule 3.04 (the "Schedule
3.04 Consent") and except as to matters which would be immaterial to the
Corporation or Buyer, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Corporation or to a loss of any benefit to which the Corporation is entitled
under any provision of any agreement or other instrument binding upon the
Corporation or (iv) result in the creation or
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imposition of any Lien on any asset of the Corporation except where such Lien
would not have a Material Adverse Effect on the Corporation.
SECTION 3.05. Capitalization. (a) As of the date hereof, the authorized
capital stock of the Corporation consists of: 200,000,000 shares of common stock
("Common Stock"), par value $1.00 per share; 400,000,000 shares of Class B
common stock ("Class B Stock"), par value $1.00 per share; and 25,000,000 shares
of preferred stock, par value $1.00 per share. As of September 24, 1999, there
were issued and outstanding the following shares of such stock: 76,319,126
shares of Common Stock, no shares of Class B Stock and 254,083 shares of Series
A 7% Senior Convertible Preferred Stock ("Series A Preferred Stock").
(b) All outstanding shares of Common Stock and all outstanding shares of
Series A Preferred Stock are duly authorized, validly issued and fully paid and
nonassessable. There are no preemptive or other similar rights available to the
existing holders of the capital stock of the Corporation. As of the date hereof
and other than (i) as set forth in the financial statements contained in the
forms, reports and documents filed with the Commission (the "SEC Reports"), (ii)
as set forth on Schedule 3.05(b) hereto, and (iii) in connection with the
transactions contemplated by this Agreement, there are no outstanding options,
warrants, rights, puts, calls, commitments, or other contracts, arrangements, or
understandings issued by or binding upon the Corporation requiring, and there
are no outstanding debt or equity securities of the Corporation which upon the
conversion, exchange or exercise thereof would require, the issuance, sale or
transfer by the Corporation of any new or additional equity interests in the
Corporation (or any other securities of the Corporation or any of its
Subsidiaries which, whether after notice, lapse of time or payment of monies,
are or would be convertible into or exercisable or exchangeable for equity
interests in the Corporation). Except as set forth in the SEC Reports and as
contemplated by this Agreement, there are no voting trusts or other agreements
or understandings to which the Corporation or any of its Subsidiaries is a party
with respect to the voting of capital stock of the Corporation.
SECTION 3.06. Authorization of Preferred Shares. The issuance, sale and
delivery of the Preferred Shares has been duly authorized by all requisite
corporate action of the Corporation, except for any required approval of the
Corporation's stockholders, and the Preferred Shares issued to Buyer in
accordance with the terms of the Certificate of Designations, Preferences and
Rights of Series B 7% Senior Convertible Preferred Stock (the "Certificate of
Designations") set forth on Exhibit A hereto, when issued and delivered in
accordance with the terms of this Agreement will be validly issued and
outstanding, fully paid and nonassessable, free and clear of any Liens and not
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subject to preemptive or other similar rights of the stockholders of the
Corporation.
SECTION 3.07. Finders' Fees. Except for Chase Securities Inc. and Morgan
Stanley & Co. Incorporated, whose fees and expenses will be paid by the
Corporation, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Corporation
who might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement.
SECTION 3.08. SEC Reports. The Corporation has filed all required SEC
Reports when due in accordance with the Exchange Act and delivered or made
available to Buyer copies thereof. As of their respective dates (or, in the case
of any amended SEC Report, as of the date of the amendment), the SEC Reports
complied in all material respects with all applicable requirements of the
Exchange Act or the Securities Act, as the case may be. As of their respective
dates (or, in the case of any amended SEC Report, as of the date of the
amendment), none of the SEC Reports contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 3.09. Proxy Materials. If the Corporation seeks the approval of
the Corporation's stockholders in connection with the issuance of securities
contemplated hereby, the proxy or information statement of the Corporation to be
filed with the Commission in connection with the related shareholders meeting
(the "Proxy Statement") and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act. At the time the Proxy Statement or any
amendment or supplement thereto is first mailed to stockholders of the
Corporation, and at the time such stockholders vote on approval of the issuance
of securities hereunder, the Proxy Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this Section 3.09 will not apply
to statements or omissions included in the Proxy Statement based upon
information furnished in writing to the Corporation by Buyer specifically for
use therein.
SECTION 3.10. Financial Statements. The consolidated financial
statements of the Corporation contained in the SEC Reports (or, in the case of
any amended SEC Report, in the SEC Report as so amended) comply as to form in
all material respects with the published rules and regulations of the Commission
with
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respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present, in conformity with GAAP (except as may be indicated
in the notes thereto), the consolidated financial position of the Corporation
and its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements, which adjustments will not be material either
individually or in the aggregate).
SECTION 3.11. Absence of Certain Changes. Since June 30, 1999, there has
not been any event, occurrence or development of a state of circumstances or
facts that has had or would reasonably be expected to have a Material Adverse
Effect on the Corporation or an adverse effect on the ability of the Corporation
to perform its obligations under this Agreement.
SECTION 3.12. Litigation. Except as disclosed in the SEC Reports, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of the Corporation threatened against or affecting, the Corporation or
any Subsidiary before any court or arbitrator or any governmental body, agency
or official which (i) in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement or
(ii) if resolved adversely to the Corporation or a Subsidiary would reasonably
be likely to have, individually or in the aggregate, a Material Adverse Effect
on the Corporation.
SECTION 3.13. Offering of Preferred Shares. Neither the Corporation nor
any Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Corporation under
circumstances which would require, under the Securities Act, the integration of
such offering with the offering and sale of the Preferred Shares) which might
subject the offering, issuance or sale of the Preferred Shares to the
registration requirements of Section 5 of the Securities Act.
SECTION 3.14. Governmental Authorizations. The Corporation has all
necessary franchises, approvals, authorizations, permits, licenses,
registrations, qualifications and similar rights obtained from any Federal,
State or Local regulatory authority ("Authorizations") to conduct and operate
the businesses of the Corporation, except any such Authorizations which the
failure to have would not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Corporation. The
Authorizations are currently in full force and effect, are not in default, and
are valid under all applicable rules and regulations according to their terms,
except as would not, either individually or in
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the aggregate, reasonably be expected to have a Material Adverse Effect on the
Corporation. The Corporation is in compliance with the terms and conditions of
the Authorizations, including requirements for notifications, filing, reporting,
posting and maintenance of logs and records, except where any failure to so
comply would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Corporation.
SECTION 3.15. State Takeover Statutes. The Board of Directors of the
Corporation, at a meeting duly called (or for which notice was duly waived by
all directors of the Corporation) and held on September 28, 1999, has approved
the terms of this Agreement, the Certificate of Designations, the Voting
Agreement and the other documents contemplated by this Agreement, and the
consummation of the transactions contemplated hereby and thereby (including
without limitation the sale and issuance to Buyer of the Preferred Stock
pursuant to this Agreement, and Buyer's acquisition of shares of Common Stock or
Class B Common Stock upon conversion of the Preferred Stock), and such approval
constitutes approval of such transactions by the Board of Directors under the
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL"),
and constitutes all actions necessary to ensure that the restrictions contained
in Section 203 of the DGCL will not apply to Buyer in connection with or as a
result of such transactions. To its knowledge, no other state takeover statute
is applicable to the transactions contemplated by this Agreement and the other
documents contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date hereof
and as of the Closing that:
SECTION 4.01. Corporate Existence and Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance of this Agreement by Buyer are within Buyer's corporate powers and
have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement constitutes a legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, except (a) as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting
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the enforcement of creditors' rights generally and (b) for limitations imposed
by general principles of equity.
SECTION 4.03. Authorization. The execution, delivery and performance of
this Agreement by Buyer requires no action by or in respect of, or filing with,
any governmental or non-governmental body, agency or official or any other
Person other than (i) compliance with any applicable requirements of the
Exchange Act, (ii) compliance with the applicable requirements of the HSR Act,
(iii) filings with, notifications to and consents from Regulatory Authorities
and (iv) other filings or notifications that are immaterial to the consummation
of the transactions contemplated hereby.
SECTION 4.04. Non-contravention. Assuming compliance with the matters
referred to in Section 4.03, the execution, delivery and performance of this
Agreement by Buyer does not and will not (i) violate the certificate of
incorporation or bylaws of Buyer, (ii) violate any applicable law, rule,
regulation, judgment, injunction, order or decree, except for any such
violations which would not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby or (iii) constitute a
default under any agreement or other instrument binding upon Buyer except as to
matters which would not be material to Buyer.
SECTION 4.05. Purchase for Investment. Buyer is an "accredited investor"
as defined in Rule 501 under the Securities Act. Buyer is purchasing the
Preferred Stock for investment for its own account and not with a view to, or
for sale in connection with, any distribution thereof or of any shares of Common
Stock or Class B Stock issued on conversion of the Preferred Stock in violation
of the Securities Act. Buyer (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Preferred
Stock and is capable of bearing the economic risks of such investment.
SECTION 4.06. Current Ownership. The Buyer is the record and beneficial
owner of 3,407,100 shares of Common Stock (the "Current Shares"). Except for the
Current Shares, neither Buyer nor any of its Affiliates beneficially owns any
Common Equity.
SECTION 4.07. Voting Arrangements. The Buyer has not:
(i) formed, joined or in any way participated in a Group with
respect to any Common Equity; or
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(ii) granted any "proxies" (as defined under the Exchange Act) with
respect to any Common Equity to any Person or deposited any Common
Equity in a voting trust or entered into any other arrangement or
agreement with respect to the voting thereof except as set forth in
Section 6.05.
SECTION 4.08. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which has a reasonable likelihood of success and in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
SECTION 4.09. Finders' Fees. Except for Allen & Company Incorporated,
whose fees and expenses shall be paid by Buyer, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Buyer who might be entitled to any fee or commission from
the Corporation or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.10. Proxy Materials. If the Corporation seeks the approval of
the Corporation's stockholders in connection with the issuance of securities
contemplated hereby, none of the information provided by Buyer in writing
specifically for inclusion in the Proxy Statement or any amendment or supplement
thereto, at the time the Proxy Statement or any amendment or supplement thereto
is first mailed to stockholders of the Corporation and at the time the
stockholders vote on approval of the issuance of securities hereunder, will
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE 5
COVENANTS OF THE CORPORATION
The Corporation agrees that:
SECTION 5.01. Access to Information. From the date hereof until the
Closing Date, the Corporation will (i) furnish to Buyer and its authorized
representatives such financial and operating data and other information relating
to the Corporation and its Subsidiaries as such Persons may reasonably request
and (ii) instruct its counsel, independent accountants and financial advisors to
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cooperate with Buyer and its authorized representatives in its investigation of
the Corporation. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Corporation. In addition, during any time that Buyer has the right to
designate the Buyer Directors pursuant to Section 5.04, the Corporation will
provide Buyer with copies of all financial information, reports and
presentations delivered to the lenders under the Corporation's principal credit
facilities, subject to the confidentiality agreement set forth in Section 6.01.
SECTION 5.02. Certificate of Designations. Prior to the Closing, the
Corporation shall cause to be filed the Certificate of Designations set forth as
Exhibit A hereto as required pursuant to the law of Delaware.
SECTION 5.03. Restrictions Pending the Closing. After the date hereof
and prior to the Closing Date, except as expressly provided for in this
Agreement or as consented to in writing by Buyer, the Corporation will not:
(i) amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(ii) split, combine or reclassify any shares of the Corporation's
capital stock;
(iii) declare or pay any dividend or distribution (whether in cash,
stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any action, that
would, or that would reasonably be expected to, result in (A) any of the
representations and warranties of the Corporation set forth in Article 3
becoming untrue or (B) any of the conditions to the obligations of Buyer
set forth in Section 8.01 or 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any of the
foregoing.
SECTION 5.04. Buyer Director. Buyer shall be entitled to designate for
election to the Board of Directors (i) two persons (each a "Buyer Director"),
for so long as the aggregate number of shares of Common Stock and Class B Stock
(treating all shares of Preferred Stock as if they had been converted) owned by
Buyer is not less than 50% of the sum of the number of Current Shares plus the
number of shares of Common Stock and Class B Stock issued or issuable on
conversion of all shares of Preferred Stock issued to Buyer from time to time
(appropriately adjusted in the event of any reclassification, recapitalization,
stock
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split, reverse stock split or combination, exchange or readjustment of shares or
any stock dividend thereon) and (ii) one Buyer Director for so long as the
aggregate number of shares of Common Stock and Class B Stock (treating all
shares of Preferred Stock as if they had been converted) owned by Buyer is not
less than 25% of the sum of the number of Current Shares plus the number of
shares of Common Stock and Class B Stock issued or issuable on conversion of all
shares of Preferred Stock issued to Buyer from time to time (appropriately
adjusted in the event of any reclassification, recapitalization, stock split,
reverse stock split or combination, exchange or readjustment of shares or any
stock dividend thereon); provided, however, that the right to designate one
Buyer Director under this Section shall be suspended at any time that the
holders of the Preferred Stock have the right to designate a person for election
to the Board of Directors under the terms of the Preferred Stock set forth in
the Certificate of Designations. In the event Buyer elects to designate one or
two Buyer Directors pursuant to this Section 5.04, it shall so notify the
Corporation in writing and the Corporation shall (a) increase the size of the
Board of Directors by one or two, as the case may be, and fill the vacancy
created thereby by electing the Buyer Director or Buyer Directors, as the case
may be, and (b) in connection with the meeting of shareholders of the
Corporation next following such election, nominate such Buyer Director or Buyer
Directors, as the case may be, for election as director(s) by the shareholders
and use its best efforts to cause the Buyer Director to be so elected and
re-elected at each subsequent stockholder meeting at which directors are elected
(and if such Buyer Director(s) are not elected, the Board of Directors shall
take all action permitted by law to appoint such Buyer Director(s) to the Board
of Directors). If a vacancy shall exist in the office of a Buyer Director, Buyer
shall be entitled to designate a successor and the Board of Directors shall
elect such successor and, in connection with the meeting of shareholders of the
Corporation next following such election, nominate such successor for election
as director by the shareholders and use its best efforts to cause the successor
to be so elected. At least one Buyer Director shall be entitled to serve on the
Executive Committee of the Board of Directors and any standing or special
committee of the Board of Directors established for purposes of considering or
which otherwise does consider any Takeover Proposal or any issuance of equity
securities of the Corporation (other than any such issuance pursuant to any
director or employee stock compensation plan). On the date upon which Buyer
ceases to beneficially own the minimum amount of securities that would entitle
Buyer to designate one or both of the Buyer Directors under this Section 5.04,
Buyer's right to designate such Buyer Director or Buyer Directors, as the case
may be, shall cease and, upon notice of termination from the Corporation to
Buyer, Buyer shall cause such Buyer Director or Buyer Directors, as the case may
be, to immediately resign, the terms of office of such Buyer Director or Buyer
Directors, as the case may be, shall forthwith terminate and the size of the
Board of Directors shall be reduced accordingly.
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SECTION 5.05. Reservation of Shares. For so long as any of the Preferred
Stock is outstanding, the Corporation shall keep reserved for issuance a
sufficient number of shares of Common Stock and Class B Stock to satisfy its
conversion obligations under the Certificate of Designations.
SECTION 5.06. Other Transfers of Restricted Securities. The Corporation
shall take all actions reasonably necessary to enable holders of the Common
Stock or Class B Stock to sell such stock without registration under the
Securities Act pursuant to Rule 144 under the Securities Act or any successor
rule or regulation, subject in each case to the provisions of this Agreement
and, specifically, the filing on a timely basis of all reports required to be
filed under the Exchange Act.
SECTION 5.07. Pro-rata Participation. (a) If the Corporation shall issue
(such issuance, including any Common Equity issued to Buyer pursuant to this
Section 5.07, an "Issuance") any Common Equity (other than an issuance of Common
Equity (i) pursuant to the Corporation's existing or future stock option plans
or pursuant to any other existing or future director or employee compensation
plan approved by the Board of Directors, (ii) as consideration for the
acquisition of a business or of assets, (iii) to the Corporation's joint venture
partners in exchange for interests in the relevant joint venture, (iv) upon
conversion, exercise or exchange of Convertible Securities, (v) pursuant to
Section 5.08 hereof, (vi) which would cause an adjustment under paragraph
8(g)(iii) of the Certificate of Designations, (vii) pursuant to any
shareholders' rights plan or (viii) as dividends on any class of preferred stock
of the Corporation), Buyer shall have the right to purchase for cash an amount
of such Common Equity ("Pro-Rata Securities") on the same terms and at the same
price as the issue price of such Common Equity (such price to be agreed by the
Corporation and Buyer if such Common Equity is to be issued for consideration
other than cash, and if the parties cannot agree on such price, the price shall
be determined as provided in paragraph (c) of this Section 5.07) so that, after
the Issuance, Buyer would own the same proportional interest of Common Stock and
Class B Stock in the aggregate (assuming conversion, exercise or exchange of all
Convertible Securities) as is owned by it prior to the Issuance (assuming
conversion, exercise or exchange of all Convertible Securities). The Corporation
shall deliver written notice (a "Pro-Rata Notice") to Buyer with respect to any
Issuance subject to the provisions of this Section 5.07 either, at the
Corporation's option, (i) not less than 5 days before the anticipated date of
such Issuance (an "Advance Pro-Rata Notice"), or (ii) promptly after
consummation of such Issuance. Buyer's right to purchase Pro-Rata Securities
with respect to any Issuance of Common Equity shall terminate 5 business days
after delivery of the Pro-Rata Notice. If Buyer timely elects to exercise its
right to purchase Pro-Rata Securities, such election will constitute a binding
offer to purchase and may not be revoked by Buyer; provided, however, that
Buyer's obligation to acquire the
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Pro-Rata Securities will be subject to terms and conditions at least as
favorable as those applicable to the Issuance giving rise to Buyer's rights
under this Section 5.07 and to receipt of any necessary governmental approvals
(and the parties agree to expeditiously seek and cooperate with respect to
obtaining such approvals). Notwithstanding anything in this Section 5.07 to the
contrary, (i) if Buyer exercises its right to purchase any Pro-Rata Securities
pursuant to an Advance Pro-Rata Notice, but the Corporation does not consummate
the issuance of Common Equity referred to in such notice (or reduces the size of
such issuance), Buyer will not have the right to purchase such Pro-Rata
Securities (or, in the event of a reduction in the size of the Issuance, have
its right to purchase reduced pro rata), (ii) if Buyer exercises its right to
purchase any Pro-Rata Securities, the Corporation and Buyer agree that the
Issuance giving Buyer such right shall not cause an adjustment under paragraph
8(g)(ii) of the Certificate of Designations, and (iii) if the Corporation issues
securities ("Rights") the issuance of which, except for this paragraph, would
cause an adjustment under paragraph 8(g)(iii) of the Certificate of
Designations, then (A) Buyer shall, in addition to any Rights it receives in
respect of any Common Stock and Class B Stock it owns, be entitled to receive
Rights in respect of all Preferred Stock (as if such Preferred Stock had been
converted into Common Stock immediately prior to the record date for the
Issuance of such Rights) owned by Buyer, and (B) the Corporation and Buyer agree
that the issuance of Rights shall not cause an adjustment under Section
8(g)(iii) or 8(g)(iv) of the Certificate of Designations. Buyer agrees that it
will not, directly or indirectly, sell, pledge, encumber or otherwise transfer
or agree to sell, pledge, encumber or otherwise transfer, any Rights it receives
pursuant to this Section 5.07 in respect of Preferred Stock. During the
Standstill Period, Buyer may exercise only that portion of the Rights it
receives as is equal to a fraction, the numerator which is the number of Rights
exercised by other Persons and the denominator of which is the number of Rights
distributed to other Persons. The agreements between the Corporation and Buyer
in this paragraph (c) not to make adjustments under paragraph 8(g) of the
Certificate of Designations under the circumstances set forth in this paragraph
(c) shall constitute agreements as referred to in, and for the purposes of,
paragraph 8(g)(vii) of the Certificate of Designations.
(b) The rights and agreements in paragraph (a) of this Section 5.07
shall terminate in their entirety if either (i) Buyer is no longer entitled to
designate one or both of the Buyer Directors pursuant to Section 5.04 (other
than as a result of the first proviso to the first sentence of such Section) or
(ii) all shares of Preferred Stock have been either redeemed by the Corporation
or converted into Common Stock or Class B Stock.
(c) If Buyer and the Corporation fail to agree on the price at which
Buyer may purchase securities under paragraph (a) of this Section 5.07 within 30
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days following receipt by the Buyer of a Pro-Rata Notice, then the items in
dispute shall be referred to a nationally recognized investment banking firm
selected jointly by Buyer and the Corporation. The determination of such
investment banking firm shall be rendered within 30 days of such referral. The
Corporation and Buyer shall share equally in payment of all fees and expenses of
such investment banking firm. All determinations made pursuant to this paragraph
(c) shall be final and binding on the Buyer and the Corporation.
SECTION 5.08. Exchange of Class B Stock. (a) Subject to the provisions
of this Section 5.08, Buyer shall have the right, at any time, to exchange each
share of Class B Stock for one fully paid and non-assessable share of Common
Stock. Such right of exchange shall be exercised by giving written notice to the
Corporation that Buyer elects to exchange a stated number of shares of Class B
Stock for Common Stock and by surrender of a certificate or certificates for the
shares to be exchanged as provided in paragraph (b) below.
(b) Each certificate for shares of Class B Stock to be surrendered to
the Corporation in connection with an exchange shall be surrendered at the
principal office of the Corporation (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to Buyer) at
any time during its usual business hours. If the exchange is in connection with
a transfer permitted under Section 6.02, each share certificate surrendered
shall be accompanied by (i) a statement of the name or names of the transferee
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued, (ii) instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by Buyer's duly authorized
attorney and by transfer tax stamps or funds therefor, if required pursuant to
paragraph (e) of this Section 5.08 and (iii) evidence reasonably satisfactory to
the Corporation that the transfer is permitted under Section 6.02. If the
exchange is not in connection with a transfer permitted under Section 6.02, each
share certificate surrendered shall be duly endorsed or accompanied by stock
powers duly endorsed in blank.
(c) Promptly following the receipt by the Corporation of the certificate
for the share or shares of Class B Stock surrendered for exchange, together with
the other documents referred to in paragraph (b) of this Section 5.08, if
applicable, and the payment in cash of any amount required pursuant to
subparagraph (e) of this Section 5.08, the Corporation shall issue and deliver,
or cause to be issued and delivered, to Buyer (registered in the name or names
of the transferee in the case of an exchange in connection with a transfer), a
certificate or certificates for the number of shares of Common Stock issuable
upon exchange of such share or shares of Class B Stock. Such exchange shall be
deemed to have been effected immediately prior to the close of business on the
date on which the certificate or certificates for such share or shares, together
with the other documents referred to
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in paragraph (b) of this Section 5.08, if applicable, shall have been
surrendered and any payment required pursuant to paragraph (e) of this Section
5.08 shall have been made.
(d) In the case of an exchange in connection with a transfer, if the
number of shares of Class B Stock represented by the certificate or certificates
surrendered for exchange exceeds the number of shares exchanged, the Corporation
shall, upon such exchange, execute and deliver to Buyer, at the expense of the
Corporation, a new certificate or certificates for the number of shares of Class
B Stock represented by the certificate or certificates surrendered which are not
to be exchanged.
(e) Buyer will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on exchange of the Class B Stock pursuant to this Section 5.08.
SECTION 5.09. Change of Control. (a) Subject to paragraphs (c) and (d)
below, upon the occurrence of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Corporation shall, to the extent funds
are legally available therefor, make an offer (the "Change of Control Offer") to
Buyer to repurchase (i) if such Change of Control Date is prior to the Change of
Control Premium Date, 100% of Buyer's shares of Preferred Stock, or (ii) if such
Change of Control Date is on or after the Change of Control Premium Date, 50% of
Buyer's shares of Preferred Stock, in either case, at a price per share in cash
equal to (A) if the Change of Control Payment Date is prior to the First Call
Date (as defined in the Certificate of Designations), 110% of the product of (i)
one plus the number (or fraction) of shares of Preferred Stock accrued and
unpaid as dividends on such share to the Change of Control Payment Date, times
(ii) the Conversion Ratio in effect immediately prior to the Change of Control,
times (iii) if the Change of Control is the result of a tender or exchange
offer, merger or other form of business combination, the price paid per share of
Common Stock in such tender or exchange offer, merger or other form of business
combination (with the fair market value of any non-cash consideration being
determined in good faith by the Board of Directors of the Corporation), or if
the Change of Control is not the result of a tender or exchange offer, merger or
other form of business combination, the 10-Day Market Price of the Common Stock
on the Change of Control Date and (B) if the Change of Control Payment Date is
on or after the First Call Date, the Redemption Price (as defined in the
Certificate of Designations); provided, that Buyer shall not be entitled to
tender any Preferred Stock under this provision until such time as the
Corporation has repurchased such debt securities as are required to be
repurchased by the Corporation upon such event pursuant to the Corporation's
credit and financing agreements. The
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Corporation shall promptly take all actions required to make such repurchases of
debt securities.
(b) The Corporation shall make the Change of Control Offer not later
than 30 days following the Change of Control Date by giving notice to Buyer
specifying a date, not less than 20 days nor more than 30 days after the date of
such notice, on which the Corporation will purchase any shares of Preferred
Stock subject to such offer (the "Change of Control Payment Date"). Not less
than 2 business days prior to the Change of Control Payment Date, Buyer shall
notify the Corporation (an "Election Notice") as to the number of shares of
Preferred Stock in respect of which Buyer is accepting the Change of Control
Offer. If Buyer does not deliver the Election Notice by such date, its rights
under this Section 5.09 will terminate. If Buyer does deliver an Election Notice
by such date, then (i) such Election Notice will be a binding commitment of
Buyer to sell to the Corporation on the Change of Control Payment Date the
number of shares of Preferred Stock specified in such Election Notice, subject
to Section 5.09(a) and (ii) on the Change of Control Payment Date, (A) the
Corporation will deliver to Buyer an amount of cash equal to the purchase price
for the Preferred Stock to be purchased and (B) Buyer will deliver to the
Corporation free and clear of any Liens one or more certificates representing
the Preferred Stock to be sold duly endorsed or accompanied by stock powers duly
endorsed in blank, with any required transfer stamps affixed thereto.
(c) Notwithstanding the foregoing, the Corporation shall not be required
to make a Change of Control Offer following a Change of Control if a third party
makes the Change of Control Offer in the manner, at the price and at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Corporation and purchases all shares of Preferred
Stock validly tendered under such Change of Control Offer.
(d) The Corporation's obligations under this Section 5.09 are subject to
compliance with the DGCL. If the Corporation is limited by the DGCL from fully
complying with its obligations hereunder, the Corporation agrees that: (i) it
will comply with its obligations hereunder to the extent it is able to do so and
(ii) it will use its best efforts to remove any such legal impediment. If at any
time, the Corporation is obligated to make a Change of Control Offer hereunder
but is not able to fully perform its obligations hereunder because of a legal
impediment, Buyer may elect to have the Corporation defer such Change of Control
Offer until the Corporation is legally able to fully perform its obligations
hereunder. The Preferred Stock will continue to accrue dividends until
repurchased, redeemed or converted.
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SECTION 5.10. Cross Ownership. For so long as Buyer holds equity
securities representing at least 5% of the total equity of the Corporation, the
Corporation and its Affiliates will use their reasonable best efforts not to
take any action which would cause or result in any violation by the Corporation
and its Affiliates or by the Buyer or any of its Affiliates of applicable
provisions of the cross-ownership provisions of the Communications Act of 1934,
as amended, or any comparable provisions of other applicable federal, state or
local statutes or regulations, such that Buyer or any of its Affiliates would,
as a result of Buyer's or its Affiliates' ownership, operation or management of
cable television systems owned, operated, managed or subject to a definitive
purchase agreement to be acquired by Buyer or its Affiliates as of the date of
this Agreement and its interest in the Corporation, be compelled to (i) divest
or restructure any interest in any such cable television system; (ii) divest or
restructure its interest in the Corporation (or be compelled to terminate or
restructure any of the agreements referred to in Section 8.02(d)); or (iii)
incur any penalty or other sanction as a result of such action. Buyer and the
Corporation will, and will cause their respective Affiliates to, cooperate with
each other to seek to obtain any consents or waivers necessary to avoid
violations of the type referred to in the previous sentence, provided that
neither Buyer nor any of its Affiliates shall be required to agree to any
divestiture or restructuring of any of its assets or business or the agreements
referred to in Section 8.02(d) in order to secure any such consent or waiver.
Should such required consents and waivers not be secured, the Corporation and
its Affiliates will use their reasonable best efforts to refrain from such
actions and will use their reasonable best efforts to take such actions as may
be necessary from time to time in order to remedy any situation that could
otherwise give rise to any such results as a result of such circumstances.
SECTION 5.11. Special Preferred Stock. After the Closing and for so long
as Buyer is entitled to appoint a Buyer Director under Section 5.04
(disregarding the proviso to the first sentence thereof), if the Corporation
proposes to take any action that would cause Buyer to cease to be an "interested
stockholder" for purposes of Section 203 of the DGCL under circumstances where
Buyer's subsequent attainment of such status would not, for any reason, have
been previously approved by the action of the Board of Directors taken on
September 28, 1999 (or at any time on Buyer's reasonable request), then prior to
taking such action the Corporation shall create and deliver to Buyer one share
of a new series of preferred stock (the "Special Preferred") of the Corporation,
such share of Special Preferred to (x) have no economic interest or right in the
Corporation or any of its assets and (y) have at all times a vote equal to the
difference between (a) 15% of the "outstanding voting stock" (as defined in
Section 203 of the DGCL and as calculated under Section 203 with respect to
Buyer) and (b) the percentage of the outstanding voting stock of the Corporation
that Buyer otherwise "owns" (as defined in Section 203 of the DGCL); provided,
however, that in no event will
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such vote be less than zero. The Special Preferred will vote together with the
Common Stock generally in the election of directors and on no other matters
except as required by law. The Special Preferred will have no separate or class
voting rights, except as required by law. Buyer agrees to cause such share of
Special Preferred to be present at all votes of the Corporation's stockholders
on the election of directors in the same proportion as the Voting Securities are
present, and will vote (and abstain) such share of Special Preferred on the
election of directors in the same proportion as the Corporation's other
stockholders vote (and abstain) on such matters. At the time the Special
Preferred is issued, Buyer will grant to the Corporation an irrevocable proxy to
vote the share of Special Preferred at all meetings of the Corporation's
stockholders at which directors are elected, and in all actions by written
consent, in the manner set forth in the preceding sentence. Buyer also agrees to
enter into such other arrangements, but not including depositing the share of
Special Preferred in a voting trust, as the Corporation may request from time to
time, in order to ensure that the share of Special Preferred will be voted in
the manner set forth above. The parties acknowledge and agree that the purpose
and intent of the creation of the Special Preferred is to ensure that until
Buyer's rights under Section 5.04 terminate, Buyer's status as an "interested
stockholder" of the Corporation as a result of the exercise of any of Buyer's
rights under this Agreement or the Certificate of Designations be and has been
approved in advance by the Board of Directors of the Corporation for all
purposes of Section 203 of the DGCL without in any way providing to Buyer any
additional economic rights or benefits other than those otherwise provided for
in this Agreement or the Certificate of Designations.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. Confidentiality. (a) Buyer will hold, and will use its
best efforts to cause its officers, directors, shareholders, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law or national stock exchange, all confidential documents and
information concerning the Corporation or any of its Affiliates furnished to
Buyer, except to the extent that such information can be shown to have been (i)
previously known on a non- confidential basis by Buyer or such Representatives,
(ii) in the public domain through no fault of Buyer or its Representatives
(acting in their capacity as such or with respect to information received in
their capacity as such) or (iii) later
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acquired by Buyer or such Representatives from sources other than the
Corporation or any of its Affiliates not known by Buyer or such Representatives,
as applicable, to be bound by any confidentiality obligation; provided that
Buyer may disclose such information to any of the Representatives in connection
with the transactions contemplated by this Agreement so long as such Persons are
informed by Buyer of the confidential nature of such information and are
directed by Buyer to treat such information confidentially. Buyer shall be
responsible for any failure to treat such information confidentially by such
Persons. The obligation of Buyer to hold and to cause the Representatives to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information. Buyer agrees that it shall not
and it shall cause the Representatives not to use any confidential documents or
information for any purpose other than monitoring and evaluating its investment
in the Corporation and in connection with the transactions contemplated by this
Agreement. If this Agreement is terminated, Buyer will, and will use its
reasonable best efforts to cause its Representatives to, destroy or deliver to
the Corporation, upon request, all documents and other materials, and all copies
thereof, obtained by Buyer or on its behalf from the Corporation, or any of the
Representatives, in connection with this Agreement that are subject to such
confidence.
(b) In the event Buyer or anyone to whom Buyer transmits confidential
information is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoenas, civil investigative demand or
similar process) to disclose any such information, Buyer will provide the
Corporation with prompt notice so that the Corporation may seek a protective
order or other appropriate remedy and/or waive Buyer's compliance with the
provisions of this Section. In the event that such protective order or other
remedy is not obtained sufficiently promptly so as not to adversely affect Buyer
or those of its officers, directors, employees, accountants, counsel,
consultants, advisors and agents as to whom the information has been requested
or required, or the Corporation waives Buyer's compliance with the provisions of
this Agreement, Buyer will furnish only that portion of such information that
Buyer is advised by counsel is legally required and will, at the Corporation's
expense and direction, exercise its reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information.
SECTION 6.02. Sale or Transfer of Restricted Securities. During the
Standstill Period, Buyer will not, and will not permit its Affiliates to,
directly or indirectly, sell, pledge, encumber or otherwise transfer, or agree
to sell, pledge, encumber or otherwise transfer, any Restricted Securities;
provided that Buyer and its Affiliates may sell, pledge, encumber or otherwise
transfer Preferred Stock, Common Stock or Class B Stock (a) in any transaction
in compliance with
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Rule 144 under the Securities Act; provided that any such sale shall be subject
to the volume and manner of sale limitations set forth in such rule whether or
not legally required unless Buyer shall use commercially reasonable efforts not
to sell securities to a Person that would not be a Permitted Transferee (and in
the case of an arranged sale Buyer will not transfer securities to a Person that
would not be a Permitted Transferee), (b) in a bona fide firm commitment,
underwritten public offering registered under the Securities Act in which Buyer
and the underwriters use commercially reasonable efforts to prevent the sale of
such stock to any Person that would, after giving effect to such sale, not be a
Permitted Transferee, (c) to a commercial bank or other financial institution in
connection with a bona fide financing transaction by Buyer, provided that such
bank or other financial institution agrees to comply with the transfer and
voting restrictions set forth in this Agreement with respect to such stock, and
(d) to Permitted Transferees. Buyer shall not sell, pledge, encumber or
otherwise transfer any Preferred Stock unless the transferee agrees to
arrangements consistent with those described in Section 6.06 which are
acceptable to the Corporation in its reasonable discretion. A "Permitted
Transferee" is a Person who after giving effect to such sale, pledge,
encumbrance or transfer, would, together with its Affiliates and with any
members of a Group in which such Person or any of its Affiliates is a member,
beneficially own securities representing less than 5% of the Total Voting Power
and less than 15% of the aggregate number of outstanding shares of Common Stock
and Class B Stock (assuming, in each case, the conversion, exercise or exchange
of all Convertible Securities beneficially owned by such Person, its Affiliates
and such Group members).
SECTION 6.03. Acquisition of Voting Securities. (a) During the
Standstill Period, and notwithstanding anything in this Agreement to the
contrary, without the prior written consent of the Board of Directors,
specifically expressed in a resolution adopted by a majority of the directors of
the Corporation who are not Buyer Directors, Buyer will not, and will not permit
its Affiliates to, purchase or otherwise acquire, directly or indirectly, or
agree or offer to purchase or otherwise acquire any Voting Securities of the
Corporation if, as a result thereof, Buyer and its Affiliates, in the aggregate,
would beneficially own Voting Securities representing more than the Agreed
Percentage of the Total Voting Power.
(b) If, immediately prior to the record date for a meeting of the
Corporation's stockholders at which a Takeover Proposal or Stock Issuance
Proposal is to be considered, the conversion by Buyer of Preferred Stock into
Common Stock would violate any material legal impediment imposed by any
Regulatory Authority, Buyer shall, notwithstanding Section 6.06 or any other
provision of this Agreement, be permitted to vote Preferred Stock beneficially
owned by Buyer in respect of such Takeover Proposal or Stock Issuance Proposal
to the extent necessary to increase Buyer's vote to the Agreed Percentage. With
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respect to such vote and the implementation of this Section 6.03 only, the
applicable amount of Preferred Stock will be deemed to have been converted to
Common Stock for purposes of the definition of the terms "Agreed Percentage" and
"Voting Securities" in Section 1.01. The parties will cooperate with each other
to remove any such legal impediments to the conversion of the Preferred Stock.
SECTION 6.04. Standstill. (a) Buyer agrees that from the date hereof
until the earlier of (i) the date of a Change of Control, (ii) the seventh
anniversary of the Closing Date, (iii) the date upon which the Level 3 Holders
sell to one Person, in one transaction or a series of related transactions,
Voting Securities or Convertible Voting Securities representing 5% or more of
the Total Voting Power (assuming the conversion, exercise or exchange of all
Convertible Voting Securities held by such Person and the members of any Group
of which such Person is a member) if following such sale such Person, or any
Group of which such Person is a member, would beneficially own Voting Securities
representing 15% or more of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such Person
and the members of any Group of which such Person is a member) and (iv) the
occurrence of a Section 6.04(e) Event (the "Standstill Period"), without the
prior written consent of the Board of Directors, specifically expressed in a
resolution adopted by a majority of the directors of the Corporation who are not
Buyer Directors, the Buyer will not and will not permit its Affiliates to:
(i) purchase or otherwise acquire, directly or indirectly, or agree
or offer to purchase or otherwise acquire (except, in any case, (A)
pursuant to the terms of this Agreement or the Certificate of
Designations or (B) by way of a stock dividend, stock split,
reclassification, recapitalization or other similar event by the
Corporation), any Restricted Securities; provided that if the
Corporation shall issue any Restricted Securities in respect of which
Buyer did not have the right to purchase its pro-rata share under
Section 5.07, Buyer shall be permitted to purchase in the open market or
pursuant to one or more private transactions, the number of shares of
such class of Restricted Securities as it would have been entitled to
purchase if it had been entitled to purchase its pro-rata share of such
issuance under Section 5.07;
(ii) "solicit", or become a "participant", directly or indirectly,
in any "solicitation" of proxies (as such terms are defined under the
Exchange Act) from any holder of Voting Securities or Convertible Voting
Securities in connection with any vote or other action on any matter or
agree or announce its intention to vote with any Person
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undertaking a "solicitation" or seek to advise, encourage or influence
any Person with respect to the voting of any Voting Security;
(iii) seek, propose (in a manner that is intended to require, or
would reasonably be expected to require, public disclosure) or make any
statement with respect to, or otherwise participate in, any merger,
consolidation, business combination, tender or exchange offer, sale or
purchase of assets, sale or purchase of securities (except as and to the
extent specifically permitted by this Section 6.04), dissolution,
liquidation, restructuring, recapitalization or similar transactions of
or involving the Corporation or any of its Subsidiaries;
(iv) form, join or in any way participate in a Group with respect
to any Restricted Securities;
(v) grant any "proxies" (as defined under the Exchange Act) with
respect to any Voting Securities to any Person (except as recommended by
the Board of Directors of the Corporation) or deposit any Voting
Securities or Convertible Voting Securities in a voting trust or enter
into any other arrangement or agreement with respect to the voting
thereof except as set forth in Section 6.05 or pursuant to Section 5.11
or Section 6.06;
(vi) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board
of Directors or policies of the Corporation;
(vii) seek, alone or in concert with others, representation on the
Board of Directors except as specifically set forth in Section 5.04
hereof, or seek the removal of any member of the Board of Directors;
(viii) make any publicly disclosed proposal or enter into any
discussion regarding any of the foregoing;
(ix) make any proposal, statement or inquiry, or disclose any
intention, plan or arrangement (whether written or oral) inconsistent
with the foregoing, or make or disclose any request to amend, waive or
terminate any provision of this Section 6.04 or Section 6.02, 6.03, 6.05
or 6.06; or
(x) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral)
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with, or advise, finance, assist or encourage, any other Person in
connection with any of the foregoing.
(b) Nothing contained in this Section 6.04 shall be deemed in any way to
prohibit or limit (i) the activities of the Buyer Directors acting in their
capacity as directors of the Corporation or (ii) any transactions in the
ordinary course of business between the Corporation and its Subsidiaries, on the
one hand, and Buyer and its Affiliates, on the other hand.
(c) The following shall apply during the Standstill Period:
Notwithstanding the provisions of Section 6.04(a), if the Corporation receives
an indication of interest for a Takeover Proposal that it intends to consider,
it will promptly notify Buyer of such fact. If thereafter or otherwise the
Corporation shall propose to enter into negotiations with any Person regarding a
possible Takeover Proposal (a "Negotiated Proposal"), then prior to entering
into such negotiations, the Corporation shall notify Buyer that it proposes to
enter into negotiations in respect of a Negotiated Proposal (a "Negotiation
Notice") and shall give Buyer a period of not less than four Business Days (the
"Determination Period") to determine whether Buyer wishes to enter into
negotiations with the Corporation regarding a possible Takeover Proposal (a
"Buyer Proposal"). The Negotiation Notice shall provide only the following
information: (i) if the Person making the Negotiated Proposal is proposing a
transaction involving the use by such Person of cash consideration, (A) whether
it will be Fully Financed (as defined below) at the time the Board may approve
the Negotiated Proposal or (B) if it will not be Fully Financed, the identity of
such Person and (ii) if the Person making the Negotiated Proposal is proposing a
transaction involving the use by such Person of non-cash consideration, the
identity of such Person and the form of consideration proposed to be used. If
after the delivery of the Negotiation Notice, the Person making the Negotiated
Proposal and the Corporation determine to change the form of consideration or
the Fully Financed status changes, the Corporation will provide Buyer with
another Negotiation Notice (which will commence a new Determination Period). The
cash consideration to be delivered under a Negotiated Proposal will be "Fully
Financed" for purposes hereof if either (i) the Person making the Negotiated
Proposal has committed financing for such Negotiated Proposal or (ii) such
Person is a publicly traded entity with an equity market capitalization of at
least 200% of the equity market capitalization of the Corporation.
(i) If within the Determination Period, Buyer notifies the
Corporation that it wishes to negotiate regarding a Buyer Proposal, it
shall be permitted to negotiate with the Corporation regarding a Buyer
Proposal and each of the Buyer Directors shall recuse themselves from
consideration of the Negotiated Proposal and the Buyer Proposal. If the
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Board of Directors does not approve the Negotiated Proposal or the Buyer
Proposal, Buyer's rights to negotiate regarding a Buyer Proposal shall
terminate. If the Board of Directors determines to approve the
Negotiated Proposal, Buyer shall thereafter be permitted to (A) make a
Buyer Proposal by way of a tender or exchange offer or otherwise and (B)
take other actions in opposition to the Negotiated Proposal, and in
support of a Buyer Proposal, that would otherwise be prohibited by
Section 6.04(a) (other than clause (i) thereof, except pursuant to
Buyer's tender or exchange offer) (the actions referred to under clause
(A) and (B) of this sentence, the "Permitted Actions"). If the
Negotiated Proposal is rejected by the shareholders of the Corporation,
Buyer's rights to take Permitted Actions shall thereupon terminate;
provided that if at such time Buyer has proposed a Buyer Proposal to the
Corporation's shareholders and such Buyer Proposal is still pending,
Buyer's rights to take Permitted Actions shall continue until the
earlier of (1) the date upon which the Buyer Proposal is rejected by the
Corporation's shareholders and (2) 60 days after the date upon which the
Negotiated Proposal was rejected. Upon the termination of Buyer's rights
to take Permitted Actions hereunder, Buyer shall take any action
necessary to promptly terminate all proxies, agreements, Groups and
other arrangements entered into that would have been prohibited under
Section 6.04(a) but for the effect of this Section 6.04(c).
(ii) If within the Determination Period, Buyer does not notify the
Corporation that it intends to negotiate with the Corporation regarding
a Buyer Proposal, Buyer shall not be permitted to negotiate with the
Corporation regarding, or otherwise make, a Buyer Proposal and shall not
be released from the restrictions contained in Section 6.04(a) at any
time either before or after approval of the Negotiated Proposal by the
Board of Directors with respect to such Negotiated Proposal.
(d) If, during the Standstill Period, the Board of Directors shall
approve a process pursuant to which Takeover Proposals are to be solicited from
one or more Persons, then the provisions of Section 6.04(c) shall apply in
respect of such process except that (i) the Determination Period shall end no
earlier than the day prior to the last date by which such Persons are required
to submit Takeover Proposals (or in the event that the Corporation determines to
enter into its bona fide negotiation with one or more participants in such
process prior to such date, the date upon which such negotiations shall begin)
and (ii) the term "Negotiated Proposal" shall mean the Takeover Proposal(s) of
one or more of the participants in such process.
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(e) If any Person shall commence and not withdraw a bona fide
unsolicited tender or exchange offer that if successful would result in a Change
of Control (an "Offer"), the Standstill Period shall terminate unless (i) within
10 business days of the announcement of such Offer, the Corporation shall have
publicly recommended that the Offer not be accepted and (ii) the Level 3 Holders
shall be subject to an agreement not to tender or otherwise sell Voting
Securities beneficially owned by the Level 3 Holders to the Person making the
Offer except to the extent the Voting Securities beneficially owned by the Level
3 Holders that are not subject to such an agreement shall be less than 5% of the
Total Voting Power. The termination of the Standstill Period pursuant to this
Section 6.04(e) is referred to herein as a "Section 6.04(e) Event."
SECTION 6.05. Voting Arrangements. During the Standstill Period, Buyer
shall vote and cause to be voted all Voting Securities owned by the Buyer (i)
for nominees to the Board of Directors of the Corporation who have been
recommended by the Corporation's Board of Directors and (ii) on all other
matters submitted to the holders of Voting Securities, either in accordance with
the recommendations of the Corporation's Board of Directors or in proportion to
the votes cast by the other holders of Voting Securities; provided that (A) with
respect to any Takeover Proposal submitted to the vote of the Corporation's
stockholders, Buyer shall be free to vote without restriction all Voting
Securities beneficially owned by it and (B) with respect to any proposal to
approve the issuance of equity securities by the Corporation (not including a
proposal to approve a stock option or other director or officer compensation
plan and not in connection with a Takeover Proposal) (a "Stock Issuance
Proposal") submitted to the vote of the Corporation's stockholders, Buyer shall
be free to vote without restriction Voting Securities beneficially owned by it
representing up to the Agreed Percentage (disregarding clause (i) of the proviso
in the definition of such term) of the Total Voting Power. Buyer shall cause all
Voting Securities owned by Buyer to be represented, in person or by proxy, at
all meetings of holders of Voting Securities of which Buyer has actual notice,
so that such Voting Securities may be counted for the purpose of determining the
presence of a quorum at such meetings. The Corporation agrees to give Buyer
reasonable advance notice of the record date of any meeting of stockholders (or
consent solicitation) to which a Takeover Proposal or a Stock Issuance Proposal
will be submitted for approval (or in respect of which consents will be sought)
so that Buyer may, subject to the other provisions of this Agreement, convert
shares of Preferred Stock into Common Stock prior to the applicable record date
and vote such shares of Common Stock at such meeting (or execute such consent)
as permitted hereby.
SECTION 6.06. Voting of Preferred Stock. At the Closing and subject to
Section 6.03(b), Buyer shall enter into any arrangement, agreement or proxy with
respect to the voting of the Preferred Stock (other than a voting trust) as
requested
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by the Corporation, in its reasonable discretion, for purposes of ensuring that
such shares of Preferred Stock (together with any shares of Preferred Stock
issued as dividends) will be (i) represented, in person or by proxy at all
meetings of holders of Voting Securities of which Buyer has actual notice in
proportion to the representation of votes entitled to be cast by holders of
Voting Securities, so that such portion of such shares of Preferred Stock may be
counted for the purpose of determining the presence of a quorum at such meetings
and (ii) voted (and abstained) in proportion to the votes cast (and abstained)
by the holders of Voting Securities.
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts;
Further Assurances. Buyer and the Corporation acknowledge that certain
regulatory or governmental approvals may be required to lawfully consummate the
transactions contemplated by this Agreement. Subject to the terms and conditions
of this Agreement, Buyer and the Corporation will, and will cause their
Affiliates to, use their reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. The Corporation and Buyer agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this Agreement.
SECTION 7.02. Certain Filings. (a) The Corporation and Buyer will, and
will cause their Affiliates to, cooperate with one another (i) in connection
with the Proxy Statement, (ii) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement or the
conversion by Buyer of Preferred Stock and (ii) in taking such actions or making
any such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
Without limiting the generality of the foregoing, the Corporation and Buyer
shall promptly after the date of this Agreement, prepare and file the
notifications required under the HSR Act in connection with the transactions
contemplated by this Agreement. The Corporation and Buyer shall respond as
promptly as practicable to (i) any inquiries or requests received from the
Federal Trade Commission or the
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Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general or other
governmental body in connection with antitrust or related matters. Each of the
Corporation and Buyer shall (A) give the other party prompt notice of the
commencement of any action, suit, litigation, arbitration, preceding or
investigation by or before any governmental body with respect to the
transactions contemplated by this Agreement, (B) keep the other party informed
as to the status of any such action, suit, litigation, arbitration, preceding or
investigation , and (C) promptly inform the other party of any communication to
or from the Federal Trade Commission, the Department of Justice or any other
governmental body regarding the transactions contemplated by this Agreement.
(b) The Corporation and Buyer will, and will cause their Affiliates to,
take such actions, make such payments or commitments, and agree to such
amendments to any of their respective franchises, licenses, contracts or other
agreements or authorizations, as shall be required in order to obtain a consent,
approval or waiver from any other Person in connection with the transactions
contemplated hereby and by the Certificate of Designations (including conversion
of the Preferred Stock), except if such actions, payments, commitments or
amendments, considered individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Corporation or Charter, as the
case may be. If the Corporation or Buyer, as the case may be, believes that such
actions, payments, commitments or amendments would have such a Material Adverse
Effect, the Corporation and Buyer shall cooperate in good faith to seek a
resolution to the circumstances which give rise to the requirement for such
action, payment, commitment or amendment or to determine an otherwise
appropriate resolution.
SECTION 7.03. Public Announcements. Prior to the Closing, the parties
agree to consult with each other before issuing any press release or making any
public statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange or quotation system, will not issue any
such press release or make any such public statement prior to such consultation.
Following the Closing, the parties agree to consult with each other before
issuing any press release or making any public filing that describes any terms
of this Agreement.
SECTION 7.04. Registration Rights Agreement. The terms set forth in
Exhibit B hereto are hereby incorporated by reference.
SECTION 7.05. Shareholder Meeting. (a) Promptly after the execution of
this Agreement, the Corporation will seek the concurrence of the National
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Association of Securities Dealers, Inc. (the "NASD") with the Corporation's view
that the issuance of securities contemplated hereby does not require approval of
the Corporation's stockholders. If the NASD concurs with the Corporation's view
that stockholder approval is not required, then approval of the Corporation's
stockholders will not be sought. If the NASD does not concur in the
Corporation's view, then the Corporation shall cause a meeting of its
stockholders (the "Stockholder Meeting") to be duly called and held as soon as
reasonably practicable for the purpose of voting on the approval of the issuance
of securities, contemplated by this Agreement. In connection with such meeting,
the Corporation will (i) promptly prepare and file with the Commission, use its
best efforts to have cleared by the Commission and thereafter mail to its
stockholders as promptly as practicable the Proxy Statement and all other proxy
materials for such meeting, (ii) use its best efforts to obtain the necessary
approvals by its stockholders of the transactions contemplated hereby and (iii)
otherwise comply with all legal requirements applicable to such meeting. The
Board of Directors shall recommend approval of the issuance of securities
contemplated by this Agreement by the Corporation's stockholders.
SECTION 7.06. Buyer's Option. (a) In the event that approval of the
transactions contemplated by this Agreement by the Corporation's stockholders
("Stockholder Approval") is required and prior to the Stockholders Meeting all
closing conditions set forth in Article 8 hereof (other than Section 8.01(a))
are satisfied or waived (other than those conditions that by their nature are to
be satisfied at the Closing and will in fact be satisfied at the Closing), then
at any time within 10 business days of the first date upon which the Corporation
notifies Buyer that the closing conditions set forth in Sections 8.01 (other
than Section 8.01(a)) and 8.02 (other than conditions that by their nature are
to be satisfied at Closing and will in fact be satisfied at Closing) are
satisfied or waived, Buyer may elect to purchase from the Corporation at the
Closing (the date of which shall be determined as if the closing condition in
Section 8.01(a) were satisfied) the largest number of shares of Preferred Stock
that it may acquire under applicable NASD rules without Stockholder Approval
(rounded down to the nearest hundred shares) ("Initial Shares") and the Purchase
Price to be paid therefor shall be appropriately adjusted. In the event that
Buyer does so elect and purchases the Initial Shares, the closing of such
transaction shall be treated as the Closing for purposes hereof, and dividends
shall accrue on the Initial Shares from the Closing Date. Buyer may exercise its
rights under this Section 7.06(a) by delivering written notice within the 10
business day period referred to above. If the Initial Shares are purchased,
Buyer and the Corporation shall use their best efforts to obtain Stockholder
Approval and consummate the Second Closing (as defined below).
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(b) In the event that, subsequent to the issuance of Initial Shares
pursuant to Section 7.06(a), Stockholder Approval is obtained at the Stockholder
Meeting, Buyer shall purchase from the Corporation a number of shares of
Preferred Stock equal to the Preferred Shares minus the Initial Shares (the
"Approved Shares") on the second business day following such Stockholder
Approval (the "Second Closing"); provided that the consummation of the Second
Closing would not contravene any applicable law or regulation that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on Buyer or the Corporation, or any judgment, injunction, order or
decree. At the Second Closing, Buyer shall pay the Corporation the Purchase
Price (appropriately adjusted to account for that portion of the Purchase Price
paid with respect to the Initial Shares) and an amount in cash equal to all
accrued and unpaid dividends on the Approved Shares to the date of the Second
Closing. Dividends shall accrue on the Approved Shares from the Closing Date but
shall not be payable until the first Dividend Payment Date after the date of the
Second Closing. In the event that subsequent to the issuance of Initial Shares
pursuant to Section 7.06(a), Stockholder Approval is not obtained at the
Shareholder Meeting, Buyer and the Corporation shall negotiate in good faith to
achieve a business objective similar to that contemplated by this Agreement
assuming Stockholder Approval had been obtained.
(c) In the event that (i) Stockholder Approval is required but is not
obtained at the Stockholder Meeting, (ii) all closing conditions set forth in
Article 8 hereof (other than Section 8.01(a)) are satisfied or waived (other
than those conditions that by their nature are to be satisfied at the Closing
and will in fact be satisfied at the Closing) and (iii) Buyer has not exercised
its option under Section 7.06(a), Buyer, at its option, may elect to purchase
Initial Shares from the Corporation at the Closing (as if the closing condition
in Section 8.01(a) were satisfied), and the Purchase Price to be paid therefor
shall be appropriately adjusted. Buyer may exercise its rights under this
Section 7.06(c) by written notice delivered to the Corporation within 10
business days after the failure to obtain Stockholder Approval. In the event
that Buyer exercises its option under this Section 7.06(c), Buyer and the
Corporation shall negotiate in good faith to achieve a business objective
similar to that contemplated by this Agreement assuming Stockholder Approval had
been obtained.
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ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Buyer and the Corporation.
The obligations of Buyer and the Corporation to consummate the Closing are
subject to the satisfaction of the following conditions:
(a) the transactions contemplated by this Agreement shall have been
approved by the stockholders of the Corporation, if required;
(b) (i) all filings with, notifications to and consents from Regulatory
Authorities required for the consummation of the Closing, with such exceptions
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Corporation or Buyer and (ii) the Schedule 3.04
Consent, shall in each case have been made or obtained, as applicable, in form
and substance reasonably satisfactory to the Corporation and Buyer; and
(c) no provision of any applicable law or regulation (with such
exceptions as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Corporation or Charter) and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
SECTION 8.02. Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) The Corporation shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing;
(b) The representations and warranties of the Corporation contained in
this Agreement shall in each case, if specifically qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing (except that, for the purposes of this Section
8.02(b), the representation and warranty in Section 3.12(i) shall only apply
with respect to any action, suit, investigation or proceeding instituted by a
governmental agency or authority), as if made at and as of such date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct, or true and correct in all material respects, as the case may be, on
and as of such earlier date);
(c) The Certificate of Designations shall have been filed in accordance
with the laws of Delaware;
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(d) the Portal Agreement, the Channel Agreement and the LA Agreement
(or, in the case of any of the foregoing agreements, an agreement superseding
such first agreement executed by the parties to the first agreement) shall be in
full force and effect;
(e) The Corporation shall have delivered to Buyer (i) a copy of the
resolutions adopted by the Board of Directors, certified by the Secretary of the
Corporation, authorizing this Agreement and approving Buyer's attainment of the
status of an "interested stockholder" under Section 203 of the DGCL and (ii) a
certificate dated the Closing Date, signed by an officer of the Corporation,
certifying as to the fulfillment of the conditions set forth in Sections 8.02(a)
and (b);
(f) The Corporation shall have delivered to Buyer an opinion reasonably
acceptable to Buyer from the General Counsel of the Corporation, with respect to
the due incorporation, due authorization and capitalization of the Corporation;
and
(g) The Corporation shall have delivered to Buyer an opinion reasonably
acceptable to Buyer from Davis Polk & Wardwell, special counsel to the
Corporation, with respect to the validity of the Preferred Shares and the valid
and binding nature and enforceability of this Agreement.
SECTION 8.03. Conditions to Obligation of the Corporation. The
obligation of the Corporation to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date;
(b) The representations and warranties of Buyer contained in this
Agreement shall in each case, if specifically qualified by materiality, be true
and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing, as if made at and as of such date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct, or true and correct in all material respects, as the case may be, on
and as of such earlier date);
(c) The Corporation shall have received a certificate dated the Closing
Date, signed by an appropriate officer of Buyer, certifying as to the
fulfillment of the conditions set forth in Sections 8.03(a) and 8.03(b); and
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(d) Buyer shall have delivered to the Corporation an opinion reasonably
acceptable to the Corporation from Irell & Manella LLP, special counsel to
Buyer, with respect to the due incorporation and due authorization of Buyer and
the valid and binding nature and enforceability of this Agreement.
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Corporation and Buyer;
(b) by either the Corporation or Buyer if the Closing shall not have
been consummated on or before June 30, 2000, unless extended by mutual agreement
or unless the failure to consummate the Closing is attributable to a failure on
the part of the party seeking to terminate this Agreement to perform any
obligation required to be performed by such party at or prior to the Closing
Date;
(c) by either the Corporation or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction; or
(d) if the approval of the Corporation's stockholders to the
consummation of the transactions contemplated by this Agreement, if required,
shall not have been obtained at the Stockholder Meeting duly convened and
finally adjourned; provided, however, that the Corporation may not terminate
this Agreement pursuant to this clause (d) unless Buyer does not exercise its
rights under Section 7.06(a) or 7.06(c) hereof.
The party desiring to terminate this Agreement pursuant to Section 9.01(b),
9.01(c) or 9.01(d) shall promptly give notice of such termination to the other
party.
SECTION 9.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of either
party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful (a) failure of either
party to fulfill a condition to the performance of the obligations of the other
party, (b) failure to perform a covenant of this Agreement or (c) breach by
either party hereto of any
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representation or warranty or agreement contained herein, such party shall be
fully liable for any and all losses incurred or suffered by the other party as a
result of such failure or breach. The provisions of Sections 6.01, 11.01, 11.03,
11.05, 11.06, 11.07, 11.08, 11.09, 11.10, and 11.12 shall survive any
termination hereof pursuant to Section 9.01.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
SECTION 10.01. Survival of Representation and Warranties. All
representations and warranties contained in this Agreement and all claims with
respect thereto shall terminate upon the expiration of 18 months after the
Closing Date, except that the representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.06, 4.01, 4.02, and 4.03 shall survive
indefinitely. Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right of indemnity shall have been given in reasonable detail to the party
against whom such indemnity may be sought prior to such time.
SECTION 10.02. Indemnification. (a) The Corporation hereby indemnifies
Buyer against and agrees to hold Buyer harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Buyer arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by the Corporation pursuant to this Agreement; provided that
(i) the Corporation shall not be liable under this Section 10.02(a) unless the
aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(a) exceeds $33,000,000 in which event Buyer shall be entitled to
make a claim against the Corporation for the full amount of such Damages, and
(ii) the Corporation's maximum liability under this Section 10.02(a) shall not
exceed $1,320,000,000. In the event that such indemnity is payable by the
Corporation, the Corporation will advance or reimburse Buyer (in lieu of the
amount set forth in the preceding sentence) an amount equal to the product of
(x) such Damages, and (y) the Gross Up Adjustment. "Gross Up Adjustment" means a
fraction, the numerator of which is one and the denominator of which is the
difference between (A) one, and (B) Buyer's percentage ownership of the
outstanding Common Stock and Class B Stock (assuming the conversion, exercise or
exchange of all
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Convertible Securities and expressed as a decimal) at the time of payment of
such Damages.
(b) Buyer hereby indemnifies the Corporation against and agrees to hold
the Corporation harmless from any and all Damages incurred or suffered by the
Corporation arising out of any misrepresentation or breach of warranty, covenant
or agreement made or to be performed by Buyer pursuant to this Agreement;
provided that (i) Buyer shall not be liable under this Section 10.02(b) unless
the aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(b) exceeds $33,000,000, in which event the Corporation shall be
entitled to make a claim against Buyer for the full amount of such Damages, and
(ii) Buyer's maximum liability under this Section 10.02(b) shall not exceed
$1,320,000,000.
SECTION 10.03. Procedures. The party seeking indemnification under
Section 10.02 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may at its election participate in and control the defense of any such
suit, action or proceeding at its own expense. The Indemnifying Party shall not
be liable under Section 10.02 for any settlement effected without its consent of
any claim, litigation or proceeding in respect of which indemnity may be sought
hereunder.
SECTION 10.04. Inspections; No Other Representations . Buyer is an
informed and sophisticated purchaser, and has undertaken such investigation and
has been provided with and has evaluated such documents and information as it
has deemed necessary to enable it to make an informed and intelligent decision
with respect to the execution, delivery and performance of this Agreement. Buyer
will undertake prior to the Closing such further investigation and request such
additional documents and information as it deems necessary. Buyer agrees to
accept the Preferred Shares based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to the Corporation, except as expressly set forth in this
Agreement. Without limiting the generality of the foregoing, Buyer acknowledges
that the Corporation makes no representation or warranty with respect to (i) any
projections, estimates or budgets delivered to or made available to Buyer of
future revenues, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof) of the
Corporation and the Subsidiaries or the future business and operations of the
Corporation and the Subsidiaries or (ii) any other information or documents made
available to Buyer or its counsel, accountants or advisors with respect to the
Corporation or the
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Subsidiaries or their respective businesses or operations, except as expressly
set forth in this Agreement.
SECTION 10.05. Exclusivity. Except as specifically set forth in this
Agreement and except in the case of fraud, effective as of the Closing Buyer
waives any rights and claims Buyer may have against the Corporation, whether in
law or in equity, relating to the Corporation or the Preferred Shares or the
transactions contemplated hereby. The rights and claims waived by Buyer include,
without limitation, claims for breach of contract, breach of representation or
warranty, negligent misrepresentation and all other claims for breach of duty.
After the Closing, Section 10.02 will provide the exclusive remedy for any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby,
except in the case of fraud.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent if sent by
telecopier or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally to
the intended recipient, and (iv) one Business Day later, if sent by overnight
delivery via a national courier service, and in each case, addressed,
if to Buyer, to:
Vulcan Ventures Incorporated
110 110th Avenue, N.E.
Suite 550
Bellevue, Washington 98004
Attention: William D. Savoy
Fax: (425) 453-1985
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
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Attention: Alvin G. Segel, Esq.
Andrew W. Gross, Esq.
Fax: (310) 203-7199
if to the Corporation, to:
RCN Corporation
105 Carnegie Center
Princeton, NJ 08540-6215
Attention: John J. Jones, Esq.
Fax: (609) 734-3830
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Taylor, Esq.
Fax: (212) 450-4800
Any party may change the address to which notices or other communications
hereunder are to be delivered by giving the other party notice in the manner
herein set forth.
SECTION 11.02. Amendments and Waivers. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative.
SECTION 11.03. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 11.04. Assignment. The rights and obligations of the parties
hereunder cannot be assigned or delegated except that (i) Buyer may assign all
of its rights and obligations under this Agreement to a single Controlled
Affiliate (provided that (A) any such Controlled Affiliate continues to be a
Controlled Affiliate of Buyer and (B) Buyer shall be responsible for any breach
by such Controlled Affiliate), (ii) Buyer may assign its rights and obligations
under Section
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7.04 and Exhibit B of this Agreement to any one or more Permitted Transferees
(if the related transfer is not a sale made under Rule 144 under the Exchange
Act), and (iii) if Buyer pledges any Preferred Stock to any commercial bank(s)
or other financial institution(s) in connection with a bona fide financing
transaction by Buyer then Buyer may assign to such commercial bank(s) or
financial institution(s) its rights and obligations under Section 5.09 of this
Agreement to the extent relating to the Preferred Shares so pledged, provided
that the rights of any such commercial bank(s) or financial institution(s) under
Section 5.09 will terminate immediately upon default by Buyer in connection with
such financing transaction, and provided further that if Buyer and such
commercial bank(s) or financial institution(s) shall each own shares of
Preferred Stock in respect of which a Change of Control Offer is made under
Section 5.09 when the Change of Control Date is on or after the Change of
Control Premium Date, each of Buyer and such commercial bank(s) or financial
institution(s) shall be entitled to accept the Change of Control Offer in
respect of 50% of the shares of Preferred Stock owned by such Person and subject
to such offer.
SECTION 11.05. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such state.
SECTION 11.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may only
be brought in the United States District Court for the Southern District of New
York or any New York State court sitting in New York City, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.01 shall be deemed
effective service of process on such party.
SECTION 11.07. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision
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of this Agreement is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder, except for rights provided to Permitted
Transferees under Section 7.04.
SECTION 11.08. Entire Agreement. This Agreement (including the Exhibits
hereto) and the Certificate of Designations constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement (except
for the provisions of the letter agreement dated July 29, 1999 that relate to
the solicitation and employment of employees of the Corporation, which remain in
effect).
SECTION 11.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 11.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 11.11. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to any court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
SECTION 11.12. No Recourse. Notwithstanding any of the terms or
provisions of this Agreement, (i) the Corporation agrees that neither it nor any
Person acting on its behalf may assert any claims or cause of action against any
officer, director, partner, member or stockholder of the Buyer or any of its
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Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby and (ii) the Buyer agrees that neither it nor
any Person acting on its behalf may assert any claims or cause of action against
any officer, director, partner, member or stockholder of the Corporation or any
of its Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
RCN CORPORATION
By: /s/ Bruce C. Godfrey
-----------------------------------
Name: Bruce C. Godfrey
Title: Chief Financial Officer
VULCAN VENTURES
INCORPORATED
By: /s/ William D. Savoy
-----------------------------------
Name: William D. Savoy
Title: Vice President
<PAGE>
SCHEDULE 3.04
Waiver in connection with the transactions contemplated by this
Agreement of clause (n) of Article VII of the Credit Agreement dated as of June
3, 1999 among the Corporation, the borrowers and lenders named therein and Chase
Manhattan Bank.
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SCHEDULE 3.05(b)
1. 6,514,949 shares of Common Stock issuable on conversion of the Series A
Preferred Stock.
2. 9,388,195 outstanding employee options.
3. An indeterminate number of shares of Common Stock issuable pursuant to
the Exchange Agreement dated as of July 17, 1999 between BecoCom, Inc.
and the Corporation.
4. Common Stock is convertible into Class B Stock under the Corporation's
Certificate of Incorporation.
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES B 7% SENIOR CONVERTIBLE PREFERRED STOCK
of
RCN CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, John J. Jones, Executive Vice President, General
Counsel and Corporate Secretary, and Bruce C. Godfrey, Executive Vice President
and Chief Financial Officer, of RCN Corporation, a Delaware corporation
(hereinafter called the "Corporation"), pursuant to the provisions of Sections
103 and 151 of the General Corporation Law of the State of Delaware, do hereby
make this Certificate of Designations and do hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation, the Board of Directors duly
adopted the following resolutions:
RESOLVED, that, pursuant to Article FOURTH of the Certificate of
Incorporation (which authorizes 25,000,000 shares of preferred stock, $1.00 par
value ("Preferred Stock") of which shares of Series A 7% Senior Convertible
Preferred Stock are currently issued and outstanding), the Board of Directors
hereby fixes the powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, of a series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 2,681,931 shares of the Preferred Stock of the
Corporation shall be designated as Series B 7% Senior Convertible Preferred
Stock (the "Series B Preferred Stock") (including 1,031,931 shares of Series B
Preferred Stock reserved exclusively for the payment of dividends pursuant to
paragraph 4).
2. Definitions. Unless the context otherwise requires, when used herein
the following terms shall have the meaning indicated.
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"10 Day Market Price" means the average of the daily Market Prices of the
Common Stock for the 10 consecutive trading days ending the day prior to the
date for which such value is to be computed
"20 Day Market Price" means the average of the daily Market Prices of the
Common Stock for the 20 consecutive trading days ending the day prior to the
date for which such value is to be computed.
"Adjusted Conversion Price" means, at any time, the Liquidation Preference
divided by the Conversion Ratio in effect at such time.
"Affiliate" means, with respect to any specified Person, any other Person
which, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling," and "controlled" have meanings
correlative to the foregoing.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York
City, New York generally are authorized or required by law or other
governmental actions to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting and/or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights (other than any evidence of indebtedness), warrants or options
exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of any of the following events:
(a) any Person or Group is or becomes the beneficial owner (as defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total Voting Stock of the Corporation; or (b) the Corporation consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person
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consolidates with, or merges with or into the Corporation, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the
Corporation is converted into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting
Stock of the Corporation is converted into or exchanged for Voting Stock of the
surviving or transferee corporation or its parent corporation and/or cash,
securities or other property in an amount which could be paid by the
Corporation under the terms of the Corporation's credit and financing
agreements and (ii) immediately after such transaction no Person or Group is
the beneficial owner (as defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Stock of the
surviving or transferee corporation, as applicable; or (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
"Class B Stock" means the Corporation's Class B common stock, par value
$1.00 per share.
"Common Stock" means the Corporation's common stock, par value $1.00 per
share.
"Conversion Price" means $62.00.
"Directed Conversion Election Date" means any date on or after the fifth
day before the First Call Date but before the Mandatory Conversion Date on
which the 20 Day Market Price is an amount equal to at least 110% of the
Adjusted Conversion Price.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
"First Call Date" means the 42-month anniversary of the earlier of (i)
January 1, 2000 and (ii) the Issue Date.
"Group" means a group within the meaning of Section 13(d)(3) of the
Exchange Act.
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"Issue Date" means the first date of issuance of shares of Series B
Preferred Stock.
"Issue 42 Date" means the 42-month anniversary of the Issue Date.
"Level 3 Holders" means Peter Kiewit Sons Inc., Level 3 Communications,
Inc. and Level 3 Telecom Holdings, Inc. and any of their respective controlled
Affiliates.
"Liquidation Preference" is an amount equal to $1,000.00 per share of
Series B Preferred Stock.
"Mandatory Conversion Date" means the seventh anniversary of the Issue
Date.
"Market Price" means, with respect to the Common Stock, on any given day,
(i) the price of the last trade, as reported on the Nasdaq National Market, not
identified as having been reported late to such system, or (ii) if the Common
Stock is so quoted, but not so traded, the average of the last bid and ask
prices, as those prices are reported on the Nasdaq National Market, or (iii) if
the Common Stock is not listed or authorized for trading on the Nasdaq National
Market or any comparable system, the average of the closing bid and asked
prices as furnished by two members of the National Association of Securities
Dealers, Inc. selected from time to time by the Corporation for that purpose;
provided that, in connection with (i) or (ii), the Corporation may from time to
time specify in advance the time at which the trade price or bid and ask
prices, respectively, shall be determined for purposes of a particular
calculation under this Certificate of Designations. If the Common Stock is not
listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be the fair value per share of such security as
determined in good faith by the Board of Directors of the Corporation.
"outstanding", when used with reference to shares of stock, means issued
shares, excluding shares held by the Corporation or a subsidiary.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust and any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Voting Stock" means, with respect to any Person, the Capital Stock of any
class or kind (other than the Series B Preferred Stock) ordinarily having the
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power to vote for the election of directors or other members of the governing
body of such Person.
3. Rank. (a) Any class or series of stock of the Corporation shall be
deemed to rank:
(i) prior to the Series B Preferred Stock, either as to the payment
of dividends or as to distribution of assets upon liquidation, dissolution
or winding up, or both, if the holders of such class or series shall be
entitled by the terms thereof to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up, in preference
or priority to the holders of Series B Preferred Stock ("Senior
Securities");
(ii) on a parity with the Series B Preferred Stock, either as to the
payment of dividends or as to distribution of assets upon liquidation,
dissolution or winding up, or both, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices per share
thereof be different from those of the Series B Preferred Stock, if such
stock shall be Series A 7% Senior Convertible Preferred Stock ( "Series A
Preferred Stock") or if the holders of the Series B Preferred Stock and of
such class of stock or series shall be entitled by the terms thereof to
the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, or both, in proportion to their respective
amounts of accrued and unpaid dividends per share or liquidation
preferences (including, but not limited to preferences as to payment of
dividends or other amounts distributable upon liquidation), without
preference or priority one over the other and such class of stock or
series is not a class of Senior Securities ("Parity Securities"); and
(iii) junior to the Series B Preferred Stock, either as to the
payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, or both, if such stock or series shall be
Common Stock or Class B Stock or if the holders of the Series B Preferred
Stock shall be entitled by the terms thereof to receipt of dividends, and
of amounts distributable upon liquidation, dissolution or winding up, in
preference or priority to the holders of shares of such stock or series
(including, but not limited to preferences as to payment of dividends or
other amounts distributable upon liquidation) ("Junior Securities").
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(b) The respective definitions of Senior Securities, Junior Securities and
Parity Securities shall also include any rights or options exercisable or
exchangeable for or convertible into any of the Senior Securities, Junior
Securities and Parity Securities, as the case may be.
(c) The Series B Preferred Stock shall be subject to the creation of
Junior Securities and Parity Securities.
4. Dividends. (a) The holders of shares of Series B Preferred Stock shall
be entitled to receive with respect to each share of Series B Preferred Stock,
when, as and if declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at a rate per annum equal to
seven percent (7%) of the Liquidation Preference per share, payable in
additional shares of Series B Preferred Stock ("Additional Shares") in
accordance with the terms of this Section 4. Such dividends shall be cumulative
from the Issue Date regardless of when actually issued (except that dividends
on Additional Shares shall accrue from the date such Additional Shares are
issued), whether or not in any Dividend Period or Dividend Periods there shall
be funds of the Corporation legally available for the payment of such
dividends, and shall be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (unless such day is not a Business
Day, in which event such dividends shall be payable on the next succeeding
Business Day) (each such date being a "Dividend Payment Date" and each such
quarterly period being a "Dividend Period"). Each such dividend shall be
payable to the holders of record of shares of the Series B Preferred Stock as
they appear on the share register of the Corporation on the corresponding
Record Date. As used herein, the term "Record Date" means, with respect to the
dividend payable on March 31, June 30, September 30 and December 31,
respectively of each year, the preceding March 15, June 15, September 15 and
December 15, or such other record date, not more than 60 days or less than 10
days preceding the payment dates thereof, as shall be fixed by the Board of
Directors. Accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time, without reference to any Dividend Payment Date,
to holders of record on such record date, not more than 45 days preceding the
payment date thereof, as may be fixed by the Board of Directors.
(b) The amount of dividends payable for each full Dividend Period for the
Series B Preferred Stock shall be computed by dividing the annual seven percent
(7%) rate by four. The amount of dividends payable for the initial Dividend
Period, or any other period shorter or longer than a full Dividend Period, on
the Series B Preferred Stock shall be computed on the basis of twelve 30-day
months and a 360-day year. Holders of shares of Series B Preferred Stock shall
not be entitled to any dividends, whether payable in cash, property or stock,
in excess of cumulative dividends, as herein provided, on the Series B
Preferred
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Stock. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series B Preferred Stock
that may be in arrears; provided that if dividends are not paid in full on any
Dividend Payment Date, dividends will cumulate as if the unpaid dividends were
payable in cash and the Liquidation Preference had been increased by the amount
of unpaid dividends until paid.
(c) So long as any shares of the Series B Preferred Stock are outstanding,
no dividend, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any Parity Securities, nor shall
any Parity Securities be redeemed, purchased or otherwise acquired for any
consideration (or moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly, (except by conversion into or exchange for Junior Securities)
unless in each case full cumulative dividends have been or contemporaneously
are declared and paid or declared and consideration sufficient for the payment
thereof set apart for such payment on the Series B Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of the dividend
on such class or series of Parity Securities or the redemption, purchase or
other acquisition thereof. When dividends are not paid in full or consideration
sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon shares of the Series B Preferred Stock and all dividends declared
upon any other class or series of Parity Securities shall be declared ratably
in proportion to the respective amounts of dividends accumulated and unpaid on
the Series B Preferred Stock and accumulated and unpaid on such Parity
Securities.
(d) So long as any shares of the Series B Preferred Stock are outstanding,
no dividends (other than dividends or distributions paid in shares of, or to
effectuate a stock split on, or options, warrants or rights to subscribe for or
purchase shares of, Junior Securities) shall be declared or paid or set apart
for payment or other distribution declared or made upon Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of shares of Common Stock made
for purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) (any such dividend, distribution, redemption or purchase being
hereinafter referred to as a "Junior Securities Distribution") for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation,
directly or indirectly (except by conversion into or exchange for Junior
Securities), unless in each case (i) the full cumulative dividends on all
outstanding shares of the Series B Preferred Stock and accrued and unpaid
dividends on any other Parity Securities shall have been paid or set apart for
payment for all past Dividend Periods with respect to the Series B Preferred
Stock and all past dividend periods
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with respect to such Parity Securities and (ii) sufficient consideration shall
have been paid or set apart for the payment of the dividend for the current
Dividend Period with respect to the Series B Preferred Stock and the current
dividend period with respect to such Parity Securities.
(e) The number of Additional Shares to be issued as dividends will equal
the cash amount of the dividend that would have been payable if dividends were
payable in cash, divided by the Liquidation Preference.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series B Preferred Stock shall be
entitled to receive with respect to each share of Series B Preferred Stock an
amount in cash equal to the Liquidation Preference per share plus an amount
equal to all dividends accrued and unpaid thereon to the date of final
distribution to such holders, but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on the Series B Preferred Stock and all Parity Securities, then such
assets, or the proceeds thereof, shall be distributed among the holders of
shares of Series B Preferred Stock and any such other Parity Securities ratably
in accordance with the respective amounts that would be payable on such shares
of Preferred Stock and any such other Parity Securities if all amounts payable
thereon were paid in full. For the purposes of this paragraph 5, (i) a
consolidation or merger of the Corporation with one or more corporations, or
(ii) a sale or transfer of all or substantially all of the Corporation's
assets, shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation.
(b) Subject to the rights of the holders of any Parity Securities, after
payment shall have been made in full to the holders of the Series B Preferred
Stock, as provided in this paragraph 5, any other series or class or classes of
Junior Securities shall, subject to the respective terms and provisions (if
any) applying thereto, be entitled to receive any and all assets remaining to
be paid or distributed, and the holders of the Series B Preferred Stock and any
Parity Securities shall not be entitled to share therein.
6. Redemption. (a) The Series B Preferred Stock shall not be redeemable by
the Corporation prior to the First Call Date. On and after the First Call Date,
to the extent the Corporation shall have funds legally available for such
payment, the Corporation may redeem at its option shares of Series B Preferred
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Stock, at any time in whole or from time to time in part, at a redemption price
per share equal to the Liquidation Preference, plus accrued and unpaid
dividends thereon to the date fixed for redemption, plus (if the date fixed for
redemption is prior to the Issue 42 Date) the amount of dividends that would
have accrued during the period from the date fixed for redemption to the Issue
42 Date, without interest (the "Redemption Price").
(b) Shares of Series B Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of the State of Delaware)
have the status of authorized and unissued shares of the class of Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of the Preferred Stock; provided that no such issued and reacquired
shares of Series B Preferred Stock shall be reissued or sold as Series B
Preferred Stock.
7. Procedure for Redemption. (a) In the event that fewer than all the
outstanding shares of Series B Preferred Stock are to be redeemed, the number
of shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be selected by lot or pro rata (with any fractional
shares being rounded to the nearest whole share) as may be determined by the
Board of Directors.
(b) In the event the Corporation shall redeem shares of Series B Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock register of the Corporation;
provided that neither the failure to give such notice nor any defect therein
shall affect the validity of the giving of notice for the redemption of any
share of Series B Preferred Stock to be redeemed except as to the holder to
whom the Corporation has failed to give said notice or except as to the holder
whose notice was defective. Each such notice shall state: (i) the redemption
date (which shall be a date on or after the First Call Date); (ii) the number
of shares of Series B Preferred Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of shares to be
redeemed from such holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, from and after the redemption
date, dividends on the shares of Series B Preferred Stock so called for
redemption shall cease to accrue, and all rights of the holders thereof as
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stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance
with said notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors of the Corporation
shall so require and the notice shall so state), such share shall be redeemed
by the Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.
8. Conversion. (a) (i) Subject to the provisions of this paragraph 8, (A)
a holder of shares of Series B Preferred Stock shall have the right, at any
time and from time to time at such holder's option, to convert any or all
outstanding shares (and fractional shares) of Series B Preferred Stock held by
such holder, in whole or in part, into fully paid and non-assessable shares of,
at the election of the holder, Common Stock or Class B Stock (each such
conversion being an "Optional Conversion"), (B) the Corporation shall have the
right, from time to time within 5 days after any Directed Conversion Election
Date, to give written notice (a "Directed Conversion Notice") to a holder of
Series B Preferred Stock of a conversion of any or all outstanding shares (and
fractional shares) of Series B Preferred Stock held by such holder, into fully
paid and non-assessable shares of, at the election of the holder, Common Stock
or Class B Stock, on a date (a "Directed Conversion Date") not less than 5 days
nor more than 30 days after the date of delivery of such Directed Conversion
Notice (each such conversion being a "Directed Conversion"), and (C) any shares
(and fractional shares) of Series B Preferred Stock outstanding on the
Mandatory Conversion Date shall be converted into fully paid and non-assessable
shares of, at the election of the holder, Common Stock or Class B Stock
("Mandatory Conversion").
(ii) The number of shares of Common Stock or Class B Stock
deliverable upon conversion of a share of Series B Preferred Stock,
adjusted as hereinafter provided, is referred to herein as the "Conversion
Ratio." The Conversion Ratio as of any date shall be an amount equal to
the Liquidation Preference divided by the Conversion Price, subject to
adjustment from time to time pursuant to paragraph 8(g) hereof.
Notwithstanding any call for redemption pursuant to paragraph 6, the right
to convert shares so called for redemption shall terminate at the close of
business on the date immediately preceding the date fixed for such
redemption unless the Corporation shall default in making payment of the
amount payable upon such redemption. Upon conversion of any share of
Series B Preferred Stock, the holder thereof shall be entitled to receive
from the Corporation an additional number of shares (or fraction of a
share, as the case may be) of Common Stock or Class B Stock, at the
election of the holder, equal to the product of (A) the number of
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Additional Shares (or fraction of an Additional Share, as the case may be)
accrued and unpaid as of the date of conversion on the share of Series B
Preferred Stock being converted times (B) the Conversion Ratio. If (1) the
conversion is either (a) an Optional Conversion that is being made in
respect of a share of Series B Preferred Stock that has been called for
redemption or (b) a Directed Conversion and (2) the Effective Time of such
conversion is prior to the Issue 42 Date, then upon conversion of such
share of Series B Preferred Stock, the holder thereof shall also be
entitled to receive from the Corporation an additional number of shares
(or fraction of a share, as the case may be) of Common Stock or Class B
Stock, at the election of the holder, equal to the product of (w) the
number of Additional Shares (or fraction of an Additional Share, as the
case may be) that would have accrued on the share of Series B Preferred
Stock being converted during the period from the Effective Time to the
Issue 42 Date times (y) the Conversion Ratio (the "Issue 42 Shares"). All
shares of Common Stock or Class B Stock received pursuant to this
paragraph 8(a)(ii) are to be received in conversion of the Series B
Preferred Stock pursuant to Section 151(e) of the Delaware General
Corporation Law.
(b) (i) In connection with any Optional Conversion, the holder of the
shares of Series B Preferred Stock to be converted shall surrender the
certificates representing such shares at the office of the Corporation
with a written notice (an "Optional Conversion Notice") of election to
convert completed and signed, specifying (A) the number of shares to be
converted and (B) whether such shares are to be converted into Common
Stock, Class B Stock, or a specified combination of Common Stock and Class
B Stock. Unless the shares issuable on conversion are to be issued in the
same name as the name in which such shares of Series B Preferred Stock are
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the holder or the holder's duly authorized attorney, and an
amount sufficient to pay any transfer or similar tax.
(ii) In connection with any Directed Conversion or Mandatory
Conversion, the holder of the shares of Series B Preferred Stock to be
converted shall surrender the certificates representing such shares at the
office of the Corporation on the Directed Conversion Date or the Mandatory
Conversion Date, as applicable, with a written notice specifying whether
such shares (and any Additional Shares issued as dividends thereon) are to
be converted into Common Stock, Class B Stock, or a specified combination
of Common Stock and Class B Stock; provided that the failure of a holder
to comply with this paragraph 8(b)(ii)
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will not prevent or otherwise affect conversion of such shares (and any
such Additional Shares).
(iii) As promptly as practicable after the surrender by a holder of
certificates for shares of Series B Preferred Stock under paragraph
8(b)(i) or (ii), the Corporation shall issue and shall deliver to such
holder, or on the holder's written order to the holder's transferee, (w) a
certificate or certificates for the whole number of shares of Common Stock
or Class B Stock issuable upon the conversion of such shares in accordance
with the provisions of this paragraph 8, (x) any cash adjustment required
pursuant to Section 8(f) and (y) in the event of a conversion in part, a
certificate or certificates for the whole number of Series B Preferred
Stock not being so converted.
(iv) In the event that there is a Change of Control, the Corporation
shall give written notice (a "Change of Control Notice") to each holder of
Series B Preferred Stock of such Change of Control within 5 days after the
Corporation has knowledge of such Change of Control. If such holder
properly exercises its right to an Optional Conversion under paragraph
8(a) prior to the Issue 42 Date and not more than 20 days after the date
of delivery of a Change of Control Notice to such holder, then in addition
to the foregoing, such holder shall be entitled to receive an amount of
cash to the extent there are funds legally available therefor, equal to
the product of (A) the amount of dividends that would have accrued on the
Series B Preferred Stock so converted for the period beginning on the date
of delivery of the Optional Conversion Notice and ending on the Issue 42
Date if such Series B Preferred Stock had not been converted, times (B)
the Conversion Ratio in effect immediately prior to the Change of Control,
times (C) if the Change of Control is the result of a tender or exchange
offer, merger or other form of business combination, the price paid per
share of Common Stock in such tender or exchange offer, merger or other
form of business combination (with the fair market value of any non-cash
consideration being determined in accordance with paragraph 8(g)(ii)
hereof), or if the Change of Control is not the result of a tender or
exchange offer, merger or other form of business combination, the 10 Day
Market Price of the Common Stock on the date of the Change of Control,
divided by the Liquidation Preference; provided that a holder of Series B
Preferred Stock shall not be entitled to receive any cash payment under
this provision until such time as the Corporation has repurchased such
debt securities as are required to be repurchased by the Corporation upon
such Change of Control pursuant to the Corporation's credit and financing
agreements and provided further that a holder of
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Series B Preferred Stock that receives a payment under this paragraph
8(b)(iv) shall not be entitled to receive any Issue 42 Shares.
(v) Each conversion shall be deemed to have been effected (the
"Effective Time") immediately prior to the close of business (A) in the
case of an Optional Conversion, on the date of delivery of the Optional
Conversion Notice, (B) in the case of a Directed Conversion, on the
Directed Conversion Date, and (C) in the case of a Mandatory Conversion,
on the Mandatory Conversion Date. At the Effective Time, the Person in
whose name or names any certificate or certificates for shares of Common
Stock or Class B Stock shall be issuable upon such conversion shall be
deemed to have become the holder of record of the shares of Common Stock
or Class B Stock represented thereby at such time on such date and such
conversion shall be into a number of whole shares of Common Stock and
Class B Stock in the aggregate equal to the product of the number of
shares of Series B Preferred Stock surrendered and the Conversion Ratio in
effect at such time on such date. All shares of Common Stock and Class B
Stock delivered upon conversion of the Series B Preferred Stock will upon
delivery be duly and validly issued and fully paid and non-assessable,
free of all liens and charges and not subject to any preemptive rights. At
the Effective Time, the shares to be so converted shall no longer be
deemed to be outstanding and all rights of a holder with respect to such
shares surrendered for conversion shall immediately terminate except the
right to receive the Common Stock or Class B Stock and other amounts
payable pursuant to this paragraph 8 and a certificate or certificates
representing the shares of Series B Preferred Stock not converted. In the
event that a holder of shares of Series B Preferred Stock fails to
surrender certificates representing shares to be converted in accordance
with paragraph 8(b)(ii) or the written notice referred to therein, such
holder will be deemed to have elected to convert such shares into shares
of Class B Stock; provided that the certificates representing such shares
of Class B Stock and any shares of Series B Preferred Stock not converted
shall not be issued and delivered under paragraph 8(b)(iii), nor shall any
cash adjustment be paid under such paragraph, until such time as the
certificates representing the converted shares of Series B Preferred Stock
have been surrendered to the Corporation.
(c) (i) Upon delivery to the Corporation of an Optional Conversion
Notice by a holder of shares of Series B Preferred Stock or delivery to
such a holder of a Directed Conversion Notice by the Corporation, the
right of the Corporation to redeem such shares of Series B Preferred Stock
shall terminate, regardless of whether a notice of redemption has been
mailed pursuant to paragraph 7.
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(ii) Except as provided above and in paragraph 8(g), the Corporation
shall make no payment or adjustment for accrued and unpaid dividends on
shares of Series B Preferred Stock, whether or not in arrears, on
conversion of such shares or for dividends in cash on the shares of Common
Stock or Class B Stock issued upon such conversion.
(d) (i) The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Common Stock and Class B Stock as shall
be required for the purpose of effecting conversions of the Series B
Preferred Stock.
(ii) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon conversion of the Series B Preferred
Stock, the Corporation shall comply with all applicable federal and state
laws and regulations which require action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock or Class B Stock on conversion of the Series B Preferred Stock
pursuant hereto; provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock or Class B Stock in a name other than that
of the holder of the Series B Preferred Stock to be converted and no such issue
or delivery shall be made unless and until the Person requesting such issue or
delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(f) In connection with the conversion by a holder of any shares of Series
B Preferred Stock, no fractions of shares of Common Stock or Class B Stock
shall be required to be issued to such holder, but in lieu thereof the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to such fractional interest multiplied by the Market Price
per share of Common Stock on the business day on which such shares of Series B
Preferred Stock are deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the date of issue
of the Series B Preferred Stock (A) declare a dividend or make a distribution
on Common Stock or Class B Stock payable in Common Stock or Class B Stock, (B)
subdivide or split the outstanding Common Stock or Class B Stock, (C) combine
or reclassify the outstanding Common Stock or Class B Stock into a smaller
number of shares, (D) issue any shares of its Capital Stock in a
reclassification of
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Common Stock or Class B Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing corporation) or, (E) consolidate with, or merge with or into, any
other Person, or engage in any reorganization, recapitalization, sale of all or
substantially all of the Corporation's assets to any entity or any other
transaction which, in the case of any of the transactions referred in this
subclause (E), is effected in such a manner that the holders of Common Stock or
Class B Stock are entitled to receive stock, securities or assets with respect
to or in exchange for Common Stock or Class B Stock (any such transaction
described in this subclause (E), an "Organic Change"), the Conversion Ratio in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, split, combination, consolidation,
merger, reclassification or Organic Change shall be proportionately adjusted,
or other provision shall be made, so that the conversion of the Series B
Preferred Stock after such time shall entitle the holder to receive the
aggregate number of shares of Common Stock, Class B Stock or other securities
of the Corporation (or shares of any security or cash or other property into
which such shares of Common Stock or Class B Stock have been combined,
consolidated, merged, reclassified or changed, or which were otherwise
receivable with respect to or in exchange for shares of Common Stock or Class B
Stock, pursuant to clause 8(g)(i)(C), 8(g)(i)(D) or 8(g)(i)(E) above) which, if
the Series B Preferred Stock had been converted immediately prior to such time,
such holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger, reclassification or Organic Change, assuming such holder
of Common Stock or Class B Stock of the Corporation (x) is not a Person with
which the Corporation consolidated or into which the Corporation merged or
which merged into the Corporation or in connection with which such
reclassification or Organic Change was made, as the case may be ("Constituent
Person"), or an affiliate of a Constituent Person and (y) failed to exercise
any rights of election as to the kind or amount of securities, cash and other
property receivable upon such reclassification, change, consolidation, merger
or Organic Change (provided, that if the kind or amount of securities, cash and
other property receivable upon such reclassification, change, consolidation,
merger or Organic Change, is not the same for each share of Common Stock or
Class B Stock of the Corporation held immediately prior to such
reclassification, change, consolidation, merger or Organic Change by other than
a Constituent Person or an affiliate thereof and in respect of which such
rights of election shall not have been exercised ("non-electing share"), then
for the purpose of this subparagraph 8(g) the kind and amount of securities,
cash and other property receivable upon such reclassification, change,
consolidation, merger or Organic Change by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Such adjustment shall be made successively whenever any
event listed above shall occur.
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(ii) In case the Corporation shall issue or sell any Common Stock
(other than Common Stock issued (A) pursuant to the Corporation's existing
or future stock option plans or pursuant to any other existing or future
Common Stock-related director or employee compensation plan of the
Corporation approved by the Board of Directors, (B) as consideration for
the acquisition of a business or of assets, (C) in a firmly committed
underwritten public offering, (D) to the Corporation's joint venture
partners in exchange for interests in the relevant joint venture, (E) upon
conversion of shares of any series of Preferred Stock or (F) upon exercise
or conversion of any security the issuance of which caused an adjustment
under paragraph 8(g)(i), 8(g)(iii) or 8(g)(iv) hereof or the issuance of
which did not require adjustment hereunder) without consideration or for a
consideration per share less than the 20 Day Market Price on the date of
such issuance, or shall issue securities convertible into Common Stock
(other than such securities paid as dividends on any class of Preferred
Stock) having a conversion price per share less than the 20 Day Market
Price at the date of issuance of such convertible security, the Conversion
Ratio to be in effect after such issuance or sale shall be determined by
multiplying the Conversion Ratio in effect immediately prior to such
issuance or sale by a fraction, (1) the numerator of which shall be the
sum of the number of shares of Common Stock outstanding immediately prior
to such issuance or sale and the number of additional shares of Common
Stock to be issued or sold (or, in the case of convertible securities,
issued on conversion), and (2) the denominator of which shall be the sum
of (x) the number of shares of Common Stock outstanding immediately prior
to such issuance or sale and (y) the number of shares of Common Stock
which the aggregate consideration receivable by the Corporation for the
total number of additional shares of Common Stock so issued or sold (or
issuable on conversion) would purchase at the 20 Day Market Price in
effect on the date of such issuance or sale. In case any portion of the
consideration to be received by the Corporation shall be in a form other
than cash, the fair market value of such noncash consideration shall be
utilized in the foregoing computation. Such fair market value shall be
determined in good faith by the Board of Directors.
(iii) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants (other than rights, options or
warrants issued under a shareholders' rights plan) to the holders of its
Common Stock or other securities entitling such holders to subscribe for
or purchase shares of Common Stock (or securities convertible into shares
of Common Stock) at a price per share of Common Stock (or having a
conversion price per share of Common Stock, if a security convertible into
shares of Common
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Stock) less than the 20 Day Market Price on such record date, the maximum
number of shares of Common Stock issuable upon exercise of such rights,
options or warrants (or conversion of such convertible securities) shall
be deemed to have been issued and outstanding as of such record date and
the Conversion Ratio shall be adjusted pursuant to paragraph 8(g)(ii)
hereof, as though such maximum number of shares of Common Stock had been
so issued for an aggregate consideration payable by the holders of such
rights, options, warrants or convertible securities prior to their receipt
of such shares of Common Stock. In case any portion of such consideration
shall be in a form other than cash, the fair market value of such noncash
consideration shall be determined as set forth in paragraph 8(g)(ii)
hereof. Such adjustment shall be made successively whenever such record
date is fixed. In the event that after fixing a record date such rights,
options or warrants are not so issued, the Conversion Rate shall be
readjusted to the Conversion Rate that would then be in effect if such
record date had not been fixed. In the event that such rights, options or
warrants expire in whole or in part unexercised or in the event of a
change in the number of shares of Common Stock to which the holders of
such rights, options or warrants are entitled (other than pursuant to
adjustment provisions therein comparable to those contained in this
paragraph 8(g)), the Conversion Ratio shall again be adjusted as follows:
(A) in the event that all of such rights, options or warrants expire
unexercised, the Conversion Ratio shall be the Conversion Ratio that would
then be in effect if such record date had not been fixed; (B) in the event
that less than all of such rights, options or warrants expire unexercised,
the Conversion Ratio shall be adjusted pursuant to paragraph 8(g)(ii) to
reflect the maximum number of shares of Common Stock issuable upon
exercise of such rights, options or warrants that remain outstanding
(without taking into effect shares of Common Stock issuable upon exercise
of rights, options or warrants that have lapsed or expired); and (C) in
the event of a change in the number of shares of Common Stock to which the
holders of such rights, options or warrants are entitled, the Conversion
Ratio shall be adjusted to reflect the Conversion Ratio which would then
be in effect if such holder had initially been entitled to such changed
number of shares of Common Stock. Notwithstanding anything herein to the
contrary, no further adjustment to the Conversion Ratio shall be made upon
the issuance or sale of Common Stock upon the exercise of any rights,
options or warrants to subscribe for or purchase Common Stock, if any
adjustment in the Conversion Ratio was made or required to be made upon
the record date for the issuance or sale of such rights, options or
warrants under this clause 8(g)(iii).
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(iv) In case the Corporation shall fix a record date for the making
of a distribution to holders of Common Stock or Class B Stock (including
any such distribution made in connection with a consolidation or merger in
which the Corporation is the continuing corporation) of evidences of
indebtedness, assets or other property (other than (x) dividends or
distributions for which an adjustment is made pursuant to paragraph
8(g)(i) or 8(g)(iii) hereof or issued under a shareholders' rights plan,
(y) cash dividends paid from the Corporation's retained earnings, or (z)
distributions of stock or assets having an aggregate fair market value of
less than $25 million), the Conversion Ratio to be in effect after such
record date shall be determined by multiplying the Conversion Ratio in
effect immediately prior to such record date by a fraction, (A) the
numerator of which shall be the 20 Day Market Price on such record date,
and (B) the denominator of which shall be the 20 Day Market Price on such
record date, less the fair market value (determined as set forth in
paragraph 8(g)(ii) hereof) of the portion of the assets, other property or
evidence of indebtedness so to be distributed which is applicable to one
share of Common Stock. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such
distribution is not so made, the Conversion Ratio shall again be adjusted
to be the Conversion Ratio which would then be in effect if such record
date had not been fixed. In addition to the foregoing, an adjustment to
the Conversion Ratio shall be made in respect of dividends and
distributions paid in cash or other property (excluding any dividend or
distribution in connection with the liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, and any cash or
property that is distributed upon a merger, consolidation or other
transaction for which an adjustment pursuant to paragraph 8(g)(i) or
8(g)(iii) is made) where the sum of (1) all such cash dividends and
distributions and the fair market value (determined in accordance with
paragraph 8(g)(ii) hereof) of all non-cash dividends and distributions
made within the preceding 12 months in respect of which no adjustment has
been made and (2) any cash and the fair market value (determined in
accordance with paragraph 8(g)(ii) hereof) of other consideration paid in
respect of any repurchases of Common Stock by the Corporation or any of
its subsidiaries within the preceding 12 months in respect of which no
adjustment has been made, exceeds 5% of the Corporation's market
capitalization (being the product of the then 20 Day Market Price of the
Common Stock times the aggregate number of shares of Common Stock then
outstanding on the record date for such distribution).
(v) No adjustment to the Conversion Ratio pursuant to paragraphs
8(g)(ii), 8(g)(iii) or 8(g)(iv) above shall be required unless such
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adjustment would require an increase or decrease of at least 1% in the
Conversion Ratio; provided however, that any adjustments which by reason
of this paragraph 8(g)(v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this paragraph 8(g) shall be made to the nearest four
decimal points.
(vi) In the event that, at any time as a result of the provisions of
this paragraph 8(g), a holder of Series B Preferred Stock upon subsequent
conversion shall become entitled to receive any shares of Capital Stock of
the Corporation other than Common Stock or Class B Stock, the number of
such other shares so receivable upon conversion of Series B Preferred
Stock shall thereafter be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
contained herein.
(vii) Notwithstanding the provisions of this paragraph 8(g), the
Corporation and a holder of shares of Series B Preferred Stock may agree
that the occurrence of an event that would otherwise cause an adjustment
under this paragraph 8(g) shall not cause such an adjustment with respect
to such shares held by such holder. If, as a result of the foregoing, the
Conversion Ratio applicable to such shares would be different from the
Conversion Ratio applicable to other shares of Series B Preferred Stock,
the Corporation shall create a new series of Preferred Stock with the same
terms as the Series B Preferred Stock except for the difference in the
Conversion Ratio resulting from such agreement, and such holder shall
exchange its shares of Series B Preferred Stock for an equal number of
shares of such new series of Preferred Stock.
(h) All adjustments pursuant to this paragraph 8 shall be notified to the
holders of the Series B Preferred Stock and such notice shall be accompanied by
a schedule of computations of the adjustments
9. Voting Rights. (a) Except as otherwise provided in this paragraph 9 or
by applicable law, the holders of the shares of Series B Preferred Stock (i)
shall be entitled to vote with the holders of the Common Stock on all matters
submitted for a vote of holders of Common Stock, (ii) shall be entitled to a
number of votes equal to the number of votes to which shares of Common Stock
issuable upon conversion of such shares of Series B Preferred Stock would have
been entitled if such shares of Common Stock had been outstanding at the time
of the applicable vote and related record date and (iii) shall be entitled to
notice of any stockholders' meeting in accordance with the certificate of
incorporation and bylaws of the Corporation. Except as provided in the
following provisions of this
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paragraph 9, or as otherwise required by law, the holders of shares of Series B
Preferred Stock shall not be entitled to any separate or class vote.
(b) If and whenever six quarterly dividends payable on the Series B
Preferred Stock have not been paid in full, the number of directors then
constituting the Board of Directors shall be increased by one and the holders
of shares of Series B Preferred Stock, voting as a single class, shall be
entitled to elect the additional director to serve on the Board of Directors at
any annual meeting of stockholders or special meeting held in place thereof, or
at a special meeting of the holders of the Series B Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends on the Series B
Preferred Stock then outstanding shall have been paid and dividends thereon for
the current quarterly dividend period shall have been paid or declared and set
apart for payment, then the right of the holders of the Series B Preferred
Stock to elect such additional director shall cease (but subject always to the
same provisions for the vesting of such voting rights in the case of any
similar future arrearage in six quarterly dividends), and the term of office of
any person elected as director by the holders of the Series B Preferred Stock
shall forthwith terminate and the number of the Board of Directors shall be
reduced accordingly. At any time after voting power to elect a director shall
have become vested and be continuing in the holders of Series B Preferred Stock
pursuant to this paragraph, or if a vacancy shall exist in the office of a
director elected by the holders of Series B Preferred Stock, a proper officer
of the Corporation may, and upon the written request of the holders of record
of at least twenty-five percent (25%) of the shares of Series B Preferred Stock
then outstanding addressed to the Secretary of the Corporation shall, call a
special meeting of the holders of Series B Preferred Stock, for the purpose of
electing the director which such holders are entitled to elect. If such meeting
shall not be called by a proper officer of the Corporation within twenty (20)
days after personal service of said written request upon the Secretary of the
Corporation, or within twenty (20) days after mailing the same within the
United States by certified mail, addressed to the Secretary of the Corporation
at its principal executive offices, then the holders of at least twenty-five
percent (25%) of the outstanding shares of Series B Preferred Stock may
designate in writing one of their number to call such meeting at the expense of
the Corporation, and such meeting may be called by the person so designated
upon the notice required for the annual meeting of stockholders of the
Corporation and shall be held at the place for holding the annual meetings of
stockholders. Any holder of Series B Preferred Stock so designated shall have,
and the Corporation shall provide, access to the lists of stockholders to be
called pursuant to the provisions hereof.
(c) Without the written consent of holders of a majority of the
outstanding shares of Series B Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series B Preferred Stock at a meeting of
the holders
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of Series B Preferred Stock called for such purpose, the Corporation will not
amend, alter or repeal any provision of the Certificate of Incorporation or
this Certificate of Designations so as to adversely affect the preferences,
rights or powers of the Series B Preferred Stock; provided that any such
amendment that changes the dividend payable on or the liquidation preference of
the Series B Preferred Stock shall require the written consent of holders of
two-thirds of the outstanding shares of Series B Preferred Stock or the vote of
holders of two-thirds of the outstanding shares of Series B Preferred Stock at
a meeting of the holders of Series B Preferred Stock called for such purpose.
(d) Without the written consent of holders of a majority of the
outstanding shares of Series B Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series B Preferred Stock at a meeting of
such holders called for such purpose, the Corporation will not create,
authorize or issue any Senior Securities.
(e) Without the written consent of holders of a majority of the
outstanding shares of Series B Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series B Preferred Stock at a meeting of
the holders of Series B Preferred Stock called for such purpose, the
Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets
to, any Person or adopt a plan of liquidation unless: either (1) the
Corporation is the surviving or continuing Person and the Series B Preferred
Stock shall remain outstanding without any amendment that would adversely
affect the preferences, rights or powers of the Series B Preferred Stock or (2)
(i) the Person (if other than the Corporation) formed by such consolidation or
into which the Corporation is merged or the Person which acquires by
conveyance, transfer or lease the properties and assets of the Corporation
substantially as an entirety or in the case of a plan of liquidation, the
Person to which assets of the Corporation have been transferred, shall be a
corporation, partnership or trust organized and existing under the laws of the
United States or any State thereof or the District of Columbia and (ii) the
Series B Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or resulting Person, having in
respect of such successor, transferee or resulting Person, the same powers,
preferences and relative participating, optional or other special rights and
the qualifications, limitations or restrictions thereon, that the Series B
Preferred Stock had immediately prior to such transaction except as provided in
paragraph 8(g)(i). For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of one or
more subsidiaries of the Corporation, the Capital Stock of which constitutes
all or substantially all of the properties and assets of
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the Corporation, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Corporation.
(f) In exercising the voting rights set forth in clauses (b), (c), (d) and
(e) of this paragraph 9, each share of Series B Preferred Stock shall have one
vote per share, except that when any other series of preferred stock shall have
the right to vote with the Series B Preferred Stock as a single class on any
matter, then the Series B Preferred Stock shall have with respect to such
matters one vote per $1,000 (or fraction thereof) of aggregate Liquidation
Preferences plus accrued and unpaid dividends.
(g) The consent or votes required above shall be in addition to any
approval of stockholders of the Corporation which may be required by law or
pursuant to any provision of the Corporation's certificate of incorporation or
bylaws, which approval shall be obtained by vote of the stockholders of the
Corporation in the manner provided in paragraph (a) above or as otherwise
required by applicable law or the Corporation's certificate of incorporation or
bylaws.
10. Reports. So long as any of the Series B Preferred Stock is
outstanding, in the event the Corporation is not required to file quarterly and
annual financial reports with the Securities and Exchange Commission pursuant
to Section 13 or Section 15(d) of the Exchange Act, the Corporation will
furnish the holders of the Series B Preferred Stock with reports containing the
same information as would be required in such reports.
11. General Provisions.
(a) The headings of the paragraphs, subparagraphs, clauses and subclauses
of this Certificate of Designations are for convenience of reference only and
shall not define, limit or affect any of the provisions hereof.
(b) Each holder of Series B Preferred Stock, by acceptance thereof,
acknowledges and agrees that payments of dividends, interest, premium and
principal on, and exchange, redemption and repurchase of, such securities by
the Corporation are subject to restrictions on the Corporation contained in
certain credit and financing agreements.
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EXHIBIT B
REGISTRATION RIGHTS
This constitutes Exhibit B to the Stock Purchase Agreement (as it may be
amended from time to time, the "Stock Purchase Agreement") dated as of October
1, 1999 between RCN Corporation, a Delaware corporation (the "Corporation"),
and Vulcan Ventures Incorporated, a Washington corporation ("Buyer").
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Terms defined in the Stock Purchase Agreement
are used herein as therein defined. In addition, the following terms, as used
herein, have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Conversion Shares" means shares of Common Stock or Class B Stock issued
upon conversion of the Preferred Stock.
"Holder" means a person who owns Registrable Securities and is either (a)
Buyer or (b) a Permitted Transferee who has agreed in writing to be bound by
the terms of Sections 2.03, 6.02 and 7.04 of the Stock Purchase Agreement and
this Exhibit B.
"Piggyback Registration" means a Piggyback Registration as defined in
Section 2.02.
"Registrable Securities" means (i) shares of Common Stock constituting
Conversion Shares, (ii) shares of Common Stock issued upon exchange under
Section 5.08 of the Stock Purchase Agreement of shares of Class B Stock
constituting Conversion Shares, (iii) shares of Common Stock acquired under
Sections 5.07 or 6.04 of the Stock Purchase Agreement, (iv) the Current Shares,
and (v) any additional shares of Common Stock issued in respect of the shares
referred to in (i), (ii), (iii) and (iv) in connection with a stock split,
stock dividend or similar event with respect to the Common Stock or Class B
Stock. As to any particular Registrable Securities, such Registrable Securities
shall cease to be
<PAGE>
Registrable Securities as soon as they (i) have been sold or otherwise disposed
of pursuant to a registration statement that was filed with the Commission and
declared effective under the Securities Act, (ii) are eligible for sale
pursuant to Rule 144 without being subject to applicable volume limitations
thereunder, (iii) have been otherwise sold, transferred or disposed of by a
Holder to any Person that is not a Holder, or (iv) have ceased to be
outstanding.
"Rule 144" means Rule 144 (or any successor rule of similar effect)
promulgated under the Securities Act.
"Selling Holder" means any Holder who is selling Registrable Securities
pursuant to a public offering registered hereunder.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
SECTION 1.02. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Exhibit B, and
references to the parties shall mean the parties to the Stock Purchase
Agreement.
ARTICLE 2
REGISTRATION RIGHTS
SECTION 2.01. Demand Registration. (a) Buyer, on its own behalf and on
behalf of the other Holders, may make up to six written requests for
registration under the Securities Act of all or any part of the Registrable
Securities held by the Holders (each, a "Demand Registration"); provided that
(i) Buyer may not request a Demand Registration before the first anniversary of
the Closing Date, (ii) no Demand Registration may be requested within 180 days
after the preceding request for a Demand Registration, and (iii) each Demand
Registration must be (x) in respect of Registrable Securities with a fair
market value of at least $50,000,000 or (y) in respect of all remaining
Registrable Securities and have a fair market value of at least $5,000,000.
Such request will specify the aggregate number of shares of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. A registration will not count as a Demand Registration
until it has become effective. Should a Demand Registration not become
effective due to the failure of a Holder to perform its obligations under this
Exhibit B or the inability of the requesting Holders to reach agreement with
the Underwriters for the proposed sale on price or other
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customary terms for such transaction, or in the event the requesting Holders
withdraw or do not pursue the request for the Demand Registration (in each of
the foregoing cases, provided that at such time the Corporation is in
compliance in all material respects with its obligations under this Exhibit B),
then such Demand Registration shall be deemed to have been effected (provided
that if the Demand Registration does not become effective because of a material
adverse change in the condition (financial or otherwise), business, assets or
results of operations of the Corporation and its subsidiaries taken as a whole
that occurs subsequent to the date of the written request made by the
requesting Holders, then the Demand Registration shall not be deemed to have
been effected).
(b) In the event that the requesting Holders withdraw or do not pursue a
request for a Demand Registration and, pursuant to Section 2.01(a) hereof, such
Demand Registration is deemed to have been effected, the Holders may reacquire
such Demand Registration (such that the withdrawal or failure to pursue a
request will not count as a Demand Registration hereunder) if the Holders
reimburse the Corporation for any and all Registration Expenses incurred by the
Corporation in connection with such request for a Demand Registration; provided
that the right to reacquire a Demand Registration may be exercised a maximum of
two times.
(c) If the Selling Holders so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. A majority in interest of the Selling Holders shall have
the right to select the managing Underwriters and any additional investment
bankers and managers to be used in connection with such offering, subject to
the Corporation's approval, which approval shall not be unreasonably withheld.
(d) The Selling Holders will inform the Corporation of the time and manner
of any disposition of Registrable Securities, and agree to reasonably cooperate
with the Corporation in effecting the disposition of the Registrable Securities
in a manner that does not unreasonably disrupt the public trading market for
the Common Stock.
(e) The Corporation will have the right to preempt any Demand Registration
with a primary registration by delivering written notice (within five business
days after the Corporation has received a request for such Demand Registration)
of such intention to Buyer indicating that the Corporation has identified a
specific business need and use for the proceeds of the sale of such securities
and the Corporation shall use commercially reasonable efforts to effect a
primary registration within 60 days of such notice. In the ensuing primary
registration, the Holders will have such piggyback registration rights as are
set forth in Section 2.02 hereof. Upon the Corporation's preemption of a
requested Demand Registration, such requested registration will not count as a
Demand
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Registration; provided that a Demand Registration will not be deemed preempted
if the Holders are permitted to sell all requested securities in connection
with the ensuing primary offering by exercising their piggyback registration
rights as set forth in Section 2.02. The Corporation may exercise the right to
preempt only twice in any 360-day period; provided, that during any 360 day
period there shall be a period of at least 120 consecutive days during which
the Selling Holders may effect a Demand Registration.
(f) Subject to Section 2.03, the Corporation will be entitled to include
in a Demand Registration shares of Common Stock for its own account or for the
account of other Persons.
SECTION 2.02. Piggyback Registration. If the Corporation proposes to file
a registration statement under the Securities Act with respect to an offering
of Common Stock for its own account or for the account of another Person (other
than a registration statement on Form S-4 or S-8 or pursuant to Rule 415 (or
any substitute form or rule, respectively, that may be adopted by the
Commission)), the Corporation shall give written notice of such proposed filing
to the Holders at the address set forth in the share register of the
Corporation as soon as reasonably practicable (but in no event less than 10
days before the anticipated filing date), and such notice shall offer each
Holder the opportunity to register on the same terms and conditions such number
of shares of Registrable Securities as such Holder may request (a "Piggyback
Registration"). Each Holder will have five business days after receipt of any
such notice to notify the Corporation as to whether it wishes to participate in
a Piggyback Registration; provided that should a Holder fail to provide timely
notice to the Corporation, such Holder will forfeit any rights to participate
in the Piggyback Registration with respect to such proposed offering. In the
event that the registration statement is filed on behalf of a Person other than
the Corporation, the Corporation will use its best efforts to have the shares
of Registrable Securities that the Holders wish to sell included in the
registration statement. If the Corporation shall determine in its sole
discretion not to register or to delay the proposed offering, the Corporation
may, at its election, provide written notice of such determination to the
Holders and (i) in the case of a determination not to effect the proposed
offering, shall thereupon be relieved of the obligation to register such
Registrable Securities in connection therewith, and (ii) in the case of a
determination to delay a proposed offering, shall thereupon be permitted to
delay registering such Registrable Securities for the same period as the delay
in respect of the proposed offering. As between the Corporation and the Selling
Holders, the Corporation shall be entitled to select the Underwriters in
connection with any Piggyback Registration.
SECTION 2.03. Reduction of Offering. Notwithstanding anything contained
herein, if the managing Underwriter of an offering described in Section 2.01 or
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2.02 states in writing that the size of the offering that Holders, the
Corporation and any other Persons intend to make is such that the inclusion of
the Registrable Securities would be likely to materially and adversely affect
the price, timing or distribution of the offering, then the amount of
Registrable Securities to be offered for the account of Holders shall be
reduced to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing
Underwriter; provided that in the case of a Piggyback Registration, if
securities are being offered for the account of Persons other than the
Corporation, then the proportion by which the amount of Registrable Securities
intended to be offered for the account of Holders is reduced shall not exceed
the proportion by which the amount of securities intended to be offered for the
account of such other Persons (other than any Person exercising a demand
registration right) is reduced; provided further that in the case of a Demand
Registration, the amount of Registrable Securities to be offered for the
account of the Holders making the Demand Registration shall be reduced only
after the amount of securities to be offered for the account of the Corporation
and any other Persons has been reduced to zero. In the event of a reduction
pursuant to this Section 2.03 of Registrable Securities to be offered for the
account of Holders, such reduction shall be pro rata among such Holders based
on the number of Registrable Securities each Holder had proposed to sell.
SECTION 2.04. Preservation of Rights. The Corporation will not grant any
registration rights to third parties which contravene the rights granted
hereunder.
ARTICLE 3
REGISTRATION PROCEDURES
SECTION 3.01. Filings; Information. In connection with a Demand
Registration pursuant to Section 2.01 hereof, the Corporation will use its
reasonable best efforts to effect the registration of such Registrable
Securities as promptly as is reasonably practicable, and in connection with any
such request:
(a) The Corporation will expeditiously prepare and file with the
Commission a registration statement on any form for which the Corporation
then qualifies and which counsel for the Corporation shall deem
appropriate and available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of
distribution thereof, and use its reasonable best efforts to cause such
filed registration statement to become and remain effective for such
period, not to exceed 60 days, as may be reasonably necessary to effect
the sale of
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such securities; provided that if the Corporation shall furnish to Buyer a
certificate signed by the Corporation's Chairman, President or any
Vice-President stating that in his or her good faith judgment it would be
detrimental or otherwise disadvantageous to the Corporation or its
shareholders for such a registration statement to be filed as
expeditiously as possible (because the sale of Registrable Securities
covered by such Registration Statement or the disclosure of information in
any related prospectus or prospectus supplement would materially interfere
with any acquisition, financing or other material event or transaction
which is then intended or the public disclosure of which at the time would
be materially prejudicial to the Corporation), the Corporation may
postpone the filing or effectiveness of a registration statement for a
period of not more than 120 days; provided, that during any 360 day period
there shall be a period of at least 120 consecutive days during which the
Corporation will make a registration statement available under this
Exhibit B; and provided further, that if (i) the effective date of any
registration statement filed pursuant to a Demand Registration would
otherwise be at least 45 calendar days, but fewer than 90 calendar days,
after the end of the Corporation's fiscal year, and (ii) the Securities
Act requires the Corporation to include audited financials as of the end
of such fiscal year, the Corporation may delay the effectiveness of such
registration statement for such period as is reasonably necessary to
include therein its audited financial statements for such fiscal year.
(b) The Corporation will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish to
the Selling Holders, and each applicable managing Underwriter, if any,
copies thereof, and thereafter furnish to the Selling Holders and each
such Underwriter, if any, such number of copies of such registration
statement, amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein) and the
prospectus included in such registration statement (including each
preliminary prospectus) as the Selling Holders or each such Underwriter
may reasonably request in order to facilitate the sale of the Registrable
Securities by the Selling Holders.
(c) After the filing of the registration statement, the Corporation
will promptly notify the Selling Holders of any stop order issued or, to
the Corporation's knowledge, threatened to be issued by the Commission and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
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(d) The Corporation will use its reasonable best efforts to qualify
the Registrable Securities for offer and sale under such other securities
or blue sky laws of such jurisdictions in the United States as the Selling
Holders reasonably request; provided that the Corporation will not be
required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph
3.01(d), (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction.
(e) The Corporation will as promptly as is practicable notify the
Selling Holders, at any time when a prospectus relating to the sale of the
Registrable Securities is required by law to be delivered in connection
with sales by an Underwriter or dealer, of the occurrence of any event
requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and promptly make
available to the Selling Holders, and to the Underwriters any such
supplement or amendment. Upon receipt of any notice from the Corporation
of the occurrence of any event of the kind described in the preceding
sentence, the Selling Holders will forthwith discontinue the offer and
sale of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until receipt by the Selling Holders
and the Underwriters of the copies of such supplemented or amended
prospectus and, if so directed by the Corporation, the Selling Holders
will deliver to the Corporation all copies, other than permanent file
copies then in the possession of Selling Holders, of the most recent
prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event the Corporation shall give such notice, the
Corporation shall extend the period during which such registration
statement shall be maintained effective as provided in Section 3.01(a)
hereof by the number of days during the period from and including the date
of the giving of such notice to the date when the Corporation shall make
available to the Selling Holders such supplemented or amended prospectus.
(f) The Corporation will enter into customary agreements (including
an underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the sale of
such Registrable Securities.
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(g) At the request of any Underwriter in connection with an
underwritten offering the Corporation will furnish (i) an opinion of
counsel, addressed to the Underwriters, covering such customary matters as
the managing Underwriter may reasonably request and (ii) a comfort letter
or comfort letters from the Corporation's independent public accountants
covering such customary matters as the managing Underwriter may reasonably
request.
(h) The Corporation will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of 12 months, beginning within three months after the effective
date of the registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(i) The Corporation will use commercially reasonable efforts to cause
all such Registrable Securities to be listed on each securities exchange
or quoted on each inter-dealer quotation system on which the Common Stock
is then listed or quoted.
SECTION 3.02. Selling Holder Information. The Corporation may require
Selling Holders promptly to furnish in writing to the Corporation such
information regarding such Selling Holders, the plan of distribution of the
Registrable Securities and other information as the Corporation may from time
to time reasonably request or as may be legally required in connection with any
Demand Registration or Piggyback Registration.
SECTION 3.03. Registration Expenses. In connection with any Demand
Registration, the Corporation shall pay the following expenses incurred in
connection with such registration (the "Registration Expenses"): (i)
registration and filing fees with the Commission and the National Association
of Securities Dealers, Inc., (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) fees and expenses incurred in
connection with the listing or quotation of the Registrable Securities, (v)
fees and expenses of counsel to the Corporation and the reasonable fees and
expenses of independent certified public accountants for the Corporation
(including fees and expenses associated with the special audits or the delivery
of comfort letters) and (vi) the reasonable fees and expenses of any additional
experts retained by the Corporation in connection with such registration. In
connection with any Piggyback Registration, the Corporation shall pay the
Registration Expenses set forth in clauses (ii) through (vi) of the preceding
sentence. The Selling Holders shall pay (i) any underwriting fees,
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discounts or commissions attributable to the sale of Registrable Securities,
(ii) fees and expenses of counsel for the Selling Holders and (iii) any
out-of-pocket expenses of the Selling Holders. In connection with any Piggyback
Registration, the Selling Holders shall pay, in addition to items (i) through
(iii) of the preceding sentence, registration and filing fees with the
Commission and National Association of Securities Dealers Inc., in proportion
to the ratio that the number of shares of Registrable Securities being
registered for the account of the Selling Holders bears to the aggregate number
of shares of Common Stock being included in the applicable registration
statement.
ARTICLE 4
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01. Indemnification by the Corporation. The Corporation agrees
to indemnify and hold harmless each Selling Holder and its Affiliates and their
respective officers, directors, partners, stockholders, members, employees,
agents and representatives and each Person (if any) which controls a Selling
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) caused
by, arising out of resulting from or related to any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented
if the Corporation shall have furnished any amendments or supplements thereto)
or any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by or contained in or based upon any
information furnished in writing to the Corporation by or on behalf of such
Selling Holder or any Underwriter expressly for use therein or by the Selling
Holder or Underwriter's failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the Corporation
has furnished Buyer or Underwriter with copies of the same. The Corporation
also agrees to indemnify any Underwriters of the Registrable Securities, their
officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Selling
Holders provided in this Section 4.01.
SECTION 4.02. Indemnification by Buyer. Each Selling Holder agrees to
indemnify and hold harmless the Corporation, its officers and directors, and
each
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Person, if any, which controls the Corporation within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Corporation to each Selling Holder,
but only with reference to information furnished in writing by or on behalf of
such Selling Holder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus. Each Selling Holder also
agrees to indemnify and hold harmless any Underwriters of the Registrable
Securities, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Corporation provided in this Section 4.02.
SECTION 4.03. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 4.01 or Section 4.02, such Person (the "Indemnified Party") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the request
of the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and, in the written
opinion of counsel for the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent (not to
be unreasonably withheld), or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment.
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SECTION 4.04. Contribution. If the indemnification provided for in this
Article 4 is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities in respect of which indemnity is to be provided
hereunder, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall to the fullest extent permitted by law contribute to
the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of such party in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Corporation, a Selling Holder and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Corporation and each Selling Holder agrees that it would not be just
and equitable if contribution pursuant to this Section 4.04 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Article 4, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and each Selling
Holder shall not be required to contribute any amount in excess of the amount
by which the net proceeds of the offering (before deducting expenses) received
by such Selling Holder exceeds the amount of any damages which such Selling
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
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ARTICLE 5
MISCELLANEOUS
SECTION 5.01. Participation in Underwritten Registrations. No Person may
participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements, (b) completes and executes all questionnaires,
powers of attorney, custody arrangements, indemnities, underwriting agreements
and other documents reasonably required under the terms of such underwriting
arrangements and this Exhibit B and (c) furnishes in writing to the Corporation
such information regarding such Person, the plan of distribution of the
Registrable Securities and other information as the Corporation may from time
to time request or as may be legally required in connection with such
registration.
SECTION 5.02. Rule 144. The Corporation covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange
Act and that it will take such further action as the Holders may reasonably
request to the extent required from time to time to enable the Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of Buyer, the Corporation
will deliver to Buyer a written statement as to whether it has complied with
such reporting requirements.
SECTION 5.03. Holdback Agreements. Each Holder agrees, in the event of an
underwritten offering for the Corporation (whether for the account of the
Corporation or otherwise) not to offer, sell, contract to sell or otherwise
dispose of any Registrable Securities or other Common Stock or Class B Stock,
or any securities convertible into or exchangeable or exercisable for any of
the foregoing, including any sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten offering), during the 14 days prior to,
and during the 180-day period (or such lesser period as the lead or managing
Underwriter may agree) beginning on, the effective date of the registration
statement for such underwritten offering (or, in the case of an offering
pursuant to an effective shelf registration statement pursuant to Rule 415, the
pricing date for such underwritten offering).
SECTION 5.04. Termination. The registration rights granted under this
Agreement will terminate on the fifteenth anniversary of the Closing Date.
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SECTION 5.05. Holder Determinations. In the event any determination is to
be made by the Holders or the Selling Holders as a group, such determination
shall be made by Holders or Selling Holders holding a majority in interest of
the Registrable Securities or the Registrable Securities being sold,
respectively.
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EXHIBIT 10.02
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement") dated as of October 1, 1999 between
RCN Corporation, a Delaware corporation (the "Corporation"), Vulcan Ventures
Incorporated ("Vulcan") and Level 3 Telecom Holdings, Inc., a Delaware
corporation ("Level 3").
WHEREAS, Level 3 owns 26,640,970 shares of the Corporation's common
stock (the "Common Stock"), par value $1.00 per share (all shares of Common
Stock owned as of the date hereof and which may be hereafter be acquired by
Level 3 prior to the termination of this Agreement shall be referred to herein
as the "Shares");
WHEREAS, the Corporation and Vulcan propose to enter into a Stock
Purchase Agreement dated as of the date hereof (as amended from time to time,
the "Stock Purchase Agreement"), which provides for the purchase by Vulcan of
1,650,000 shares of Series B 7% Senior Convertible Preferred Stock (the
"Preferred Stock") of the Corporation;
WHEREAS, promptly after the execution of the Stock Purchase Agreement,
the Corporation will seek the concurrence of the National Association of
Securities Dealers, Inc. (the "NASD") with the Corporation's view that the
issuance of the Preferred Stock does not require the approval of the
Corporation's stockholders. If the NASD does not concur with the Corporation's
view, then the Corporation shall cause a meeting of its stockholders (including
any adjournment or postponement thereof, the "Stockholder Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the issuance of the Preferred Stock;
WHEREAS, it is a condition to the willingness of Vulcan to enter into
the Stock Purchase Agreement that Level 3 agree, and in order to induce Vulcan
to enter into the Stock Purchase Agreement, Level 3 has agreed, to enter into
this Agreement;
WHEREAS, the Board of Directors of the Corporation has approved this
Agreement for the purposes of Section 203 of the Delaware General Corporation
Law;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
VOTING OF THE SHARES
SECTION 1.1. Voting Agreement. Level 3 hereby agrees to vote the Shares
at the Stockholder Meeting: (i) in favor of the issuance of the shares of
Preferred Stock as contemplated by the Stock Purchase Agreement and (ii) in
favor of any other matter relating to the consummation of the transactions
contemplated by the Stock Purchase Agreement with respect to which Level 3 may
be entitled to vote and against any action which would reasonably be expected to
result in a failure of the conditions described in Article 8 of the Stock
Purchase Agreement to be satisfied.
SECTION 1.2. Irrevocable Proxy. Level 3 hereby revokes any and all
previous proxies granted with respect to the Shares that are inconsistent with
the voting agreement set forth in Section 1.1. By entering into this Agreement,
Level 3 hereby grants a proxy appointing Vulcan as Level 3's attorney-in-fact
and proxy, with full power of substitution, for and in Level 3's name, to vote
or consent or otherwise to utilize such voting power solely in the manner
contemplated by Section 1.1. The proxy granted by Level 3 pursuant to this
Section 1.2 is irrevocable and is coupled with an interest and is granted in
consideration of Vulcan entering into this Agreement and the Stock Purchase
Agreement and as security for the obligations of Level 3 under Section 1.1.
Without limiting the foregoing, Level 3 will, upon Vulcan's request, take all
action as shall be reasonably required from time to time in order to appoint
Vulcan as its duly authorized proxy holder for the Shares solely for the purpose
set forth in Section 1.1.
SECTION 1.3. Record Holder. If Level 3 is not the record owner of any
Shares as to which such Stockholder is the beneficial owner, Level 3 agrees to
cause or direct the record holder to vote such Shares in accordance with the
terms of this Agreement or, to the extent permitted by law, to provide a proxy
to Vulcan with respect thereto.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF LEVEL 3
Level 3 hereby represents and warrants to the Corporation as follows:
SECTION 2.1. Authority Relative to this Agreement. Level 3 is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Level 3 has all necessary power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Level 3 and the consummation by Level 3 of the transactions
contemplated hereby have been duly and validly authorized by Level 3, and no
other proceedings on the part of Level 3 are necessary to authorize the
execution and delivery of this Agreement or to consummate such transactions.
This Agreement has been duly and validly executed and delivered by Level 3 and
constitutes a legal, valid and binding obligation of Level 3, enforceable
against Level 3 in accordance with its terms.
SECTION 2.2. No Conflict. (a) The execution and delivery of this
Agreement by Level 3 do not, and the performance of this Agreement by Level 3
will not, (i) conflict with or violate the certificate of incorporation or
bylaws of Level 3, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Level 3 or by which the Shares are bound
or affected or (iii) require any consent or other action by any person or
private or governmental entity, result in any breach of or constitute a default
(or an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien or encumbrance on any of
the Shares pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Level 3 is a party or by which Level 3 or the Shares are bound or
affected, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences that would not prevent,
delay or impair the performance by Level 3 of its obligations under this
Agreement.
(b) The execution and delivery of this Agreement by Level 3 do not, and
the performance of this Agreement by Level 3 will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
federal, state, local or foreign regulatory body, except (i) filings with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to
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make such filings or notifications, would not prevent, delay or impair the
performance by Level 3 of its obligations under this Agreement.
SECTION 2.3. Title to the Shares. Level 3 is the owner of the Shares,
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever. Other than the Shares, Level 3 does
not own, either of record or beneficially, any other voting securities of the
Corporation. Level 3 has not appointed or granted any proxy, which appointment
or grant is still effective, with respect to the Shares. Level 3 has sole voting
power with respect to the Shares and Level 3 has the sole power to direct the
voting of the Shares.
ARTICLE 3
COVENANTS OF LEVEL 3
SECTION 3.1. No Inconsistent Agreement. Level 3 hereby covenants and
agrees that it shall not enter into any voting agreement or grant a proxy or
power of attorney or take any other action with respect to the Shares which is
inconsistent with this Agreement.
SECTION 3.2. Transfer of Title. Level 3 hereby covenants and agrees
that, prior to the termination of this Agreement, Level 3 will not transfer
ownership of any of its Shares except for transfers to a transferee that agrees
in writing to be bound by the terms and conditions of this Agreement. Nothing
else contained in this Agreement shall be construed to prohibit any transfer
permitted by this Section 3.2.
SECTION 3.3. Further Assurances. Level 3 will execute and deliver, or
cause to be executed and delivered, all further documents and instruments and
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 applicable
laws and regulations, to vote the Shares to approve the issuance of the
Preferred Stock as contemplated by the Stock Purchase Agreement and to take all
other acts required to be taken by Level 3 pursuant to this Agreement.
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ARTICLE 4
MISCELLANEOUS
SECTION 4.1. Termination. This Agreement (including, without
limitation, the proxy granted hereunder) shall terminate on the earlier of (i)
the date of notification by the NASD to the Corporation that the NASD concurs
with the Corporation's view that the issuance of the Preferred Stock does not
require the approval of the Corporation's stockholders, (ii) the day immediately
following final adjournment of the Stockholder Meeting and (iii) the date upon
which the Stock Purchase Agreement terminates.
SECTION 4.2. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that Vulcan shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 4.3. Entire Agreement. This Agreement constitutes the entire
agreement among the parties, and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings, with respect to the subject
matter hereof.
SECTION 4.4. Amendment. This Agreement may not be amended except
by an instrument in writing signed by all the parties hereto.
SECTION 4.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 4.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under principles of conflicts of law
applicable hereto.
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SECTION 4.7. Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 4.8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 4.9. Assignments. This Agreement shall not be assigned by any
party hereto except that Vulcan may assign its rights under this Agreement to a
Controlled Affiliate (as defined in the Stock Purchase Agreement).
SECTION 4.10. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
other than the parties hereto any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
RCN CORPORATION
By: /s/ Bruce C. Godfrey
-----------------------------------------
Name: Bruce C. Godfrey
Title: Chief Financial Officer
LEVEL 3 TELECOM HOLDINGS, INC.
By: /s/ R. Douglas Bradbury
-----------------------------------------
Name: R. Douglas Bradbury
Title: Executive Vice President and
Chief Financial Officer
VULCAN VENTURES INCORPORATED
By: /s/ William D. Savoy
-----------------------------------------
Name: William D. Savoy
Title: Vice President
7
